-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V+vO72n+TP5VQald4Nuek2hG7bIWvtEa9WLwhp77M3A5goUoRLDwSoX9oCnuPVjC PGMkdxZq/2ROEQEljL9ZQw== 0000029332-97-000004.txt : 19970514 0000029332-97-000004.hdr.sgml : 19970514 ACCESSION NUMBER: 0000029332-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIXIE GROUP INC CENTRAL INDEX KEY: 0000029332 STANDARD INDUSTRIAL CLASSIFICATION: CARPETS AND RUGS [2273] IRS NUMBER: 620183370 STATE OF INCORPORATION: TN FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02585 FILM NUMBER: 97601610 BUSINESS ADDRESS: STREET 1: 1100 S WATKINS ST CITY: CHATTANOOGA STATE: TN ZIP: 37404 BUSINESS PHONE: 6156982501 MAIL ADDRESS: STREET 1: P O BOX 751 CITY: CHATTANOOGA STATE: TN ZIP: 37401 FORMER COMPANY: FORMER CONFORMED NAME: DIXIE YARNS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DIXIE MERCERIZING CO DATE OF NAME CHANGE: 19670524 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 29, 1997 Commission File Number 0-2585 THE DIXIE GROUP, INC. (Exact name of registrant as specified in its charter) Tennessee 62-0183370 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1100 South Watkins Street Chattanooga, Tennessee 37404 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (423) 698-2501 DIXIE YARNS, INC. (Former name, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of April 29, 1997 Common Stock, $3 Par Value 10,466,894 shares Class B Common Stock, $3 Par Value 735,228 shares Class C Common Stock, $3 Par Value 0 shares THE DIXIE GROUP, INC. 2 INDEX Part I. Financial Information: Page No. Consolidated Condensed Balance Sheets -- March 29, 1997 and December 28, 1996 3 Consolidated Statements of Income (Loss) -- Three Months Ended March 29, 1997 and March 30, 1996 5 Consolidated Condensed Statements of Cash Flows -- Three Months Ended March 29, 1997 and March 30, 1996 6 Notes to Consolidated Condensed Financial Statements 8 Management's Discussion and Analysis of Results of Operations and Financial Condition 10 Part II. Other Information: Item 6 - Exhibits and Reports on Form 8-K 12 PART I - ITEM 1 3 FINANCIAL INFORMATION THE DIXIE GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) March 29, December 28, 1997 1996 _____________ ____________ (dollar amounts in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,882 $ 1,988 Accounts receivable (less allowance for doubtful accounts of $3,205 in 1997 and $3,614 in 1996) 29,663 14,628 Inventories 104,738 93,226 Assets held for sale 10,000 10,350 Other 9,446 10,520 _____________ ____________ TOTAL CURRENT ASSETS 155,729 130,712 PROPERTY, PLANT AND EQUIPMENT 345,417 338,573 Less accumulated amortization and depreciation 188,560 182,797 _____________ ____________ NET PROPERTY, PLANT AND EQUIPMENT 156,857 155,776 INTANGIBLE ASSETS (less accumulated amortization of $7,261 in 1997 and $6,928 in 1996) 44,706 31,611 OTHER ASSETS 11,672 10,036 _____________ ____________ TOTAL ASSETS $ 368,964 $ 328,135 _____________ ____________ _____________ ____________ See Notes to Consolidated Condensed Financial Statements. THE DIXIE GROUP, INC. 4 CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) March 29, December 28, 1997 1996 _____________ ____________ (dollar amounts in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 33,712 $ 31,473 Accrued expenses 29,109 24,338 Current portion of long-term debt 2,638 2,641 _____________ ____________ TOTAL CURRENT LIABILITIES 65,459 58,452 LONG-TERM DEBT Senior indebtedness 64,187 34,036 Subordinated notes 50,000 50,000 Convertible subordinated debentures 44,782 44,782 _____________ ____________ TOTAL LONG-TERM DEBT 158,969 128,818 OTHER LIABILITIES 9,688 9,555 DEFERRED INCOME TAXES 23,317 22,760 STOCKHOLDERS' EQUITY Common Stock - issued and outstanding, 13,876,826 shares in 1997 and 1996 41,630 41,630 Class B Common Stock - issued and outstanding, 735,228 shares in 1997 and 1996 2,206 2,206 Common Stock Subscribed 1,550 1,348 Additional paid-in capital 132,771 132,475 Stock Subscriptions Receivable (2,688) (2,190) Retained earnings (5,785) (8,766) Minimum pension liability adjustment (2,668) (2,668) _____________ ____________ 167,016 164,035 Less Common Stock in treasury at cost - 3,409,932 shares in 1997 and 3,409,872 shares in 1996 55,485 55,485 _____________ ____________ TOTAL STOCKHOLDERS' EQUITY 111,531 108,550 _____________ ____________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 368,964 $ 328,135 _____________ ____________ _____________ ____________ See Notes to Consolidated Condensed Financial Statements. THE DIXIE GROUP, INC. 5 CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) Three Months Ended ______________________________ March 29, March 30, 1997 1996 _____________ _____________ (dollar amounts in thousands, except per share data) Net