<PAGE>
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 September 27, 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
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 October 28, 1997
Common Stock, $3 Par Value 10,521,163 shares
Class B Common Stock, $3 Par Value 735,228 shares
Class C Common Stock, $3 Par Value 0 shares
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THE DIXIE GROUP, INC 2
INDEX
Part I. Financial Information: Page No.
Consolidated Condensed Balance Sheets --
September 27, 1997 and December 28, 1996 3
Consolidated Statements of Income --
Three Months Ended September 27, 1997
and September 28, 1996 5
Consolidated Statements of Income --
Nine Months ended September 27, 1997
and September 28, 1996 6
Consolidated Condensed Statements of Cash Flows --
Nine Months Ended September 27, 1997
and September 28, 1996 7
Notes to Consolidated Condensed Financial Statements 9
Management's Discussion and Analysis of Results of
Operations and Financial Condition 12
Part II. Other Information:
Item 6 - Exhibits and Reports on Form 8-K 15
<PAGE>
PART I - ITEM 1 3
FINANCIAL INFORMATION
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
September 27, December 28,
1997 1996
_____________ ____________
(dollar amounts in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,096 $ 1,988
Accounts receivable (less allowance for
doubtful accounts of $3,209 in 1997
and $3,614 in 1996) 30,426 14,628
Inventories 94,873 93,226
Assets held for sale 10,000 10,350
Other 7,801 10,520
_____________ ____________
TOTAL CURRENT ASSETS 145,196 130,712
PROPERTY, PLANT AND EQUIPMENT 352,668 338,573
Less accumulated amortization and
depreciation 195,533 182,797
_____________ ____________
NET PROPERTY, PLANT AND EQUIPMENT 157,135 155,776
INTANGIBLE ASSETS (less accumulated
amortization of $7,911 in 1997
and $6,928 in 1996) 44,057 31,611
OTHER ASSETS 10,677 10,036
_____________ ____________
TOTAL ASSETS $ 357,065 $ 328,135
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
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THE DIXIE GROUP, INC. 4
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
September 27, December 28,
1997 1996
_____________ ____________
(dollar amounts in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 35,464 $ 31,473
Accrued expenses 32,246 24,338
Current portion of long-term debt 5,131 2,641
_____________ ____________
TOTAL CURRENT LIABILITIES 72,841 58,452
LONG-TERM DEBT
Senior indebtedness 41,904 34,036
Subordinated notes 50,000 50,000
Convertible subordinated debentures 42,282 44,782
_____________ ____________
TOTAL LONG-TERM DEBT 134,186 128,818
OTHER LIABILITIES 8,960 9,555
DEFERRED INCOME TAXES 23,112 22,760
STOCKHOLDERS' EQUITY
Common Stock - issued and outstanding,
13,960,262 shares in 1997 and
13,876,826 shares in 1996 41,881 41,630
Class B Common Stock - issued and
outstanding, 735,228 shares in 1997
and 1996 2,206 2,206
Common Stock subscribed 1,366 1,348
Additional paid-in capital 132,785 132,475
Stock subscriptions receivable (2,388) (2,190)
Retained earnings 528 (8,766)
Minimum pension liability adjustment (2,668) (2,668)
_____________ ____________
173,710 164,035
Less Common Stock in treasury at cost -
3,439,099 shares in 1997 and
3,409,872 shares in 1996 55,744 55,485
_____________ ____________
TOTAL STOCKHOLDERS' EQUITY 117,966 108,550
_____________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 357,065 $ 328,135
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
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THE DIXIE GROUP, INC. 5
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
______________________________
September 27, September 28,
1997 1996
_____________ _____________
(dollar amounts in thousands,
except per share data)
Net sales $ 159,940 $ 145,400
Cost of sales 133,804 120,442
_____________ _____________
GROSS PROFIT 26,136 24,958
Selling and administrative
expenses 18,139 16,824
Other expense - net 606 1,682
_____________ _____________
INCOME BEFORE INTEREST AND TAXES 7,391 6,452
Interest expense 2,798 2,920
_____________ _____________
INCOME BEFORE INCOME TAXES 4,593 3,532
Income tax provision 1,581 1,502
_____________ _____________
NET INCOME $ 3,012 $ 2,030
_____________ _____________
_____________ _____________
Net income per common
and common equivalent
share:
Primary $ .25 $ .18
Fully-diluted $ .25 $ .18
See Notes to Consolidated Condensed Financial Statements.
