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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
[X] |
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 26, 2004 |
||
or |
||
[ ] |
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ____________________ to ____________________ |
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 |
(IRS Employer Identification Number) |
|
|
|
|
345-B Nowlin Lane |
|
|
(Address of principal executive offices) |
(Zip code) |
(423) 510-7010 |
(Registrant's telephone number, including area code) |
|
NOT APPLICABLE |
(Former name, former address and former fiscal year, 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.
[X] |
Yes |
|
[ ] |
No |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
[ ] |
Yes |
|
[X] |
No |
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 July 29, 2004 |
|
Common Stock, $3 Par Value |
11,545,700 shares |
THE DIXIE GROUP, INC.
INDEX TO QUARTERLY FINANCIAL REPORT
Table of Contents
PART I. FINANCIAL INFORMATION |
Page |
||
Item 1 -- Financial Statements |
|||
Consolidated Condensed Balance Sheets - June 26, 2004 and December 27, 2003 |
3 - 4 |
||
Consolidated Condensed Statements of Operations - Three and Six Months Ended June 26, 2004 and June 28, 2003 |
5 |
||
Consolidated Condensed Statements of Cash Flows - Six Months Ended June 26, 2004 and June 28, 2003 |
6 |
||
Consolidated Condensed Statement of Stockholders' Equity - Six Months Ended June 26, 2004 |
7 |
||
Notes to Consolidated Condensed Financial Statements |
8 - 14 |
||
15 - 18 |
|||
19 |
|||
19 |
|||
PART II. OTHER INFORMATION |
20 |
||
Item 1 -- Legal Proceedings Item 2 -- Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities Item 3 -- Defaults Upon Senior Securities Item 4 -- Submission of Matters to a Vote of Security Holders Item 5 -- Other Information Item 6 -- Exhibits and Reports on Form 8-K |
|||
Signatures |
22 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE DIXIE GROUP, INC. |
|||||||
(Unaudited) |
|
||||||
ASSETS |
|||||||
CURRENT ASSETS |
|||||||
Cash and cash equivalents |
$ |
2,541 |
$ |
11,058 |
|||
Accounts receivable (less allowance for doubtful |
|||||||
accounts of $1,604 for 2004 and $1,309 for 2003) |
31,789 |
26,197 |
|||||
Inventories |
63,197 |
50,772 |
|||||
Assets held for sale |
--- |
5,593 |
|||||
Other |
17,258 |
17,146 |
|||||
TOTAL CURRENT ASSETS |
114,785 |
110,766 |
|||||
PROPERTY, PLANT AND EQUIPMENT |
|||||||
Land and improvements |
1,135 |
1,047 |
|||||
Buildings and improvements |
25,123 |
23,750 |
|||||
Machinery and equipment |
84,136 |
79,688 |
|||||
110,394 |
104,485 |
||||||
Less accumulated amortization and depreciation |
(54,561) |
(51,858) |
|||||
NET PROPERTY, PLANT AND EQUIPMENT |
55,833 |
52,627 |
|||||
GOODWILL |
52,598 |
52,598 |
|||||
INVESTMENT IN AFFILIATE |
11,770 |
11,949 |
|||||
OTHER ASSETS |
11,598 |
11,014 |
|||||
TOTAL ASSETS |
$ |
246,584 |
$ |
238,954 |
|||
See accompanying notes to the consolidated condensed financial statements. |
Return to Table of Contents
THE DIXIE GROUP, INC. |
|||||||
(Unaudited) |
|
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
CURRENT LIABILITIES |
|||||||
Accounts payable |
$ |
22,300 |
$ |
11,368 |
|||
Accrued expenses |
19,961 |
36,010 |
|||||
Current portion of long-term debt |
7,537 |
13,670 |
|||||
TOTAL CURRENT LIABILITIES |
49,798 |
61,048 |
|||||
LONG-TERM DEBT |
|||||||
Senior indebtedness |
39,198 |
22,174 |
|||||
Capital lease obligations |
6,395 |
5,837 |
|||||
Convertible subordinated debentures |
24,737 |
27,237 |
|||||
TOTAL LONG-TERM DEBT |
70,330 |
55,248 |
|||||
OTHER LIABILITIES |
13,105 |
15,056 |
|||||
DEFERRED INCOME TAXES |
10,462 |
11,521 |
|||||
STOCKHOLDERS' EQUITY |
|||||||
Common Stock ($3 par value per share): Authorized |
|||||||
80,000,000 shares, issued - 14,926,415 shares |
|||||||
for 2004 and 14,509,617 shares for 2003 |
44,779 |
43,529 |
|||||
Class B Common Stock ($3 par value per share): |
|||||||
Authorized 16,000,000 shares, issued - 636,230 |
|||||||
shares for 2004 and 795,970 shares for 2003 |
1,909 |
2,388 |
|||||
Common Stock subscribed - 104,653 shares for |
|||||||
2004 and 127,694 shares for 2003 |
314 |
383 |
|||||
Additional paid-in capital |
131,391 |
130,862 |
|||||
Stock subscriptions receivable |
(929) |
(1,131) |
|||||
Unearned stock compensation |
(40) |
(54) |
|||||
Accumulated deficit |
(18,692) |
(23,857) |
|||||
Accumulated other comprehensive loss |
(1,799) |
(1,995) |
|||||
156,933 |
150,125 |
||||||
Less Common Stock in treasury at cost - 3,395,390 |
|||||||
shares for 2004 and 2003 |
(54,044) |
(54,044) |
|||||
TOTAL STOCKHOLDERS' EQUITY |
102,889 |
96,081 |
|||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
246,584 |
$ |
238,954 |
|||
See accompanying notes to the consolidated condensed financial statements. |
Return to Table of Contents
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
NET SALES |
$ |
70,818 |
$ |
58,857 |
$ |
135,221 |
$ |
110,742 |
||||||
Cost of sales |
46,151 |
38,509 |
89,032 |
72,265 |
||||||||||
GROSS PROFIT |
24,667 |
20,348 |
46,189 |
38,477 |
||||||||||
Selling and administrative expenses |
18,476 |
15,906 |
36,062 |
31,138 |