sales $ 162,360 $ 161,520 Cost of sales 135,147 137,260 _____________ _____________ GROSS PROFIT 27,213 24,260 Selling and administrative expenses 18,466 20,806 Other expense - net 446 693 _____________ _____________ INCOME BEFORE INTEREST AND TAXES 8,301 2,761 Interest expense 3,337 3,977 _____________ _____________ INCOME (LOSS) BEFORE INCOME TAXES 4,964 (1,216) Income tax provision (benefit) 1,983 (225) _____________ _____________ NET INCOME (LOSS) $ 2,981 $ (991) _____________ _____________ _____________ _____________ Per common and common equivalent share: Net income (loss) $ .26 $ (.09) See Notes to Consolidated Condensed Financial Statements. THE DIXIE GROUP, INC. 6 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended ______________________________ March 29, March 30, 1997 1996 _____________ _____________ (dollar amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 2,981 $ (991) Depreciation and amortization 6,099 7,345 Benefit for deferred income taxes (250) (87) _____________ _____________ 8,830 6,267 Changes in operating assets and liabilities, net of effects of business combination (16,192) 757 _____________ _____________ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (7,362) 7,024 CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from sale of property, plant, and equipment 191 484 Purchase of property, plant, and equipment (4,036) (4,832) Net cash paid in business combination (19,046) -0- _____________ _____________ NET CASH USED IN INVESTING ACTIVITIES (22,891) (4,348) See Notes to Consolidated Condensed Financial Statements. THE DIXIE GROUP, INC. 7 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED) Three Months Ended ______________________________ March 29, March 30, 1997 1996 _____________ _____________ (dollar amounts in thousands) CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in credit line borrowings 30,807 (1,664) Payments on term loan (625) (625) Other (35) (12) _____________ _____________ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 30,147 (2,301) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (106) 375 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,988 3,413 _____________ _____________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,882 $ 3,788 _____________ _____________ _____________ _____________ SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 3,517 $ 4,563 ____________ _____________ ____________ _____________ Tax refunds received, net of income taxes paid $ (429) $ (3,313) ____________ _____________ ____________ _____________ See Notes to Consolidated Condensed Financial Statements. THE DIXIE GROUP, INC. 8 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (dollar amounts in thousands, except per share data) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements which do not include all of the information and footnotes required in annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 29, 1997 are not necessarily indicative of the results that may be expected for the entire year. NOTE B - INVENTORIES Inventories are summarized as follows: March 29, December 28, 1997 1996 _____________ ____________ At current cost Raw materials $ 23,763 $ 20,276 Work-in-process 24,974 26,294 Finished goods 63,360 54,109 Supplies, repair parts, and other 3,851 4,000 _____________ ____________ 115,948 104,679 Excess of current cost over LIFO value (11,210) (11,453) _____________ ____________ $ 104,738 $ 93,226 _____________ ____________ _____________ ____________ NOTE C - EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which the Company is required to adopt on December 27, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating "basic earnings per share", which replaces primary earnings per share, the dilutive effect of stock options will be excluded. The restated basic earnings per share is expected to result in an increase over primary earnings per share for the quarter ended March 29, 1997 of $.01 per share. The adoption of Statement 128 will have no impact on the calculation of diluted earnings per share for the quarter ended March 29, 1997. 