Dixie Group Realigning After Second Quarter Loss

Chattanooga, TN, July 29, 2009--The Dixie Group said it is realigning its organizational structure after it reported a second quarter loss from continuing operations of $984,000, or $0.08 per share, compared with income from continuing operations of $1,283,000, or $0.10 per share, a year ago.

“The actions taken to reduce costs in 2008 and 2009 have resulted in 25% fewer associates and approximately $15 million in cost reductions, which has had a positive impact on our second quarter results; however, at current business activity levels, we need to reduce expenses further in order to become profitable," said CEO Daniel Frierson.

“We will combine our three residential carpet units into one business with three distinct brands. As a result, our residential business will be organized much like our commercial carpet business and more like the rest of the industry."

He said the realignment should cut costs for the rest of this year and save from $8 million to $10 million in 2010.

Sales were $52,572,000, down 32% from $77,155,000 in the year-earlier quarter.

For the six months ended June 27, the loss from continuing operations was $36,425,000, or $2.97 per diluted share, compared with income from continuing operations of $1,365,000, or $0.11 per diluted share for the first half of 2008.

Sales year-to-date period were $100,211,000, down 32% from $147,877,000 reported in the prior-year period.

Results for the second quarter of 2009 were affected by $117,000 of pre-tax costs for facility consolidations and severance expenses related to the implementation of the Company’s cost-reduction plans.

"In the second quarter, we experienced the normal seasonal increase in business, with sales up 10% over first quarter levels; however, market weakness continues, and we are not sure when to expect volumes to improve," Frierson said.

As part of the reorganization, Kennedy Frierson will become chief operating offier with responsibility for all sales and manufacturing. Also, Paul Comiskey will head residential sales and marketing.

“The new structure should enable us to improve our responsiveness to customers’ changing needs and market conditions as well as enhance our operating capability, while significantly reducing costs," Frierson said.

Chief financial officer Gary Harmon has announced his plans to retire and he will be replaced by Jon Faulkner, who currently serves as vice president of planning and development.

In addition, David Polley, vice president of marketing, is retiring in the fourth quarter.