<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 1, 2000
Commission File Number 0-2585
THE DIXIE GROUP, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-0183370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 South Watkins Street
Chattanooga, Tennessee 37404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 698-2501
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of April 28, 2000
Common Stock, $3 Par Value 10,747,058 shares
Class B Common Stock, $3 Par Value 795,970 shares
Class C Common Stock, $3 Par Value 0 shares
<PAGE> 1
THE DIXIE GROUP, INC.
INDEX
Part I. Financial Information: Page No.
Consolidated Condensed Balance Sheets --
April 1, 2000 and December 25, 1999 3
Consolidated Statements of Operations --
Three Months Ended April 1, 2000
and March 27, 1999 5
Consolidated Condensed Statements of Cash Flows --
Three Months Ended April 1, 2000
and March 27, 1999 6
Consolidated Statement of Stockholder's Equity --
Three Months Ended April 1, 2000 8
Notes to Consolidated Condensed Financial Statements 9
Management's Discussion and Analysis of Results of
Operations and Financial Condition 14
Part II. Other Information:
Item 1 - Legal Proceedings 17
Item 2 - Changes in Securities and Use of Proceeds 17
Item 3 - Defaults Upon Senior Securities 17
Item 4 - Submission of Matters to a Vote of Security Holders 17
Item 5 - Other Information 18
Item 6 - Exhibits and Reports on Form 8-K 18
<PAGE> 2
PART I - ITEM 1
FINANCIAL INFORMATION
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
April 1, December 25,
2000 1999
_____________ ____________
(dollar amounts in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,413 $ 12,541
Accounts receivable (less allowance for
doubtful accounts of $1,736 for 2000
and $1,831 for 1999) 18,996 19,454
Inventories 120,857 104,042
Net assets held for sale 457 457
Other 14,148 14,471
_____________ ____________
TOTAL CURRENT ASSETS 167,871 150,965
PROPERTY, PLANT AND EQUIPMENT 321,520 307,766
Less accumulated amortization and
depreciation (139,984) (134,180)
_____________ ____________
NET PROPERTY, PLANT AND EQUIPMENT 181,536 173,586
INTANGIBLE ASSETS (less accumulated
amortization of $6,585 for 2000
and $6,190 for 1999) 51,862 52,460
OTHER ASSETS 15,107 14,890
_____________ ____________
TOTAL ASSETS $ 416,376 $ 391,901
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 3
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
April 1, December 25,
2000 1999
_____________ ____________
(dollar amounts in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 35,068 $ 53,590
Accrued expenses 20,091 26,241
Accrued losses of discontinued operations 3,276 3,461
Current portion of long-term debt 13,824 13,460
_____________ ____________
TOTAL CURRENT LIABILITIES 72,259 96,752
LONG-TERM DEBT
Senior indebtedness 113,425 60,961
Subordinated notes 42,857 45,238
Convertible subordinated debentures 37,237 37,237
_____________ ____________
TOTAL LONG-TERM DEBT 193,519 143,436
OTHER LIABILITIES 10,355 10,295
DEFERRED INCOME TAXES 23,508 23,508
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share)
authorized 80,000,000 shares -
issued and outstanding,
14,265,296 shares for 2000 and
14,264,277 shares for 1999 42,796 42,793
Class B Common Stock ($3 par value per share)
authorized 16,000,000 shares -
issued and outstanding, 795,970 shares
for 2000 and 1999 2,388 2,388
Common Stock Subscribed - 646,230 shares
for 2000 and 620,516 shares for 1999 1,939 1,861
Additional paid-in capital 136,260 136,144
Stock subscriptions receivable (5,649) (5,456)
Unearned stock compensation (453) (489)
Retained earnings (deficit) (3,843) (2,659)
Accumulated other comprehensive income (412) (412)
_____________ ____________
173,026 174,170
Less Common Stock in treasury at cost -
3,516,798 shares for 2000 and
3,511,829 shares for 1999 (56,291) (56,260)
_____________ ____________
TOTAL STOCKHOLDERS' EQUITY 116,735 117,910
_____________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 416,376 $ 391,901
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 4
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
______________________________
April 1, March 27,
2000 1999
_____________ _____________
(dollar amounts in thousands,
except per share data)
Net sales $ 131,574 $ 141,224
Cost of sales 106,199 112,014
_____________ _____________
GROSS PROFIT 25,375 29,210
Selling and administrative expenses 23,160 20,470
Other expense - net 132 1,120
_____________ _____________
INCOME BEFORE INTEREST AND TAXES 2,083 7,620
Interest expense 4,002 3,346
