SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $3.00 Par Value
(Title of Class)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
-Continued-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Continued)
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 10, 2000: Common Stock - $48,617,014; Class B
Common Stock - No market exists for the shares of Class B Common Stock, which
is neither registered under Section 12 of the Act nor subject to section 15(d)
of the Act.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable date.
Class Outstanding as of March 10, 2000
Common Stock, $3.00 Par Value 10,748,503 shares
Class B Common Stock, $3.00 Par Value 795,970 shares
Class C Common Stock, $3.00 Par Value 0 shares
Documents Incorporated By Reference
Specified portions of the following document are incorporated by reference:
Proxy Statement of the registrant for annual meeting of shareholders to be held
May 4, 2000 (Part III).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Prior to 1993, the Company's business consisted of yarn, thread, and fabrics
sold to industrial manufacturers. All products required further processing by
the Company's customers before reaching the final consumers. The principal
markets served were home furnishings, textile related industrial markets,
transportation, and apparel. A component of the Company's yarn business was
Candlewick Yarns, a supplier of yarn to carpet and rug manufacturers serving
various markets in the floorcovering industry. The Company's total sales in
1992 were $470 million.
In 1993, the Company embarked on a strategic plan to divest itself of those
textile assets which were considered to limit return potential to its
shareholders and to redeploy assets into the floorcovering industry utilizing
its strengths in product offerings and development through Candlewick as a
value base.
From 1993 through 1998, the Company either sold or closed the majority of its
textile related operations. In the second quarter of 1999, the Company
finalized the sale of its specialty yarns operations, completing the disposal
of its textile products business segment. The textile products operations were
accounted for as discontinued operations since 1998.
During the same period of textile related asset divestitures, the Company
invested in floorcovering related assets with the acquisitions of Carriage
Carpets, Bretlin Carpets and Masland Carpets in 1993, RHS Carpet Mills in 1994,
Danube Carpet Mills and certain carpet assets of General Felt Industries in
1997, and Ideal Fibers in late 1998. In January 1999, the Company acquired the
assets and assumed certain liabilities of Multitex Corporation of America,
Inc., a manufacturer who sells carpet under the name Globaltex, and acquired
the carpet assets of Graphic Tec, Inc.
Sales for 1999 were $569.5 million for continuing operations which consists of
the Company's floorcovering businesses. Results for the textile related
businesses were reclassified to discontinued operations in the Company's
financial statements for the periods presented. Entering 2000, the strategic
repositioning to a floorcovering company is expected to provide greater return
potential to the Company's shareholders. Approximately 80 percent of the
Company's dollar sales volume relate to products that are used by consumers
without further processing.
THE INDUSTRY INFORMATION - The carpet and rug industry has two primary markets,
residential and commercial, with the residential market making up the largest
portion of the industry's sales. A substantial portion of industry shipments
is made in response to replacement demand. Residential products consist of
broadloom carpets, rugs, and bathmats in a broad range of styles, colors, and
textures. Commercial products consist primarily of broadloom carpets for a
variety of institutional applications such as office buildings, restaurant
chains, schools and other commercial establishments. The carpet industry also
manufactures carpet for the automotive, recreational vehicle, and small boat
industries.
The Carpet and Rug Institute ( the "CRI") is the national trade association
representing carpet and rug manufacturers. Based on information compiled by
the CRI, the domestic carpet and rug industry is composed of less than 100
manufacturers of which the top three account for over 75% of the industry's
production. The carpet industry has undergone substantial consolidation at the
manufacturing level in recent years. The Company believes the consolidations
provide opportunities in selected markets where styling, product
differentiation, and focused service can add value to selected customers.
<PAGE>
THE COMPANY'S BUSINESSES - The Company's businesses are segmented between
Carpet Manufacturing and Floorcovering Base Materials (See Note M in the
Company's 1999 Consolidated Financial Statements for quantitative segment
information). The products of each segment serve carpet and rug markets in the
floorcovering industry.
The Company's Carpet Manufacturing segment is viewed as a manufacturing,
selling, marketing, and distribution resource pool with a wide range of
capabilities to serve selected markets with a variety of products. The
products are sold in roll or piece goods with a breadth of textures, colors and
designs. Products in the Carpet Manufacturing segment, although marketed for
diverse applications under different marketing names, are manufactured by
similar techniques and are sold through wholesale distribution channels.
Businesses in the Company's Carpet Manufacturing segment are described below.
Masland Carpets is a manufacturer of specialty carpets and rugs for the
high-end residential and commercial marketplaces. Masland's products are
marketed to the architectural and interior design community and specialty
floorcovering showrooms. Masland competes in each of these markets through
quality, service, and innovation in styling and product design. Masland's
business includes a product line designed to cater to value oriented commercial
customers where style, design, and quality are required. Masland's product
lines are marketed by its own sales force.
Carriage Industries is a carpet manufacturer supplying tufted broadloom carpet
for customers of the manufactured/modular housing, recreational vehicle, van
conversion, and exposition trade show industries. Carriage creates specialty
products geared to specifications that maximize efficiency and minimize waste
for their customers with a just-in-time delivery approach through its own
trucking fleet. The acquisition of Danube Carpet Mills increased Carriage's
sales in the manufactured housing and recreational vehicle industries and
provided the opportunity to be more competitive by expanding its core business.
Carriage's product lines are marketed by a staff of salaried sales personnel.
Bretlin is a manufacturer of tufted broadloom carpet, indoor/outdoor needlebond
carpet and runners, floormats, decorative accent rugs, commercial/industrial
polypropylene needlebond carpet, and synthetic fiber cushion. Its products are
marketed to home centers, mass merchants, floorcovering groups or co-ops,
distributors, and independent floorcovering retailers. The needlebond and
artificial turf assets and business acquired from General Felt Industries in
October 1997 are complementary to Bretlin's previously existing manufacturing
capabilities and product lines. The acquisition of Multitex and Graphic Tec in
January 1999 strengthened and expanded Bretlin's position in the home center
markets. High service standards in terms of speed and accuracy in filling
orders for its customers are key competitive factors for Bretlin. Products of
Bretlin are marketed primarily through its own sales force, and to a lesser
extent, through commission sales representatives.
The Company's Floorcovering Base Materials segment includes Candlewick Yarns
and the filament yarn extrusion assets of Ideal Fibers, which were acquired in
a start-up phase in the fourth quarter of 1998. Ideal operates as a component
of Candlewick. The Base Materials group produces yarns for the carpet industry
which are sold for applications in residential and commercial carpet, bath and
decorative accent rugs, and automotive floorcovering. A substantial majority
of the unit production volume in this segment is utilized in the Company's
Carpet Manufacturing group. The basic premise followed in the Company's
Floorcovering Base Materials group involves the development and production
for sourcing of low costs yarn through yarn spinning or extrusion and finishing
to satisfy the Company's internal needs providing the Carpet Manufacturing
group a competitive advantage in the marketplace and to supply the industry
with products which do not compromise its internal return potential.
The Company's sales order backlog position in its floorcovering businesses,
excluding Carriage, was approximately $42,400,000 at December 25, 1999 and
$38,100,000 at December 26, 1998. Approximately 90% of orders received by
<PAGE>
Carriage are shipped within the same week. All of the order backlog can
reasonably be expected to be filled within the 2000 fiscal year.
The Company's floorcovering businesses own a variety of trademarks under which
their products are marketed. While such trademarks are important to the
Company's businesses, there is no one trademark, other than the name "Masland",
which is of material importance to the floorcovering business.
CUSTOMER AND PRODUCT CONCENTRATION
There was no single class of products exceeding 10 percent of the Company's
consolidated sales volume for 1998, 1997, or 1996. Sales to The Home Depot
were 10.5% of the Company's consolidated sales in 1999. Although no other
single customer accounted for more than 10% of the Company's consolidated net
sales in 1999, sales to manufacturers of factory-built housing collectively
constituted approximately 22% of the 1999 total.
SEASONALITY
Within the varied markets serviced by the Company, there are a number of
seasonal production cycles, but the Company's business as a whole is not
considered to be significantly affected by seasonal factors. Consequently,
there are no material impacts on working capital relating to seasonality.
ENVIRONMENTAL
While compliance with current federal, state and local provisions regulating
the discharge of material into the environment may require additional
expenditures by the Company, these expenditures are not expected to have a
material effect on capital expenditures, earnings or the competitive position
of the Company.
RAW MATERIALS
The Company obtains natural and synthetic raw materials from a number of
domestic suppliers. Man-made fibers are purchased from major chemical
suppliers. A number of these suppliers, whose products are petroleum based,
have announced their desire to increase prices. Where possible, the Company
intends to pass through raw material price increases to its customers.
Although the Company does not anticipate any interruption in its sources of
supply due to these increases, there can be no assurance that such increases
can be passed through in the Company's prices or that they will not have an
adverse effect on profitability. Although the Company's procurement of raw
materials is subject to variations in price and availability due to market
conditions and the price of petroleum used to produce man-made fibers, the
Company believes that its sources of raw materials are adequate and that
it is not materially dependent on any single supplier.
UTILITIES
The Company uses electricity as its principal energy source, with oil or
natural gas used in some facilities for finishing operations as well as
heating. During the past five years the Company has not experienced any
material problems in obtaining electricity, natural gas or oil at anticipated
prices. Nevertheless, energy shortages of extended duration could have an
adverse effect on the Company's operations.
<PAGE>
EMPLOYMENT LEVEL
The Company had approximately 3,600 associates in its continuing operations as
of the end of fiscal 1999.
ITEM 2. PROPERTIES
The following table lists the Company's facilities according to location, type
of operation and approximate total floor space as of March 10, 2000:
Approximate
Location Type of Operation Square Feet
FLOORCOVERING
Administrative:
Calhoun, GA Administrative 24,000
Dalton, GA Administrative 12,000
Mobile, AL Administrative 14,000
Total Administrative 50,000
Manufacturing:
Atmore, AL Carpet Manufacturing,
Distribution 443,000
Calhoun, GA Carpet Manufacturing,
Distribution 1,196,000
Needlebond Manufacturing,
Distribution 347,000
Carpet Yarn Processing 139,000
Filament Yarn Extrusion 125,000
Chatsworth, GA Carpet Manufacturing 51,000
(1) Dalton, GA Carpet Manufacturing,
Distribution 654,000
LaFayette, GA Carpet Padding Manufacturing 73,000
Lemoore, CA Carpet Yarn Processing 322,000
Mobile, AL Rug Manufacturing, Distribution 396,000
Ringgold, GA Carpet Yarn Processing 413,000
Roanoke, AL Filament Yarn Processing 189,000
Total Manufacturing 4,348,000
CORPORATE
Administrative:
(2) Chattanooga, TN Administrative 41,000
Total 4,439,000
<PAGE>
ITEM 2. PROPERTIES - CONTINUED
(1) The Company is currently leasing 63,000 square feet for carpet
manufacturing.
(2) Currently "held for sale".
In addition to the facilities listed above, the Company owns or leases various
administrative, storage, warehouse and office spaces.
In the opinion of the Company, its manufacturing facilities are well maintained
and the machinery is efficient and competitive. Operations at each plant
generally vary between 120 hours and 168 hours per week. There are no material
encumbrances on any of the Company's properties.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
subsidiaries are a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of 1999 to a vote of
the shareholders.
<PAGE>
Pursuant to instruction G of Form 10-K the following is included as an
unnumbered item to Part I.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and offices held by the executive officers of the
registrant as of March 10, 2000, are listed below along with their business
experience during the past five years.
Name, Age Business Experience During
and Position Past Five Years
Daniel K. Frierson, 58 Director since 1973, Chairman of
Chairman of the Board, the Board since 1987 and Chief
and Chief Executive Officer, Executive Officer since 1980.
Director, Member of Executive Director of SunTrust Bank,
Committee Chattanooga, N.A. Brother of
Paul K. Frierson.
William N. Fry, IV, 41 President and Chief Operating
President and Chief Operating Officer since February 1999.
Officer Executive Vice President and
Chief Operating Officer,
Floorcovering Business from
January 1997 to February 1999.
