Dixie’s Income Way Up

Chattanooga, TN, Oct. 23--The Dixie Group had net income of $2.4 million, or $0.20 per diluted share, for the third quarter ended September 28, compared with net income of $223,000, or $0.02 per diluted share, for the same period a year ago. Sales for the third quarter were $125.7 million compared with $132.3 million last year. For the first nine months of the year, the company reported net income of $5.9 million, or $0.50 per diluted share, compared with a net loss of $2.3 million, or $0.20 per diluted share, for the first nine months of last year. Year to date sales in 2002 were $389.0 million compared with $410.9 million in the same period last year. The net loss for the first nine months of 2001 included unusual charges of $1.5 million pre-tax ($900,000 after-tax), or $.08 per diluted share, for severance and asset write offs. "Despite lower sales and higher raw material costs, third quarter earnings benefited from our determination to control expenses," said Daniel K. Frierson, chairman and CEO. "We significantly improved our gross margins and bottom line compared with the previous year. Lower sales in 2002 were attributable to our external carpet yarn business, which we continue to de-emphasize in favor of supplying yarn to our carpet operations, and a 2.8% decline in carpet sales due primarily to soft sales to our home center/mass merchant markets. Our sales to high end markets continued to gain momentum and showed positive comparisons in the third quarter, although commercial markets were slow. Our factory built/modular housing markets grew as a result of strong demand for modular and aftermarket products. "We reduced debt an additional $8.2 million during the third quarter, bringing total debt (including amounts advanced under our prior accounts receivable securitization program) down by $38.4 million for the first nine months of this year. Although public debt markets appear difficult to access in the near term, we believe these markets can be a longer term source of liquidity. We continue to focus on a number of other options, which we believe are available to satisfy the $50.0 million obligation due in April 2003 to Fabrica’s former shareholders. The availability and pricing of any such alternatives will be subject to market conditions. "We’re encouraged by the progress we made in improving our results and balance sheet during a difficult economic environment. To improve sales, we significantly expanded our development and introduction of new products in 2002. The new products are being well received in the marketplace, and we should begin to see their impact on our top line in 2003. Our strong position in most of the markets we serve, our improved cost structure, and new products position us well to take advantage of improvements in the economy. Based on our business conditions today, we anticipate that earnings per diluted share for the fourth quarter of 2002 will be substantially ahead of the prior year and will meet or exceed the current street estimate of $0.14 per diluted share."