_____________ _____________
INCOME (LOSS) BEFORE INCOME TAXES (1,919) 4,274
Income tax provision (benefit) (735) 1,694
_____________ _____________
Net Income (Loss) $ (1,184) $ 2,580
_____________ _____________
_____________ _____________
Earnings per Share:
Basic Earnings (Loss) per share:
Income (loss) from continuing operations $ (0.10) $ 0.23
Income from discontinued operations - -
Net Income (Loss) $ (0.10) $ 0.23
_____________ ____________
Shares outstanding 11,474 11,282
Diluted Earnings (Loss) per share:
Income (loss) from continuing operations $ (0.10) $ 0.22
Income from discontinued operations - -
Net Income (Loss) $ (0.10) $ 0.22
_____________ ____________
Shares outstanding 11,474 11,627
Dividends per share:
Common Stock $ -- $ --
Class B Common Stock $ -- $ --
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 5
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
______________________________
April 1, March 27,
2000 1999
_____________ _____________
(dollar amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,184) $ 2,580
Depreciation and amortization 6,429 6,260
Provision (benefit) for deferred
income taxes --- 1
Gain on property, plant and
equipment disposals (352) ---
_____________ _____________
4,893 8,841
Changes in operating assets and
liabilities, net of effects
of business combination (40,967) (17,684)
_____________ _____________
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (36,074) (8,843)
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of
property, plant, and equipment 617 ---
Net proceeds from assets held for sale --- 9,943
Purchase of property, plant, and equipment:
Continuing operations (14,091) (4,745)
Discontinued operations --- (657)
Net cash paid in business combinations --- (32,194)
_____________ ____________
NET CASH USED IN INVESTING ACTIVITIES (13,474) (27,653)
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 6
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
- CONTINUED
(UNAUDITED)
Three Months Ended
______________________________
April 1, March 27,
2000 1999
_____________ _____________
(dollar amounts in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in credit line
borrowings 55,745 36,612
Payments on term loan (2,908) (1,500)
Payments on subordinated notes (2,381) ---
Other (36) 351
_____________ _____________
NET CASH PROVIDED BY FINANCING
ACTIVITIES 50,420 35,463
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 872 (1,033)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 12,541 2,815
_____________ _____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 13,413 $ 1,782
_____________ _____________
_____________ _____________
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 3,957 $ 4,122
____________ _____________
____________ _____________
Income taxes paid, net of
tax refunds (received) $ (33) $ 967
____________ _____________
____________ _____________
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 7
<TABLE>
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
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 25, 1999 $45,181 $1,861 $136,144 $(5,945) $ (2,659) $ (412) $(56,260) $117,910
Common Stock acquired for treasury -
4,969 shares (31) (31)
Common Stock subscribed -
45,714 shares 138 203 (341) -
Stock subscriptions settled -
20,000 shares (60) (87) 147 -
Amortization of restricted
Stock grants 36 36
Other 3 1 4
Net income (loss) for the period (1,184) (1,184)
BALANCE AT APRIL 1, 2000 $45,184 $1,939 $136,260 $(6,102) $ (3,843) $ (412) $(56,291) $116,735
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(dollar amounts in thousands, except per share data)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial statements which do not include all of the
information and footnotes required in annual financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended April 1, 2000 are not
necessarily indicative of the results that may be expected for the entire
year.
Cash and Cash Equivalents: Cash and highly liquid investments with
original maturities of three months or less when purchased are reported as
cash equivalents.
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.
The Company invests its excess cash in short-term investments and has not
experienced any losses on those investments.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost or market. At December 25,
1999 and April 1, 2000, the last-in, first-out (LIFO) cost method was used
for approximately 80% of total inventories and the first-in, first-out
(FIFO) cost method was used for approximately 20% of total inventories.