Executive Vice President
and Chief Operating Officer,
Candlewick, Carriage and
Bretlin from January 1996
to January 1997. President,
Bretlin from January 1995 to
January 1996. Executive Vice
President, Bretlin from November
1993 to January 1995. Business
Analyst, Carriage from July
1993 to November 1993. General
Manager, Dyed Yarns from May 1992 to
July 1993. Assistant Plant Manager,
Chattanooga Finishing from July 1991
to May 1992.
Philip H. Barlow, 50 Vice President and President of
Vice President and President, Carriage Industries, Inc. since
Carriage Industries, Inc. 1993. Vice President of Sales and
Marketing, Carriage, 1988 to 1993.
Director of Sales and Marketing,
Carriage, 1986 to 1988.
Kenneth L. Dempsey, 41 Vice President and President,
Vice President and President, Masland Carpets, Inc. since
Masland Carpets, Inc. January 1997. Vice President of
Marketing, Masland, 1991 to 1996.
Director of Marketing, The Harbinger
Company, Inc., subsidiary of Horizon
Industries, Inc., 1982 to 1991.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
Paul K. Frierson, 62 Director since 1988. Vice President
Vice President and President, and President, Candlewick Yarns
Candlewick Yarns, Director since 1989. Director of
NationsBank/Chattanooga. Brother of
Daniel K. Frierson.
Jeffrey L. Gregg, 36 Vice President and President of
Vice President and President, Bretlin, Inc. since January 1998.
Bretlin, Inc. Vice President of Operations,
Carriage Industries, Inc. from May
1996 to January 1998. Chief
Operating Officer and Chief
Financial Officer, The Geiger Group,
Inc. from July 1991 to April 1996.
W. Derek Davis, 49 Vice President of Human Resources
Vice President, Human since January 1991. Corporate
Resources Employee Relations Director,
1990 to 1991.
Gary A. Harmon, 54 Vice President and Chief
Vice President and Financial Officer since
Chief Financial Officer January 2000. Treasurer
Since 1993. Director of
Tax and Financial Planning,
1985 to 1993.
D. Eugene Lasater, 49 Controller since 1988.
Controller
Starr T. Klein, 57 Secretary since November 1992.
Secretary Assistant Secretary, 1987 to 1992.
The executive officers of the registrant are elected annually by the Board of
Directors at its first meeting held after each annual meeting of the Company's
shareholders.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The Company's Common Stock trades on the over-the-counter National Market
System with the NASDAQ symbol DXYN. No market exists for the Company's Class B
Common Stock.
As of March 10, 2000, the total number of record holders of the Company's
Common Stock was approximately 3,500 and the total number of holders of the
Company's Class B Common Stock was 15. Management of the Company estimates
that there are approximately 2,500 shareholders who hold the Company's Common
Stock in nominee names. Dividends and Price Range of Common Stock for the four
quarterly periods in the years ended December 25, 1999 and December 26, 1998
are as follows:
<PAGE>
THE DIXIE GROUP, INC.
QUARTERLY FINANCIAL DATA, DIVIDENDS
AND PRICE RANGE OF COMMON STOCK
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1999
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $141,224 $152,113 $142,589 $143,540
Gross profit 29,210 33,019 30,876 30,001
Income from continuing operations 2,580 4,060 3,069 2,690
Net income 2,580 8,479 3,069 3,063
Basic earnings per share:
Income from continuing operations .23 .36 .27 .23
Net income .23 .75 .27 .26
Diluted earnings per share:
Income from continuing operations .22 .35 .26 .23
Net income .22 .72 .26 .26
Dividends:
Common Stock --- --- --- ---
Class B Common Stock --- --- --- ---
Common Stock prices:
High $ 9.19 $ 9.38 $ 9.375 $ 8.125
Low 6.97 7.00 7.125 5.281
1998
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $118,601 $130,489 $120,387 $126,935
Gross profit 23,960 27,544 22,827 25,077
Income from continuing operations 2,247 3,343 1,650 1,868
Net income (loss) 2,472 (12,008) 206 (11,672)
Basic earnings (loss) per share:
Income from continuing operations .20 .30 .15 .17
Net income (loss) .22 (1.07) .02 (1.03)
Diluted earnings (loss) per share:
Income from continuing operations .19 .28 .14 .16
Net income (loss) .21 (.99) .02 (1.02)
Dividends:
Common Stock .05 .05 .05 ---
Class B Common Stock .05 .05 .05 ---
Common Stock prices:
High $ 13.00 $ 14.00 $ 10.00 $ 8.125
Low 9.75 9.75 6.75 4.375
</TABLE>
The total of quarterly earnings per share may not equal the annual earnings per
share due primarily to Common Stock purchased and issued during the respective
periods. Discontinued operations consist of textile products operations. In
the second quarter of 1999, results included income of $7,244 ($4,419 or $.37
per diluted share after taxes), resulting from favorable adjustments to amounts
accrued at the end of the preceding year for estimated future operating
results, including related exit costs, of the discontinued segment through the
disposal date. In the fourth quarter of 1999, results included income of $611
($373 or $.03 per diluted share after taxes), resulting from additional
<PAGE>
favorable adjustments to amounts accrued at the end of the preceding year for
estimated future operating results, including related exit costs, of the
discontinued segment through the disposal date. In the second quarter of
1998, results included charges of $21,745 ($14,717 or $1.22 per diluted share
after taxes), for the loss on the disposition of the knit fabric and apparel
business. In the fourth quarter of 1998, results included charges of $17,580
($13,540 or $1.18 per diluted share after taxes) for the loss on the
disposition of the specialty yarns business.
The discussion of restrictions on payment of dividends is included in Note F to
the Consolidated Financial Statements included herein.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
The following selected financial data should be read in conjunction with the
related consolidated financial statements and notes thereto included under
Items 8, 14(a) (1) and (2) and 14 (d) of the report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended
December December December December December
25, 1999(1) 26, 1998 27, 1997(2) 28, 1996 30, 1995
<S> <C> <C> <C> <C> <C>
Net sales $579,466 $496,412 $432,086 $363,113 $357,145
Income from continuing
operations(1)(2) 12,399 9,108 8,812 5,701 4,365
Total assets 391,901 374,646 386,614 328,135 396,997
Long-term debt:
Senior indebtedness 60,961 64,466 68,528 34,036 97,383
Subordinated notes 45,238 50,000 50,000 50,000 50,000
Convertible subordinated
debentures 37,237 39,737 42,282 44,782 44,782
Per Share:
Income from continuing
operations: (3)
Basic 1.09 .81 .78 .51 .37
Diluted 1.06 .77 .75 .51 .37
Cash dividends declared:
Common Stock --- .15 --- --- ---
Class B Common Stock --- .15 --- --- ---
</TABLE>
(1) Includes the results of operations of Graphic Tec and Multitex subsequent
to their acquisitions on January 21, 1999 and January 8, 1999,
respectively.
(2) Includes the results of operations of Danube and GFI Dalton subsequent to
their acquisitions on December 31, 1996 and October 2, 1997, respectively.
(3) Income (loss) from continuing operations includes asset valuation losses
of $13,074, or $1.17 per share, for the year ended December 28, 1996,
and asset valuation losses of $51,058, or $4.35 per share, and casualty
insurance gains of $3,298, or $.28 per share, for the year ended December
30, 1995. See Note B, Note K, and Note M to the Consolidated Financial
Statements.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
During the three years ended December 25, 1999, the Company acquired the
operating assets and business of Danube Carpet Mills, Inc., a producer of
carpet for the factory-built housing industry, General Felt Industries Dalton,
Georgia needlebond and artificial turf operations, Ideal Fibers filament yarn
assets, Multitex Corporation of America, Inc.'s yarn and tufted carpet business
(Multitex) and the graphic carpet business of Graphic Tec, Inc. All of these
acquisitions were accounted for as purchase business combinations and their
results are included in the Company's consolidated financial statements
subsequent to their respective acquisitions.
The Company decided to discontinue its textile knit fabric, apparel and
specialty yarn business segments in fiscal 1998 and disposed of these
operations in late 1998 and 1999. Results of the discontinued textile
operations are segregated from the Company's continuing floorcovering
operations and accounted for as discontinued operations for all periods
presented. Results from the discontinued operations and disposal were income
of $4.8 million, or $.41 per diluted share in 1999, a loss of $30.1 million,
or $2.55 per diluted share in 1998 and income of $2.8 million, or $.24 per
diluted share in 1997.
The Company's floorcovering operations are segmented around product
similarities between its carpet manufacturing and floorcovering base materials
businesses. Its carpet manufacturing operations supply carpet and rugs to the
factory-built housing and recreational vehicle markets through Carriage
Carpets, to consumers through major retailers under the Bretlin, Globaltex and
Alliance Mills names and to higher-end residential and commercial customers
serviced by Masland Carpets. Its floorcovering base material operations supply
extruded plyed and heat-set filament and spun yarns to the Company's carpet
manufacturing segment and to a lesser extent to specialty carpet yarn markets
through Candlewick Yarns.
The compounded annual growth rates of the Company's floorcovering business were
approximately 13% for sales, 24% for EBIT (earnings before interest and taxes)
and 24% for income from continuing operations for the five year period ended
December 25, 1999. Business combinations accounted for a significant portion
of the growth in sales and earnings.
1999 Compared to 1998 - Sales increased 17% to $579.5 million in 1999 compared
to 1998. The significant increase in sales is principally attributable to the
acquisition of the carpet and yarn processing operations of Multitex in January
1999, expansion into extruded filament yarn in late 1998 and increased sales
volume of residential and commercial products at Masland and Bretlin. These
improvements more than offset a 5% decline in Carriage's sales. Carriage sales
declined due to softness in the factory-built housing market, which is
expected to continue through the first half of 2000. Sales to external
customers increased 14% for carpet manufacturing and 30% for floorcovering base
materials.
In the year 2000 the Company anticipates that a higher portion of Candlewick's
yarn production will be utilized by the Company's carpet manufacturing
operations. Additionally, a number of the Company's carpet yarn sales programs
are being converted from a full package basis to a conversion basis in which
the customer supplies fiber for yarn processing. Accordingly, the Company
anticipates a significant reduction in sales of base materials to external
customers as a result of these changes.
As a percentage of sales, 1999 gross margins increased 1.2 percentage points to
21.2% and selling expenses increased 0.8 percentage points to 15.1% compared
with 1998. These increases are principally attributable to the growth in the
carpet manufacturing's home center and high-end residential and commercial
businesses and the higher cost required to service these markets.
The profit performance measure of the Company's business segments is internal
EBIT (earnings before interest, taxes, cost of the Company's A/R sales program
<PAGE>
and other non-segment income). Internal EBIT for 1999 was $30.0 million, or
6.6% of sales for carpet manufacturing and $3.5 million, or 2.8% of sales for
floorcovering base materials. The comparable 1998 internal EBIT was $24.5
million, or 6.1% of sales for carpet manufacturing and $3.1 million, or 3.3% of
sales for floorcovering base materials. The improved carpet manufacturing
internal EBIT is principally attributable to the sales growth and manufacturing
cost reductions. During the last half of 1999, floorcovering base materials
began a significant expansion and re-alignment of its facilities to increase
yarn processing capacity and lower cost. The costs associated with this
expansion and re-alignment negatively impacted margins of this business. Such
costs are anticipated to intensify until the project is completed in the first
half of 2000. Additionally, a number of the Company's suppliers, whose
products are petroleum based, have announced their desire to increase prices.
Where possible, the Company intends to pass through raw material price
increases to its customers. However, there can be no assurance that such
increases can be passed through and significant increases in the cost of raw
materials could negatively affect future results.
The decrease in "Other expense - net" is due primarily to interest income
related to a note received in connection with the sale of the Company's textile
specialty yarn business.
Interest expense increased $2.8 million in 1999 compared with 1998 due to
higher average debt resulting from the January 1999 acquisitions and working
capital to support sales growth. Interest expense as a percentage of sales was
2.3% in 1999 and 2.0% in 1998.