9 NOTE D - DEBT AND CREDIT ARRANGEMENTS Under the Company's revolving credit and term loan agreement, the Company is required to maintain a certain ratio of equity to total capitalization. Including reductions in borrowing availability associated with this covenant, the Company's available unused borrowing capacity under revolving credit facilities was approximately $42,863 at May 3, 1997. NOTE E - BUSINESS COMBINATION In early fiscal 1997, the Company acquired the business and operating assets of Danube Carpet Mills, Inc. ("Danube"), a manufacturer of carpet for the manufactured housing, recreational vehicle, and van conversion industries. The acquisition was accounted for as a purchase effective December 31, 1996, and accordingly, the results of operations of Danube subsequent to December 31, 1996 are included in the Company's consolidated financial statements. The total purchase price of $20,846 (of which $19,046 had been expended through March 29, 1997) was allocated to the net tangible assets acquired based on their estimated fair market values. The excess amount of the purchase price over the estimated fair market value of the net tangible assets was recorded as an intangible asset and is being amortized using the straight-line method over 40 years. A summary of net assets acquired is as follows: Current assets $ 8,863 Property, plant, and equipment 4,421 Current liabilities (5,203) Deferred taxes (663) Intangible asset 13,428 Net assets acquired $20,846 The following unaudited pro forma summary presents the consolidated results of operations as if the acquisition of Danube had occurred at the beginning of 1996 after giving effect to certain adjustments, including the consolidation of Danube into existing operations, amortization of cost in excess of net tangible assets acquired, interest expense on debt to finance the acquisition, and related income taxes. The pro forma results are presented for comparative purposes only and do not purport to be indicative of future results or of the results that would have occurred had the acquisition taken place at the beginning of 1996. Pro forma information is not presented for the current year since the transaction was completed at the beginning of fiscal 1997. Three months ended March 30, 1996 Net sales $172,951 Loss from continuing operations (113) Net loss (113) Per common and common equivalent share: Loss from continuing operations (.01) Net loss (.01) PART I - ITEM 2 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is presented to update the discussion of results of operations and financial condition included in the Company's 1996 Annual Report. RESULTS OF OPERATIONS The Company reported net income of $3.0 million, or $.26 per share, on sales of $162.4 million in the first quarter of 1997 compared with a net loss of $1.0 million, or $.09 per share, on sales of $161.5 million in the first quarter of 1996. The 1997 results include the effects of acquiring the assets and business of Danube Carpet Mills, Inc. at the beginning of fiscal 1997. The following table reflects selected operating data (in millions of dollars) related to the two business segments of the Company: Floorcovering Business and Textile/Apparel Business. Quarter Ended March 29, March 30, 1997 1996 SALES Floorcovering $102.2 $ 88.2 Textile/Apparel 60.5 74.6 Intersegment elimination (0.3) (1.3) Total sales $162.4 $161.5 OPERATING PROFIT (LOSS) Floorcovering $ 7.8 $ 4.4 Textile/Apparel 2.7 (0.4) Total operating profit $ 10.5 $ 4.0 Sales in the Company's Floorcovering Business were $102.2 million in the quarter ended March 29, 1997, reflecting an increase of $14.0 million, or 16%, compared with the corresponding period in 1996. Sales were above first quarter levels of the prior year in each company within the Floorcovering Business. Operating profits in the Company's Floorcovering Business were $7.8 million in the first quarter of 1997, an increase of $3.4 million from the corresponding period in 1996. The increased profitability resulted primarily from the additional business associated with the Danube acquisition and included a more favorable product mix as sales of lower margin products declined. Operating profits in the Company's Textile/Apparel Business were $2.7 million on sales of $60.5 million during the quarter ended March 29, 1997, compared with an operating loss of $.4 million on sales of $74.6 million in the corresponding period in 1996. Sales declined in 1997 compared with 1996 by $22.6 million as a result of the mid-1996 sale of the Company's thread business. Excluding sales related to the Company's thread business, Textile/Apparel sales increased 17% in the first quarter of 1997 compared with the corresponding period in 1996. The 1997 increase in operating profits of $3.1 million compared with 1996 resulted from stronger demand for specialty products combined with lower costs of manufacturing and 11 selling and administrative cost decreases resulting primarily from exiting the thread business. The Company's interest expense declined in the first quarter of 1997 compared with the first quarter of 1996 due to a net reduction in debt resulting from the application of proceeds from the sale of the Company's thread business partially offset by debt incurred to finance the Danube acquisition. LIQUIDITY AND CAPITAL RESOURCES During the quarter ended March 29, 1997, the Company's debt increased $30.1 million from year-end 