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THE DIXIE GROUP, INC. 6
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended
______________________________
September 27, September 28,
1997 1996
_____________ _____________
(dollar amounts in thousands,
except per share data)
Net sales $ 491,463 $ 474,882
Cost of sales 408,283 395,235
_____________ _____________
GROSS PROFIT 83,180 79,647
Selling and administrative
expenses 56,668 57,430
Other expense - net 1,963 6,662
_____________ _____________
INCOME BEFORE INTEREST AND TAXES 24,549 15,555
Interest expense 9,417 10,702
_____________ _____________
INCOME BEFORE INCOME TAXES 15,132 4,853
Income tax provision 5,839 2,494
_____________ _____________
NET INCOME $ 9,293 $ 2,359
_____________ _____________
_____________ _____________
Net income per common
and common equivalent
share:
Primary $ .79 $ .21
Fully-diluted $ .76 $ .21
See Notes to Consolidated Condensed Financial Statements.
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THE DIXIE GROUP, INC. 7
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
______________________________
September 27, September 28,
1997 1996
_____________ _____________
(dollar amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,293 $ 2,359
Depreciation and amortization 18,531 21,561
Benefit for deferred income
taxes (458) (154)
Gain on property, plant and
equipment (335) (354)
_____________ _____________
27,031 23,412
Changes in operating assets and
liabilities, net of effects
of business combination (1,801) 21,523
_____________ _____________
NET CASH PROVIDED BY
OPERATING ACTIVITIES 25,230 44,935
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of
property, plant and equipment 1,604 23,590
Purchase of property, plant and
equipment (15,661) (11,972)
Net cash paid in business
combination (19,046) -0-
_____________ _____________
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (33,103) 11,618
See Notes to Consolidated Condensed Financial Statements.
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THE DIXIE GROUP, INC. 8
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
- CONTINUED
(UNAUDITED)
Nine Months Ended
______________________________
September 27, September 28,
1997 1996
_____________ _____________
(dollar amounts in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in
credit line borrowings 9,839 (55,675)
Payments on term-loan (1,875) (1,875)
Other 17 (226)
_____________ _____________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 7,981 (57,776)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 108 (1,223)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,988 3,413
_____________ _____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,096 $ 2,190
_____________ _____________
_____________ _____________
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 9,602 $ 11,397
_____________ _____________
_____________ _____________
Income taxes paid, net of
tax refunds received $ 2,159 $ (589)
_____________ _____________
_____________ _____________
See Notes to Consolidated Condensed Financial Statements.
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THE DIXIE GROUP, INC. 9
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 and nine months ended September 27, 1997
are not necessarily indicative of the results that may be expected for the
entire year.
NOTE B - INVENTORIES
Inventories are summarized as follows:
September 27, December 28,
1997 1996
_____________ ____________
(dollar amounts in thousands)
At current cost
Raw materials $ 20,376 $ 20,276
Work-in-process 24,795 26,294
Finished goods 55,087 54,109
Supplies, repair parts
and other 3,775 4,000
_____________ ____________
104,033 104,679
Excess of current cost
over LIFO value (9,160) (11,453)
_____________ ____________
$ 94,873 $ 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, calculations of "basic earnings
per share" replaces "primary earnings per share" and "diluted earnings per
share" replaces "fully diluted earnings per share". The basic calculation
excludes the effect of stock options and stock equivalents. The dilutive
calculation uses the average stock price for the period, rather than the
quarter end price if higher, to determine the dilutive effect of stock
options and stock equivalents. The restated basic earnings per share is
expected to result in an increase over primary earnings per share for the
quarter and nine months ended September 27, 1997 of $.02 per share and $.04
per share, respectively. The restated diluted earnings per share is
expected to result in no change compared with the fully diluted earnings
<PAGE>
10
per share for the quarter ended September 27, 1997 and is expected to
result in an increase of $.03 per share for the nine months ended September
27, 1997.
