The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the second quarter and six months ended June 27, 2009. For the second quarter of 2009, the Company reported a loss from continuing operations of $984,000, or $0.08 per diluted share, compared with income from continuing operations of $1,283,000, or $0.10 per diluted share, for the second quarter of 2008. Sales for the second quarter of 2009 were $52,572,000, down 32% from $77,155,000 in the year-earlier quarter.

For the six months ended June 27, 2009, the loss from continuing operations was $36,425,000, or $2.97 per diluted share, compared with income from continuing operations of $1,365,000, or $0.11 per diluted share for the first half of 2008. Sales for the year-to-date period in 2009 were $100,211,000, down 32% from $147,877,000 reported in the prior-year period.

Results for the second quarter of 2009 were affected by $117,000 of pre-tax costs for facility consolidations and severance expenses related to the implementation of the Company’s cost-reduction plans. Lower inventories in 2009 resulted in liquidations of LIFO inventory carried at lower costs established in prior years, increasing pre-tax income by $1,020,000 for the second quarter and first six months of 2009. Results for the first half of 2009 were also affected by the write-off of the Company's remaining goodwill, together with facility consolidation and severance expenses. For the first half of 2009 these expenses aggregated $33,138,000, of which $31,406,000 were non-cash.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "In the second quarter, we experienced the normal seasonal increase in business, with sales up 10% over first quarter levels; however, market weakness continues, and we are not sure when to expect volumes to improve.

“The actions taken to reduce costs in 2008 and 2009 have resulted in 25% fewer associates and approximately $15 million in cost reductions, which has had a positive impact on our second quarter results; however, at current business activity levels, we need to reduce expenses further in order to become profitable.

“To achieve this objective, we are embarking on a realignment of our organizational structure, which will result in additional cost reductions in the third and fourth quarters. These actions are intended to reduce expenses by approximately $8.0 to $10.0 million for 2010 from current levels.

“We will combine our three residential carpet units into one business with three distinct brands. As a result, our residential business will be organized much like our commercial carpet business and more like the rest of the industry.

“Under the new structure, Kennedy Frierson will become Chief Operating Officer of the Company with responsibility for all sales and manufacturing. Paul Comiskey will assume leadership of residential sales and marketing, and Ken Dempsey will continue leading commercial sales and marketing.

“The new structure should enable us to improve our responsiveness to customers’ changing needs and market conditions as well as enhance our operating capability, while significantly reducing costs. We will continue to build and invest in our brands – Masland Residential, Fabrica, Dixie Home, Masland Contract, and Whitespace; each has a distinct character and each is designed to appeal to and attract different customers.

“Gary Harmon has announced his plans to retire as Chief Financial Officer at the end of third quarter. He has agreed to be a consultant to Dixie for a two-year period following his retirement and will be replaced by Jon Faulkner, who currently serves as Vice President – Planning and Development. Jon will continue to be responsible for strategic planning in addition to his new duties as Chief Financial Officer.

“David Polley, Vice President – Marketing, will be retiring from Dixie in the fourth quarter,” Frierson concluded.

The Company’s loss from discontinued operations was $83,000, or $0.01 per diluted share, for the second quarter of 2009, compared with income from discontinued operations of $3,000, or $0.00 per diluted share, for the second quarter of 2008. Including discontinued operations, the Company reported a net loss of $1,067,000, or $0.09 per diluted share, for the second quarter of 2009 compared with net income of $1,286,000, or $0.10 per diluted share, for the year-earlier period. For the first half of 2009, the Company's loss from discontinued operations was $199,000, or $0.02 per diluted share, compared with a loss of $66,000, or $0.01 per diluted share, in the prior-year period. Including discontinued operations and the aforementioned unusual costs, the Company reported a net loss of $36,624,000, or $2.99 per diluted share, for the first six months of fiscal 2009 compared with net income of $1,299,000, or $0.10 per diluted share, for the year-earlier period.

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 July 29, 2009. A replay will be available approximately two hours later and will continue for approximately 30 days. If Internet access is unavailable, a listen-only telephonic conference will be available by dialing (913) 312-1449 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 4102781 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, Dixie Home and Whitespace brands.