1996 levels as a result of $19.0 million expended in connection with the acquisition of Danube, a net cash usage of $7.4 million from operating activities (including a $15.0 million increase in accounts receivable from the seasonally low year-end level and the higher level of first quarter 1997 sales), and $4.0 million in capital expenditures. Under the Company's revolving credit and term loan agreement, the Company is required to maintain a certain ratio of equity to total capitalization. Including reductions in borrowing availability associated with this covenant, the Company's available unused borrowing capacity under revolving credit facilities was approximately $42.9 million at May 3, 1997. The available borrowing capacity and operating cash flows are deemed adequate to finance the Company's future liquidity requirements, which are anticipated to consist primarily of capital expenditures and seasonal working capital needs. PENDING ACCOUNTING PRONOUNCEMENT In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which the Company is required to adopt on December 27, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating "basic earnings per share", which replaces primary earnings per share, the dilutive effect of stock options will be excluded. The restated basic earnings per share is expected to result in an increase over primary earnings per share for the quarter ended March 29, 1997 of $0.01 per share. The adoption of Statement 128 will have no impact on the calculation of diluted earnings per share for the quarter ended March 29, 1997. PART II. OTHER INFORMATION 12 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (i) Exhibits Incorporated by Reference None. (ii) Exhibits Filed with this Report (3) Restated Charter of The Dixie Group, Inc. as amended to date. (11) Statement re: Computation of Earnings Per Share. (b) Reports on Form 8-K No reports on Form 8-K have been filed by the registrant during the three month period ended March 29, 1997. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE DIXIE GROUP, INC. __________________________ (Registrant) May 12, 1997 ____________________ (Date) /s/GLENN A. BERRY __________________________ Glenn A. Berry Executive Vice President and Chief Financial Officer /s/D. EUGENE LASATER __________________________ D. Eugene Lasater Controller QUARTERLY REPORT ON FORM 10-Q 14 ITEM 6(a) EXHIBITS QUARTER ENDED MARCH 29, 1997 THE DIXIE GROUP, INC. CHATTANOOGA, TENNESSEE Exhibit Index EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (3) Restated Charter of Filed herewith. The Dixie Group, Inc. as amended to date. (11) Statement re: Computation Filed herewith. of Earnings Per Share. EX-3 2 EXHIBIT (3) ARTICLES OF AMENDMENT TO THE RESTATED CHARTER OF DIXIE YARNS, INC. Pursuant to Section 48-20-106 of the Tennessee Business Corporation Act, the undersigned corporation hereby submits the following Articles of Amendment to amend its Restated Charter and states as follows: 1. The name of the corporation is Dixie Yarns, Inc. 2. The text of Part I, Article 1 of the Restated Charter is hereby amended to read as follows: The name of the corporation is THE DIXIE GROUP, INC. 3. The amendment was duly adopted on February 20, 1997, by the Board of Directors. 4. The amendment was duly adopted on May 1, 1997, by the shareholders. DATED this 1st day of May, 1997. DIXIE YARNS, INC. BY: /s/ DANIEL K. FRIERSON Daniel K. Frierson President, Chief Executive Officer and Chairman of the Board RESTATED CHARTER OF DIXIE YARNS, INC. UNDER SECTION 48-20-107 OF THE TENNESSEE BUSINESS CORPORATION ACT Pursuant to the provisions of Section 48-20-107 of the Tennessee Business Corporation Act, the undersigned corporation, by its board of directors, adopts the following restated charter: Part I: 1. The name of the Corporation is DIXIE YARNS, INC. 2. The address of the principal office of the Corporation in Tennessee is 1100 South Watkins Street, Chattanooga, Hamilton County, Tennessee 37404. 3. The general nature of the business to be transacted by the corporation is manufacturing, mercerizing and processing yarns, and doing all things necessary or incidental thereto. 