10-Q 1 dxyn-20230930.htm 10-Q dxyn-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   20549
 
Form 10-Q
 
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended September 30, 2023
OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from ___________ to __________

Commission File Number: 0-2585
dixiegroupa58.jpg

THE DIXIE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Tennessee     62-0183370
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
475 Reed Road, Dalton, Georgia
30720
(706) 876-5800
(Address of principal executive offices)(zip code)(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $3 Par ValueDXYNNASDAQ Stock Market, LLC

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.  R Yes  o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). R Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.  
Large accelerated filero Accelerated filero
Non-accelerated Filer
o Smaller reporting company
 Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes R No

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 November 3, 2023
Common Stock, $3 Par Value 14,426,034 shares
Class B Common Stock, $3 Par Value 1,121,129 shares
Class C Common Stock, $3 Par Value 0 shares






THE DIXIE GROUP, INC.

Table of Contents
PART I.  FINANCIAL INFORMATIONPage
    
 Item 1.
Financial Statements
  
  
  
  
 Item 2.
 Item 3.
 Item 4.
    
PART II. OTHER INFORMATION
   
 Item 1.
 Item 1A.
 Item 2.
 Item 3.
 Item 4.
 Item 5.
 Item 6.
   
  









PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in thousands, except share data)
 September 30,
2023
December 31, 2022
ASSETS(Unaudited)
CURRENT ASSETS
Cash and cash equivalents$173 $363 
Receivables, net28,074 25,009 
Inventories, net79,940 83,699 
Prepaid and other current assets12,187 10,167 
Current assets of discontinued operations301 641 
TOTAL CURRENT ASSETS120,675 119,879 
  
PROPERTY, PLANT AND EQUIPMENT, NET40,952 44,916 
OPERATING LEASE RIGHT-OF-USE ASSETS18,780 20,617 
OTHER ASSETS15,393 15,982 
LONG-TERM ASSETS OF DISCONTINUED OPERATIONS1,335 1,552 
TOTAL ASSETS$197,135 $202,946 
LIABILITIES AND STOCKHOLDERS' EQUITY  
CURRENT LIABILITIES  
Accounts payable$18,909 $14,205 
Accrued expenses18,851 17,667 
Current portion of long-term debt3,197 4,573 
Current portion of operating lease liabilities2,824 2,774 
Current liabilities of discontinued operations1,360 2,447 
TOTAL CURRENT LIABILITIES45,141 41,666 
LONG-TERM DEBT, NET92,696 94,725 
OPERATING LEASE LIABILITIES16,676 18,802 
OTHER LONG-TERM LIABILITIES13,067 12,480 
LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS3,627 3,759 
TOTAL LIABILITIES171,207 171,432 
COMMITMENTS AND CONTINGENCIES (See Note 17)
STOCKHOLDERS' EQUITY  
Common Stock ($3 par value per share): Authorized 80,000,000 shares, issued and outstanding - 14,435,334 shares for 2023 and 14,453,466 shares for 2022
43,306 43,360 
Class B Common Stock ($3 par value per share): Authorized 16,000,000 shares, issued and outstanding - 1,121,129 shares for 2023 and 1,129,158 shares for 2022
3,363 3,388 
Additional paid-in capital158,916 158,331 
Accumulated deficit(179,860)(173,784)
Accumulated other comprehensive income203 219 
TOTAL STOCKHOLDERS' EQUITY25,928 31,514 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$197,135 $202,946 

See accompanying notes to the consolidated condensed financial statements.






THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(amounts in thousands, except per share data)
 Three Months EndedNine Months Ended
 September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
NET SALES$68,576 $71,762 $209,669 $233,034 
Cost of sales50,341 59,225 153,821 189,266 
GROSS PROFIT18,235 12,537 55,848 43,768 
Selling and administrative expenses18,743 18,606 54,195 54,875 
Other operating (income) expense, net(147)113 (313)258 
Facility consolidation and severance expenses, net552 968 2,320 968 
OPERATING LOSS(913)(7,150)(354)(12,333)
Interest expense1,795 1,302 5,503 3,498 
Other income, net(622)(2)(634)(3)
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES(2,086)(8,450)(5,223)(15,828)
Income tax provision (benefit)125 (78)159 (94)
LOSS FROM CONTINUING OPERATIONS(2,211)(8,372)(5,382)(15,734)
Loss from discontinued operations, net of tax(183)(408)(496)(890)
NET LOSS$(2,394)$(8,780)$(5,878)$(16,624)
BASIC EARNINGS (LOSS) PER SHARE:   
Continuing operations$(0.15)$(0.55)$(0.36)$(1.04)
Discontinued operations(0.01)(0.03)(0.04)(0.05)
Net loss$(0.16)$(0.58)$(0.40)$(1.09)
BASIC SHARES OUTSTANDING14,824 15,226 14,769 15,196 
DILUTED EARNINGS (LOSS) PER SHARE:   
Continuing operations$(0.15)$(0.55)$(0.36)$(1.04)
Discontinued operations(0.01)(0.03)(0.04)(0.05)
Net loss$(0.16)$(0.58)$(0.40)$(1.09)
DILUTED SHARES OUTSTANDING14,824 15,226 14,769 15,196 
DIVIDENDS PER SHARE:   
Common Stock$ $ $ $ 
Class B Common Stock    

See accompanying notes to the consolidated condensed financial statements. 
Table of Contents    4    






THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(amounts in thousands)

 Three Months EndedNine Months Ended
 September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
NET LOSS$(2,394)$(8,780)$(5,878)$(16,624)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Reclassification of gain into earnings from interest rate swaps (1)   (7)
Income taxes   (2)
Reclassification of gain into earnings from interest rate swaps, net   (5)
Reclassification of unrealized loss into earnings from dedesignated interest rate swaps (1)   210 
Income taxes   33 
Reclassification of unrealized loss into earnings from dedesignated interest rate swaps, net   177 
Reclassification of net actuarial gain into earnings from postretirement benefit plans (2)(5) (16)(2)
Income taxes    
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net(5) (16)(2)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX(5) (16)170 
COMPREHENSIVE LOSS$(2,399)$(8,780)$(5,894)$(16,454)

(1) Amounts for cash flow hedges reclassified from accumulated other comprehensive income to net loss were included in interest expense in the Company's consolidated condensed statements of operations.
(2) Amounts for postretirement plans reclassified from accumulated other comprehensive income to net loss were included in selling and administrative expenses in the Company's consolidated condensed statements of operations.