NOTE D - DEBT AND CREDIT ARRANGEMENTS
The Company's available unused borrowing capacity under revolving credit
facilities was $66,414 at September 27, 1997. As of November 7, 1997, the
Company's unused available debt capacity was $36,655 under the credit line
and includes the change in availability after the recent acquisition.
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 September 27, 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 Nine months
ended ended
Sept 28, 1996 Sept 28, 1996
Net sales $156,325 $507,994
Income from continuing operations 2,749 4,844
Net income 2,749 4,844
Per common and common equivalent share:
Income from continuing operations .25 .43
Net income .25 .43
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11
NOTE F - SUBSEQUENT EVENT
On October 2, 1997, the Company acquired the needlebond and artificial turf
assets and business of General Felt Industries based in Dalton, Georgia for
approximately $41.0 million. The acquired business will be merged with the
Company's Bretlin floorcovering operation serving selected needlebond and
artificial turf markets.
<PAGE>
PART I - ITEM 2 12
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 acquired the assets and business of Danube Carpet Mills, Inc.
at the beginning of fiscal 1997. The results for 1997 include the effects
of the Danube acquisition.
Following the end of the most recent quarter, on October 2, 1997, the
Company acquired the needlebond and artificial turf assets and business of
General Felt Industries. The acquired business will be merged with the
Company's Bretlin floorcovering operation serving selected needlebond and
artificial turf markets.
For the quarter ended September 27, 1997, the Company reported net income
of $3.0 million, or $.25 per share, on sales of $159.9 million,
representing an increase of 50% over the third quarter 1996 net income of
$2.0 million, or $.18 per share, on sales of $145.4 million. Excluding
sales from the Company's Thread Business, which was sold in June 1996,
third quarter 1997 sales were up over the corresponding 1996 quarter by
$19.3 million, or 13.8%.
For the first nine months of 1997, the Company's net income was $9.3
million, or $.76 per share, on sales of $491.5 million. The year to date
net income represents a significant increase over the comparable 1996
period's net income of $2.4 million, or $.21 per share, on sales of $474.9
million. Excluding sales from the Thread Business, year to date 1997 sales
were up $65.0 million, or 15.3%.
The Company's third quarter and year to date 1997 interest expense is lower
than the 1996 comparable periods as a result of lower interest rates and
lower debt levels due to improved operating cash flows. Additionally, the
Company's effective tax rate for the third quarter and first nine months of
1997 was lower than 1996 due primarily to tax effects realized in the third
quarter of 1997 from the utilization of net operating loss carrybacks to
periods when higher rates were in effect.
<PAGE>
13
The following table reflects selected operating data (in millions of
dollars) relating to the two business segments of the Company:
Floorcovering Business and Textile/Apparel Business.
Quarter Ended Nine Months Ended
Sept 27, Sept 28, Sept 27, Sept 28,
1997 1996 1997 1996
SALES
Floorcovering $107.2 $ 93.3 $318.5 $277.5
Textile/Apparel 53.0 52.6 173.8 200.1
Intersegment elimination (0.3) (0.5) (0.8) (2.7)
Total sales $159.9 $145.4 $491.5 $474.9
OPERATING PROFIT
Floorcovering $ 6.9 $ 7.4 $ 23.9 $ 18.3
Textile/Apparel 2.1 0.2 6.8 1.2
Total operating profit $ 9.0 $ 7.6 $ 30.7 $ 19.5
Sales in the Company's Floorcovering Business for the quarter and nine
months ended September 27, 1997 were up 15% over the corresponding periods
in 1996. Operating profits in the Company's Floorcovering Business for the
first nine months of 1997 were up $5.6 million over the same period in 1996
but did reflect a decline in the most recent quarter against the previous
two quarters in 1997 and the third quarter of 1996. The decline was due to
market sluggishness and price pressures experienced in certain
floorcovering markets and costs associated with acquisition consolidations.