||||||||||
Other (income) expense - net |
(248) |
(636) |
(984) |
(728) |
||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST AND TAXES |
|
|
|
|
||||||||||
Interest expense |
911 |
2,033 |
2,405 |
3,607 |
||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES |
5,528 |
3,045 |
8,706 |
4,460 |
||||||||||
Income tax provision |
2,042 |
1,156 |
3,243 |
1,694 |
||||||||||
INCOME FROM CONTINUING OPERATIONS |
3,486 |
1,889 |
5,463 |
2,766 |
||||||||||
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX |
(38) |
(492) |
(377) |
(1,705) |
||||||||||
INCOME ON DISPOSAL OF DISCONTINUED OPERATIONS, NET OF TAX |
|
|
|
|
||||||||||
NET INCOME |
$ |
3,448 |
$ |
1,397 |
$ |
5,165 |
$ |
1,061 |
||||||
BASIC EARNINGS (LOSS) PER SHARE: |
||||||||||||||
Continuing operations |
$ |
0.28 |
$ |
0.16 |
$ |
0.45 |
$ |
0.24 |
||||||
Discontinued operations |
--- |
(0.04) |
(0.03) |
(0.15) |
||||||||||
Disposal of discontinued operations |
--- |
--- |
0.01 |
--- |
||||||||||
Net income |
$ |
0.28 |
$ |
0.12 |
$ |
0.43 |
$ |
0.09 |
||||||
WEIGHTED-AVERAGE SHARES OUTSTANDING |
12,111 |
11,755 |
12,036 |
11,752 |
||||||||||
DILUTED EARNINGS (LOSS) PER SHARE: |
||||||||||||||
Continuing operations |
$ |
0.27 |
$ |
0.16 |
$ |
0.43 |
$ |
0.24 |
||||||
Discontinued operations |
--- |
(0.04) |
(0.03) |
(0.15) |
||||||||||
Disposal of discontinued operations |
--- |
--- |
0.01 |
--- |
||||||||||
Net income |
$ |
0.27 |
$ |
0.12 |
$ |
0.41 |
$ |
0.09 |
||||||
WEIGHTED-AVERAGE SHARES OUTSTANDING |
12,583 |
11,755 |
12,502 |
11,753 |
||||||||||
DIVIDENDS PER SHARE: |
||||||||||||||
Common Stock |
--- |
--- |
--- |
--- |
||||||||||
Class B Common Stock |
--- |
--- |
--- |
--- |
||||||||||
See accompanying notes to the consolidated condensed financial statements. |
THE DIXIE GROUP, INC. |
|||||||||
Six Months Ended |
|||||||||
June 26, 2004 |
June 28, 2003 |
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|||||||||
Income from continuing operations |
$ |
5,463 |
$ |
2,766 |
|||||
Loss from discontinued operations |
(377) |
(1,705) |
|||||||
Income on disposal of discontinued operations |
79 |
--- |
|||||||
Net income |
5,165 |
1,061 |
|||||||
Adjustments to reconcile net income to net |
|||||||||
cash used in operating activities: |
|||||||||
Depreciation and amortization - |
|||||||||
Continuing operations |
4,396 |
4,751 |
|||||||
Discontinued operations |
--- |
6,056 |
|||||||
Provision for deferred income taxes |
(382) |
2,343 |
|||||||
Net gain on property, plant and equipment disposals |
(127) |
(593) |
|||||||
Changes in operating assets and liabilities: |
|||||||||
Accounts receivable |
(5,592) |
(9,182) |
|||||||
Inventories |
(12,425) |
(14,381) |
|||||||
Accounts payable and accrued expenses |
8,604 |
10,693 |
|||||||
Accrued income taxes related to sale of business |
(10,230) |
--- |
|||||||
Accrued purchase price consideration related to sale of business |
(3,351) |
--- |
|||||||
Other operating assets and liabilities |
(3,977) |
(9,172) |
|||||||
NET CASH USED IN OPERATING ACTIVITIES |
(17,919) |
(8,424) |
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|||||||||
Net proceeds from sales of property, plant and equipment |
6,424 |
615 |
|||||||
Purchase of property, plant and equipment - |
|||||||||
Continuing operations |
(7,313) |
(1,556) |
|||||||
Discontinued operations |
--- |
(476) |
|||||||
Investment in affiliate |
48 |
979 |
|||||||
Additional cash paid in business combination |
--- |
(50,266) |
|||||||
NET CASH USED IN INVESTING ACTIVITIES |
(841) |
(50,704) |
|||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|||||||||
Net borrowings on credit facility |
12,680 |
25,693 |
|||||||
Borrowings on term loan |
1,479 |
4,551 |
|||||||
Payments on term loan |
(7,194) |
(3,121) |
|||||||
Borrowings from equipment financing |
3,723 |
--- |
|||||||
Payments on equipment financing |
(71) |
--- |
|||||||
Borrowings under capitalized leases |
1,579 |
--- |
|||||||
Payments on capitalized leases |
(747) |
(11) |
|||||||
Senior notes issued |
--- |
37,000 |
|||||||
Payments on subordinated indebtedness |
(2,500) |
(4,881) |
|||||||
Common stock issued under stock option plans |
1,294 |
--- |
|||||||
Other |
--- |
(262) |
|||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
10,243 |
58,969 |
|||||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(8,517) |
(159) |
|||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
11,058 |
2,440 |
|||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ |
2,541 |
$ |
2,281 |
|||||
Interest paid |
$ |
2,895 |
$ |
7,724 |
|||||
Income taxes paid, net of tax refunds (received) |
11,247 |
1,846 |
|||||||
See accompanying notes to the consolidated condensed financial statements. |
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
Common Stock and Class B Common Stock |
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 27, 2003 |
$ |
45,917 |
$ |
383 |
$ |
130,862 |
$ |
(1,185) |
$ |
(23,857) |
$ |
(1,995) |
$ |
(54,044) |
$ |
96,081 |
||||||||
Stock subscriptions settled - 23,041 shares |
19 |
(69) |
(152) |
202 |
--- |
|||||||||||||||||||
Common Stock sold under Stock Option Plan -224,670 shares |
|
|
|
|||||||||||||||||||||