Inventories are summarized as follows:
April 1, December 25,
2000 1999
_____________ ____________
At FIFO cost:
Raw materials $ 39,196 $ 31,664
Work-in-process 19,160 18,389
Finished goods 57,562 49,121
Supplies, repair parts, and other 2,051 1,835
_____________ ____________
117,969 101,009
LIFO value over FIFO value 2,888 3,033
_____________ ____________
Total inventories $ 120,857 $ 104,042
_____________ ____________
_____________ ____________
<PAGE> 9
NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
April 1, March 27,
2000 1999
Income (loss) from continuing operations (1) $ (1,184) $ 2,580
Income from discontinued operations (1) - -
--------- ---------
Net income (loss) $ (1,184) $ 2,580
_________ _________
_________ _________
Denominator for calculation of
basic earnings per share -
weighted average shares (2) 11,474 11,282
Effect of dilutive securities:
Stock options - 200
Stock subscriptions - 145
Denominator for calculation of
diluted earnings per share -
weighted average shares adjusted --------- ---------
for potential dilution (3) 11,474 11,627
_________ _________
_________ _________
Basic Earnings (Loss) per share:
Income (loss) from continuing operations $ (0.10) $ 0.23
Income from discontinued operations - -
--------- ---------
Net Income (loss) $ (0.10) $ 0.23
_________ _________
_________ _________
Diluted Earnings (Loss) per share:
Income (loss) from continuing operations $ (0.10) $ 0.22
Income from discontinued operations - -
--------- ---------
Net Income (loss) $ (0.10) $ 0.22
_________ _________
_________ _________
Dividends per share:
Common Stock $ -- $ --
Class B Common Stock $ -- $ --
(1) No adjustments needed for diluted calculation.
(2) Includes Common and Class B Common shares in thousands.
(3) Because their effects are anti-dilutive, excludes shares issuable
pursuant to certain grants under stock option, stock subscription, and
restricted stock plans and the assumed conversion of subordinated
debentures into shares of Common Stock as follows: 3,298 shares in 2000
and 2,634 shares in 1999.
<PAGE> 10
NOTE D - LONG TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
April 1, December 25,
2000 1999
Senior indebtedness:
Credit line borrowings $ 85,818 $ 30,073
Term loan 33,438 36,346
Other 731 740
-------- --------
Total senior indebtedness 119,987 67,159
Subordinated notes 47,619 50,000
Convertible subordinated debentures 39,737 39,737
-------- --------
Total long-term debt 207,343 156,896
Less current portion (13,824) (13,460)
Total long-term debt (less current -------- --------
portion) $193,519 $143,436
________ ________
________ ________
The Company's unsecured revolving credit and term-loan facility provides
for revolving credit of up to $100.0 million through a five-year commitment
period beginning on March 31, 1998, and a $60.0 million, 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 equal to or lower than the greater of the lender's prime rate, or the
federal funds rate plus .5% per annum. 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.
The Company's subordinated notes are unsecured, bear interest at 9.96% to
10.61% payable semiannually, and are due in semiannual installments of
$2,381 which commenced 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 agreements 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.
As of April 1, 2000, the most restrictive covenants under the revolving
credit and term-loan agreement limit available borrowing capacity to $9.3
million (including amounts available under short-term credit lines).
<PAGE> 11
NOTE E - SEGMENT DATA
The Company's floorcovering operations are segmented around product
similarities between its Carpet Manufacturing and Floorcovering Base
Materials businesses. The Company's 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 and Globaltex brands, through select distributors under
the Alliance Mills name and to higher-end residential and commercial
customers serviced by Masland Carpets. The Company's Floorcovering Base
Materials operations supply extruded plied and heat-set filament and spun
yarns, through Candlewick Yarns, to the Company's Carpet Manufacturing
segment and, to a lesser extent, to specialty carpet yarn markets.
The following table reflects selected operating data relating to the two
reportable segments of the Company:
Quarter Ended
April 1, March 27,
2000 1999
SALES TO EXTERNAL CUSTOMERS
Carpet Manufacturing $111,557 $108,132
Floorcovering Base Materials 19,212 31,806
Other 805 1,286
------- -------
Total sales to external customers $131,574 $141,224
INTERSEGMENTAL SALES
Carpet Manufacturing $ 2,443 $ 2,153
Floorcovering Base Materials 32,941 20,141
Other 2,790 1,905
------- -------
Total intersegmental sales $ 38,174 $ 24,199
OPERATING PROFIT (Internal E.B.I.T.)