4. The total amount of the capital stock of this corporation is 296,000,000 shares of common stock and 16,000,000 shares of Preferred Stock. (a)(i) The common stock which the corporation shall have authority to issue shall consist of: (1) 80,000,000 shares of Common Stock having $3 par value per share; (2) 16,000,000 shares of Class B Common Stock having $3 par value per share; and (3) 200,000,000 shares of Class C Common Stock having $3 par value per share. (a)(ii) The preferred stock which the Corporation shall have authority to issue shall consist of 16,000,000 shares of Preferred Stock, issuable in series, the rights, preferences and powers of which shall be determined by the Board of Directors in the resolution or resolutions authorizing the issuance of such shares. (b) The holders of Common Stock and Class B Common Stock shall have the same rights and privileges, except that: (1) The holders of Common Stock and Class B Common Stock shall have the right to vote, but not as separate classes except to the extent required by law, upon all matters submitted to the stockholders of the corporation for consideration at any meeting of stockholders; provided, however, that (i) the holders of Common Stock shall be entitled to one vote per share and the holders of Class B Common Stock shall be entitled to twenty votes per share with respect to each matter to be voted upon, and (ii) in addition to any other vote required by law, the corporation may not alter or change, either by increase, diminution or otherwise, the relative rights, preferences, privileges, restrictions, dividend rights, voting power or other powers given to the holders of Common Stock and Class B Common Stock pursuant to this Article Fourth of this Charger other than by the affirmative vote of not less than two-thirds of all the votes entitled to be voted by the holders of each class of stock voting as a separate class, except that the corporation may increase the total number of shares of Common Stock or Class B Common Stock that may be issued by the corporation and may approve a merger, acquisition, sale or transfer of all or substantially all of the assets of the corporation, or any other such transaction by the affirmative vote of a majority of all the votes entitled to be voted by the holders of Common Stock and Class B Common Stock voting together without regard to class, as provided in subsection (i) above. (2)(i) For the four year period immediately following the completion of the Corporation's Exchange Offer dated March 22, 1985, if a quarterly dividend is declared on the Class B Common Stock, a $.20 per share greater quarterly dividend shall be paid on the Common Stock; provided that should shares of Common Stock or Class B Common Stock be distributed to shareholders of the Corporation in the form of a dividend or split, then the amount per share of greater quarterly dividend required to be paid on the Common Stock by this Section shall be adjusted proportionately so that the effect thereof is to provide a $.20 per share greater quarterly dividend on the Common Stock outstanding prior to all of such stock dividends and stock splits. (ii) No cash dividend or dividend of property or stock, other than stock of the corporation as provided for in subsection 2(iv) below, may be declared and paid, per share, on the Class B Common Stock unless a dividend of an equal or greater amount of cash or value of property or stock has been declared and paid, per share, on the Common Stock. (iii) A dividend of cash, property or stock may be paid on the Common Stock without an equal or any dividend being paid on the Class B Common Stock. (iv) A dividend of shares of Common Stock may be paid to holders of Common Stock only or to the holders of both Common Stock and Class B Common Stock if the number of shares paid per share to holders of Common Stock and Class B Common Stock shall be the same; a dividend of shares of Class B Common Stock may be paid to holders of Common Stock only or to holders of both Common Stock and Class B Common Stock if the number of shares paid per share to holders of Common Stock and Class B Common Stock shall be the same; and a dividend of shares may be declared and paid in Common Stock to holders of Common Stock and in Class B Common Stock to holders of Class B Common Stock, if the number of shares paid per share to holders of Common Stock and Class B Common Stock shall be the same. (3) Shares of Class B Common Stock shall not be registered in "street" or "nominee" name, nor shall such shares be sold, assigned, transferred, pledged or otherwise disposed of except as provided in subparagraphs (i) and (ii) of this paragraph 3. (i) A holder of shares of Class B Common Stock may sell, assign, give, bequeath or otherwise transfer all or part of said shares (a) to a co-owner; (b) to a trust for the benefit of the owner or owners; (c) to the owner's spouse or a trust for the benefit of the owner's spouse; (d) to the owner's brothers or sisters; (e) to the parents and issue, including adopted children, of the owner, or a trust or custodianship for the benefit of any such person; (f) if the owner is an estate or the personal representative thereof, a trust or trustee, guardian, custodian or similar entity, then to the beneficiary or beneficiaries thereof; and (g) to the corporation; and (ii) Shares of Class B Common Stock may be pledged by the owner thereof, provided such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the restrictions of this paragraph 3. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Common Stock may, at the option of the pledgee, be sold, transferred or otherwise disposed of only on behalf of the owner to those persons specified in subparagraph (i) of this paragraph 3 or after May 1, 1989 be converted into shares of Common Stock in accordance with the provisions of paragraph (4) of this Section (b). For purposes of this paragraph 3, any sale, assignment, transfer or pledge incident to a merger, acquisition or other such transaction approved by the Board of Directors of the Corporation shall not be subject to the restrictions of this paragraph 3; provided, however, that any other sale, assignment, transfer or pledge occurring by operation of law, and any sale, assignment, transfer or pledge of the stock or any interest in a corporation, partnership or other entity which owns or holds shares of Class B Common Stock, whether or not such sale, assignment, transfer or pledge constitutes a transfer of control of such entity, shall be subject to the restrictions of this paragraph 3. Any transfer or attempted transfer in contravention of the restrictions set forth in this paragraph 3 shall be void. (4) From and after May 1, 1989, the outstanding shares of Class B Common Stock shall be convertible into fully paid and nonassessable shares of Common Stock at the option of the holders thereof on a one share for one share basis. In order for a stockholder to effect any such conversion, such stockholder must furnish the corporation with a written notice of the request for conversion, which notice shall be addressed to the principal office of the corporation or to the corporation's designated transfer agent, shall state the number of shares of Class B Common Stock to be converted into shares of Common Stock and shall be accompanied by a certificate or certificates, properly endorsed and ready for transfer. A conversion shall be deemed to be made on the close of business of the date when the corporation or transfer agent has received the prescribed written notice and required certificate or certificates, properly endorsed and ready for transfer. (5) Except as provided in subsection (2)(iv) above, shares of Class B Common Stock outstanding at any time shall not be split or subdivided, whether by stock distribution, reclassification, recapitalization, or otherwise, so as to increase the number of shares thereof issued and outstanding unless at the same time the shares of Common Stock are split up or subdivided whether by stock distribution, reclassification, recapitalization, or otherwise, so that the number of shares thereof outstanding shall be proportionately increased in order to maintain the same proportionate equity ownership (i.e., the same proportion of shares held by each class) between the holders of Common Stock and Class B Common Stock as existed on the date following the date of issuance of the Class B Common Stock in exchange for shares of Common Stock as proposed in connection with this amendment of the Charter. (6) Shares of Common Stock outstanding at any time shall not be reverse split or combined, whether by reclassification, recapitalization or otherwise, so as to decrease the number of shares thereof issued and outstanding unless at the same time the shares of Class B Common Stock are reverse split or combined so that the number of shares thereof outstanding shall be proportionately decreased in order to maintain the same proportionate ownership (i.e., the same proportion of shares held by each class) between the holders of Common Stock and Class B Common Stock as existed on the date following the date of issuance of the Class B Common Stock in exchange for shares of Common Stock as proposed in connection with this amendment of the Charter. (7) In the event of a liquidation or dissolution of the corporation, or a winding up of its affairs, whether voluntary or involuntary, or a merger or consolidation of the corporation, after payment or provision for payment of the debts or liabilities of the corporation, holders of Common Stock and Class B Common Stock shall be entitled to share pro rata(i.e., an equal amount of assets distributed for each share of either Common Stock or Class B Common Stock) in the remaining assets of the corporation. (c) Neither the Common Stock nor the Class B Common Stock shall be subject to redemption or call by the corporation nor shall the holders of such shares be entitled to preemptive rights with respect to the issuance of additional shares of Common Stock or Class B Common Stock. (d) The holders of Class C Common Stock shall have the same