Common Stock issued under Directors' Stock Plan - 26,020 shares |
|
62 |
|
|||||||||||||||||||||
Amortization of restricted stock grants |
14 |
14 |
||||||||||||||||||||||
Other comprehensive income |
196 |
196 |
||||||||||||||||||||||
Net income |
5,165 |
5,165 |
||||||||||||||||||||||
Balance at June 26, 2004 |
$ |
46,688 |
$ |
314 |
$ |
131,391 |
$ |
(969) |
$ |
(18,692) |
$ |
(1,799) |
$ |
(54,044) |
$ |
102,889 |
||||||||
See accompanying notes to the consolidated condensed financial statements. |
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements which do not include all the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission, which includes consolidated financial statements for the fiscal year ended December 27, 2003. Operating results for the three and six month periods ended June 26, 2004 are not necessarily indicative of the results that may be expected for the entire 2004 year.
The financial statements separately report discontinued operations and the results of continuing operations (See Note F). Disclosures included herein pertain to the Company's continuing operations unless noted otherwise.
Certain prior period financial statement balances have been restated to reflect discontinued operations.
NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities"("FIN 46") and later issued a revised version, FIN 46R. FIN 46 requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. The revised version was applicable to all special purpose entities ("SPE's") created prior to February 1, 2003 at the end of the first interim or annual period after December 15, 2003. It was applicable to all non-SPE's created prior to February 1, 2003 at the first interim or annual reporting period ending after March 15, 2004. The Company has adopted FIN 46 and FIN 46R and the adoption of the provisions did not have a material impact on its financial statements.
The Company has a 50% interest in the ownership, profits and losses of Chroma Systems Partners, which operates a carpet dyeing and finishing plant. The Company accounts for the partnership under the equity method of accounting. The Company's maximum exposure to loss of its interest in the partnership is limited to its initial investment and its undistributed share of the partnership's earnings.
NOTE C - STOCK COMPENSATION
The following pro forma summary presents the Company's net income and earnings per share which would have been reported had the Company determined stock compensation cost using the alternative fair value method of accounting set forth under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" and Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure". The pro forma impact on net income and effects on earnings per share shown below may not be representative of future effects.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
CONTINUED
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Net income, as reported |
$ |
3,448 |
$ |
1,397 |
$ |
5,165 |
$ |
1,061 |
||||||
Stock compensation expense, net of taxes |
(47) |
(42) |
(87) |
(83) |
||||||||||
Adjusted net income |
$ |
3,401 |
$ |
1,355 |
$ |
5,078 |
$ |
978 |
||||||
Basic earnings per share, as reported |
$ |
0.28 |
$ |
0.12 |
$ |
0.43 |
$ |
0.09 |
||||||
Stock compensation expense, net of taxes |
--- |
--- |
(0.01) |
(0.01) |
||||||||||
Adjusted basic earnings per share |
$ |
0.28 |
$ |
0.12 |
$ |
0.42 |
$ |
0.08 |
||||||
Diluted earnings per share, as reported |
$ |
0.27 |
$ |
0.12 |
$ |
0.41 |
$ |
0.09 |
||||||
Stock compensation expense, net of taxes |
--- |
--- |
(0.01) |
(0.01) |
||||||||||
Adjusted diluted earnings per share |
$ |
0.27 |
$ |
0.12 |
$ |
0.40 |
$ |
0.08 |
||||||
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Expected life |
5 years |
5 years |
5 years |
5 years |
||||||||||
Expected volatility |
63.40% |
54.00% |
63.40% |
54.00% |
||||||||||
Risk-free interest rate |
3.62% |
2.27% |
3.51% |
2.79% |
||||||||||
Dividend yield |
0.00% |
0.00% |
0.00% |
0.00% |
NOTE D - RECEIVABLES
Receivables are summarized as follows:
June 26, 2004 |
December 27, 2003 |
|||||||||
Customers, trade |
$ |
31,937 |
$ |
26,361 |
||||||
Other |
1,456 |
1,145 |
||||||||
33,393 |
27,506 |
|||||||||
Less allowance for doubtful accounts |
1,604 |
1,309 |
||||||||
Net receivables |
$ |
31,789 |
$ |
26,197 |
||||||
The Company had notes receivables in the amount of $3,345 and $3,381 at June 26, 2004 and December 27, 2003, respectively.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
CONTINUED
NOTE E - INVENTORIES
Inventories are summarized as follows:
June 26, 2004 |
December 27, 2003 |
|||||||||
Raw materials |
$ |
17,516 |
$ |
14,266 |
||||||
Work-in-process |
18,664 |
9,373 |
||||||||
Finished goods |
29,013 |
29,448 |
||||||||
Supplies, repair parts and other |
487 |
456 |
||||||||
LIFO |
(2,483) |
(2,771) |
||||||||
Total inventories |
$ |
63,197 |
$ |
50,772 |
||||||
Inventories in the Company's carpet yarn LIFO inventory pool were permanently reduced in 2004 resulting in a LIFO inventory tier liquidation, the effect of which reduced cost of sales by approximately $300 and $1,300 in the three and six month periods ending June 26, 2004, respectively.