The effective income tax rate increased to 39.1% in 1999 from 38.0% in 1998 as
a result of the phase out of the benefit of lower tax brackets for corporations
with pre-tax income in excess of $10.0 million.
1998 Compared to 1997 - Sales increased 15% to $496.4 million in 1998 compared
with 1997. Sales improved 18% in the Company's carpet manufacturing segment and
3% for floorcovering base materials. Growth in the carpet manufacturing
segment was attributable to increased unit volume that resulted from the
acquisition of the needlebond business and artificial turf business of General
Felt Industries in late fiscal 1997 and strong growth in higher-end residential
and commercial products.
Internal EBIT was $24.5 million, or 6.1% of sales for carpet manufacturing and
$3.1 million, or 3.3% of sales for floorcovering base materials. The
comparable 1997 internal EBIT was $21.3 million, or 6.2% of sales for carpet
manufacturing and $3.3 million, or 3.6% of sales for floorcovering base
materials. The increase in carpet manufacturing internal EBIT is principally
attributable to sales growth. Cost associated with facilities expansion and
selling expenses in support of current and anticipated future growth negatively
impacted 1998 earnings.
Interest expense increased $1.3 million in 1998 compared with 1997. The
increase resulted from additional borrowing to support the Company's growth.
Interest expense, as a percentage of sales, was 2.0% in 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the three year period ended December 25, 1999, cash flows generated from
operating activities were $120.1 million. These funds were supplemented by
$69.7 million from asset sales, including $52.1 million from sale of fixed
assets and inventories in 1999, and $57.4 million from borrowings under the
Company's credit lines. Funds were used to finance the Company's operations,
$109.1 million of capital expenditures, $94.5 million for business acquisitions
and $31.8 million to retire long-term debt.
In October 1993, the Company entered into a seven year agreement under which it
sold a $45.0 million undivided interest in a revolving pool of its trade
accounts receivable. The sale is reflected as a reduction of accounts
receivable in the Company's balance sheets. No further interest has been sold
under this agreement subsequent to the original sale. The cost of this program
<PAGE>
was fixed at 6.08% per annum of the undivided interest sold plus administrative
fees typical in such transactions. In addition, the Company is generally at
risk for credit losses associated with sold receivables and provides for such
losses in the Company's financial statements. This agreement expires in
October 2000. The Company is currently in the process of replacing this
facility with an accounts receivable sales facility where costs will vary with
interest rates. The Company anticipates completion of an agreement for the
replacement facility by mid year 2000.
At December 25, 1999, the Company's debt consisted of $39.7 million of
convertible subordinated debentures, $50.0 million of subordinated notes, $36.3
million of senior term loans and $30.1 million of credit line indebtedness,
principally under the Company's senior credit agreement. Annual payments
for the convertible subordinated debentures, the subordinated notes and the
senior term loan are approximately $13.6 million in 2000 and will average
approximately $13.8 million for each of the succeeding four years. The
Company's unsecured credit agreement was replaced in March 1998 and provides
for a revolving credit of up to $100.0 million through a five-year commitment
period and a $60.0 million seven-year term loan. Under the terms of the credit
agreement, borrowing capacity is permanently reduced by 50% of the net cash
proceeds from certain significant asset sales. Accordingly, the term loan has
been reduced by $14.0 million as a result of asset sales in 1999.
Interest rates available under the credit agreement may be selected by the
Company from a number of options which effectively allow for borrowing at rates
equal to or lower than the greater of the lender's prime rate or federal funds
rate plus 0.5%. At year-end, the available unused borrowing capacity under
the Company's credit agreements (including amounts available under short-term
credit lines) was $74.8 million.
The Company's long-term debt and credit agreements contain financial covenants
relating to minimum net worth, the ratio of debt to capitalization, payment of
dividends and certain other financial ratios. Currently, payment of dividends
is limited to 50% of aggregate consolidated net income subsequent to December
25, 1999.
Capital expenditures for the year 2000 are expected to be approximately $45.0
million and to exceed depreciation and amortization by approximately $20.0
million. The primary capital expenditure focus for 2000 will be to expand and
optimize extrusion and yarn capacity, build a distribution center to improve
service for the Company's home center business and expand the Company's carpet
operations.
Availability under the Company's existing debt arrangements, the anticipated
replacement of the accounts receivable sale arrangement and operating cash
flows are expected to be adequate to finance the Company's normal liquidity
requirements. However, significant additional cash expenditures beyond normal
requirements could require the supplementation or replacement of the Company's
credit facilities. There can be no assurance that any such additional credit
will be available on terms as favorable as the Company's current credit
facilities.
The Company's balance sheet contains approximately $52.5 million of unamortized
goodwill representing 13.4% of total assets and 44.5% of total equity. All
goodwill is the result of acquisitions made in connection with the Company's
floorcovering business. The Company's analysis of goodwill did not identify
factors related to the estimated future cash flows of the businesses acquired
that would appear to limit the life of the goodwill and it is therefore being
amortized over 40 years in accordance with Accounting Principles Board Opinion
No. 17: Intangible Assets.
YEAR 2000 SYSTEMS ISSUES
The Company experienced no significant system related year 2000 conversion
issues. The Company believes that it identified all information technology
systems that could be impacted by the year 2000 issue. Incremental costs
associated with all aspects of year 2000 compliance and remediation were not
material.
<PAGE>
FORWARD - LOOKING INFORMATION
This Annual Report to Shareholders may contain certain statements that may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended. These forward-looking statements are
identified by their use of terms or phases such as "expects", "estimates",
"projects", "believes", "anticipates", "intends", and similar terms and
phrases. Such terms or phrases relate to, among other matters, the Company's
future financial performance, business prospects, growth, strategies, or
liquidity. Forward-looking statements involve a number of risks and
uncertainties. The following important factors may affect the future results of
The Dixie Group, Inc. and could cause those results to differ materially from
its historical results or those expressed in the forward-looking statements.
These risks include, among others, market risks relating to interest
rates, raw material prices, the loss of a significant customer or group of
customers, materially adverse changes in economic conditions generally in
carpet, rug and floorcovering markets served by the Company and other risks
detailed from time to time in the Company's filings with the Securities
and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk-sensitive instruments do not subject the Company to
material market risk exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary financial information as required by Item 302 of Regulation
S-K is included in PART II, ITEM 5 of this report and the remaining response is
included in a separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Information about Nominees for Directors" in the Proxy
Statement of the registrant for the annual meeting of shareholders to be held
May 4, 2000 is incorporated herein by reference. Information regarding the
executive officers of the registrant is presented in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation Information" in the Proxy
Statement of the registrant for the annual meeting of shareholders to be held
May 4, 2000 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Principal Shareholders", as well as the beneficial
ownership table (and accompanying notes) in the Proxy Statement of the
registrant for the annual meeting of shareholders to be held May 4, 2000 is
incorporated herein by reference.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions Between the Company and Directors
and Officers" in the Proxy Statement of the registrant for the annual meeting
of shareholders to be held May 4, 2000 is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2)-- The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of Exhibits:
(i) Exhibits Incorporated by Reference:
(3a) Restated Charter of The Dixie Group, Inc.
(3b) Amended and Restated By-Laws of Dixie Yarns, Inc.
(4a) Second Amended and Restated Revolving Credit and
Term Loan Agreement dated January 31, 1992 by and
among Dixie Yarns, Inc., and Trust Company Bank,
NationsBank of North Carolina, N.A. and Chemical
Bank.
(4b) Loan Agreement dated February 6, 1990, between
Dixie Yarns, Inc. and New York Life Insurance
Company and New York Life Insurance and Annuity
Corporation.
(4c) Form of Indenture, Dated May 15, 1987 between Dixie
Yarns, Inc. and Morgan Guaranty Trust Company of
New York as trustee.
(4d) Revolving Credit Loan Agreement dated as of
September 16, 1991 by and among Ti-Caro, Inc. and
Trust Company Bank, individually and as Agent, NCNB
National Bank and Chemical Bank.
(4e) First Amendment to Revolving Credit Loan Agreement
dated as of August 19, 1992 by and among Ti-Caro,
Inc., T-C Threads, Inc. and Trust Company Bank,
individually and as agent, NCNB National Bank, and
Chemical Bank.
(4f) First Amendment, dated August 25, 1993 to Second
Amended and Restated Revolving Credit and Term Loan
Agreement dated January 31, 1992, by and among
Dixie Yarns, Inc. and Trust Company Bank,
NationsBank of North Carolina, N.A. and Chemical
Bank.
(4g) Third Amended and Restated Credit Agreement dated
March 31, 1995.
(4h) Waiver and First Amendment to Credit Agreement dated
February 27, 1996.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(4i) Waiver and Modification Agreement dated November 1,
1996.
(4j) Waiver Letter dated December 13, 1996.
(4k) Second Amendment dated September 7, 1997 to the Third
Amended and Restated Credit Agreement dated March 31,
1995.
(4l) Amendment to 9.96% Senior Subordinated notes due
February 1, 2010.
(4m) Letter agreement dated February 17, 1998 re: Amendment
to 9.96% Senior Subordinated Notes due February 1, 2010.
(4n) Credit Agreement dated as of March 31, 1998 by and
among The Dixie Group, Inc., SunTrust Bank, Atlanta,
and NationsBank, N.A. and Form of Revolving Credit Note,
Form of Term Note and Form of Swing Line Note.
(4o) Waiver letter dated August 17, 1998 from New York Life
Insurance and Annuity Corporation.
(4p) Waiver letter dated August 17, 1998 from New York Life
Insurance Company.
(10a) Dixie Yarns, Inc. Nonqualified Defined Contribution
Plan.
(10b) Dixie Yarns, Inc. Nonqualified Employee Savings Plan.
(10c) Dixie Yarns, Inc. Incentive Compensation Plan.
(10d) Pooling and Servicing Agreement dated as of October
15, 1993, among Dixie Yarns, Inc., Dixie Funding,
Inc. and NationsBank of Virginia, N.A. (as
Trustee).
(10e) Annex X - Definitions, to Pooling and Servicing
Agreement dated as of October 15, 1993, among Dixie
Yarns, Inc., Dixie Funding, Inc. and NationsBank of
Virginia, N.A. (as Trustee).
(10f) Series 1993-1 Supplement, dated as of October 15,
1993, to Pooling and Servicing Agreement dated as
of October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding Inc. and NationsBank of Virginia, N.A. (as
Trustee).
(10g) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and New York Life Insurance and
Annuity Corporation.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(10h) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance
Company.
(10i) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance Company
of New York.
(10j) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and Keyport Life Insurance Company.
(10k) Asset Purchase Agreement dated May 23, 1996, by and
among T-C Threads, Inc. d/b/a Threads USA, Threads of
Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(10l) Amendment, dated May 31, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc. d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A. de C. V., and Dixie Yarns,
Inc. and American & Efird, Inc.
(10m) Second Amendment, dated June 3, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc., d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A. de C. V., and Dixie Yarns,
Inc. and American & Efird, Inc.
(10n) Yarn and Finished Goods Agreement dated as of June 3,
1996, by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
(10o) Accounts Receivable Agreement dated as of June 3, 1996,
by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(10p) Noncompetition Agreement dated as of June 3, 1996, by
and among T-C Threads, Inc. d/b/a Threads USA, Threads
of Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(10q) Asset Purchase Agreement dated as of August 29, 1997
among The Dixie Group, Inc., Bretlin, Inc., Foamex L.P.
and General Felt Industries, Inc.
(10r) Dixie Yarns, Inc. Incentive Stock Plan as amended.
(10s) Form of Nonqualified Stock Option Agreement Under the
Dixie Yarns, Inc. Incentive Stock Plan.
(10t) Form of Amendment to Nonqualified Stock Option
Agreement Under the Dixie Yarns, Inc. Incentive Stock
Plan.
(10u) Form of Stock Option Agreement Under the Dixie Yarns,
Inc. Incentive Stock Plan as amended.
(10v) Form of Stock Rights and Restrictions Agreement for
Restricted Stock Award Under Incentive Stock Plan as
Amended.
(10w) The Dixie Group, Inc. Stock Ownership Plan as amended.
