Dixie’s Sales Down, Earnings Up

Chattanooga, TN, Feb. 20--The Dixie Group had income from continuing operations of $2.3 million, or $0.20 per diluted share, for the fourth quarter ended December 28. Results for the quarter included an income tax benefit of $423,000, or $.04 per diluted share, due to a tax contribution deduction related to the sale of a carpet yarn facility that was closed at the end of 2001. For the same period a year ago, the company had net income of $2.8 million, or $0.24 per diluted share. Results for the period included an unusual gain, principally from the sale of real estate, of $2.3 million, or $0.19 per diluted share. Net sales were $118.5 million in the fourth quarter, compared with net sales of $123.7 million in the year earlier period. For the year ended December 28, the company reported income from continuing operations of $8.3 million, or $0.70 per diluted share, compared with net income of $517,000, or $0.04 per diluted share, the previous year. Results for the previous year reflected the real estate gain, net of the cost of first quarter workforce reductions, which improved results by $1.4 million, or $0.12 per diluted share. Net sales for the year were $507.5 million, compared with net sales of $534.6 million a year ago. During the fourth quarter, the company recorded a non-cash, after-tax charge of $3.7 million, or $0.32 per diluted share, on discontinued operations to fully reserve a note received in 1999 when the company's textile cotton yarn and dyeing operations were sold. This action was taken as the result of further deterioration of economic conditions in the textile industry. Including discontinued operations, the company reported a net loss of $1.4 million, or $0.12 per diluted share, in the fourth quarter and net income of $4.6 million, or $0.39 per diluted share, for the full year. Commenting on the results, Daniel K. Frierson, chairman and CEO, said, "In a year hampered by a difficult economy, our sales were down 5.1%, but our earnings from continuing operations improved significantly. Gross margin improved from 21.3% to 23.7%, earnings before interest and taxes improved $9.9 million, or 53%, and we reduced debt by $44.8 million. "While we are proud of our progress, we are not satisfied. Our strategy calls for achieving growth in most of our markets. Business conditions were very soft as the 2003 year began; however, sales have steadily improved and we are optimistic the growth strategies we have developed will improve our top line as we move through the year. "We also have executed a letter of intent with a new lender and accepted a proposal to amend our senior credit facility to provide the financing for the $50.0 million obligation due in April 2003 to the former shareholders of Fabrica. We anticipate completing the new financing within the next three weeks, subject to agreement on loan and inter-creditor documentation and the satisfaction of customary conditions to closing. "Softness in our markets and the cost of our growth initiatives during the early part of the current year will make the first quarter 2003 difficult. Although we expect to be profitable, earnings per diluted share could be less than the current street estimate of $0.12 per diluted share."