rights and privileges as holders of Common Stock, and Class B Common Stock except that: (i) The holders of Class C Common Stock shall have the right to vote, but not as a separate class except to the extent required by law, upon all matters submitted to the stockholders of the corporation for consideration at any meeting of stockholders; provided, however, that the holders of Class C Common Stock shall be entitled to 1/20th vote per share with respect to each matter to be voted upon; (ii) If any cash dividend or dividend of property or stock, other than stock of the corporation as provided for in subsection (d)(iii) below, shall be declared and paid, per share, on the Common Stock, then a dividend of an equal amount of cash or value of property or stock shall be declared and paid, per share, on the Class C Common Stock; and no cash dividend or dividend of property or stock, other than as provided for in subsection (d)(iii) below, may be declared and paid, per share, on the Class C Common Stock, unless a dividend of an equal amount of cash or value of property or stock has been declared and paid, per share, on the Common Stock; and provided that if any cash dividend or dividend of property or stock, other than as provided for in subsection (d)(iii) below, shall be declared and paid, per share, on the Class B Common Stock, then a dividend of an equal or greater amount of cash or value of property or stock shall be declared and paid, per share, on the Class C Common Stock; (iii) If any dividend of shares of any class of common stock is paid to holders of Common Stock, or to holders of Class B Common Stock in the event that there is no Common Stock outstanding, then an equal dividend of shares of such common stock shall be paid to holders of Class C Common Stock; provided, however, that if any dividend of shares of Common Stock is declared and paid to holders of Common Stock and in Class B Common Stock to holders of Class B Common Stock, then an equal dividend of shares of Class C Common Stock shall be paid to holders of Class C Common Stock and if any dividend of shares of Class C Common Stock is declared and paid to holders of Class B Common Stock then an equal dividend of shares of Class C Common Stock shall be declared and paid to holders of Common Stock and Class C Common Stock; and provided further that if only shares of Class B Common Stock and Class C Common Stock are outstanding and a dividend of shares of Class B Common Stock is paid to holders of Class B Common Stock, then an equal dividend of shares of Class C Common Stock or Common Stock may be paid to holders of Class C Common Stock; (iv) Except as provided in subsection (d)(iii) above, if shares of Common Stock and Class B Common Stock outstanding at any time are split or subdivided, whether by stock distribution, reclassification, recapitalization, or otherwise, so as to increase the number of shares thereof issued and outstanding, then the shares of Class C Common Stock shall be split or subdivided, whether by stock distribution, reclassification, recapitalization, or otherwise, so that the number of shares thereof outstanding shall be proportionately increased in order to maintain the same proportionate equity ownership (i.e., the same proportion of shares held by each class) among the holders of Common Stock, Class B Common Stock and Class C Common Stock as existed on the date hereof; similarly, if shares of Class C Common Stock shall be split or subdivided in any manner, then all other outstanding classes of common stock shall be proportionately split or subdivided; (v) If shares of Common Stock and Class B Common Stock outstanding at any time are reverse split or combined, whether by reclassification, recapitalization or otherwise, so as to decrease the number of shares thereof issued and outstanding, then the shares of all other classes of common stock shall be reverse split or combined so that the number of shares thereof outstanding shall be proportionately decreased in order to maintain the same proportionate ownership (i.e., the same proportion of shares held by each class) between the holders of Common Stock, Class B Common Stock and Class C Common Stock as existed on the date hereof; similarly, if shares of Class C Common Stock are reverse split or combined in any manner, all other outstanding classes of common stock shall be proportionately reverse split or combined; (vi) In the event of a liquidation or dissolution of the corporation, or a winding up of its affairs, whether voluntary of involuntary, or a merger or consolidation of the corporation, after payment or provision for payment of the debts or liabilities of the corporation, holders of Class C Common Stock shall be entitled to share pro rata in the remaining assets of the corporation with the holders of all other outstanding classes of common stock. (e) The Class C Common Stock shall not be subject to redemption or call by the corporation nor shall the holders of such shares be entitled to preemptive rights with respect to the issuance of additional shares of Common Stock, Class B Common Stock, or Class C Common Stock. 