(10x) Form of Stock Subscription Agreement Under Stock
Ownership Plan of The Dixie Group, Inc.
(10y) The Dixie Group, Inc. Directors Stock Plan.
(10z) Asset Purchase Agreement dated January 8, 1999,
by and between Multitex Corporation of America
and the Dixie Group, Inc.
(10A) The Dixie Group, Inc. New Nonqualified Retirement
Savings Plan effective August 1, 1999.
(10B) The Dixie Group, Inc. Deferred Compensation Plan
Amended and Restated Master Trust Agreement
Effective as of August 1, 1999.
(10C) Asset Purchase Agreement dated as of May 7, 1999,
between R.L. Stowe Mills, Inc. and The Dixie Group,
Inc.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(ii) Exhibits filed with this report:
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule
(b) Reports on Form 8-K -- No reports on Form 8-K have been filed by the
registrant during the last quarter of the period covered by this
report.
(c) Exhibits -- The response to this portion of Item 14 is submitted as a
separate section of this report. See Item 14 (a) (3) (ii) above.
(d) Financial Statement Schedules -- The response to this portion of Item 14
is submitted as a separate section of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 24, 2000 BY: /s/DANIEL K. FRIERSON
Daniel K. Frierson,
Chairman of the Board,
and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Chairman of the Board,
Director and Chief
/s/DANIEL K. FRIERSON Executive Officer March 24, 2000
Daniel K. Frierson
President, Chief
Operating Officer
/s/WILLIAM N. FRY, IV and Director March 24, 2000
William N. Fry, IV
Vice President,
President of Candlewick
/s/PAUL K. FRIERSON Yarns and Director March 24, 2000
Paul K. Frierson
Vice President and
/s/GARY A. HARMON Chief Financial Officer March 24, 2000
Gary A. Harmon
/s/D. EUGENE LASATER Controller March 24, 2000
D. Eugene Lasater
<PAGE>
SIGNATURES -- CONTINUED
/s/J. DON BROCK Director March 24, 2000
J. Don Brock
/s/PAUL K. BROCK Director March 24, 2000
Paul K. Brock
/s/ LOVIC A. BROOKS, JR. Director March 24, 2000
Lovic A. Brooks, Jr.
/s/JOHN W. MURREY, III Director March 24, 2000
John W. Murrey, III
/s/PETER L. SMITH Director March 24, 2000
Peter L. Smith
/s/ROBERT J. SUDDERTH, JR. Director March 24, 2000
Robert J. Sudderth, Jr.
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a)(1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 25, 1999
THE DIXIE GROUP, INC.
CHATTANOOGA, TENNESSEE
<PAGE>
FORM 10-K--ITEM 14(a)(1) and (2)
THE DIXIE GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of The Dixie Group, Inc. and
subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated balance sheets--December 25, 1999 and
December 26, 1998
Consolidated statements of operations--Years ended
December 25, 1999, December 26, 1998, and December 27, 1997
Consolidated statements of cash flows--Years ended
December 25, 1999, December 27, 1998, and December 27, 1997
Consolidated statements of stockholders' equity--Years ended
December 25, 1999, December 26, 1998, and December 27, 1997
The following consolidated financial statement schedule of The Dixie Group,
Inc. and subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, or the information is otherwise
shown in the financial statements or notes thereto, and therefore have been
omitted.
<PAGE>
Report of Independent Auditors
Board of Directors
The Dixie Group, Inc.
We have audited the accompanying consolidated balance sheets of The Dixie
Group, Inc. as of December 25, 1999 and December 26, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 25, 1999. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Dixie Group, Inc. at December 25, 1999 and December 26, 1998, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 25, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 15, 2000
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
December 25, December 26,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,541 $ 2,815
Accounts receivable (less allowance for doubtful
accounts of $1,831 for 1999 and $1,294 for 1998) 19,454 8,364
Inventories 104,042 72,671
Net assets held for sale 457 67,508
Other 14,471 14,810
TOTAL CURRENT ASSETS 150,965 166,168
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 5,829 5,329
Buildings and improvements 68,885 56,027
Machinery and equipment 233,052 204,346
307,766 265,702
Less accumulated amortization and depreciation (134,180) (120,517)
NET PROPERTY, PLANT AND EQUIPMENT 173,586 145,185
INTANGIBLE ASSETS (less accumulated amortization of
$6,190 for 1999 and $4,687 for 1998) 52,460 52,394
OTHER ASSETS 14,890 10,899
TOTAL ASSETS $391,901 $374,646
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
December 25, December 26,
1999 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 53,590 $ 39,264
Accrued expenses 26,241 24,028
Accrued liabilities of discontinued operations 3,461 12,649
Current portion of long-term debt 13,460 9,645
TOTAL CURRENT LIABILITIES 96,752 85,586
LONG-TERM DEBT
Senior indebtedness 60,961 64,466
Subordinated notes 45,238 50,000
Convertible subordinated debentures 37,237 39,737
TOTAL LONG-TERM DEBT 143,436 154,203
OTHER LIABILITIES 10,295 11,869
DEFERRED INCOME TAXES 23,508 22,998
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized
80,000,000 shares, issued - 14,264,277 shares for
1999 and 14,071,629 shares for 1998 42,793 42,215
Class B Common Stock ($3 par value per share):
Authorized 16,000,000 shares, issued - 795,970
shares for 1999 and 735,228 shares for 1998 2,388 2,206
Common Stock subscribed - 620,516 shares for 1999
and 573,463 shares for 1998 1,861 1,720
Additional paid-in capital 136,144 134,720
Stock subscriptions receivable (5,456) (3,719)
Unearned stock compensation (489) (716)
Retained earnings (deficit) (2,659) (19,850)
Accumulated other comprehensive income (412) (799)
174,170 155,777
Less Common Stock in treasury at cost - 3,511,829
shares for 1999 and 3,442,900 shares for 1998 (56,260) (55,787)
TOTAL STOCKHOLDERS' EQUITY 117,910 99,990
Commitments - Note L
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $391,901 $374,646
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Years Ended
December 25, December 26, December 27,
1999 1998 1997
<S> <C> <C> <C>
NET SALES $579,466 $496,412 $432,086
Cost of sales 456,360 397,004 345,416
GROSS PROFIT 123,106 99,408 86,670
Selling and administrative expenses 87,604 71,088 61,475
Other expense - net 2,081 3,357 2,283
INCOME BEFORE INTEREST AND TAXES 33,421 24,963 22,912
Interest expense 13,051 10,263 8,886
INCOME BEFORE INCOME TAXES 20,370 14,700 14,026
Income tax provision 7,971 5,592 5,214
INCOME FROM CONTINUING OPERATIONS 12,399 9,108 8,812
INCOME (LOSS) FROM DISCONTINUED OPERATIONS --- (1,853) 2,807
INCOME (LOSS) ON DISPOSAL OF
DISCONTINUED OPERATIONS 4,792 (28,257) ---
NET INCOME (LOSS) $ 17,191 $(21,002) $ 11,619
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(dollars in thousands, except per share data)
Years Ended
December 25, December 26, December 27,
1999 1998 1997
<S> <C> <C> <C>
Basic earnings (loss) per share:
Income from continuing operations $ 1.09 $ .81 $ .78
Income (loss) from discontinued
operations --- (0.16) .25
Income (loss) on disposal of
discontinued operations .42 (2.51) ---
Net income (loss) $ 1.51 $ (1.86) $ 1.03
Diluted earnings (loss) per share:
Income from continuing operations $ 1.06 $ .77 $ .75
Income (loss) from discontinued
operations --- (.16) .24
Income (loss) on disposal of
discontinued operations .41 (2.39) ---
Net income (loss) $ 1.47 $ (1.78) $ .99
Dividends per share:
Common Stock $ --- $ .15 $ ---
Class B Common Stock --- .15 ---
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Years Ended
December 25, December 26, December 27,
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 12,399 $ 9,108 $ 8,812
Income (loss) from discontinued operations 4,792 (30,110) 2,807
Net income (loss) 17,191 (21,002) 11,619
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization:
Continuing operations 22,330 18,701 15,809
Discontinued operations --- 6,272 8,686
Provision (benefit) for deferred
income taxes 2,045 (7,900) 3,993
Long-lived asset losses-
discontinued operations --- 19,992 ---
(Gain) loss on property, plant
and equipment disposals (160) (56) (211)
Changes in operating assets and
liabilities, net of effects of
business combinations:
Accounts receivable 23,739 (6,017) (14,821)
Inventories (12,685) 2,196 26,361
Other current assets (1,122) 21 (1,370)
Other assets (6,129) (1,518) (2,600)
Accounts payable and accrued expenses 1,831 6,939 36
Accrued losses of
discontinued operations (9,188) 12,649 ---
Other liabilities (1,114) 4,167 1,444
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,738 34,444 48,946
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sales of property,
plant and equipment 52,097 13,078 4,556
Purchase of property, plant and equipment:
Continuing operations (35,327) (33,363) (19,183)
Discontinued operations (4,385) (9,482) (7,336)
Cash payments in connection with business
combinations (32,714) --- (61,744)
NET CASH (USED IN) INVESTING ACTIVITIES (20,329) (29,767) (83,707)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in credit line
borrowings 16,073 4,176 37,135
Payments under term loan facility (20,654) (3,625) (2,500)
Payments on subordinated debentures (2,500) (2,545) ---
Dividends paid --- (1,701) ---
Other 398 (15) (14)
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (6,683) (3,710) 34,621
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(dollars in thousands)
Years Ended
December 25, December 26, December 27,
1999 1998 1997
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 9,726 967 (140)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 2,815 1,848 1,988
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,541 $ 2,815 $ 1,848
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
Common
Stock Accumulated
and Common Additional Retained Other Common Total
Class B Stock Paid-In Earnings Comprehensive Stock In Stockholders'
Stock Subscribed Capital Other (Deficit) Income Treasury Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 28, 1996 $43,836 $ 1,348 $132,475 $(2,190) $(8,766) $(2,668) $(55,485) $108,550
Common Stock acquired for treasury -
30,127 shares (268) (268)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 60,925 shares 183 250 433
Common Stock subscribed -
124,677 shares 374 868 (1,242)
Stock subscription settled 77 (185) (192) 300
Restricted stock grants -
75,000 shares 225 750 (975)
Amortization of restricted
stock grants 81 81
Net income for the year 11,619 11,619
Other comprehensive income
Change in additional
minimum pension liability,
net of tax of $530 829 829
Comprehensive income 12,448
BALANCE AT DECEMBER 27, 1997 44,321 1,537 134,151 (4,026) 2,853 (1,839) (55,753) 121,244
Common Stock acquired for treasury -
2,901 shares (34) (34)
Common Stock sold under stock
option and restricted stock grant
plan - 22,759 shares 68 93 161
Common Stock issued upon conversion
of convertible subordinated
debentures - 1,552 shares 5 45 50
Common Stock subscribed -
60,986 shares 183 405 (588)
Restricted stock grants -
9,000 shares 27 26 (53)
Amortization of restricted
stock grants 232 232
Net loss for the year (21,002) (21,002)
Other comprehensive income
Change in additional
minimum pension liability,
net of tax of $533 1,040 1,040
Comprehensive income (loss) (19,962)
Dividends - Common Stock and Class B
Common Stock $.15 per share (1,701) (1,701)
BALANCE AT DECEMBER 26, 1998 $44,421 $1,720 $134,720 $(4,435) $(19,850) $ (799) $(55,787) $ 99,990
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
(dollars in thousands, except per share data)
Common
Stock Accumulated
and Common Additional Retained Other Common Total
Class B Stock Paid-In Earnings Comprehensive Stock In Stockholders'
Stock Subscribed Capital Other (Deficit) Income Treasury Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 26, 1998 $44,421 $1,720 $134,720 $(4,435) $(19,850) $ (799) $(55,787) $ 99,990
Common Stock acquired for treasury -
68,929 shares (473) (473)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 89,993 shares 270 318 588
Common Stock subscribed -
562,751 shares 1,688 3,184 (4,872)
Stock subscriptions settled -
515,698 shares 490 (1,547) (2,078) 3,135
Amortization of restricted
stock grants 227 227
Net income for the year 17,191 17,191
Other comprehensive income
Change in additional
minimum pension liability,
net of tax of $247 387 387
Comprehensive income 17,578
BALANCE AT DECEMBER 25, 1999 $45,181 $1,861 $136,144 $(5,945) $ (2,659) $ (412) $(56,260) $117,910
</TABLE>
See notes to consolidated financial statements.