Following is a summary of the financial information for the Company's discontinued operations:
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Net sales |
$ |
--- |
$ |
73,278 |
$ |
--- |
$ |
133,357 |
||||||
Loss from discontinued operations: |
||||||||||||||
Before income taxes |
(54) |
(794) |
(601) |
(2,750) |
||||||||||
Income tax benefit |
(16) |
(302) |
(224) |
(1,045) |
||||||||||
Loss from discontinued operations, net of tax |
$ |
(38) |
$ |
(492) |
$ |
(377) |
$ |
(1,705) |
||||||
Income on disposal of discontinued operations: |
||||||||||||||
Before income taxes |
--- |
--- |
127 |
--- |
||||||||||
Income tax provision |
--- |
--- |
48 |
--- |
||||||||||
Income on disposal of discontinued operations, net of tax |
$ |
--- |
$ |
--- |
$ |
79 |
$ |
--- |
||||||
At December 27, 2003, assets held for sale consisted of $999 of inventories and $4,594 of property, plant and equipment.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
CONTINUED
NOTE G - ACCRUED EXPENSES
June 26, 2004 |
December 27, 2003 |
|||||||||
Compensation and benefits |
$ |
9,157 |
$ |
12,511 |
||||||
Accrued income taxes |
2,100 |
10,695 |
||||||||
Provision for customer rebates, claims and allowances |
3,618 |
3,881 |
||||||||
Accrued purchase price consideration |
--- |
3,791 |
||||||||
Other |
5,086 |
5,132 |
||||||||
Total accrued expenses |
$ |
19,961 |
$ |
36,010 |
||||||
Other liabilities on the Company's balance sheet included $7,358 at June 26, 2004 and $7,764 at December 27, 2003, related to a non-qualified retirement plan.
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Reserve balance at beginning of period |
$ |
623 |
$ |
700 |
$ |
608 |
$ |
806 |
||||||
Warranty liabilities accrued |
368 |
358 |
774 |
901 |
||||||||||
Warranty liabilities settled |
(574) |
(779) |
(981) |
(1,330) |
||||||||||
Changes for pre-existing warranty liabilities |
(65) |
56 |
(49) |
(42) |
||||||||||
Reserve balance at end of period |
$ |
352 |
$ |
335 |
$ |
352 |
$ |
335 |
||||||
NOTE I - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
June 26, 2004 |
December 27, 2003 |
|||||||||
Senior indebtedness |
||||||||||
Credit line borrowings |
$ |
19,680 |
$ |
7,000 |
||||||
Term loans |
22,937 |
25,000 |
||||||||
Capital lease obligations |
8,013 |
7,181 |
||||||||
Total senior indebtedness |
50,630 |
39,181 |
||||||||
Convertible subordinated debentures |
27,237 |
29,737 |
||||||||
Total long-term debt |
77,867 |
68,918 |
||||||||
Less current portion of long-term debt |
(5,918) |
(12,326) |
||||||||
Less current portion of capital lease obligations |
(1,619) |
(1,344) |
||||||||
Total long-term debt, less current portions |
$ |
70,330 |
$ |
55,248 |
||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
CONTINUED
On April 14, 2004, the Company amended and restated its senior loan and security agreement with Fleet Capital Corporation, as Agent. The amended agreement reduced interest rates and certain fees applicable to the credit facility, modified financial covenants and provides the Company with $60,000 of credit, consisting of $40,000 of revolving credit through May 11, 2007 and a $20,000 term loan. The term loan is payable in quarterly installments of $715 beginning June 1, 2004 and is due in May 2007. Interest rates available under the facility may be selected from a number of options that effectively allow the Company to borrow at rates ranging from the lender's prime rate to the lender's prime rate plus 1.00% for base rate loans, or at rates ranging from LIBOR plus 2.00% to LIBOR plus 3.50% for LIBOR loans. Commitment fees of 0.375% per annum are payable on the average daily unused balance of the revolving credit facility. The levels of the Company's accounts receivable and inventory limit borrowing ava
ilability under the revolving credit facility. The facility is secured by a first priority lien in substantially all of the Company's assets.
The credit facility contains financial covenants relating to fixed charges and total debt that apply if availability under the revolving credit facility falls below $15,000, as well as covenants that limit future acquisitions, capital expenditures, and the payment of dividends. The unused borrowing capacity under this facility on June 26, 2004 was approximately $17,984.