Excluding Threads, sales in the Company's Textile/Apparel Business were up
for the quarter and nine months ended September 27, 1997 over the 1996
periods by 11.0% and 14.8%, respectively. Textile/Apparel operating
profits in the quarter ended September 27, 1997 reflected an increase of
$1.9 million over the comparable period in 1996. The year to date
operating profit of $6.8 million compared with an operating loss of $.5
million, excluding Threads, for the first nine months of 1996. The
favorable operating earnings in the 1997 periods reflect the effects of
stronger product demand and lower costs of manufacturing.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1997, the Company's debt increased $7.9
million. The increase resulted from $19.0 million expended in connection
with the acquisition of Danube in the first quarter and $15.7 million in
year to date capital expenditures net of $25.2 million provided by
operating activities and $1.6 million from miscellaneous asset sales during
the first nine months. Since the end of the first quarter of 1997, debt
has decreased $22.3 million through September 27, 1997. Cash generated
from operating activities, including a decrease of $17.9 million in working
capital requirements (due primarily to inventory reductions), was used to
reduce debt. On October 2, 1997, the needlebond and turf assets and
business of General Felt Industries were acquired for approximately $41.0
million. This acquisition was financed under the Company's revolving
credit facility.
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14
The Company's available unused borrowing capacity under revolving credit
facilities was $66.4 million at September 27, 1997. As of November 7,
1997, the Company's unused available debt capacity was $36.7 million under
the credit line and includes the change in availability after the recent
acquisition.
PENDING ACCOUNTING PRONOUNCEMENTS
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, calculations of "basic earnings
per share" replaces "primary earnings per share" and "diluted earnings per
share" replaces "fully diluted earnings per share". The basic calculation
excludes the effect of stock options and stock equivalents. The dilutive
calculation uses the average stock price for the period, rather than the
quarter end price if higher, to determine the dilutive effect of stock
options and stock equivalents. The restated basic earnings per share is
expected to result in an increase over primary earnings per share for the
quarter and nine months ended September 27, 1997 of $.02 per share and $.04
per share, respectively. The restated diluted earnings per share is
expected to result in no change compared with the fully diluted earnings
per share for the quarter ended September 27, 1997 and is expected to
result in an increase of $.03 per share for the nine months ended September
27, 1997.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information".
The Statement is effective for fiscal 1998 and includes provisions
requiring companies to report segment information using a "management
approach", which modifies the required disclosures and business
segmentation approach used in a company's public financial statements.
Statement No. 131 will not have any effect on the consolidated results of
operations or financial condition of the Company. The Company has not made
a final determination as to whether compliance with the Statement will
require changes in its current business segmentation for financial
reporting purposes.
<PAGE>
PART II. OTHER INFORMATION 15
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibits Incorporated by Reference
None.
(ii) Exhibits Filed with this Report
(4) Second Amendment dated September 7, 1997 to the
Third Amended and Restated Credit Agreement dated
March 31, 1995.
(11) Statement re: Computation of Earnings Per Share.
(b) Reports on Form 8-K
Current Report on Form 8-K dated August 29, 1997 reporting the
execution of an Asset Purchase Agreement with Foamex L. P. under
which the Company acquired the Dalton, Georgia based business of
General Felt Industries, Inc.
<PAGE>
16
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)
November 10, 1997
____________________
(Date)
/s/GLENN A. BERRY
__________________________
Glenn A. Berry
Executive Vice President and
Chief Financial Officer
/s/D. EUGENE LASATER
__________________________
D. Eugene Lasater
Controller
<PAGE>
QUARTERLY REPORT ON FORM 10-Q 17
ITEM 6(a)
EXHIBITS
QUARTER ENDED SEPTEMBER 27, 1997
THE DIXIE GROUP, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4) Second Amendment dated Filed herewith.
September 7, 1997 to
the Third Amended and
Restated Credit Agreement
dated March 31, 1995.
(11) Statement re: Computation Filed herewith.
of Earnings Per Share.
<PAGE>
EXHIBIT 4
THE DIXIE GROUP, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of September 7,
1997 (this "AMENDMENT"), and effective as of the Effective Date (as such
term is defined below) is entered into by and among THE DIXIE GROUP, INC.,
a Tennessee corporation, formerly known as Dixie Yarns, Inc. (referred to
herein as the "BORROWER"), SUNTRUST BANK, ATLANTA (formerly known as Trust
Company Bank), a Georgia banking corporation, individually and as Agent (in
such capacity, the "AGENT"), NATIONSBANK, N.A. (formerly known as
NationsBank, N.A. (Carolinas)), a national banking association,
individually and as Lead Manager and THE CHASE MANHATTAN BANK, a New York
banking corporation, as successor by merger to Chemical Bank (collectively,
the "LENDERS").
