ICS Magazine

Dixie Group Closing Eton Plant, Consolidating California Operations

October 13, 2008

CHATTANOOGA – October 12, 2008 (The Chattanoogan) -- The Chattanooga-based Dixie Group, Inc. plans to consolidate its carpet tufting operations in Eton, Ga., into its tufting, dyeing and finishing facility in Atmore, Ala.

Dixie Group also is consolidating its California tufting and custom rug operation into its West Coast dyeing and finishing facility.

Dixie Group said its earnings for the third quarter ended Sept. 27 "will be adversely affected by continuing weakness in the sales of new and existing homes and deteriorating credit conditions."

Officials said, "In response to the difficult economic environment, the company has developed cost-reduction initiatives that will begin to be implemented during the fourth fiscal quarter of 2008 to better utilize its facilities and reduce costs."

Dan K. Frierson, chairman and chief executive officer, said, "We are disappointed that residential carpet markets have continued to weaken and commercial carpet sales have declined faster than anticipated.

"As a result, we expect to report a loss from continuing operations for the third quarter, which will result in earnings well below current analyst estimates."

He said the plant consolidations were a result of the economic slowdown.

Mr. Frierson said, "We are in the process of quantifying the costs of completing these consolidations. Although the costs of these consolidations will have a negative impact on results until they are completed in the first quarter of next year, these actions should reduce ongoing fixed costs, improve operating efficiencies in both our East Coast and West Coast operations, and significantly improve our operating results, with only a slight, if any, impact on our production capacity and flexibility.

"We are also in the process of evaluating our entire organization to determine what additional expenses can be reduced or eliminated, without compromising our ability to grow or affecting our leadership position in high-end markets.

"Our total employment was reduced by approximately 9% in the second quarter of this year. The anticipated effect of the facility consolidations and other contemplated organizational changes should reduce total employment by an additional 5% to 7%.

"These initiatives, higher selling prices which should be fully in place by the fourth quarter of this year, and some decreases in raw material costs are expected to return our operations to profitable levels and position us to take full advantage of improvement in industry conditions when they occur."