NOTE J - FINANCIAL INSTRUMENTS
The Company has risk related to fluctuations in the interest rates of its variable rate debt instruments. From time to time, the Company has used derivative instruments to minimize the effects of interest rate volatility. The Company is party to an interest rate swap agreement which expires March 11, 2005. Under the agreement, the Company pays a fixed rate of 3.24% times a notional amount of $70,000, and receives in return an amount equal to the 30-day LIBOR rate of interest times the same notional amount.
The swap agreement was deemed highly effective as a cash flow hedge by the Company until a significant portion of its debt was retired in 2003. At such time, the Company de-designated the interest rate swap as a cash flow hedge and charged to interest expense the portion of the expense related to the interest rate hedge that was included in Accumulated Other Comprehensive Income ("AOCI") in proportion to the debt retired. Future changes in the fair value of the interest rate swap agreement are being recognized through interest expense. Amounts that remained in AOCI at the time the interest rate swap was de-designated are being amortized against earnings as interest expense over the remaining life of the swap.
NOTE K - PENSION AND POSTRETIREMENT BENEFIT PLANS
The Company sponsors two defined benefit retirement plans, one that covers a limited number of the Company's active associates and another that has been frozen since 1993 as to new benefits earned under the plan. The Company is in the process of terminating the frozen defined benefit plan.
Costs charged to continuing operations for pension plans are summarized as follows:
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Components of net periodic benefit costs: |
||||||||||||||
Defined benefit retirement plans |
||||||||||||||
Service cost |
$ |
62 |
$ |
33 |
$ |
127 |
$ |
65 |
||||||
Interest cost |
53 |
26 |
114 |
53 |
||||||||||
Expected return on plan assets |
(37) |
(19) |
(75) |
(38) |
||||||||||
Amortization of prior service cost |
6 |
--- |
6 |
--- |
||||||||||
Recognized net actuarial loss |
26 |
15 |
60 |
30 |
||||||||||
Net periodic benefit cost |
$ |
110 |
$ |
55 |
$ |
232 |
$ |
110 |
||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
CONTINUED
Costs charged to continuing operations for all postretirement plans are summarized as follows:
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Components of net periodic benefit costs: |
||||||||||||||
Postretirement benefit plans |
||||||||||||||
Service cost |
$ |
10 |
$ |
10 |
$ |
20 |
$ |
20 |
||||||
Interest cost |
20 |
19 |
40 |
38 |
||||||||||
Amortization of prior service costs |
(10) |
(10) |
(20) |
(20) |
||||||||||
Net periodic benefit cost |
$ |
20 |
$ |
19 |
$ |
40 |
$ |
38 |
||||||
Amounts contributed or expected to be contributed by the Company during the current fiscal year to its pension and postretirement plans are not anticipated to be significantly different from amounts disclosed in the Company's 2003 Annual Report filed on Form 10-K.
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Income from continuing operations (1) |
$ |
3,486 |
$ |
1,889 |
$ |
5,463 |
$ |
2,766 |
||||||
Denominator for calculation of basic earnings per share - weighted-average shares (2) |
|
|
|
|
||||||||||
Effect of dilutive securities: |
||||||||||||||
Stock options (3) |
427 |
--- |
423 |
--- |
||||||||||
Stock subscriptions (3) |
26 |
--- |
21 |
--- |
||||||||||
Restricted stock grants (3) |
7 |
--- |
11 |
1 |
||||||||||
Directors' stock performance units (3) |
12 |
--- |
11 |
--- |
||||||||||
Denominator for calculation of diluted earnings per share - weighted-average shares adjusted for potential dilution (2)(3) |
|
|
|
|
||||||||||
Earnings per share: |
||||||||||||||
Basic |
$ |
0.28 |
$ |
0.16 |
$ |
0.45 |
$ |
0.24 |
||||||
Diluted |
$ |
0.27 |
$ |
0.16 |
$ |
0.43 |
$ |
0.24 |
||||||
(1) |
No adjustments needed in the numerator for diluted calculations. |
|||||||||||||
(2) |
Includes Common and Class B Common shares stated in thousands. |
|||||||||||||
(3) |
Because their effects are anti-dilutive, excludes shares under restricted stock plans and shares issuable under stock option and stock subscription plans, whose grant price was greater than the average market price of Common Shares outstanding at the end of the relevant period, and excludes shares issuable on conversion of subordinated debentures into shares of Common Stock. Aggregate shares excluded were 893 in 2004 and 3,026 in 2003. |
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except per share data)
CONTINUED
NOTE M - COMPREHENSIVE INCOME
Comprehensive income is summarized as follows: |
||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
|||||||||||
Net income |
$ |
3,448 |
$ |
1,397 |
$ |
5,165 |
$ |
1,061 |
||||||
Other comprehensive income: |
||||||||||||||
Unrealized gain (loss) on interest rate swap |
||||||||||||||
Pretax |
100 |
(127) |
316 |
193 |
||||||||||
Tax effect |
(38) |
48 |
(120) |
(98) |
||||||||||
Net unrealized gain (loss) |
62 |
(79) |
196 |
95 |
||||||||||
Comprehensive income |
$ |
3,510 |
$ |
1,318 |
$ |
5,361 |
$ |
1,156 |
||||||
Components of accumulated other comprehensive loss, net of tax, are summarized as follows: |
||||||||||||||
Minimum Pension Liability |
Interest Rate Swaps |
|
||||||||||||
Balance at December 27, 2003 |
$ |
(1,632) |
$ |
(363) |
$ |
(1,995) |
||||||||
Unrealized gain on interest rate swap agreement, net of tax of $76 |
--- |
124 |
124 |
|||||||||||
Ineffective portion of interest rate swap agreement, net of tax of $44 |
--- |
72 |
72 |
|||||||||||
Balance at June 26, 2004 |
$ |
(1,632) |
$ |
(167) |
$ |
(1,799) |
||||||||
NOTE N - SEGMENT INFORMATION
Item 2. 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 our 2003 Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies were outlined in the Management's Discussion and Analysis of Results of Operations and Financial Condition in our 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Subsequent to the date of that report, there have been no changes to those critical accounting policies.