WITNESSETH:
WHEREAS, the Borrower, the Agent and the Lenders are parties to a
certain Third Amended and Restated Credit Agreement dated as of March 31,
1995, as amended by that certain Waiver and First Amendment to Credit
Agreement dated as of February 26, 1996 (as amended, the "CREDIT
AGREEMENT;" all terms used herein without definition shall have the
meanings set forth in the Credit Agreement) wherein the Lenders extended to
the Borrower certain loan facilities;
WHEREAS, the Borrower has requested that the Lenders amend the Credit
Agreement to modify a certain financial covenant;
WHEREAS, Lenders have agreed to such amendment on the terms and
conditions set forth herein;
WHEREAS, the parties wish to amend the Credit Agreement to reflect
these agreements, all upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, for and in consideration of the mutual premises
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. Section 9.11 of the Credit Agreement is hereby amended by deleting
subsection (a) thereof in its entirety and substituting the following
subsection (a) in lieu thereof:
<PAGE>
EXHIBIT 4
THE DIXIE GROUP, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT - CONTINUED
"(a) TOTAL DEBT TO TOTAL CAPITALIZATION. Its ratio of Total Debt to
Total Capitalization as of the last day of any fiscal quarter of the
Borrower occurring during the periods set forth below to be greater than
the ratio (expressed as a percentage) set forth opposite such period:
PERIOD RATIO
Closing Date through the last day of
fiscal year 1996 65%
First day of fiscal year 1997 through
the last day of fiscal year 1997 65%
First day of fiscal year 1998 through
the last day of fiscal year 1998 62.5%
First day of fiscal year 1999 through
the last of fiscal year 1999 60.0%
First day of fiscal year 2000 and
thereafter 57.5%."
2. The Borrower hereby agrees that nothing herein shall constitute a
waiver by the Lenders of any Default or Event of Default, whether known or
unknown, which may now exist or which may hereafter exist under the Credit
Agreement. The Borrower represents and warrants to the Agent and the
Lenders that as of the date hereof, no Default or Event of Default exists
pursuant to the Credit Agreement which is not expressly waived herein.
3. Except as expressly amended and modified herein, all terms, covenants
and provisions of the Credit Agreement shall remain unaltered and in full
force and effect, and the parties hereto do expressly ratify and confirm
the Credit Agreement as modified herein. As of the Effective Date, all
future references to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
4. Borrower agrees to pay on demand all reasonable costs and expenses of
the Agent in connection with the preparation, execution and delivery of
this Amendment, including, without limitation, the reasonable fees and out-
of-pocket expenses of counsel for the Agent with respect hereto and with
respect to advising the Agent as to its rights and responsibilities
hereunder.
5. This Amendment shall become effective as of September 1, 1997 (the
"EFFECTIVE DATE") on the first day when this Amendment shall have been
executed by the Borrower and the Required Lenders and delivered to the
Agent in its office in Atlanta, Georgia.
6. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, their respective heirs, successors, successors-in-title,
and assigns.
7. This Amendment shall be governed by and construed in accordance with
the laws of the State of Georgia.
<PAGE>
EXHIBIT 4
THE DIXIE GROUP, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT - CONTINUED
8. This Amendment sets forth the entire understanding of the parties with
respect to the matters set forth herein, and shall supersede any prior
negotiations or agreements, whether written or oral, with respect hereto.
9. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts and may be delivered by
telecopier. Each counterpart so executed and delivered shall be deemed an
original and all of which taken together shall constitute but one and the
same instrument.
<PAGE>
EXECUTED AND DELIVERED by the duly authorized officers of the parties
hereto under seal as of the day and year first above written.
(CORPORATE SEAL) THE DIXIE GROUP, INC., formerly
known as DIXIE YARNS, INC.