Carpet Manufacturing $ 2,415 $ 6,390
Floorcovering Base Materials (1,266) 1,216
Other 934 14
------- -------
Total operating profit (Internal E.B.I.T.) 2,083 7,620
Interest expense 4,002 3,346
Consolidated income (loss) before income ------- -------
taxes from continuing operations $ (1,919) $ 4,274
_______ _______
_______ _______
IDENTIFIABLE ASSETS
Carpet Manufacturing $311,595 $292,889
Floorcovering Base Materials 82,215 76,051
Other 22,109 22,504
Assets of discontinued operations 457 457
------- -------
Total consolidated assets $416,376 $391,901
<PAGE> 12
NOTE F - RECENT EVENTS
On March 28, 2000, the Company announced that it had signed a letter of
intent to acquire privately held, high-end carpet and rug maker Fabrica
International and its interests in Chroma Systems Partners' dyeing and
finishing operations. The transaction is subject to regulatory approval,
due diligence review and execution of a definitive purchase agreement. The
Company anticipates closing the transaction before the end of June 2000.
Fabrica, headquartered in Santa Ana, California, with estimated 2000 sales
in excess of $50 million, manufactures and sells high-end luxury carpet and
rugs to carpet retailers, interior designers, manufacturers of luxury
yachts, furniture stores and other markets.
<PAGE> 13
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The following is presented to update the discussion of results of
operations and financial condition included in the Company's 1999 Annual
Report. (dollar amounts in thousands, except per share data)
RESULTS OF OPERATIONS
The Company reported a net loss for the quarter ended April 1, 2000 of
$1,184 or $.10 per diluted share, on sales of $131,574. The comparable
1999 period reflected net income of $2,580, or $.22 per diluted share, on
sales of $141,224. The decline in sales and net income for the period is
discussed in the Company's segment analysis below.
The Company's floorcovering operations are segmented around product
similarities between its Carpet Manufacturing and Floorcovering Base
Materials businesses. The Company's 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 and Globaltex brands, through select distributors under
the Alliance Mills name and to higher-end residential and commercial
customers serviced by Masland Carpets. The Company's Floorcovering Base
Materials operations supply extruded plied and heat-set filament and spun
yarns, through Candlewick Yarns, to the Company's Carpet Manufacturing
segment and, to a lesser extent, to specialty carpet yarn markets.
The following table reflects selected operating data relating to the two
reportable segments of the Company:
Quarter Ended
April 1, March 27,
2000 1999
SALES TO EXTERNAL CUSTOMERS
Carpet Manufacturing $111,557 $108,132
Floorcovering Base Materials 19,212 31,806
Other 805 1,286
------- -------
Total sales $131,574 $141,224
OPERATING PROFIT (Internal E.B.I.T.)
Carpet Manufacturing $ 2,415 $ 6,390
Floorcovering Base Materials (1,266) 1,216
Other 934 14
------ ------
Total operating profit (Internal E.B.I.T.) $ 2,083 $ 7,620
<PAGE> 14
Sales to external customers in the Company's Carpet Manufacturing segment
for the quarter ended April 1, 2000 were $111,557, an increase of $3,425 or
3.2% over the comparable period in 1999. The increase was a result of
increased volume in our high-end commercial and residential business of
over 10% and our home center/mass merchant business of over 20% which more
than offset a decline in sales to the factory-built housing market.
Operating profits in the Carpet Manufacturing segment were $2,415 in the
first quarter of 2000 compared with $6,380 in the first quarter of 1999.
The profitability decrease was a result of lower shipment volume to the
factory-built housing industry, inefficiencies created due to rapid
expansion in our home center business, higher raw material costs and
marketing costs and other expenses associated with the start-up of the
Company's Alliance Mills distributor partnership.
Sales to external customers in the Company's Floorcovering Base Materials
segment for the quarter ended April 1, 2000 were $19,212, a decrease of
$12,594 or 39.6% below the comparable period in 1999. The decrease was a
result of the sale of the Ulmer, SC plant in July 1999, greater utilization
of yarn capacity by our carpet operations and the shift of a number of the
Company's external yarn programs from a full package basis to a conversion
basis, in which the customer supplies fiber for yarn processing.
Operations in the Floorcovering Base Materials segment resulted in a loss
of $1,266 in the first quarter of 2000 compared with an operating profit of
$1,216 in the first quarter of 1999. The profitability decrease was
principally a result of cost associated with realignment and expansion of
the Company's yarn manufacturing facilities, expansion of the Company's
extrusion capacity and higher raw material prices.
