8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

                             

FORM 8-K
                             

CURRENT REPORT
Pursuant To Section 13 OR 15(d) Of The Securities Exchange Act Of 1934


Date of Report (Date of earliest event reported): February 27, 2007

THE DIXIE GROUP, INC.
(Exact name of Registrant as specified in its charter)

                Tennessee                 
(State or other jurisdiction of incorporation)        0-2585        
(Commission File Number)         62-0183370      
(I.R.S. Employer Identification No.)

104 Nowlin Lane - Suite 101, Chattanooga, Tennessee
(Address of principal executive offices)    37421   
(zip code)

Registrant's telephone number, including area code (423) 510-7010

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.	Results of Operations and Financial Condition.
	On February 27, 2007, The Dixie Group, Inc. issued a press release reporting results for the fourth quarter and fiscal year ended December 30, 2006.
Item 9.01.	Financial Statements and Exhibits.
	(c)	Exhibits
		(99.1)	Press Release, dated February 27, 2007.

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 hereunto duly authorized.

Date:    February 27, 2007	THE DIXIE GROUP, INC.
	By: /s/ Gary A. Harmon                Gary A. Harmon Chief Financial Officer

EX-99.1

EXHIBIT 99.1

CONTACT:

Gary A. Harmon

Chief Financial Officer

(706) 876-5851

gary.harmon@dixiegroup.com

THE DIXIE GROUP REPORTS FOURTH QUARTER,

YEAR-END 2006 RESULTS

CHATTANOOGA, Tenn. (February 27, 2007) -- The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the fourth quarter and year ended December 30, 2006.  For the fourth quarter, income from continuing operations was $3,234,000, or $0.25 per diluted share, compared with income from continuing operations of $3,254,000, or $0.25 per diluted share, for the fourth quarter of 2005.  Sales for the fourth quarter of 2006 were $80,275,000, down 8.5% from sales of $87,759,000 in the year-earlier quarter.

For the year ended December 30, 2006, income from continuing operations was $9,767,000, or $0.75 per diluted share, compared with income from continuing operations of $9,963,000, or $0.77 per diluted share, for the year-ended December 31, 2005.  Sales for 2006 were $331,100,000, up 3.9% from sales of $318,526,000 in the prior year.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "Our sales were negatively affected by weakness in the carpet industry and one less operating week in the 2006 periods compared with those in the prior year. Adjusted for the extra operating week in 2005, fourth quarter 2006 sales of carpet products declined 1.2% in dollars and 4.8% in units.  For the full-year 2006, carpet sales, adjusted for the extra week, rose 6.7% in dollars and 7.9% in units.  Despite the weakness we are experiencing in our business, our carpet sales continued to outpace the industry’s sales by a significant margin.  During the fourth quarter industry sales declined 7.7% in dollars and 10.1% in units.  For the full-year 2006, industry-wide sales were down 0.6% in dollars and 6.5% in units.  

“The progress we made in improving the quality of our products and the efficiency of our manufacturing operations is reflected in our fourth quarter results.  Despite sales weakness and costs related to the start-up of our modular/carpet tile operation, gross margins, as a percent of sales, were the highest they have been since the second quarter of 2005.  Control of discretionary spending reduced selling and administrative expenses, both in dollars and as a percentage of sales, compared with the fourth quarter and full year 2005.   

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DXYN Reports Fourth Quarter, Year-end Results

Page 2

February 27, 2007

“Carpet sales in the first eight weeks of 2007 were approximately 4% below year-earlier levels.  Our sales were very soft in January, but sales in February were ahead of the same period in the prior year.  We expect new product introductions to drive sales growth in 2007 and beyond.  Sales of the modular/carpet tile products we introduced last year are building and now are expected to be approximately $1.0 million in the first quarter of this year.  On the residential side of our business, Dixie Home is introducing its new Dixie Home and Office collection of Stainmaster® commercial products that will be sold through retail stores.  Masland and Fabrica both are introducing wool collections later this year.  Sales comparisons in the first quarter of this year will be difficult due to the general weakness the carpet industry is experiencing.  The t rends we are seeing, however, lead us to believe that our revenue will grow for the full-year 2007, and we expect our sales to continue to outperform the carpet industry.  At this time, it is difficult to predict the rate at which our sales will grow,” Frierson concluded.  

Results of discontinued operations reflected income of $72,000, or less than $0.01 per diluted share, for the fourth quarter of 2006, compared with a loss of $122,000, or $0.01 per diluted share, for the fourth quarter of 2005.  For 2006 as a whole, the loss from discontinued operations was $2,064,000, or $0.16 per diluted share, compared with income of $173,000, or $0.02 per diluted share, in the year-earlier period.  The loss from discontinued operations in 2006 was primarily related to settlement expenses for a legacy defined benefit pension plan that was terminated in June of 2006.  Including discontinued operations, the Company reported net income of $3,306,000, or $0.25 per diluted share, for the fourth quarter of 2006, compared with net income of $3,132,000, or $0.24 per diluted share, for the fourth quarter of 2005.  For 2006, net income was $7,703,000, or $0.59 per diluted share, compared with net income of $10,136,000, or $0.79 per diluted share, in 2005.

