Dixie Group Income Cut in Half

Chattanooga, TN, Aug. 5, 2008 -- The Dixie Group, Inc. reported net income of $1.26 million in the second quarter, or $.10 per share, compared to $2.4 million or $.19 per share a year ago.

Sales for the quarter were $77,155,00, down 7 percent from last year's sales of $84,403,000.

"Declining home sales, difficult credit conditions, contracting consumer confidence, and rapidly rising raw material and energy costs continued to have a negative impact on the carpet industry and on our business," said CEO Daniel K. Frierson.

“Rapidly rising raw material and energy-related costs compressed our gross margins this year. These costs increased more than 8 percent in the first half of this year and rose significantly again in July. Lower sales volume also had a negative impact on fixed-cost leverage."

Dixie Group has increased its prices three times this year but its margins will continue to be pressured until all the increases take full effect, the company said. In addition, it has cut its workforce by 9 percent.

For the first six months ended June 28, income from continuing operations was $1,365,000, or $0.11 per diluted share, compared with income from continuing operations of $2,793,000, or $0.21 per diluted share, for the first half of 2007.

Year to date sales were $147,877,000, down 7 percent from $158,893,000 last year, reflecting a 6.9 percent decline in sales of carpet. Residential carpet sales fell 8.2 percent and commercial sales fell 4.7 percent.

However, commercial product sales rose 2.2 percent, year-over-year, for the first six months.