The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the second quarter and six months ended June 26, including a $6.5 million rise in sales.

In the second quarter of 2010, the company had net sales of $59,058,000 versus $52,572,000 in the same quarter of 2009.

Including facility consolidation and severance expenses, the company reported an after-tax loss from continuing operations of $684,000, or $0.05 per diluted share, in the quarter, compared with a loss from continuing operations of $984,000, or $0.08 per diluted share, for same quarter of 2009.

For the six months ended June 26, 2010, the company had net sales of $109,512,000, versus $100,211,000, in the six months ended June 27, 2009. Including facility consolidation and severance expenses, the company reported an after-tax loss from continuing operations of $3,143,000, or $0.25 per diluted share, compared with a loss from continuing operations of $36,425,000, or $2.97 per diluted, for the six months ended June 27, 2009.

The first six months of 2010 had pre-tax facility consolidation and severance expenses of $333,000. Comparatively, the first six months of 2009 had pre-tax facility consolidation and severance expenses and impairment of goodwill of $33,138,000, as well as liquidations of LIFO inventory carried at lower costs established in prior years, increasing pre-tax income by $1,020,000.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "During the second quarter, we experienced significant improvement in revenue. Carpet sales for the second quarter were 17.0% above those of the first quarter and 12.8% above the same quarter last year, while the industry was up only 1.7% over the year-ago quarter.

"Our growth was most notable in our residential business, with strong performances in the high-end through numerous new wool offerings at Fabrica and Masland and our unique Masland Avenue collection. Dixie Home showed significant growth in its Durasilk products, and all three brands continued growth of the Stainmaster(R) brand, with a number of new Luxurelle products.

"Our sales in the commercial sector were flat with the prior-year period which we believe slightly exceeds the industry performance for the period. We continue to introduce new products in the fastest growing segments of our markets as we strive to maintain our style and design leadership.

"Margins for the quarter were 25.8%, an improvement over the first quarter of 1.3 percentage points but below the prior-year's quarter by 1.5 percentage points. The prior-year margin of 27.3% included a favorable $1.0 million LIFO tier liquidation gain. The margin for second quarter 2010 had both a less favorable mix across our markets as more value oriented products gained in share. Our residential margins were under pressure during the period as we suffered higher costs resulting from material cost increases while the effect of our corresponding price increases did not become fully effective until July.

"Our cost reduction efforts continue as we work to make progress to return to profitability during this uncertain period in the marketplace. We have seen improvement in our results as we had a positive non-GAAP operating income, adjusted for facility consolidation and severance expenses, of $181,000, for the second quarter as compared to a loss on the same basis of $341,000, for the second quarter of 2009. We plan to continue to drive down costs through strict controls on overtime, spending and improved operating efficiencies as we reap the benefits of returning our tufting and yarn operations to full staffing during the second quarter.

"Though the consolidation of our West Coast facilities is physically complete, we continue to incur facility costs for our Pullman facility and software integration charges. We continue to offer the Pullman facility for sublease.

"Our inventories and receivables grew during the period to support the higher level of sales. Despite the increases, our inventory turns improved 10% over the prior quarter and 27% versus the same period a year ago as part of our efforts to improve utilization of working capital. Capital expenditures for the first six months were a relatively modest $247,000. We still anticipate total capital expenditures for the year will be approximately $3.0 million compared to $11.7 million of depreciation and amortization. Availability under our loan agreements was $10.7 million at the end of the quarter.

"We are committed to return to profitability as we support those market segments and product lines that are experiencing growth. Despite a weakening of sales during June as compared to the rest of the quarter, we anticipate a recovering residential market ahead of the commercial sector. We are moving forward with product introductions in design-oriented rug, wool, Stainmaster(R) and Durasilk products. We continue the diligent pursuit of profitable growth opportunities while controlling costs and minimizing capital expenditures."

The company's loss from discontinued operations was $60,000, or $0.01 per diluted share, for the second quarter of 2010, compared with a loss from discontinued operations of $83,000, or $0.01 per diluted share, for the prior-year period. Including discontinued operations, the company reported a net loss of $744,000, or $0.06 per diluted share, for the second quarter of 2010 compared with a net loss of $1,067,000, or $0.09 per diluted share, for the year-earlier period. The company's loss from discontinued operations was $130,000, or $0.01 per diluted share, for the six months ended June 26, 2010, compared with a loss from discontinued operations of $199,000, or $0.02 per diluted share, for the six months ended June 27, 2009. Including discontinued operations, the company reported a net loss of $3,273,000, or $0.26 per diluted share, for the first six months of 2010 compared with a net loss of $36,624,000, or $2.99 per diluted share for the prior period.

The Dixie Group (www.thedixiegroup.com) is a leading marketer and manufacturer of carpet and rugs to higher-end residential and commercial customers through the Fabrica International, Masland Carpets, Dixie Home, Masland Contract and Whitespace brands.