By:/s/GARY A. HARMON
Title: Treasurer
Attest:/s/STARR T. KLEIN
Title: Secretary
SUNTRUST BANK, ATLANTA (formerly
known as Trust Company Bank),
individually and as Agent
By:/s/BRADLEY J. STAPLES
Title: Assistant Vice President
By:/s/DAVID W. PENTER
Title: Group Vice President
NATIONSBANK, N.A. (formerly known
as NationsBank, N.A. (Carolinas)),
individually and as Lead Manager
By:/s/DAVID H. DINKINS
Title: Vice President
THE CHASE MANHATTAN BANK, as
successor by merger to Chemical
Bank
By:/s/STEPHANIE PARKER
Title: Assistant Vice President
<PAGE>
EXHIBIT 11
THE DIXIE GROUP, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
___________________ ___________________
Sept 27, Sept 28, Sept 27, Sept 28,
1997 1996 1997 1996
________ ________ ________ ________
PRIMARY:
NET INCOME $ 3,012 $ 2,030 $ 9,293 $ 2,359
________ ________ ________ ________
________ ________ ________ ________
Weighted average number of
Common Shares outstanding
assuming conversion of
Class B Common Stock 11,253 11,202 11,219 11,200
Net effect of dilutive stock
options based on the
treasury stock method using
average market price 615 4 360 4
Net effect of stock
subscriptions based on
the treasury stock method
using average market price 255 -0- 189 -0-
________ ________ ________ ________
TOTAL SHARES 12,123 11,206 11,768 11,204
________ ________ ________ ________
________ ________ ________ ________
PER SHARE AMOUNT $ .25 $ .18 $ .79 $ .21
________ ________ ________ ________
________ ________ ________ ________
FULLY DILUTED:
Net income $ 3,012 $ 2,030 $ 9,293 $ 2,359
After-tax interest
requirement of
convertible subordinated
debentures (A) -0- -0- -0- -0-
________ ________ ________ ________
ADJUSTED NET INCOME $ 3,012 $ 2,030 $ 9,293 $ 2,359
________ ________ ________ ________
________ ________ ________ ________
<PAGE>
EXHIBIT 11
THE DIXIE GROUP, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - CONTINUED
Three Months Ended Nine Months Ended
___________________ ___________________
Sept 27, Sept 28, Sept 27, Sept 28,
1997 1996 1997 1996
________ ________ ________ ________
FULLY DILUTED - CONTINUED:
Weighted average number of
Common Shares outstanding
assuming conversion of
Class B Common Stock 11,253 11,202 11,219 11,200
Net effect of dilutive stock
options based on the
treasury stock method using
quarter end market price
if higher than the average
market price 715 5 710 5
Net effect of stock
subscriptions based on the
treasury stock method using
quarter end market price
if lower than the average
market price 280 -0- 278 -0-
Net effect of conversion of
convertible subordinated
debentures (A) -0- -0- -0- -0-
________ ________ ________ ________
TOTAL SHARES 12,248 11,207 12,207 11,205
________ ________ ________ ________
________ ________ ________ ________
PER SHARE AMOUNT $ .25 $ .18 $ .76 $ .21
________ ________ ________ ________
________ ________ ________ ________
(A) Conversion of convertible subordinated debentures to 1,391 shares
with an after-tax interest requirement of $473 for the three months ended
September 27, 1997 and September 28, 1996, respectively and of $1,418 for
the nine months ended September 27, 1997 and September 28, 1996,
respectively has been excluded from computation since the effect was anti-
dilutive.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE DIXIE GROUP, INC. AT
AND FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 2,096
<SECURITIES> 0
<RECEIVABLES> 33,635
<ALLOWANCES> 3,209
<INVENTORY> 94,873
<CURRENT-ASSETS> 145,196
<PP&E> 352,668
<DEPRECIATION> 195,533
<TOTAL-ASSETS> 357,065
<CURRENT-LIABILITIES> 72,841
<BONDS> 134,186
<COMMON> 44,087
0
0
<OTHER-SE> 73,879
<TOTAL-LIABILITY-AND-EQUITY> 357,065
<SALES> 491,463
<TOTAL-REVENUES> 491,463
<CGS> 408,283
<TOTAL-COSTS> 408,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,417
<INCOME-PRETAX> 15,132
<INCOME-TAX> 5,839
<INCOME-CONTINUING> 9,293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,293
<EPS-PRIMARY> .79
<EPS-DILUTED> .76
</TABLE>