RESULTS OF OPERATIONS
In fiscal 2003, we reported our operations as two segments; Carpet Manufacturing and Floorcovering Base Materials (Carpet Yarns). We sold substantially all of our carpet yarn manufacturing facilities and subsequently integrated the operations of our remaining carpet yarn facility into our carpet manufacturing businesses. Accordingly, we are now in a single line of business, Carpet Manufacturing.
The following table sets forth certain elements of our results from continuing operations as a percentage of net sales for the periods indicated:
Three Months Ended |
Six Months Ended |
||||||
June 26, 2004 |
June 28, 2003 |
June 26, 2004 |
June 28, 2003 |
||||
Net sales |
100.0% |
100.0% |
100.0 % |
100.0 % |
|||
Cost of sales |
65.2% |
65.4% |
65.8 % |
65.3 % |
|||
Gross profit |
34.8% |
34.6% |
34.2 % |
34.7 % |
|||
Selling and administrative expenses |
26.1% |
27.0% |
26.7 % |
28.1 % |
|||
Other (income) expense - net |
(0.4)% |
(1.0)% |
(0.7)% |
(0.7)% |
|||
Operating income |
9.1% |
8.6% |
8.2 % |
7.3 % |
Net Sales. Net sales for the quarter ended June 26, 2004 were $70.8 million, an increase of 20.3% over net sales of $58.9 million for the quarter ended June 28, 2003. Net sales for the first six-months of 2004 were $135.2 million, an increase of 22.1% over net sales of $110.7 million for the first six months of 2003. The improvement was primarily driven by year-over-year increases in sales revenue of residential and commercial carpet products. During the first six months of 2004, revenues of residential products grew over 30% and revenues of commercial products grew over 8% due to strong demand for the Company's products. Approximately half of our 2004 revenue growth was attributable to our Dixie Home residential brand of carpet products, which was introduced in 2003. Revenues from residential carpet products at Masland and Fabrica improved approximately 10% and 13% for the second quarter and first six months of 2004, respectively, compared with the same periods in 2003.
Cost of Sales and Gross Profit. Gross profit improved $4.3 million in the second quarter of 2004 and $7.7 million for the first six months of 2004, compared with the same periods in 2003. The improved gross profit reflects the effect of higher sales volume, increased selling prices, better manufacturing efficiencies and the effect of a LIFO inventory liquidation. These improvements more than offset the effect of significant increases in raw material and other costs and the negative effect of sales mix in the 2004 periods. The LIFO inventory liquidation was due to permanent reductions in inventories in our carpet yarn LIFO inventory pool which reduced our cost of sales by $0.3 million in the second quarter 2004 and $1.3 million for the first six months of 2004.
Selling and Administrative Expenses. Selling and administrative expenses decreased as a percent of sales during the 2004 reporting periods due to higher sales volume and our efforts to control cost.
Other (Income) Expense - Net. Other (income) expense - net reflected a decrease in income of $0.4 million during the second quarter 2004 as compared with the second quarter 2003 principally due to lower gains from real estate sales. For the first six months of 2004, higher earnings from our investment in affiliate, interest earned on short-term investments and other miscellaneous items caused an increase in income of $0.3 million, compared with the first six months of 2003.
Interest Expense.
Interest expense decreased $1.1 million in the second quarter 2004 and $1.2 million for the first six months of 2004, compared to the corresponding periods of 2003 due to lower levels of debt in 2004. During 2003, interest expense was allocated to continuing operations based on the ratio of net assets of continuing operations to our total net assets.
RECENT ACCOUNTING PRONOUNCEMENTS
CERTAIN FACTORS AFFECTING THE COMPANY'S PERFORMANCE
In addition to the other information provided in this Report, the following risk factors should be considered when evaluating results of our operations, future prospects and an investment in shares of our Common Stock. Any of these factors could cause our actual financial results during any period to differ materially from our historical results, and could give rise to events that might have a material adverse effect on our business, financial condition and results of operations.
The floorcovering industry is cyclical and prolonged declines in residential or commercial construction activity, or corporate remodeling and refurbishment could have a material adverse effect on our business.
The U.S. floorcovering industry is cyclical and is influenced by a number of general economic factors. The floorcovering industry in general is dependent on residential and commercial construction activity, including new construction as well as remodeling. New construction activity is cyclical in nature. To a somewhat lesser degree, this also is true with residential and commercial remodeling. A prolonged decline in construction activity or any of these industries could have a material adverse effect on our business, financial condition and results of operations. The level of activity in these industries is significantly affected by numerous factors, all of which are beyond our control, including:
·
consumer confidence;
·
housing demand;
·
financing availability;
·
national and local economic conditions;
·
interest rates;
·
employment levels;
·
changes in disposable income;
·
commercial rental vacancy rates; and
·
federal and state income tax policies.
We face intense competition in our industry, which could decrease demand for our products and could have a material adverse effect on our profitability.