5. The amount of capital stock with which this corporation will continue business shall be its present capital and surplus, the capital stock of which has been unimpaired. 6. The time of existence of this Corporation shall be perpetual. 7. Holders of Common Stock shall not have the right to subscribe pro rata according to their holdings for any unissued Common Stock which the corporation proposes to issue. 8. To the fullest extent now or hereafter provided by Tennessee law, no director of the Corporation shall be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that unless and to the extent so provided by Tennessee law, such provision shall not eliminate or limit the liability of a director (a) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (c) under Section 48-18-304 of the Tennessee Code. This provision shall not eliminate or limit the liability of a director for any act of omission occurring prior to the date that it becomes effective. 9. The Corporation's registered agent for service of process is Thomas C. Robinson, Jr., 1100 South Watkins Street, Chattanooga, Hamilton County, Tennessee 37404. 10. The Corporation is a for-profit corporation. Part II: 1. The date the original charter was filed by the Secretary of State was July 25, 1932. 2. The restated charter restates the text of the charter as amended theretofore, without making any further amendment or change except as provided below, and was duly authorized at a meeting of the directors on August 10, 1989. a. Article 9 of the Charter was added to identify the Corporation's registered agent. b. Article 10 of the Charter was added to state that the Corporation is for profit. Dated: September 26, 1989. DIXIE YARNS, INC. BY: /s/THOMAS C. ROBINSON _____________________ Secretary EX-11 3 EXHIBIT (11) EXHIBIT 11 THE DIXIE GROUP, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (amounts in thousands, except per share data) Three Months Ended __________________________ March 29, March 30, 1997 1996 ___________ ___________ PRIMARY: NET INCOME (LOSS) $ 2,981 $ (991) ___________ ___________ ___________ ___________ Weighted average number of Common Shares outstanding assuming conversion of Class B Common Stock 11,202 11,196 Net effect of dilutive stock options based on the treasury stock method using average market price 161 -0- Net effect of stock subscriptions based on the treasury stock method using average market price 151 -0- ___________ ___________ TOTAL SHARES 11,514 11,196 ___________ ___________ ___________ ___________ PER SHARE AMOUNT $ .26 $ (.09) ___________ ___________ ___________ ___________ FULLY DILUTED: Net income (loss) $ 2,981 $ (991) After-tax interest requirement of convertible subordinated debentures (A) -0- -0- ___________ ___________ ADJUSTED NET INCOME (LOSS) $ 2,981 $ (991) ___________ ___________ ___________ ___________ EXHIBIT 11 THE DIXIE GROUP, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - CONTINUED Three Months Ended __________________________ March 29, March 30, 1997 1996 ___________ ___________ FULLY DILUTED - CONTINUED: Weighted average number of Common Shares outstanding assuming conversion of Class B Common Stock 11,202 11,196 Net effect of dilutive stock options based on the treasury stock method using quarter end market price if higher than the average market price 161 -0- Net effect of stock subscriptions based on the treasury stock method using quarter end market price if higher than the average market price 151 -0- Net effect of conversion of convertible subordinated debentures (A) -0- -0- ___________ ___________ TOTAL SHARES 11,514 11,196 ___________ ___________ ___________ ___________ PER SHARE AMOUNT $ .26 $ (.09) ___________ ___________ ___________ ___________ (A) Conversion of convertible subordinated debentures to 1,391 shares with an after-tax interest requirement of $473 for the three months ended March 29, 1997 and March 30, 1996 has been excluded from computation since the effect was anti-dilutive. EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE DIXIE GROUP, INC. AT AND FOR THE THREE MONTHS ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-27-1997 MAR-29-1997 1,882 0 32,868 3,205 104,738 155,729 345,417 188,560 368,964 65,459 158,969 43,836 0 0 67,695 368,964 162,360 162,360 135,147 135,147 0 0 3,337 4,964 1,983 2,981 0 0 0 2,981 .26 .26
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