Dixie Group Anticipates Loss, Begins Cost Cutting

Chattanooga, TN, Oct. 9, 2008 -- The Dixie Group Inc. said that third quarter earnings won't meet analyst expectations as continuing weakness in the sales of new and existing homes and deteriorating credit conditions are hurting sales.

As a result, Dixie said it will cut its workforce up to 7 percent and will consolidate some operations. Dixie already cut its staff 9 percent in the second quarter.

"We are disappointed that residential carpet markets have continued to weaken and commercial carpet sales have declined faster than anticipated," commented Dan K. Frierson, chairman and chief executive officer.

"As a result, we expect to report a loss from continuing operations for the third quarter, which will result in earnings well below current analyst estimates.

"The cost reduction initiatives include consolidating our carpet tufting operations in Eton, Ga., into our tufting, dyeing and finishing facility in Atmore, Ala., and consolidating our California tufting and custom rug operation into our West Coast dyeing and finishing facility."

The downsizing should reduce ongoing fixed costs, improve operating efficiencies iand significantly improve our operating results, Frierson said, with only a slight, if any, impact on production capacity and flexibility.

The company cut its workforce by approximately 9 percent in the second quarter. The anticipated effect of the facility consolidations and other contemplated organizational changes should reduce total employment by an additional 5% to 7%.

“These initiatives, higher selling prices which should be fully in place by the fourth quarter of this year, and some decreases in raw material costs are expected to return our operations to profitable levels and position us to take full advantage of improvement in industry conditions when they occur," Frierson said in a news release.