The floorcovering industry is highly competitive. We face competition from a number of domestic manufacturers and independent distributors of floorcovering products and, in certain product areas, foreign manufacturers. There has been a significant consolidation within the floorcovering industry during recent years that has caused a number of our existing and potential competitors to be larger and have greater resources and access to capital than we do. Maintaining our competitive position may require us to make substantial investments in our product development efforts, manufacturing facilities, distribution network and sales and marketing activities, which may be limited by restrictions set forth in our credit facilities. Competitive pressures may also result in decreased demand for our products and in the loss of market share. In addition, we face, and will continue to face, pressure on sales prices of our products from competitors. As a result of any of these factors, there could be a materi
al adverse effect on our sales and profitability.
Raw material prices may increase.
Our operations also are governed by laws relating to workplace safety and worker health, which, among other things, establish noise standards and regulate the use of hazardous materials and chemicals in the workplace. We have taken and will continue to take steps to comply with these laws. If we fail to comply with present or future environmental or safety regulations, we could be subject to future liabilities. However, we cannot ensure that complying with these environmental or health and safety laws and requirements will not adversely affect our business, results of operations and financial condition. Future laws, ordinances or regulations could give rise to additional compliance or remediation costs, which could have a material adverse effect on our business, results of operations and financial condition.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk (dollars in thousands)
Item 1 - Legal Proceedings |
|||||||||||||||
None. |
|||||||||||||||
Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Company Securities |
|||||||||||||||
None. |
|||||||||||||||
Item 3 - Defaults Upon Senior Securities |
|||||||||||||||
None. |
|||||||||||||||
Item 4 - Submission of Matters to a Vote of Security Holders |
|||||||||||||||
(a) |
The annual meeting of shareholders was held on May 6, 2004. |
||||||||||||||
(b) |
The meeting was held to consider and vote upon the election of Directors for the following year. All Directors were elected with the results of the vote summarized as follows: |
||||||||||||||
FOR |
AGAINST |
ABSTAIN |
TOTAL |
||||||||||||
J. Don Brock |
21,145,430 |
518,419 |
22,497 |
21,686,346 |
|||||||||||
Daniel K. Frierson |
20,934,330 |
729,519 |
22,497 |
21,686,346 |
|||||||||||
Paul K. Frierson |
20,920,330 |
743,519 |
22,497 |
21,686,346 |
|||||||||||
Joseph L. Jennings, Jr. |
21,625,334 |
38,515 |
22,497 |
21,686,346 |
|||||||||||
Lowry F. Kline |
21,218,434 |
445,415 |
22,497 |
21,686,346 |
|||||||||||
John W. Murrey, III |
21,572,219 |
91,630 |
22,497 |
21,686,346 |
|||||||||||
Item 5 - Other Information |
|||||||||||||||
None. |
|||||||||||||||
Item 6 - Exhibits and Reports on Form 8-K |
|||||||||||||||
(a) |
Exhibits |
||||||||||||||
(i) |
Exhibits Incorporated by Reference |
||||||||||||||
None. |
|||||||||||||||
(ii) |
Exhibits Filed with this Report |
||||||||||||||
10.1 The Dixie Group, Inc. Stock Ownership Plan as amended (corrected copy). |
|||||||||||||||
31.1 CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|||||||||||||||
31.2 CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|||||||||||||||
32.1 CEO Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||||||||||||||
32.2 CFO Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|||||||||||||||
(b) |
Reports on Form 8-K |
||
(i) |
A Current Report on Form 8-K dated April 14, 2004 was filed to report an amendment to the Company's Loan and Security Agreement with Fleet Capital Corporation, as Agent and to report the seventh amendment to the Loan and Security Agreement entered into with Fleet Capital Corporation, as Agent. |
||
A Current Report on Form 8-K dated April 29, 2004 was filed to report the issuance of a press release dated April 29, 2004, announcing the Company's results for the first quarter ended March 27, 2004. |
|||
A Current Report on Form 8-K dated May 18, 2004 was filed to report a series of meetings between the Company's senior executives and securities industry analysts on May 18, 19 and 20, 2004. |
|||
Return to Table of Contents
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) |
|
|
||
Date: August 6, 2004 |
|
By: /s/ GARY A. HARMON |
Gary A. Harmon |
||
|
||
Date: August 6, 2004 |
|
By: /s/ D. EUGENE LASATER |
D. Eugene Lasater |
Exhibit 10.1
THE DIXIE GROUP, INC.
STOCK OWNERSHIP PLAN
Purpose: The Board of Directors believes that it is desirable and in the best interest of the Company to encourage ownership of Common Stock of the Company by the principal officers of the Company. It is believed that a substantial investment in the Company by such officers will encourage and enhance their incentive to manage the Company for the long-term benefit of its shareholders. Accordingly, the Board of Directors adopts this Plan in order to carry out such goals.
Goal: Every participant is encouraged to own that number of shares of Common Stock of the Company that represents in fair market value on the date of such subscription two (2) times such participant's base salary commencing on the first business day three (3) years following the Initial Subscription Offering Date (as defined herein) with respect to such participant. For such purpose, fair market value shall be determined by the closing price of the Company's Common Stock as reported by NASD on the date of such determination, or if the Common Stock is not traded on such day, then the earliest day prior thereto when such stock trades (the "NASD Price".)
Participants: This Plan shall apply to the Chief Executive Officer, President, Chief Financial Officer, and all Corporate vice-presidents, and, such other persons as may be identified periodically from time to time hereafter by the Compensation Committee.
