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): December 8, 2005

THE DIXIE GROUP, INC.

(Exact name of Registrant as specified in its charter)

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

345-B Nowlin Lane, Chattanooga, Tennessee	37421
(Address of principal executive offices)	(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 7.01 Regulation FD Disclosure.

The Company’s senior officers will hold meetings with securities industry analysts and investors on December 8, 2005. The information contained in Exhibit 99.1 to this Report is being presented in connection with such meetings. The information attached as Exhibit 99.1 hereto, and incorporated herein by reference, is being furnished pursuant to Item 7.01, and shall not be deemed to be “filed” for any purpose.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

(99.1)       Presentation Materials, December 8, 2005.

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: December 8, 2005	THE DIXIE GROUP, INC.
	By:	/s/    GARY A. HARMON
		Gary A. Harmon Chief Financial Officer

EX-99.1

DECEMBER 8, 2005

Exhibit 99.1

2

Forward-Looking Statements

Forward-Looking Statements

Statements in this presentation, 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 factors and

uncertainties may be found in the Company's filing with the Securities and

Exchange Commission.

General information set forth in this presentation concerning market

conditions, sales data and trends in the U.S. carpet and rug markets are

derived from various public and, in some cases, non-public sources. 

Although

we

believe

such

data

and

information

to

be

accurate,

we

have

not

attempted to independently verify such information.

3

Carpet vs. Traditional Textile Industry

Carpet vs. Traditional Textile Industry

1.

Burlington (1), (2)

2.

J. P. Stevens (1), (2)

3.

West Point (1), (2)

4.

Springs (1)

5.

Cone (2)

6.

Cannon (2)

7.

UM & M (2)

8.

M. Lowenstein (1), (2)

9.

Dan River (1), (2)

10.

Collins & Aikman (1), (2)

11.

Fieldcrest (1), (2)

12.

Reigel (2)

13.

Graniteville (2)

14.

Avondale

15.

Bibb (2)

16.

Ti-Caro (2)

17.

Guilford Mills (2)

18.

Dixie Yarns (3)

18 Largest Public Textile Companies in 1980

1 -

In the carpet business at one time

2 -

Have gone through bankruptcy or no longer in business

3 -

Principally in floorcovering business today

4

Dixie Strategic Positioning

Dixie Strategic Positioning

•

Grew floorcovering business from 1993 and exited

textiles

in

1999

-

now

100%

floorcovering

•

Eight acquisitions from 1993 through 2000

•

Demise of factory-built housing industry and desire

to de-leverage led to the sale of our North Georgia

operations

•

Commitment to brands and upper-end market.

5

Dixie Today

Dixie Today

•

Profitable, growing company with strong

brands in the upper-end market

•

Strong Balance Sheet

•

Diversified Customer base

o

Top 20 carpet customers -

16% of total carpet

sales

o

Top 40 carpet customers -

20% of total carpet

sales

6

100

110

120

130

140

150

160

170

2001

2002

2003

2004

YTD Sept. 2005

Dixie

Industry

Began

Growth

Initatives

Dixie's Broadloom and Area Rug Carpet Sales have

Dixie's Broadloom and Area Rug Carpet Sales have

Outperformed the U.S. Carpet Market in Recent Years

Outperformed the U.S. Carpet Market in Recent Years

•

In 2002, Dixie grew at 1% while the market grew at 2.6%

•

2002 growth initiatives

•

In 2003 and 2004, Dixie grew 11% and 26%; respectively, while the carpet market

grew at an estimated 1% in 2003 and 9% for 2004

•

In

the

1

nine

months

of

2005,

Dixie

grew

at

14%

while

the

market

grew

at

9%

•

Total

sales

in

4

quarter

2005

expected

to

grow

6%

to

10%

compared

with

the

4

quarter 2004 levels

BROADLOOM AND AREA RUG CARPET SALES

Change Index (2001=Base Year)

2003 Sales

2003 Sales

Industry -

Industry -

$13.8 Billion

$13.8 Billion

Dixie -

Dixie -

$234 Million (1.7%)

$234 Million (1.7%)

th

st

th

7

High-End

Residential,

69%

High-End

Commercial,

31%

Dixie Carpet and Rug Sales by End Market

Dixie Carpet and Rug Sales by End Market

YTD Sept 2005

8

Residential Positioning of The Dixie Group

Residential Positioning of The Dixie Group

INDUSTRY

AVERAGE

PRICE/ SQ YD

$0

$7

$14

$21

$28

$35

$42

$49

Note:  Industry average price is based on sales

reported through industry sources.

Dixie Home

Fabrica

Masland

ESTIMATED TOTAL WHOLESALE MARKET

FOR CARPETS AND RUGS:

VOLUME AND PRICE POINTS

Positioning of Dixie Brands by Price Point Segment

BROADLOOM RESIDENTIAL SALES = $7.6 Billion

Excerpt

from

KSA

Study

dated

May

6,

2004,

Titled

"KSA

Assessment

of

Dixie's

Residential

and

Contract

Carpet

Businesses",

commissioned

by

The

Dixie

Group,

Inc.