<PAGE>
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of The Dixie Group, Inc. and its wholly-owned subsidiaries (the
"Company"). Significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements: The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Discontinued Operations: The financial statements separately report
discontinued operations and the results of continuing operations. Disclosures
included herein pertain to the Company's continuing operations unless noted
otherwise. A portion of interest cost not attributable to any specific
operation of the Company is allocated to discontinued operations based on the
ratio of net assets discontinued to the sum of consolidated net assets plus
consolidated debt (exclusive of debt attributable to specific operations).
Cash and Cash Equivalents: Cash and highly liquid investments with original
maturities of three months or less when purchased are reported as cash
equivalents. See Note D.
Credit and Market Risk: The Company sells floorcovering products and, prior to
July 1999, sold textile/apparel products to a wide variety of manufacturers
and retailers located primarily throughout the United States. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. An allowance for doubtful accounts is maintained at a
level which management believes is sufficient to cover potential credit losses
including potential losses on receivables sold (see Note D). The Company
invests its excess cash in short-term investments and has not experienced any
losses on those investments.
Inventories: Inventories are stated at the lower of cost or market. The
last-in, first-out (LIFO) cost method was used to determine cost for
substantially all inventories at December 26, 1998. Inventories resulting from
a business combination in 1999 comprised 21% of total inventories at December
25, 1999, and such investments are valued using the first-in, first-out (FIFO)
method.
Inventories are summarized as follows:
<PAGE>
1999 1998
At FIFO cost:
Raw materials $ 31,664 $ 21,424
Work-in-process 18,389 11,636
Finished goods 49,121 34,796
Supplies, repair parts and other 1,835 1,631
101,009 69,487
LIFO value over FIFO value 3,033 3,184
Total inventories $104,042 $ 72,671
Property, Plant and Equipment: Property, plant and equipment is stated at the
lower of cost or impaired value. Provision for depreciation and amortization
of property, plant and equipment has been computed for financial reporting
purposes using the straight-line method over the estimated useful lives of the
related assets, ranging from 10 to 40 years for buildings and improvements, and
3 to 10 years for machinery and equipment. Applicable statutory recovery
methods are used for tax purposes. Depreciation and amortization of property,
plant and equipment for financial reporting purposes totaled $20,482 in 1999,
$16,888 in 1998, and $14,407 in 1997.
Intangible Assets: Intangible assets represent the excess of the purchase
price over the fair market value of identifiable net assets acquired in
business combinations and are being amortized using the straight-line method
over 40 years. The carrying value of goodwill will be reviewed if facts and
circumstances suggest that it may be impaired. Impairment will be measured,
and goodwill reduced, for any deficiency of estimated undiscounted cash flows
during the amortization period related to the business acquired.
Impairment of Assets: Impairment losses are recognized when expected future
cash flows are less than the assets' carrying value. In such circumstances,
property, plant, and equipment and related intangibles are adjusted to their
fair value based on the operating performance and estimated future discounted
cash flows of the underlying business.
Stock Based Compensation: As permitted under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", the Company
continues to account for stock based compensation in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Earnings per Share: In 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share". Statement No. 128 replaced
the calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per share is computed using the
weighted average common shares outstanding including the assumed conversion of
Class B Common Stock. Diluted earnings per share considers the effects of all
potentially dilutive securities. Earnings per share amounts for all periods
have been presented, and where appropriate, restated to conform to the
provisions of Statement No. 128.
Revenue Recognition: The Company recognizes revenue for goods sold at the time
title passes to the customer which is normally at the time of shipment.
<PAGE>
Comprehensive Income: During 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". The statement
requires that all items required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement
displayed with the same prominence as other financial statements. To conform
to the statement, the Company has classified the change in the minimum pension
liability adjustment as other comprehensive income in its consolidated
statements of stockholders' equity and its consolidated balance sheets.
Adoption of the statement had no effect on the consolidated results of
operations or total stockholders' equity of the Company. Reclassification of
the financial statements for all periods presented has been made to conform
with the provisions of Statement No. 130.
Segment Disclosures: During 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information". This Statement requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Operating segments, as defined by the statement, are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The statement
requires financial information to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. Adoption of the statement had no effect on the
consolidated results of operations or financial position of the Company. The
Company has identified its floorcovering base materials manufacturing business
and its carpet manufacturing business as its reportable segments under
Statement No. 131. Comparative information for all years presented has been
restated to conform with the provisions of Statement No. 131.
Pensions and Other Postretirement Benefits: During 1998, the Company adopted
Statement of Financial Accounting Standards No. 132, "Disclosures about
Pensions and Other Postretirement Benefits". This Statement standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practicable, and requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis. Adoption of the statement had no effect on the
consolidated results of operations or financial position of the Company.
Disclosures for earlier periods provided for comparative purposes have been
restated by the Company to conform with the provisions of Statement No. 132.
NOTE B - BUSINESS COMBINATIONS
In early fiscal 1997, the Company acquired for $20,854 cash the business and
operating assets of Danube Carpet Mills, Inc. ("Danube"), a manufacturer of
carpet for the factory built housing, recreational vehicle, and van conversion
industries. The Danube manufacturing and distribution facilities were closed
and their operations merged into existing facilities of the Company's Carriage
Carpet and Candlewick Yarns operations. On October 2, 1997, the Company
acquired the needlebond and artificial turf assets and business of General Felt
Industries based in Dalton, Georgia ("GFI Dalton") for $40,890 cash. The
acquired assets and business were merged with the Company's Bretlin operation.
<PAGE>
In early 1999, the Company acquired the assets and assumed certain liabilities
of Multitex Corporation of America, Inc. ("Multitex"), a Dalton, Georgia carpet
and carpet yarn producer, for approximately $30,964 cash, plus future payments
keyed to revenue growth.
The acquisitions were accounted for as purchase business combinations, and
accordingly, the results of operations of Danube subsequent to December 31,
1996, GFI Dalton subsequent to October 2, 1997 and Multitex subsequent to
January 8, 1999, are included in the Company's consolidated financial
statements. The purchase price of each acquisition was allocated to the net
assets acquired based on their estimated fair market values. The excess
amounts of the purchase prices over the estimated fair market value of the net
identifiable assets were recorded as intangible assets and are being amortized
using the straight-line method over forty years.
A summary of net assets acquired is as follows:
GFI
Multitex Danube Dalton
Current assets $18,462 $ 8,363 $ 9,015
Property, plant, and equipment 21,459 4,359 13,550
Other non-current assets 430 --- ---
Current liabilities (9,387) (4,703) (2,356)
Deferred taxes --- 141 ---
Intangible asset --- 12,694 20,681
Net assets acquired $30,964 $20,854 $40,890
The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisitions of Danube, GFI Dalton and Multitex had
occurred at the beginning of the periods presented after giving effect to
certain adjustments, including the closure of Danube facilities and
consolidation into existing operations, amortization of cost in excess of net
tangible assets acquired, interest expense on debt to finance the acquisitions,
elimination of sales between the Company and Multitex and related profit,
depreciation expense on adjusted fixed asset values 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 acquisitions taken place at the beginning of the periods
presented.
1998 1997
Net sales $581,408 $547,770
Net income (loss) (20,659) 12,149
Net income (loss) per share:
Basic (1.83) 1.08
Diluted (1.75) 1.03
<PAGE>
In the fourth quarter of 1998, The Company acquired the assets of Ideal Fibers,
a fiber extrusion business, for approximately $4,061 cash. In the first
quarter of 1999, the Company acquired Graphic Tec, Inc., a carpet producer, for
approximately $1,750 cash. These acquisitions were accounted for as
purchases, and accordingly, the results of operations of the acquired companies
subsequent to the dates of acquisitions are included in the Company's
consolidated financial statements. Pro forma information is not presented, as
the effects of the pro forma adjustments are not material.
NOTE C - DISCONTINUED OPERATIONS
In 1998, the Company decided to discontinue its textile products operations and
completed the sale of the related assets in June 1999. Cash proceeds from
disposal of the Company's textile products operations were approximately
$11,025 in 1998 and $47,396 in 1999, excluding accounts receivable, accounts
payable and accrued expenses retained by the Company. Additionally, the
Company received an $8,000 face value note as part of the consideration from
one of the purchasers in 1999. The note matures in 2003, has a stated interest
rate of 10.5% with interest payable monthly and is subordinated to the maker's
senior indebtedness. The value of the note included in the proceeds was
estimated to be $5,049 with an effective discount rate of 25%.
Following is summary financial information for the Company's discontinued
textile products operations:
1999 1998 1997
Net sales $ 11,832 $184,122 $229,757
Income (loss) from
discontinued operations:
Before income taxes --- (2,697) 4,776
Income tax provision (benefit) --- (844) 1,969
Net $ --- $(1,853) $ 2,807
Estimated income (loss) on disposal:
Before income taxes $ 7,855 (39,325) ---
Income tax provision (benefit) 3,063 (11,068) ---
Net $ 4,792 (28,257) ---
The gain on disposal in 1999 resulted from favorable adjustments to amounts
accrued as of the end of the preceding year for exit costs and estimated future
operating results. The textile products operations had operating income of
$1,622 (net of tax) from the beginning of 1999 through the disposal date,
versus a previously accrued estimated loss for such period of $1,586 (net of
tax).
The loss on disposal in 1998 includes the write-off of intangible assets of
$8,877 and estimated operating losses subsequent to the decision to discontinue
the textile products operations to the anticipated disposal date of $944 (net
of tax). The effect of liquidating inventories carried at lower costs
prevailing in prior years under the LIFO method was to reduce the loss on
disposal by approximately $5,461 in 1998. Interest cost charged to
discontinued operations was $3,325 for 1998 and $3,697 for 1997. Interest cost
for periods subsequent to the decision to discontinue the textile product
operations included in the loss on disposal was $1,996.
At December 26, 1998 assets of the textile products operations to be sold
consisted of accounts receivable, inventories, and property, plant and
equipment amounting to approximately $77,212 after deducting an allowance for
the estimated losses on disposal and liabilities were $22,354 including
<PAGE>
estimated operating losses to the anticipated disposal date. At December 25,
1999, the remaining liabilities of the textile products operations consisted of
accrued exit costs of $3,461 and no significant assets were remaining.
NOTE D--SALE OF ACCOUNTS RECEIVABLE
On October 15, 1993, the Company entered into a seven year agreement under
which it sold a $45,000 undivided interest in a revolving pool of its trade
accounts receivable. No further interest has been sold under this agreement
subsequent to the original sale. As part of the agreement, the Company's
accounts receivable are transferred to a trust in which the Company retains an
ownership interest generally equal to the value of the assets transferred to
the trust in excess of the $45,000 interest sold. During the term of the
agreement, the Company is to maintain a revolving pool of eligible accounts
receivable and/or other assets (as defined in the agreement) in the trust at
levels which vary daily based on ratios defined in the agreement. At December
25, 1999, the Company had $14,112 of liquid, highly rated securities classified
as cash equivalents included in the pool.
At December 25, 1999 and December 26, 1998, the $45,000 interest sold is
reflected as a reduction of accounts receivable in the Company's consolidated
balance sheets. Costs of this program were fixed at 6.08% per annum on the
amount of the interest sold plus administrative fees typical in such
transactions. These costs, which were approximately $2,900 for 1999, $2,935
for 1998, and $2,985 for 1997, are included in other expense - net. In
addition, the Company is generally at risk for credit losses associated with
sold receivables and provides for such losses in the Company's financial
statements.