Purchase From Company: In order to facilitate the acquisition of Common Stock of the Company, the Company will on the date of adoption of the Plan by the Board of Directors, or as soon thereafter as may be practical, or on the next anniversary date of the adoption of the Plan (an "Anniversary Date") that occurs following the selection of a new corporate officer eligible to participate in the Plan (or on such earlier date as the Compensation Committee may designate in the case of a new corporate officer) (such date, as applicable, the "Initial Subscription Offering Date"), allow each participant to subscribe for shares of Common Stock up to but not to exceed that number of shares having a fair market value based upon the NASD Price on the Initial Subscription Offering Date equal to two (2) times the participant's base salary. The subscription price for such shares shall be the NASD Price on the Initial Subscription Offering Date.
Thereafter on the two (2) successive Anniversary Dates following the Initial Subscription Offering Date, a participant shall be allowed to subscribe for the purchase of additional shares of Common Stock having a fair market value equal to two (2) times the participant's base salary on such Anniversary Date less the subscription price applicable to any previous subscriptions. The subscription price of such shares shall be the NASD Price of the Common Stock on the applicable Anniversary Date for such offering.
Each participant's subscription shall be automatically called for payment upon a date established by the Compensation Committee set forth in the written subscription agreement that is on or before the third anniversary date of the Initial Subscription Offering Date with respect to each participant (the "Call Date"). At that time, the participant may pay the subscription price in cash and/or through the surrender to the Company of shares of Common Stock of equal value either (i) owned by the participant or (ii) subject to acquisition under the subscription.
Death or Disability: In the event of the death of a participant or the disability of a participant such that the participant shall no longer continue to be employed by the Company, all subscriptions outstanding shall automatically become due and payable, if not earlier pursuant to their terms, six (6) months from the date of such participant's death or disability, as applicable.
Termination of Employment: In the event of the termination of employment of a participant for any reason other than death or disability, whether for or without cause, voluntary or involuntary, all subscriptions outstanding shall automatically become due and payable, if not earlier pursuant to their terms, ten (10) days from the participant's termination date.
Optional Subscription Payment Date Extension: For a participant whose employment with the Company has been terminated, whether by reason of death, disability or otherwise, and who's subscription has therefore been called automatically for payment, management may extend the subscription payment date under the subscription to the earlier of (i) the Call Date established in the subscription or such other date not beyond three (3) years after the date of extension, or (ii) the date the trading price of the Company's Common Stock as reported by NASD is equal to or greater than the subscription price. It shall be a condition of any such extension that the participant agree that if the trading price of the Company's Common Stock as reported by NASD at any time thereafter becomes equal to or greater than the subscription price, the subscription shall automatically terminate, and the participant shall be deemed to have exercised the subscription and exchanged and equal number of shares of Common Stock of the Company in payment for the subscribed shares.
Acquisition: In the event that the Company is acquired by another person, corporation or legal entity, whether by merger, consolidation, sale of assets, tender offer or other means, the Company shall have the right to immediately call all outstanding subscriptions for payment, at its sole option.
Restricted Stock: All shares of Common Stock purchased by a participant from the Company shall be restricted stock and shall be subject to the resale restrictions imposed by all applicable federal and state securities laws.
Rule 16b-3 Requirements: The Board of Directors reserves the right to modify the Plan retroactively. The Board of Directors may submit the Plan to the Company's shareholders for approval should it determine that it is desirable to do so either to meet the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 or for any other reason.
Authority To Modify The Plan: The Company reserves the right to modify or terminate the Plan at all times, provided that the Company will not change the number of shares of Common Stock or the maturity date of any subscription agreement outstanding without such participant's consent.
Compensation Committee Authority: The Board of Directors grants to the Compensation Committee the authority to administer the Plan and to make any changes in the Plan necessary or desirable in order to carry out the purposes of the Plan. Furthermore, the Compensation Committee shall have exclusive authority to interpret the Plan provisions and to waive or modify any requirement of the Plan or any terms of a subscription agreement issued to a participant in the Plan. The Committee may extend the Call Date in any subscription for any participant.
EXHIBIT 31.1 - Sarbanes-Oxley Section 302(a) Certification
I, Daniel K. Frierson, Chief Executive Officer of The Dixie Group, Inc. certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Dixie Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
c. disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2004 |
/s/ Daniel K. Frierson Chief Executive Officer The Dixie Group, Inc. |
Exhibit 31.2 - Sarbanes-Oxley Section 302(a) Certification
1. I have reviewed this quarterly report on Form 10-Q of The Dixie Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
c. disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 6, 2004 |
/s/ Gary A. Harmon Chief Financial Officer The Dixie Group, Inc. |
EXHIBIT 32.1 - CHIEF EXECUTIVE OFFICER CERTIFICATION
In connection with the Quarterly Report of The Dixie Group, Inc. (the "Company") on Form 10-Q for the period ending June 26, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) that he is the Chief Executive Officer of the Company and that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
/s/ DANIEL K. FRIERSON
Daniel K. Frierson, Chief Executive Officer
Date: August 6, 2004
A signed original of this written statement required by Section 906 has been provided to The Dixie Group, Inc. and will be retained by The Dixie Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2 - CHIEF FINANCIAL OFFICER CERTIFICATION
In connection with the Quarterly Report of The Dixie Group, Inc. (the "Company") on Form 10-Q for the period ending June 26, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) that he is the Chief Financial Officer of the Company and that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
/s/ GARY A. HARMON
Gary A. Harmon, Chief Financial Officer
Date: August 6, 2004
A signed original of this written statement required by Section 906 has been provided to The Dixie Group, Inc. and will be retained by The Dixie Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
8"
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