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Dixie Group experiences normal seasonal increase in business

Aug '09
The Dixie Group Inc reported financial results for the second quarter and six months ended June 27, 2009. For the second quarter of 2009, the Company reported a loss from continuing operations of $984,000, or $0.08 per diluted share, compared with income from continuing operations of $1,283,000, or $0.10 per diluted share, for the second quarter of 2008. Sales for the second quarter of 2009 were $52,572,000, down 32% from $77,155,000 in the year-earlier quarter.

For the six months ended June 27, 2009, the loss from continuing operations was $36,425,000, or $2.97 per diluted share, compared with income from continuing operations of $1,365,000, or $0.11 per diluted share for the first half of 2008. Sales for the year-to-date period in 2009 were $100,211,000, down 32% from $147,877,000 reported in the prior-year period.

Results for the second quarter of 2009 were affected by $117,000 of pre-tax costs for facility consolidations and severance expenses related to the implementation of the Company's cost-reduction plans. Lower inventories in 2009 resulted in liquidations of LIFO inventory carried at lower costs established in prior years, increasing pre-tax income by $1,020,000 for the second quarter and first six months of 2009. Results for the first half of 2009 were also affected by the write-off of the Company's remaining goodwill, together with facility consolidation and severance expenses. For the first half of 2009 these expenses aggregated $33,138,000, of which $31,406,000 were non-cash.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "In the second quarter, we experienced the normal seasonal increase in business, with sales up 10% over first quarter levels; however, market weakness continues, and we are not sure when to expect volumes to improve.

"The actions taken to reduce costs in 2008 and 2009 have resulted in 25% fewer associates and approximately $15 million in cost reductions, which has had a positive impact on our second quarter results; however, at current business activity levels, we need to reduce expenses further in order to become profitable.

"To achieve this objective, we are embarking on a realignment of our organizational structure, which will result in additional cost reductions in the third and fourth quarters. These actions are intended to reduce expenses by approximately $8.0 to $10.0 million for 2010 from current levels.

"We will combine our three residential carpet units into one business with three distinct brands. As a result, our residential business will be organized much like our commercial carpet business and more like the rest of the industry.

"Under the new structure, Kennedy Frierson will become Chief Operating Officer of the Company with responsibility for all sales and manufacturing. Paul Comiskey will assume leadership of residential sales and marketing, and Ken Dempsey will continue leading commercial sales and marketing.

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