S&P Raises Dixie Group Ratings

New York, NY, Apr. 7--Standard & Poor's Ratings Services has raised its corporate credit rating on Calhoun, Georgia based carpet and rug manufacturer The Dixie Group Inc. to 'B+' from 'B-'. At the same time, the subordinated debt rating was raised to 'B-' from 'CCC'. The outlook is stable. Total debt outstanding as of December 28 was about $149 million. "The rating actions reflect the company's improved operating performance and the related improvement in credit protection measures," said Standard & Poor's credit analyst Susan Ding. "In addition, in March 2003 the company made the final $50 million payment on its acquisition of Fabrica International, Inc., substantially alleviating Standard & Poor's near term liquidity concerns. Dixie acquired Fabrica in 2000." The ratings on the Dixie Group reflect the challenging operating environment in most of its business units and weak industry fundamentals characterized by a fragmented and intensely competitive and mature industry. These factors are offset by the company's niche positions in the high end residential and commercial carpet segments, as well as the factory built housing market. Despite a difficult operating environment, Dixie's operating results have improved during the past two years because of restructuring efforts undertaken since 2000, including the sale of non-core assets and significant reductions in workforce, debt, and inventory levels.