9

Dixie High-End Residential Sales

Dixie High-End Residential Sales

Fabrica, 30%

Dixie Home,

26%

Masland, 44%

YTD Sept. 2005

10

Residential Positioning

Residential Positioning

•

Fabrica and Masland are among the most respected

brands in high-end residential carpet

•

Fabrica's

and Masland's

combined residential sales

are estimated to be about 35% of total U.S. industry

sales at $22.00 per SQ YD and higher

•

Dixie Home at $10-$20 per SQ YD

o

Provides access for Dixie to a larger sector of the

market

o

Helps Dixie become more important to upper-

middle & high-end customers

Excerpt

from

SKA

Study

dated

May

6,

2004,

Titled

"KSA

Assessment of Dixie's

Residential

and

Contract

Carpet

Businesses",

commissioned

by

The

Dixie

Group,

Inc.

11

Residential Broadloom -

Residential Broadloom -

Dixie Home

Dixie Home

•

Launched 2003

•

Fulfill market need for third player

o

Well-styled moderate to upper priced line

•

Leverage needed by fiber suppliers for market access

o

Branded

high-styled

goods

-

not

"me

too"

o

Support fiber suppliers' branded products

•

Selective distribution strategy attractive to retailers

•

Growth potential well above industry average

o

2005 -

33% to 36%

o

2006 -

22% to 28%

12

Retailers, 46%

Designer / To

The Trade

Showrooms,

24%

Builders, 21%

Masland Residential Sales

Masland Residential Sales

YTD Sept. 2005

13

Masland Residential

Masland Residential

•

Leading high-end brand with reputation for

development of products with innovative styling,

design and color

•

High-end retail/designer driven

•

Hand crafted and imported rugs

•

Growth initiative -

doubling product introductions to

increase market penetration

14

Decorators/

Design Trade,

43%

Retailers, 24%

Furniture/

Dept. Stores,

9%

Specialty,

17%

Fabrica Residential Sales

Fabrica Residential Sales

YTD Sept. 2005

15

Fabrica Residential

Fabrica Residential

•

Premium high-end brand

o

Leader in styling/patterns/color

•

Designer focused

•

Hand crafted and imported rugs

•

Growth in sales and profit since July 2000 acquisition

16

Corporate, 34%

Hospitality, 29%

Other, 6%

Store Planning,

9%

Retail Stores,

16%

Masland Contract Sales

Masland Contract Sales

Channels:  Interior Design Specifier and Commercial End User

YTD Sept. 2005

17

Masland Contract

Masland Contract

•

Good and growing position with premium brand

•

Designer focused

•

Strong national account base

•

Strong growth from new "Energy Collection"

•

KSA study -

identified potential opportunities

o

Invest in carpet tile

18

The Energy Line has Contributed Significantly

The Energy Line has Contributed Significantly

to this Strong Growth

to this Strong Growth

•

The Energy Line was started from the ground up in 2002 and generated over $13 million and

$22 million; respectively, in sales for Masland during 2003 and 2004

o

Approximately half is sold through our residential sales force and the other half is sold through our

contract sales force

•

Introduced 1 new product in 2005 and 5 new products in 2006

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

Q1

Q2

Q3

Q4

2002

2003

2004

2005

ENERGY LINES SALES

(Dollars in thousands)

19

Masland Contract has Performed Higher than

Masland Contract has Performed Higher than

the U.S. Commercial Carpet Market

the U.S. Commercial Carpet Market

•

1998 was a great year for Masland Contract, which grew 52% that year while the market only

grew 5%

•

From 1999 to 2002, Masland Contract performed at about the same rate as the market

•

In 2003, Masland Contract grew 8% while the market declined slightly

•

In 2004, Masland Contract grew 15% while the market grew 10%

•

In

the

1

QT

2005,

Masland

Contract

grew

16%

while

the

market

grew

10%

90

100

110

120

130

140

150

160

170

180

190

200

210

220

1997

1998

1999

2000

2001

2002

2003

2004

1Q

2005

Masland

Contract

Commercial

SPECIFIED COMMERCIAL CARPET SALES

CHANGE INDEX (1997 = Base Year)

st

20

Carpet Tile (Modular)

Carpet Tile (Modular)