NOTE E--ACCRUED EXPENSES
Accrued expenses include the following:
1999 1998
Compensation and benefits $13,934 $ 8,910
<PAGE>
NOTE F--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
1999 1998
Senior indebtedness:
Credit line borrowings $ 30,073 $ 14,000
Term loan 36,346 57,000
Other 740 611
Total senior indebtedness 67,159 71,611
Subordinated notes 50,000 50,000
Convertible subordinated debentures 39,737 42,237
Total long-term debt 156,896 163,848
Less current portion (13,460) (9,645)
Total long-term debt (less current
portion) $143,436 $154,203
On March 31, 1998, the Company entered into an unsecured revolving credit and
term-loan facility with its principal senior lenders. The credit facility
provides for revolving credit of up to $100,000 through a five year commitment
period and a $60,000, seven year term-loan. Interest rates available under the
facility may be selected by the Company from a number of options which
effectively allow for borrowing at rates not exceeding the greater of the
lender's prime rate or the federal funds rate plus .5% per annum. The
effective annual interest rate on borrowings under the revolving credit and
term-loan agreement was 6.31% for 1999, 6.28% for 1998 and 6.79% for 1997. The
average interest rate on debt outstanding under this agreement was 5.92% at
December 25, 1999, and 5.97% at December 26, 1998. Commitment fees, ranging
from .25% to .375% per annum on the revolving credit line are payable on the
average daily unused balance of the revolving credit facility.
On April 2, 1998, the Company completed an agreement with the Development
Authority of Lafayette, Georgia (the Authority) to borrow $7,000 from the
Authority under a development bond issuance. Amounts received by the Company
are secured by a letter of credit issued by the Company's lead lender in favor
of the Authority. The value of the letter of credit reduces the Company's
availability under its revolving credit and term-loan facility. The proceeds
were used to finance the real property and machinery and equipment needs of the
Company's synthetic materials recycling center in Lafayette, Georgia.
The Company's subordinated notes are unsecured, bear interest ranging from
9.96% to 10.61% payable semiannually, and are due in semiannual installments of
$2,381 beginning February 1, 2000.
The Company's convertible subordinated debentures bear interest at 7% payable
semiannually, are due in 2012, and are convertible by the holder into shares of
Common Stock of the Company at an effective conversion price of $32.20 per
share, subject to adjustment under certain circumstances. Mandatory sinking
fund payments, which commenced May 15, 1998, will retire $2,500 principal
amount of the debentures annually and approximately 70% of the debentures prior
to maturity. The convertible debentures are subordinated in right of payment
to all other indebtedness of the Company.
The Company's long-term debt and credit arrangements contain financial
covenants relating to minimum net worth, the ratio of debt to capitalization,
payment of dividends and certain other financial ratios. The payment of future
dividends is currently limited to 50% of aggregate consolidated net income
subsequent to December 25, 1999.
At December 25, 1999, unused borrowing capacity under the Company's revolving
credit and term-loan agreement was approximately $74,801 (including amounts
available under short-term credit lines).
Approximate maturities of long-term debt for each of the five years succeeding
December 25, 1999 are $13,625 in 2000, $13,834 in 2001, $13,836 in 2002,
$36,910 in 2003, and $13,840 in 2004.
<PAGE>
Interest payments for continuing and discontinued operations were $14,095 in
1999, $12,918 in 1998, and $12,424 in 1997.
NOTE G--FAIR VALUE OF FINANCIAL INSTRUMENTS
All of the Company's financial instruments are held or issued for purposes
other than trading. The carrying amounts and estimated fair values of the
Company's financial instruments are summarized as follows:
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Cash and cash
equivalents $ 12,541 $ 12,541 $ 2,815 $ 2,815
Notes receivable
(including current
portion) 6,865 6,865 1,151 1,151
Escrow funds 640 640 1,030 1,030
Financial liabilities
Long-term debt
(including current
portion) $156,896 $145,324 $163,848 $155,616
The fair values of the Company's financial assets approximate their carrying
amounts due to their short-term nature and for notes receivable, adjustable
interest rate provisions. The fair values of the Company's long-term debt were
estimated using discounted cash flow analyses based on incremental
borrowing rates for similar types of borrowing arrangements and quoted market
rates for the Company's convertible debentures.
<PAGE>
NOTE H--PENSION PLANS
Information about the benefit obligation, assets and funded status of the
Company's defined benefit pension plans is as follows:
1999 1998
Change in benefit obligation:
Benefit obligation at beginning of year $ 18,225 $ 14,533
Service cost 100 51
Interest cost 945 941
Actuarial (gain) loss (1,804) 4,215
Benefits paid (10,588) (1,515)
Change in plan provisions 121 ---
Benefit obligation at end of year 6,999 18,225
Change in plan assets:
Fair value of plan assets at beginning of year 12,550 12,966
Actual return on plan assets 11 964
Employer contribution 2,097 135
Benefits paid (10,588) (1,515)
Fair value of plan assets at end of year 4,070 12,550
Funded status: (2,928) (5,675)
Unrecognized actuarial loss 674 1,400
Net amount recognized $ (2,254) $ (4,275)
Amounts recognized in the statement of financial
position consist of:
Accrued liability $ (2,928) $ (5,675)
Accumulated other comprehensive income 674 1,400
Net amount recognized $ (2,254) $ (4,275)
Weighted-average assumptions as of year-end:
Discount rate 6.27% 5.11%
Expected return on plan assets 8.50% 8.50%
The actuarial loss increasing the benefit obligation in 1998 resulted primarily
from reduction of the assumed discount rate to the estimated rate applicable
to settlement of the benefit obligation relative to associates of discontinued
operations. The amount of such benefit obligation subject to settlement
approximated $14,377 and a loss resulting from the settlement of approximately
$5,769 ($3,519 after income tax) is included in loss on disposal of
discontinued operations in 1998.
At December 25, 1999, there were no shares of the Company's Common Stock
included in plan assets. At December 26, 1998, plan assets included 130,226
shares of the Company's Common Stock with a fair value of $1,058 ($8.12 per
share). Dividends received on shares of the Company's Common Stock held during
1998 totaled $20.
<PAGE>
Costs charged to continuing operations for all pension plans are summarized as
follows:
1999 1998 1997
Components of net periodic pension cost:
Defined benefit plans
Service cost $ 100 $ 51 $ 47
Interest cost 222 331 430
Expected return on plan assets (244) (375) (411)
Recognized net actuarial loss 110 25 129
Settlement loss 64 59 108
252 91 303
Defined contribution plans 3,889 3,811 3,067
Net Pension Cost $4,141 $3,902 $3,370
Portions of the cost of the defined contribution plans are based on the
Company's operating results and the level of associates' contributions to their
accounts.
NOTE I--INCOME TAXES
The provision (benefit) for income taxes on income (loss) from continuing
operations consists of the following:
1999 1998 1997
Current Deferred Current Deferred Current Deferred
Federal $5,366 $1,940 $ 1,748 $3,525 $(1,188) $5,330
State 747 (82) 97 222 799 273
Total $6,113 $1,858 $ 1,845 $3,747 $ (389) $5,603
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the tax bases of those assets and liabilities. Significant
components of the Company's deferred tax liabilities and assets are as
follows:
Deferred Tax Liabilities: 1999 1998
Property, plant and equipment $23,035 $24,035
Inventories 267 2,046
Intangible assets 2,176 1,682
Other 3,702 3,899
Total deferred tax liabilities 29,180 31,662
Deferred Tax Assets:
Post-retirement benefits 4,350 5,014
Other employee benefits 2,695 3,481
Losses from discontinued operations 529 2,398
Alternative minimum tax --- 1,277
Allowances for bad debts,
claims and discounts 2,332 2,414
Other 1,236 1,085
Total deferred tax assets 11,142 15,669
Net deferred tax liabilities $18,038 $15,993
<PAGE>
Differences between the provision for income taxes and the amount computed by
applying the statutory Federal income tax rate to income from continuing
operations are reconciled as follows:
1999 1998 1997
Statutory rate applied to income
from continuing operations $ 7,132 $ 4,998 $ 4,769
Plus state income taxes net of
Federal tax effect 432 210 707
Total statutory provision 7,564 5,208 5,476
Increase(decrease) attributable to:
Nondeductible amortization of and
impairment adjustments to
intangible assets 242 201 200
Nondeductible portion of
travel and entertainment 246 251 228
Net operating loss carryback
benefit --- --- (781)
Other items (81) (68) 91
Total tax provision $ 7,971 $ 5,592 $ 5,214
Income tax payments, net of income tax refunds received, for continuing and
discontinued operations were $10,545 in 1999, $2,156 in 1998 and $3,162 in
1997.
NOTE J--COMMON STOCK AND EARNINGS PER SHARE
Holders of Class B Common Stock have the right to twenty votes per share on
matters that are submitted to Shareholders for approval and to dividends in an
amount not greater than dividends declared and paid on Common Stock. Class B
Common Stock is restricted as to transferability and may be converted into
Common Stock on a one share for one share basis. The Company's Charter also
authorizes 200,000,000 shares of Class C Common Stock, $3 par value per share,
and 16,000,000 shares of Preferred Stock. No shares of Class C Common Stock or
Preferred Stock have been issued.
In August 1996, the Company's Board of Directors adopted a stock ownership plan
applicable to the senior management of the Company for the purpose of
encouraging each participant to make a significant investment in the Company's
Common Stock. Pursuant to the plan, at December 25, 1999, 620,516 shares were
subscribed at a weighted average price of $8.79 per share, at December 26,
1998, 573,463 shares were subscribed at a weighted average price of $6.49 per
share, and at December 27, 1997, 512,477 shares were subscribed at a weighted
average price of $6.11 per share.
The following table sets forth the computation of basic and diluted earnings
per share from continuing operations:
<PAGE>
1999 1998 1997
Income from continuing operations (1) $12,399 $ 9,108 $ 8,812
Denominator for calculation of
basic earnings per share -
weighted average shares (2) 11,355 11,267 11,229
Effect of dilutive securities:
Stock options (2) 206 348 332
Stock subscriptions (2) 121 194 204
Denominator for calculation of
diluted earnings per share -
weighted average shares
adjusted for potential
dilution (2)(3) 11,682 11,809 11,765
Earnings per share:
Basic $ 1.09 $ 0.81 $ 0.78
Diluted 1.06 0.77 0.75
(1) No adjustments needed in the numerator for diluted calculations.
(2) Includes Common and Class B Common shares in thousands.
(3) Because their effects are anti-dilutive, excludes shares issuable under
stock option, stock subscription, and restricted stock plans whose grant
price was greater than the average market price of common shares
outstanding and the assumed conversion of subordinated debentures into
shares of Common Stock as follows: 2,835 shares in 1999, 2,065 shares in
1998, and 1,737 shares in 1997.
NOTE K--STOCK PLANS
The Company's 1990 Incentive Stock Plan reserves 2,270,000 shares of Common
Stock for sale or award to key associates or to the outside directors of the
Company under stock options, stock appreciation rights, restricted stock
performance grants, or other awards. Outstanding options are generally
exercisable at a cumulative rate of 25% per year after the second year from the
date the options are granted and generally expire after ten years from the
date of grant. Options outstanding were granted at prices at or above market
price on the date of grant.
In 1993, the Company issued options for the purchase of 83,044 shares of Common
Stock, which were immediately exercisable at prices ranging from $3.19 - $5.27
per share, in connection with the acquisition of Carriage Industries, Inc. As
of December 25, 1999, options for 18,851 of these shares remain outstanding.