A listen-only Internet simulcast and replay of Dixie's conference call may be accessed with appropriate software at the Company's web site or at www.earnings.com.  The simulcast will begin at approximately 11:00 a.m. Eastern Time on February 27, 2007.  A replay will be available shortly thereafter and will continue for approximately 30 days.  If Internet access is unavailable, a listen-only telephonic conference will be available by dialing (913) 981-5533 at least ten minutes before the appointed time. A seven-day telephonic replay will be available two hours after the call ends by dialing (719) 457-0820 and entering 4050918 when prompted for the access code.

The Dixie Group (www.thedixiegroup.com) is a leading marketer and manufacturer of carpet and rugs to higher-end residential and commercial customers through the Fabrica International, Masland Carpets and Dixie Home brands.  

Statements in this news release, which relate to the future, are subject to risk factors and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements.  Such factors include the levels of demand for the products produced by the Company.  Other factors that could affect the Company's results include, but are not limited to, raw material and transportation costs related to petroleum prices, the cost and availability of capital, and general economic and competitive conditions related to the Company's business. Issues related to the availability and price of energy may adversely affect the Company's operations.  Additional information regarding these and other risk factors and uncertainties may be found in the Company's filings with the Securities and Exchange Commission.

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DXYN Reports Fourth Quarter, Year-end Results

Page 3

February 27, 2007

THE DIXIE GROUP, INC.

Consolidated Condensed Statements of Operations

(unaudited; in thousands, except earnings per share)

			Three Months Ended				Year Ended
			Dec. 30, 2006		Dec. 31, 2005		Dec. 30, 2006		Dec. 31, 2005
NET SALES		$	80,275	$	87,759	$	331,100	$	318,526
	Cost of sales		56,231		61,885		235,548		222,008
GROSS PROFIT			24,044		25,874		95,552		96,518
	Selling and administrative expenses		18,831		20,715		75,938		76,802
	Other operating income		(41)		(334)		(640)		(562)
	Other operating expense		275		38		733		435
OPERATING INCOME			4,979		5,455		19,521		19,843
	Interest expense		1,706		1,590		7,213		5,948
	Other income		(332)		(369)		(454)		(611)
	Other expense		20		20		127		87
Income from continuing operations before       income taxes			3,585		4,214		12,635		14,419
	Income tax provision		351		960		2,868		4,456
Income from continuing operations			3,234		3,254		9,767		9,963
Income (loss) from discontinued operations,       net of tax			72		(122)		(2,064)		(661)
Income on disposal of discontinued operations,       net of tax			---		---		---		834
NET INCOME		$	3,306	$	3,132	$	7,703	$	10,136
BASIC EARNINGS (LOSS) PER SHARE:
	Continuing operations	$	0.25	$	0.26	$	0.77	$	0.80
	Discontinued operations		0.01		(0.01)		(0.16)		(0.05)
	Disposal of discontinued operations		---		---		---		0.07
	Net income	$	0.26	$	0.25	$	0.61	$	0.82
DILUTED EARNINGS (LOSS) PER SHARE:
	Continuing operations	$	0.25	$	0.25	$	0.75	$	0.77
	Discontinued operations		---		(0.01)		(0.16)		(0.05)
	Disposal of discontinued operations		---		---		---		0.07
	Net income	$	0.25	$	0.24	$	0.59	$	0.79
Weighted-average shares outstanding:
	Basic		12,750		12,595		12,702		12,416
	Diluted		12,987		12,912		12,959		12,879

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THE DIXIE GROUP, INC.

Consolidated Condensed Balance Sheets

(in thousands)

				Dec. 30, 2006		Dec. 31, 2005
ASSETS				(Unaudited)
Current Assets
	Cash and cash equivalents		$	538	$	---
	Accounts receivable, net			30,922		33,482
	Inventories			69,600		72,871
	Other			7,652		9,814
		Total Current Assets		108,712		116,167
Net Property, Plant and Equipment				98,398		92,948
Goodwill				56,960		57,177
Other Assets				13,604		11,797
TOTAL ASSETS			$	277,674	$	278,089
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable and accrued expenses		$	27,923	$	34,310
	Current portion of long-term debt			7,663		6,341
		Total Current Liabilities		35,586		40,651
Long-Term Debt
	Senior indebtedness			57,780		60,987
	Capital lease obligations			3,937		4,727
	Convertible subordinated debentures			19,662		22,162
Deferred Income Taxes				11,697		10,768
Other Liabilities				13,334		15,310
Stockholders' Equity				135,678		123,484
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	277,674	$	278,089

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