•

Specified commercial market $2.6 billion

•

Total specified commercial market is significantly

depressed from its peak in 2000 and is expected to

grow faster than the overall carpet market

•

In 2004, carpet tile grew 18% while broadloom

commercial grew at 5%

•

Carpet tile is approximately 32% of the specified

commercial market and over 50% of the corporate

office market

21

Broadloom Carpet Raw Material

Broadloom Carpet Raw Material

•

65% to 70% of cost of broadloom carpet is raw material

•

Raw material includes fiber, yarn and backing materials which are almost 100%

petroleum based

•

Raw material prices affected by:

o

Changes in petroleum prices

o

Industry demand

•

Recovery of raw material cost increases

o

The industry has generally been successful passing major raw material increases

through to its customers

o

There tends to be a lag from the time costs increase until higher selling prices are

fully implemented, partially due to LIFO inventories

o

Longer-term major fiber cost increases are opportunities to recover other cost

increases and improve margins

•

Branded vs. unbranded fiber

o

Unbranded fiber generally used with lower-end products

o

Unbranded fiber self extruded

o

Branded fiber costs similar with all competitors

22

25.9%

25.3%

25.1%

24.3%

30.6%

34.1% (2)

34.1%

34.6%

31.9%

28.1% (1)

20.0%

25.0%

30.0%

35.0%

40.0%

2001

2002

2003

2004

YTD Sept.

2005

Gross Profit

Selling & Admin. Expense

Dixie Profit Margin, Sales and Administrative

Dixie Profit Margin, Sales and Administrative

Expenses as a % of Sales

Expenses as a % of Sales

(1) -

Launch Dixie Home business

(2) -

LIFO Liquidation -

increased gross profit by .8%

23

Dixie Sales Continuing Operations

Dixie Sales Continuing Operations

($ in millions)

($ in millions)

$194

$37

$197

$26

$217

$17

$274

$18 (1)

$195

$14

$221

$10

2001

2002

2003

2004

YTD Sept.

2004

YTD Sept.

2005

Carpet Sales

Yarn Sales

$231

$223

$234

$292

(1) -

Includes sales related to disposal of North GA operations

$209

$231

24

Dixie Operating Income

Dixie Operating Income

($ in millions)

($ in millions)

$14.0

$24.1

(1)

$2.8 (2)

$25.6

(3)

$17.0

(4)(5)

$14.4

(6)

2001

2002

2003

2004

YTD Sept.

2004

YTD Sept.

2005

(1) -

Includes $3.2 million net gains from the sale of facilities and

impairments

(2) -

Includes $11.4 million of impairments and charges

(3) -

Includes LIFO liquidation that increased operating income by $2.3 million in 2004

(4) -

Includes LIFO liquidation that increased operating income by $1.3 million YTD September 25, 2004

(5) -

LIFO reserve decreased $252 thousand YTD September 25, 2004

(6) -

LIFO reserve increased $2.1 million YTD September 24, 2005

25

Dixie Capital Structure

Dixie Capital Structure

($ in millions)

($ in millions)

43%

Total Debt

11%

Subordinated Debt

32%

Senior Debt

Debt to Total Capitalization:

$ 214.3

Total Capitalization

121.2

Equity

$   93.1

24.7

Subordinated Debt

$   68.4

Senior Debt

Sept 24, 2005

Debt:

26

Third QT 2005

Third QT 2005

•

Rapid growth increased complexity and overtaxed manufacturing and

distribution capabilities

o

Carpet sales growth:

•

4

QT

2003………

22%

•

Year

2004…………

26%

•

1

&

2

QT

2005…18%

o

3

rd

QT 2004 sales up 5% from prior QT and 26% from prior YR.

o

Expected

similar

growth

in

3

rd

QT

2005

o

3

rd

QT

2005

sales

down

7%

from

prior

QT

and

only

up

5%

from

prior

YR.

o

Extremely

high

levels

of

order

entry

in

April

2005

-

up

over

50%

•

Cost increased in 3

rd

QT 2005

o

Added associates, lengthened operating schedules and increased

outsourcing to improve customer service

o

Completed staffing and movement of inventory into two new distribution

centers

o

Began installing modular/carpet tile equipment.

o

Natural gas cost up 25% VS prior Yr.

o

Tropical storm and two hurricanes interrupted order entry, manufacturing

and distribution.

th

st

nd

27

Third QT 2005

Third QT 2005

•

Growth impact

o

Overran operational capabilities

o

Delayed product introductions

o

Significantly increased cost

o

Poorer service

o

Higher levels of off-quality

o

Samples delayed

•

Changes made

o

Management

o

Adding tufting in North Georgia

•

Simplify operations

•

Improve quality

•

Improve service

•

Lower costs

•

Expected effect

o

Attain

historical

levels

of

performance

-

last

half

2006

-

2007

o

Continue growth above industry average

28

FOCUS

FOCUS

•

High-end residential carpet and rugs

o

Price

points

2

½

to

5

times

industry

average

•

Commercial carpet

o

Industry rebounding from depressed levels

o

Growing faster than the industry

o

Expanding into modular/carpet tiles

•

Growth above industry average:

o

Marketing and product driven internal growth

o

Continuous development of stylish differentiated products

o

Grow upper-end at Home Depot and Lowe's

•

Support customers with selective distribution strategy

•

Partner with raw material suppliers

o

Support fiber brands

•

Strong balance sheet

•

In 2005, invested in assets to support future growth