A summary of the option activity for the three years ended December 25, 1999 is
as follows:
<PAGE>
Weighted-
Weighted- Average
Number Average Fair Value of
of Exercise Options Granted
Shares Price During the Year
Outstanding at December 28, 1996 1,259,842 $ 6.71
Granted at market price 499,500 9.74 $4.45
Granted above market price 12,000 14.30 5.54
Exercised (22,825) 6.46
Forfeited (80,250) 7.28
Outstanding at December 27, 1997 1,668,267 7.65
Granted at market price 287,250 8.53 3.95
Granted above market price 20,000 9.35 3.69
Exercised (12,250) 5.73
Forfeited (35,750) 6.21
Expired (1,019) 3.43
Outstanding at December 26, 1998 1,926,498 7.84
Granted at market price 128,500 8.11 3.95
Exercised (103,147) 7.58
Forfeited (237,250) 6.93
Outstanding at December 25, 1999 1,714,601 7.92
Options exercisable at
December 27, 1997 240,392 $ 6.85
December 26, 1998 497,561 6.90
December 25, 1999 603,914 7.76
The following table summarizes information about stock options at December 25,
1999:
Options Outstanding
Weighted-Average
Range of Number of Remaining Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price
$4.00 - $ 5.27 115,601 5.8 years $ 4.82
5.75 - 8.81 1,319,750 6.6 7.30
9.25 - 14.30 279,250 7.3 12.14
$4.00 - $14.30 1,714,601 6.7 $ 7.92
Options Exercisable
Range of Number of Weighted-Average
Exercise Prices Shares Exercise Price
$4.00 - $ 5.27 45,601 $ 4.83
5.75 - 8.81 496,500 7.42
9.25 - 14.30 61,813 12.66
$4.00 - $14.30 603,914 $ 7.76
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:
<PAGE>
1999 Grants 1998 Grants 1997 Grants
Expected life 5 years 5 years 5 years
Expected volatility 50.1% 44.2% 41.6%
Risk-free interest rate 5.60% 5.56% 6.25%
Dividend yield 0% 0% 0%
The following pro forma summary presents the Company's net income (loss) and
earnings (loss) 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". The pro forma impact on net income
(loss) shown below may not be representative of future pro forma effects.
1999 1998 1997
Pro forma
Net income (loss) $ 16,271 $(21,788) $ 11,073
Earnings (loss)
per share:
Basic 1.43 (1.93) 0.99
Diluted 1.39 (1.84) 0.94
The Company also has a stock purchase plan which authorizes 108,000 shares of
Common Stock for purchase by supervisory associates at the market price
prevailing at the time of purchase. At December 25, 1999, 26,340 shares
remained available for issue. Shares sold under this plan are held in escrow
until paid for and are subject to repurchase agreements which give the Company
the right of first refusal at the prevailing market price at the time of sale.
Numbers of shares sold under the plan were 9,100 in 1999, 0 in 1998, and
38,500 in 1997.
NOTE L--COMMITMENTS
The Company had commitments for purchases of machinery and equipment, building
construction, and information systems of approximately $18,173 at December 25,
1999.
The Company leases buildings, machinery and equipment under operating leases.
Commitments for minimum rentals under noncancellable leases at the end of 1999
for the next five years are as follows:
2000 $1,543
2001 1,511
2002 1,346
2003 1,026
2004 443
thereafter -
Total $5,869
Subsequent to December 25, 1999, the Company entered into additional operating
leases for certain transportation equipment. The Company's practice, prior to
this leasing arrangement, was to purchase all transportation equipment. The
total future commitments related to the transportation equipment leases are
$7,649 over the next seven years.
<PAGE>
Rental expense in 1999 amounted to approximately $2,855 and for prior periods
was not material.
NOTE M--SEGMENT INFORMATION
The Company has two reportable segments in its continuing operations: Carpet
Manufacturing and Floorcovering Base Materials. Each reportable segment is
organized around product similarities. The Carpet Manufacturing segment
contains three operating businesses that manufacture and sell finished carpet
and rugs. The Floorcovering Base Materials segment manufactures and sells yarn
to external customers and transfers a significant portion of its unit volumes
to the Company's Carpet Manufacturing segment.
The profit performance measure for the Company's segments is defined as
Internal EBIT (earnings before interest and taxes). The aggregate of Internal
EBIT for the reportable segments differs from the Company's consolidated
earnings before interest and taxes by costs associated with the sale of
accounts receivable under the Company's accounts receivable sales agreement and
sundry amounts that are deemed to be non-operating in nature. Assets measured
in each reportable segment include long-lived assets and goodwill, inventories
at current cost, and accounts receivable (without reductions for receivables
sold under the Company's accounts receivable sales agreement).
Allocations of corporate general and administrative expenses are used in the
determination of segment profit performance; however, assets of the corporate
departments are not used in the segment asset performance measurement. All
expenses incurred for the amortization of goodwill are recognized in segment
profit performance measurement; however, only selected intangible assets are
included in the asset performance measurement.
Net Sales - External Customers Profit Performance
1999 1998 1997 1999 1998 1997
Reportable Segments:
Carpet
Manufacturing $456,835 $401,826 $340,271 $30,056 $24,454 $21,337
Floorcovering
Base Materials 122,631 94,586 91,815 3,466 3,108 3,349
Intersegment
eliminations - 7 -
Segment total $579,466 $496,412 $432,086 33,522 27,569 24,686
Interest expense 13,051 10,263 8,886
Cost of A/R
sales program 2,900 2,900 2,898
Other non-segment
(income) (2,799) (294) (1,124)
Consolidated income
before income taxes
from continuing
operations $20,370 $14,700 $14,026
<PAGE>
Capital Depreciation
Expenditures and Amortization
1999 1998 1997 1999 1998 1997
Reportable Segments:
Carpet
Manufacturing $21,161 $23,099 $15,803 $15,398 $14,542 $12,883
Floorcovering
Base Materials 13,671 10,219 3,158 6,328 3,359 2,298
Corporate and
Shared Services 495 45 222 604 800 628
Total Continuing
Operations $35,327 $33,363 $19,183 $22,330 $18,701 $15,809
Assets Used in
Performance Measurement
1999 1998 1997
Reportable Segments:
Carpet
Manufacturing $292,889 $229,937 $222,056
Floorcovering
Base Materials 76,051 54,463 51,680
Assets in Performance Measurement 368,940 284,400 273,736
Assets Not in Segment Measurements:
Other operating assets 22,504 22,738 112,878
Assets of discontinued operations 457 67,508 ---
Total Consolidated Assets $391,901 $374,646 $386,614
During 1999, sales to The Home Depot amounted to approximately $61.0 million or
10.5% of consolidated net sales. No single customer's net sales exceeded 10%
of the Company's consolidated net sales in 1998 or 1997. The loss of The Home
Depot business could have a material adverse effect on the Company's
operations. Substantially all of the Company's sales were to domestic
customers and all assets were domestically based for the periods presented. A
substantial majority of the unit production volume of the Company's
Floorcovering Base Materials segment is directed into the Carpet Manufacturing
segment. A significant portion of the units are processed by the Base
Materials group on a conversion basis only (costs to manufacture) and are
recorded in intersegment sales at the conversion value. The remaining
transfers are recorded on a full-package basis (raw materials plus conversion
costs) with either cost or an arms length price as the transfer value,
depending on the product. Intersegment sales from the Company's Floorcovering
Base Materials group to the Company's Carpet Manufacturing group were $103,669
in 1999, $62,545 in 1998, and $49,798 in 1997.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE DIXIE GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
(1) (2)
DESCRIPTION Balance at Charged to Charged to Deductions- Balance at
Beginning of Costs and Other Accounts Describe End of Period
Period Expenses -Describe
<S> <C> <C> <C> <C> <C>
Year ended December 25, 1999:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $ 3,772 $ 832 $ 262 (1) $ 3,035 (2) $ 1,831
Provision to reduce
inventories to net
realizable value 4,972 (531) -0- -0- (3) 4,441
Provision to reduce
assets held for sale
to estimated fair
market value 14,484 -0- -0- 13,297 (4) 1,187
Year ended December 26, 1998:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $ 3,207 $ 888 $ -0- $ 323 (2) $ 3,772 (5)
Provision to reduce
inventories to net
realizable value 7,664 -0- -0- 2,692 (3) 4,972 (5)
Provision to reduce
assets held for sale
to estimated fair
market value 16,200 11,635 -0- 13,351 (4) 14,484
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)
THE DIXIE GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
(1) (2)
DESCRIPTION Balance at Charged to Charged to Deductions- Balance at
Beginning of Costs and Other Accounts Describe End of Period
Period Expenses -Describe
<S> <C> <C> <C> <C> <C>
Year ended December 27, 1997:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $ 3,614 $ 386 $ -0- $ 793 (2) $ 3,207
Provision to reduce
inventories to net
realizable value 7,346 -0- 2,447 (1) 2,129 (3) 7,664
Provision to reduce
assets held for sale
to estimated fair
market value 18,564 -0- -0- 2,364 (4) 16,200
</TABLE>
(1) Increase in reserves in connection with business combinations.
(2) Uncollectible accounts written off, net of recoveries.
(3) Provision for current items net of reductions for previous items.
(4) Reserve reductions for assets sold.
(5) Includes amounts related to discontinued businesses.
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (c)
EXHIBITS
YEAR ENDED DECEMBER 26, 1998
THE DIXIE GROUP, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(3a) Restated Charter of The Incorporated by reference to
Dixie Group, Inc. Exhibit (3) to Dixie's Quarterly
Report on Form 10-Q for the
quarter ended March 29, 1997.*
(3b) Amended and Restated By- Incorporated by reference to
Laws of Dixie Yarns, Inc. Exhibits (3b) and (3c) to Dixie's
Annual Report on Form 10-K for
the year ended December 29,
1990.*
(4a) Second Amended and Restated Incorporated by reference to
Revolving Credit and Term Exhibit (4a) to Dixie's Annual
Loan Agreement, dated Report on Form 10-K for the
January 31, 1992, by and year ended December 28, 1991.*
among Dixie Yarns, Inc. and
Trust Company Bank, NationsBank
of North Carolina, N.A. and
Chemical Bank.
(4b) Loan Agreement, dated Incorporated by reference to
February 6, 1990 between Exhibit (4d) to Dixie's Annual
Dixie Yarns, Inc. and New Report on Form 10-K for the
York Life Insurance Company year ended December 30, 1989.*
and New York Life Annuity
Corporation.
(4c) Form of Indenture, dated Incorporated by reference to
May 15, 1987 between Dixie Exhibit 4.2 to Amendment No. 1
Yarns, Inc. and Morgan of Dixie's Registration
Guaranty Trust Company of Statement No. 33-140 78 on Form
New York as Trustee. S-3, dated May 19, 1987.
(4d) Revolving Credit Loan Incorporated by reference to
Agreement dated as of Exhibit (4d) to Dixie's Annual
September 16, 1991 by Report on Form 10-K for the
and among Ti-Caro, Inc. and year ended December 28, 1991.*
Trust Company Bank,
individually and as agent,
NCNB National Bank, and
Chemical Bank.
* Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4e) First Amendment to Revolving Incorporated by reference to
Credit Loan Agreement dated Exhibit (4e) to Dixie's Annual
as of August 19, 1992 by and Report on Form 10-K for the
among Ti-Caro, Inc., T-C year ended December 26, 1992.*
Threads, Inc. and Trust
Company Bank, individually
and as agent, NCNB National
Bank, and Chemical Bank.
(4f) First Amendment, dated Incorporated by reference to
August 25, 1993 to Second Exhibit (4f) to Dixie's Annual
Amended and Restated Report on Form 10-K for the year
Revolving Credit and Term ended December 25, 1993.*
Loan Agreement dated
January 31, 1992, by and among
Dixie Yarns, Inc. and Trust
Company Bank, NationsBank of
North Carolina, N.A. and
Chemical Bank.
(4g) Third Amended and Restated Incorporated by reference to
Credit Agreement dated Exhibit (4) to Dixie's Quarterly
March 31, 1995. Report on Form 10-Q for the
quarter ended April 1, 1995.*
(4h) Waiver and First Amendment Incorporated by reference to
to Credit Agreement dated Exhibit (4h) to Dixie's Annual
February 27, 1996. Report on Form 10-K for the year
ended December 30, 1995.*
(4i) Waiver and Modification Incorporated by reference to
Agreement dated Exhibit (4i) to Dixie's Annual
November 1, 1996. Report on Form 10-K for the year
ended December 28, 1996.*
(4j) Waiver Letter dated Incorporated by reference to
December 13, 1996. Exhibit (4j) to Dixie's Annual
Report on Form 10-K for the year
ended December 28, 1996.*
(4k) Second Amendment dated Incorporated by reference to
September 7, 1997 to the Exhibit (4) to Dixie's Quarterly
Third Amended and Restated Report on Form 10-Q for the
Credit Agreement dated quarter ended September 27, 1997.*
March 31, 1995.
