Dixie Posts 4Q Profit of $5M

Chattanooga, TN, February 24--The Dixie Group reported income from continuing operations of $5,024,000, or $0.40 per diluted share, for the fourth quarter ended December 25, 2004, compared with a loss from continuing operations of $11,734,000, or $0.99 per diluted share, for the prior-year period. Net sales increased 28% to $82,641,000 for the fourth quarter of 2004 from $64,617,000 in the year-earlier period. For the year ended December 25, 2004, the company reported income from continuing operations of $14,040,000, or $1.12 per diluted share, compared with a loss from continuing operations of $9,027,000, or $0.77 per diluted share, for 2003. Net sales increased 25% to $291,971,000 in 2004 from $234,149,000 in 2003. In the fourth quarter of 2003, income from continuing operations was reduced by impairments, other charges and debt extinguishment costs of $21,073,000 pre-tax ($13,445,000 after-tax, or $1.14 per diluted share). These costs were principally related to debt retired prior to its scheduled maturity and the write-downs of assets impaired as a result of the sale of discontinued operations. Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "All of our brands generated strong sales gains in 2004, with the fourth quarter being our strongest period of the year. "The revenue growth was driven by our residential carpet business, which was up 35% in the fourth quarter and 31% for the year. Our commercial carpet business also produced significant gains of 22% in the fourth quarter and 15% for the year. Our Dixie Home brand continues to be well accepted in the marketplace, accounting for almost 50% of our total 2004 revenue growth. We attribute this performance primarily to the success of new products we have developed and introduced over the past several years and the strength in the higher-end of the soft floorcovering market, where our business is concentrated. "Raw material, energy and other expenses increased significantly during 2004. We believe the effect of higher costs was more than offset by improved manufacturing efficiencies, higher selling prices, and a reduction in manufacturing costs due to LIFO inventory liquidations. "The LIFO inventory liquidation reduced costs by $953,000 in the fourth quarter and $2,253,000 for 2004 as a whole and is not expected to be repeated in 2005. Additional raw material cost increases have been announced for 2005. We are optimistic that our pricing strategy and continued improvement in operating efficiencies will offset the expected increases in operating expenses in 2005. "Our order entry and sales have been very strong during the first eight weeks of 2005, making us optimistic about extending these positive trends as 2005 develops. We continue to experience revenue growth that is well above that of the carpet industry as a whole and we expect sales for 2005 to increase about 15% over the previous year," Frierson concluded. Results of discontinued operations reflected a loss of $1,390,000, or $0.11 per diluted share, for the fourth quarter of 2004, compared with a loss of $4,875,000, or $0.41 per diluted share, for the fourth quarter of 2003. For 2004, discontinued operations reflected a loss of $1,725,000, or $0.14 per diluted share, compared with a loss of $7,927,000, or $0.67 per diluted share, in the prior year. Including discontinued operations, the company reported net income of $3,634,000, or $0.29 per diluted share, for the fourth quarter of 2004, compared with a net loss of $16,609,000, or $1.40 per diluted share, for the fourth quarter of 2003. For the 2004 year, net income was $12,315,000, or $0.98 per diluted share, compared with a net loss of $16,954,000, or $1.44 per diluted share, in 2003.