A number of the Company's suppliers, whose products are petroleum based,
increased prices of raw materials purchased by each of the Company's two
reportable segments in the first quarter of 2000. The Company's ability to
recover raw material cost increases varied according to the market served.
Selling and administrative expenses were $23,160, or 17.6% of sales, in the
first quarter of 2000 compared with $20,470, or 14.5% of sales, in the
first quarter of 1999. The increase resulted from growth in the high-end
residential, commercial and home center businesses, which have higher
selling and administrative expenses. Also, selling and administrative
expenses were impacted by marketing costs and other expenses associated
with the start-up of the Company's Alliance Mills distributor partnership.
Selling and administrative expenses increased as a percent of sales because
of the decline in external sales of floorcovering base materials. Such
external sales have relatively small selling and administrative expenses
per dollar of sales.
Interest expense was $4,002 which was an increase of $656 or 19.6% over the
comparable period in 1999 due an increase in interest rates and an increase
in debt from higher working capital.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 2000, the Company's long-term debt
increased $50,447 from the 1999 year-end level. The increase resulted from
expenditures of $14,091 for property, plant and equipment and $36,074 of
funds used by operating activities, net of $617 of proceeds from sale of
<PAGE> 15
property, plant and equipment. The majority of the capital expenditures in
the first quarter of 2000 were focused on the Company's yarn restructuring,
extrusion expansion and Bretlin's new distribution center. Working capital
increased as a result of higher inventory levels during the quarter and
higher levels of accounts payable and accrued expenses at the end of 1999.
The Company increased its inventory in response to anticipated disruptions
in manufacturing related to the Company's planned rationalization of its
yarn facilities, extrusion expansion and completion of Bretlin's new
distribution center
At April 1, 2000, the Company's debt consisted of $39.7 million of
convertible subordinated debentures, $47.6 million of subordinated notes,
$33.4 million of senior term loans and $85.8 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. 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%. As of April 1, 2000, the available unused
borrowing capacity under the Company's credit agreements (including amounts
available under short-term credit lines) was $9.3 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.
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. 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.
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
anticipated 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.
<PAGE> 16
YEAR 2000 SYSTEMS ISSUES
The Company has not experienced any significant system related year 2000
conversion issues. The Company believes 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.
FORWARD - LOOKING INFORMATION
This Quarterly Report on Form 10-Q 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 phrases 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.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities and Use of Proceeds
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
<PAGE> 17
Item 5 - Other Information
On March 28, 2000, the Company announced that it had signed a letter of
intent to acquire privately held, high-end carpet and rug maker Fabrica
International and its interests in Chroma Systems Partners' dyeing and
finishing operations. The transaction is subject to regulatory approval,
due diligence review and execution of a definitive purchase agreement. The
Company anticipates closing the transaction before the end of June 2000.
Fabrica, headquartered in Santa Ana, California, with estimated 2000 sales
in excess of $50 million, manufactures and sells high-end luxury carpet and
rugs to carpet retailers, interior designers, manufacturers of luxury
yachts, furniture stores and other markets.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibits Incorporated by Reference
None.
(ii) Exhibits Filed with this Report
None.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant during the
three month period ended April 1, 2000.
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DIXIE GROUP, INC.
__________________________
(Registrant)
May 16, 2000
____________________
(Date)
/s/GARY A. HARMON
__________________________
Gary A. Harmon
Vice President and
Chief Financial Officer
/s/D. EUGENE LASATER
__________________________
D. Eugene Lasater
Controller
<PAGE> 19
<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 THREE MONTHS ENDED APRIL 1, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 13,413
<SECURITIES> 0
<RECEIVABLES> 20,732
<ALLOWANCES> 1,736
<INVENTORY> 120,857
<CURRENT-ASSETS> 167,871
<PP&E> 321,520
<DEPRECIATION> 139,984
<TOTAL-ASSETS> 416,376
<CURRENT-LIABILITIES> 72,259
<BONDS> 193,519
<COMMON> 45,184
0
0
<OTHER-SE> 71,551
<TOTAL-LIABILITY-AND-EQUITY> 416,376
<SALES> 131,574
<TOTAL-REVENUES> 131,574
<CGS> 106,199
<TOTAL-COSTS> 106,199
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,002
<INCOME-PRETAX> (1,919)
<INCOME-TAX> (735)
<INCOME-CONTINUING> (1,184)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,184)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