(4l) Amendment to 9.96% Senior Incorporated by reference to
Subordinated Notes due Exhibit (4l) to Dixie's Annual
February 1, 2010. Report on Form 10-K for the
year ended December 27, 1997.*
* Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4m) Letter agreement dated Incorporated by reference to
February 17, 1998 re: Exhibit (4m) to Dixie's Annual
Amendment to 9.96% Senior Report on Form 10-K for the
Subordinated Notes due year ended December 27, 1997.*
February 1, 2010.
(4n) Credit agreement dated Incorporated by reference to
as of March 31, 1998 by Exhibit (4n) to Dixie's Annual
and among The Dixie Report on Form 10-K for the
Group, Inc., SunTrust year ended December 27, 1997.*
Bank, Atlanta, and
NationsBank, N.A. and
Form of Revolving Credit
Note, Form of Term Note
And Form of Swing Line
Note.
(4o) Waiver letter dated Incorporated by reference to
August 17, 1998 from Exhibit (4o) to Dixie's Annual
New York Life Insurance Report on Form 10-K for the
And Annuity Corporation. year ended December 27, 1997.*
(4p) Waiver letter dated Incorporated by reference to
August 17, 1998 from Exhibit (4p) to Dixie's Annual
New York Life Insurance Report on Form 10-K for the
Company. year ended December 27, 1997.*
(10a) Dixie Yarns, Inc. Nonquali- Incorporated by reference to
fied Defined Contribution Exhibit (10c) to Dixie's Annual
Plan. Report on Form 10-K for the
year ended December 26, 1992.*
(10b) Dixie Yarns, Inc. Nonquali- Incorporated by reference to
fied Employee Savings Plan. Exhibit (10d) to Dixie's Annual
Report on Form 10-K for the
year ended December 26, 1992.*
(10c) Dixie Yarns, Inc. Incentive Incorporated by reference to
Compensation Plan. Exhibit (10e) to Dixie's Annual
Report on Form 10-K for the
year ended December 26, 1992.*
(10d) Pooling and Servicing Incorporated by reference to
Agreement dated as of Exhibit (2a) to Dixie's
October 15, 1993, among Current Report on Form 8-K
Dixie Yarns, Inc., Dixie dated October 15, 1993.*
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
* Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10e) Annex X - Definitions, to Incorporated by reference to
Pooling and Servicing Exhibit (2b) to Dixie's
Agreement dated as of Current Report on Form 8-K
October 15, 1993, among dated October 15, 1993.*
Dixie Yarns, Inc., Dixie
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10f) Series 1993-1 Supplement, Incorporated by reference to
dated as of October 15, Exhibit (2c) to Dixie's
1993, to Pooling and Current Report on Form 8-K
Servicing Agreement dated as dated October 15, 1993.*
of October 15, 1993, among
Dixie Yarns, Inc., Dixie
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10g) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2d) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and New York Life Insurance
and Annuity Corporation.
(10h) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2e) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and John Alden Life
Insurance Company.
(10i) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2f) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and John Alden Life
Insurance Company of New
York.
(10j) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2g) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and Keyport Life Insurance
Company.
* Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10k) Asset Purchase Agreement Incorporated by reference to
dated May 23, 1996, by and Exhibit (2a) to Dixie's Current
among T-C Threads, Inc. Report on Form 8-K dated
d/b/a Threads USA, Threads June 3, 1996.*
of Puerto Rico, Inc.,
Productos para la Industria
de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A.
de C. V., and Dixie Yarns,
Inc. and American & Efird,
Inc.
(10l) Amendment, dated May 31, Incorporated by reference to
1996, to Asset Purchase Exhibit (2b) to Dixie's Current
Agreement dated May 23, Report on Form 8-K dated
1996, by and among T-C June 3, 1996.*
Threads, Inc. d/b/a Threads
USA, Threads of Puerto Rico,
Inc., Productos para la
Industria de la Maquila,
S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V.,
and Dixie Yarns, Inc. and
American & Efird, Inc.
(10m) Second Amendment, dated Incorporated by reference to
June 3, 1996, to Asset Exhibit (2c) to Dixie's Current
Purchase Agreement dated Report on Form 8-K dated
May 23, 1996, by and among June 3, 1996.*
T-C Threads, Inc., d/b/a
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10n) Yarn and Finished Goods Incorporated by reference to
Agreement dated as of Exhibit (2d) to Dixie's Current
June 3, 1996, by and among Report on Form 8-K dated
T-C Threads, Inc. d/b/a June 3, 1996.*
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
* Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10o) Accounts Receivable Incorporated by reference to
Agreement dated as of Exhibit (2e) to Dixie's Current
June 3, 1996, by and among Report on Form 8-K dated
T-C Threads, Inc. d/b/a June 3, 1996.*
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10p) Noncompetition Agreement Incorporated by reference to
dated as of June 3, 1996, by Exhibit (2f) to Dixie's Current
and among T-C Threads, Inc. Report on Form 8-K dated
d/b/a Threads USA, Threads June 3, 1996.*
of Puerto Rico, Inc.,
Productos para la Industria
de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A.
de C. V., and Dixie Yarns,
Inc. and American & Efird,
Inc.
(10q) Asset Purchase Agreement Incorporated by reference to
dated as of August 29, 1997 Exhibit (2) to Dixie's Current
among The Dixie Group, Inc., Report on Form 8-K dated
Bretlin, Inc., Foamex L.P. August 29, 1997.
and General Felt Industries,
Inc.
(10r) Dixie Yarns, Inc. Incentive Incorporated by reference to
Stock Plan as amended. ANNEX A to Dixie's Proxy Statement
dated March 27, 1998 for its 1998
Annual Meeting of Shareholders.
(10s) Form of Nonqualified Stock Incorporated by reference to
Option Agreement Under the Exhibit (10a) to Dixie's Quarterly
Dixie Yarns, Inc. Incentive Report on Form 10-Q for the
Stock Plan. quarter ended July 1, 1995.*
(10t) Form of Amendment to Incorporated by reference to
Nonqualified Stock Option Exhibit (10b) to Dixie's Quarterly
Agreement Under the Dixie Report on Form 10-Q for the
Yarns, Inc. Incentive Stock quarter ended July 1, 1995.*
Plan.
*Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10u) Form of Stock Option Incorporated by reference to
Agreement Under the Dixie Exhibit (10b) to Dixie's Annual
Yarns, Inc. Incentive Report on Form 10-K for the
Stock Plan as amended. year ended December 28, 1996.*
(10v) Form of Stock Rights and Incorporated by reference to
Restrictions Agreement Exhibit (10v) to Dixie's Annual
for Restricted Stock Award Report on Form 10-K for the
Under Incentive Stock Plan year ended December 27, 1997.*
as Amended.
(10w) The Dixie Group, Inc. Stock Incorporated by reference to
Ownership Plan as Exhibit (10w) to Dixie's Annual
amended. Report on Form 10-K for the
year ended December 27, 1997.*
(10x) Form of Stock Subscription Incorporated by reference to
Agreement Under Stock Exhibit (10x) to Dixie's Annual
Ownership Plan of The Report on Form 10-K for the
Dixie Group, Inc. year ended December 27, 1997.*
(10y) The Dixie Group, Inc. Incorporated by reference to
Directors Stock Plan Exhibit (10y) to Dixie's Annual
Report on Form 10-K for the
year ended December 27, 1997.*
(10z) Asset Purchase Agreement Incorporated by reference to
dated January 8, 1999, by Exhibit (10) to Dixie's Quarterly
and between Multitex Report on Form 10-Q for the
Corporation of America quarter ended March 27, 1999.*
and The Dixie Group, Inc.
(10A) The Dixie Group, Inc. New Incorporated by reference to
Nonqualified Retirement Exhibit (10.1) to Dixie's
Savings Plan effective Quarterly Report on Form 10-Q
August 1, 1999 for the quarter ended June 26,
1999.*
(10B) The Dixie Group, Inc. Incorporated by reference to
Deferred Compensation Plan Exhibit (10.2) to Dixie's
Amended and Restated Quarterly Report on Form 10-Q
Master Trust Agreement for the quarter ended June 26,
Effective as of August 1999.*
1, 1999.
*Commission File No. 0-2585
<PAGE>
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10C) Asset Purchase Agreement Incorporated by reference to
dated as of May 7, 1999, Exhibit (10.3) to Dixie's
between R.L. Stowe Mills, Quarterly Report on Form 10-Q
Inc. and The Dixie Group, for the quarter ended June 26,
Inc. 1999.*
(21) Subsidiaries of the Filed herewith
Registrant.
(23) Consent of Ernst & Young LLP. Filed herewith.
*Commission File No. 0-2585
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF THE DIXIE GROUP, INC.
STATE/COUNTRY
OF
SUBSIDIARY INCORPORATION
Amtex, Inc. TN
C-Knit Apparel, Inc. TN
Candlewick Holdings, Inc.* GA
Candlewick Lemoore, Inc.** TN
Candlewick Ringgold, Inc.** TN
Candlewick Roanoke/Tennessee, Inc.** TN
Caro-Knit, Inc.* SC
Carriage Industries, Inc. GA
Del, Inc.* TN
Dixie Export, Inc. USVI
Dixie Funding, Inc. TN
Dixie Mercerizing Co.* TN
Dy, Inc.* TN
JXM, Inc.* NC
Masland Carpets, Inc.** AL
Myers Community Utility Services, Inc.* NC
North State Knitting Company* NC
Patrick Carpet Mills, Inc.* CA
SUBSIDIARIES OF CARRIAGE INDUSTRIES, INC.
STATE/COUNTRY
OF
SUBSIDIARY INCORPORATION
Bretlin, Inc. GA
Candlewick Yarns, Inc. TN
Carriage Investments, Inc. GA
Dixie Logistics, Inc. GA
* merged into The Dixie Group, Inc. in December 1999
** merged into Candlewick Yarns, Inc. in January 1999
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-30473) pertaining to the Employee Stock Purchase Plan of
The Dixie Group, Inc., the Registration Statement (Form S-8 No. 33-59564)
pertaining to options to acquire Common Stock of The Dixie Group, Inc.
issued in connection with the acquisition of Carriage Industries, Inc., the
Registration Statement (Form S-8 No. 33-42615 and No. 333-81163) pertaining
to the Incentive Stock Option Plan of The Dixie Group, Inc., Post-Effective
Amendment Number 2 to the Registration Statements (Form S-8 No. 2-20604 and
No. 2-56744) pertaining to the Employee Stock Purchase Plan and Employee
Stock Option Plan of The Dixie Group, Inc., and the Registration Statement
(Form S-8 No. 333-80971) pertaining to the Core Leadership Team Stock
Ownership Plan of The Dixie Group, Inc. of our report dated February 15,
2000, with respect to the consolidated financial statements and schedule of
The Dixie Group, Inc. included in the Annual Report (Form 10-K) for the
year ended December 25, 1999.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 24, 2000
<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 TWELVE MONTHS ENDED DECEMBER 25, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> DEC-25-1999
<CASH> 12,541
<SECURITIES> 0
<RECEIVABLES> 21,285
<ALLOWANCES> 1,831
<INVENTORY> 104,042
<CURRENT-ASSETS> 150,965
<PP&E> 307,766
<DEPRECIATION> 134,180
<TOTAL-ASSETS> 391,901
<CURRENT-LIABILITIES> 96,752
<BONDS> 143,436
<COMMON> 42,793
0
0
<OTHER-SE> 75,117
<TOTAL-LIABILITY-AND-EQUITY> 391,901
<SALES> 579,466
<TOTAL-REVENUES> 579,466
<CGS> 456,360
<TOTAL-COSTS> 456,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,051
<INCOME-PRETAX> 20,370
<INCOME-TAX> 7,971
<INCOME-CONTINUING> 12,399
<DISCONTINUED> 4,792
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,191
<EPS-BASIC> 1.51
<EPS-DILUTED> 1.47
</TABLE>
