Dixie Group Reports Loss for Third Quarter

Chattanooga, TN, Oct. 28, 2008--The Dixie Group in the third quarter reported a loss from continuing operations of $732,000, or $0.06 per diluted share, compared with income from continuing operations of $2,239,000, or $0.17 per diluted share, for the third quarter of 2007.

Sales for the quarter were $72,917,000, down 11% from sales of $82,385,000 in the year-earlier quarter.

For the nine months ended Sept. 27, income from continuing operations was $633,000, or $0.05 per diluted share, compared with income from continuing operations of $5,032,000, or $0.39 per diluted share, for the same period in 2007.

Sales for the year-to-date period were $220,794,000, down 8% from $241,278,000 reported in the same period last year.

"The third quarter began with another announcement of significantly higher raw material costs,"
said CEO Daniel K. Frierson.

"We increased our selling prices to reflect the June and July raw material price increases; however, the higher selling prices were not fully implemented until the fourth quarter of this year. We also were faced with unit volume decreases that led to lower operating efficiencies and higher unabsorbed fixed costs."

Frierson said that carpet sales dollars declined 10.7% in the quarter, compared to a year ago, with residential carpet sales down 12.1% and commercial carpet sales down 8.5%.

"In response to the difficult economic environment, we developed and began implementing a plan to consolidate certain of our operations to better utilize our facilities and reduce costs," Frierson said.

"The plan consolidates our tufting operations in North Georgia into our Atmore, Alabama, facility and our tufting, dyeing and finishing operations in Santa Ana, California, into one facility.

Frierson said the company is making making organizational changes to cut costs.

“The effects of these initiatives, together with higher selling prices in place during the fourth quarter of 2008 and anticipated decreases in raw material costs, are expected to return our operations to profitable levels next year and position us to take full advantage of improvement in industry conditions when they occur,” Frierson conclude

During the quarter, Dixie Group purchased 237,186 shares of its common stock at an average price of $5.97 per share.