See accompanying notes to the consolidated condensed financial statements.
Table of Contents    5    






THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
 Nine Months Ended
 September 30,
2023
September 24,
2022
CASH FLOWS FROM OPERATING ACTIVITIES  
Loss from continuing operations$(5,382)$(15,734)
Loss from discontinued operations(496)(890)
Net loss(5,878)(16,624)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  
Depreciation and amortization 4,978 6,057 
Benefit for deferred income taxes (125)
Net gain on property, plant and equipment disposals(1)(40)
Stock-based compensation expense550 559 
Expense for expected credit losses21 39 
Gain on extinguishment of debt(625) 
Changes in operating assets and liabilities:  
Receivables(3,284)8,508 
Inventories3,759 (11,162)
Prepaid and other current assets(2,020)(1,406)
Accounts payable and accrued expenses6,130 (1,216)
Other operating assets and liabilities914 800 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES5,040 (13,720)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES - DISCONTINUED OPERATIONS(1,166)1,416 
CASH FLOWS FROM INVESTING ACTIVITIES  
Net proceeds from sales of property, plant and equipment29 40 
Purchase of property, plant and equipment(763)(3,961)
Cash paid for investment in joint venture (1,000)
NET CASH USED IN INVESTING ACTIVITIES(734)(4,921)
NET CASH PROVIDED BY INVESTING ACTIVITIES - DISCONTINUED OPERATIONS8 1 
CASH FLOWS FROM FINANCING ACTIVITIES  
Net borrowings (payments) on revolving credit facility(528)13,884 
Borrowings on notes payable - buildings 11,000 
Payments on notes payable - buildings and other term loans(457)(5,798)
Payments on notes payable - equipment and other(1,341)(1,607)
Payments on finance leases(726)(881)
Change in outstanding checks in excess of cash(242)572 
Repurchases of Common Stock(44)(229)
Payments for debt issuance costs (227)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES(3,338)16,714 
DECREASE IN CASH AND CASH EQUIVALENTS(190)(510)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD363 1,471 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$173 $961 
SUPPLEMENTAL CASH FLOW INFORMATION:  
Interest paid$4,270 $2,027 
Interest paid for financing leases943 973 
Income taxes paid, net of (tax refunds)(725)55 
Right-of-use assets obtained in exchange for new operating lease liabilities7 911 
Equipment purchased under finance lease133  

See accompanying notes to the consolidated condensed financial statements.
Table of Contents    6    







THE DIXIE GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(amounts in thousands, except share data)

 Common StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders' Equity
Balance at December 31, 2022$43,360 $3,388 $158,331 $(173,784)$219 $31,514 
Repurchases of Common Stock - 55,994 shares
(168)— 124 — — (44)
Class B converted into Common Stock - 8,029 shares
25 (25)— — —  
Stock-based compensation expense— — 197 — — 197 
Net loss— — — (1,758)— (1,758)
Cumulative effect of CECL adoption— — — (198)— (198)
Other comprehensive loss— — — — (5)(5)
Balance at April 1, 2023$43,217 $3,363 $158,652 $(175,740)$214 $29,706 
Restricted stock grants issued - 40,000 shares
120  (120)— —  
Restricted stock grants forfeited - 10,167 shares
(31)— 31 — —  
Stock-based compensation expense— — 171 — — 171 
Net loss— — — (1,726)— (1,726)
Other comprehensive loss— — — — (6)(6)
Balance at July 1, 2023$43,306 $3,363 $158,734 $(177,466)$208 $28,145 
Stock-based compensation expense— — 182 — — 182 
Net loss— — — (2,394)— (2,394)
Other comprehensive loss— — — — (5)(5)
Balance at September 30, 2023$43,306 $3,363 $158,916 $(179,860)$203 $25,928 

 Common StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders' Equity
Balance at December 25, 2021$44,378 $3,015 $157,658 $(138,706)$30 $66,375 
Repurchases of Common Stock - 35,160 shares
(105)— 10 — — (95)
Restricted stock grants issued - 284,954 shares
580 274 (854)— —  
Restricted stock grants forfeited - 2,000 shares
(6)— 6 — —  
Stock-based compensation expense— — 154 — — 154 
Net loss— — — (3,357)— (3,357)
Other comprehensive income— — — — 170 170 
Balance at March 26, 2022$44,847 $3,289 $156,974 $(142,063)$200 $63,247 
Restricted stock grants issued - 142,957 shares
331 98 (429)— —  
Stock-based compensation expense— — 197 — — 197 
Net loss— — — (4,487)— (4,487)
Balance at June 25, 2022$45,178 $3,387 $156,742 $(146,550)$200 $58,957 
Repurchases of Common Stock - 105,381 shares
(316)— 183 — — (133)
Stock-based compensation expense— — 207 — — 207 
Net loss— — — (8,780)— (8,780)
Balance at September 24, 2022$44,862 $3,387 $157,132 $(155,330)$200 $50,251 

See accompanying notes to the consolidated condensed financial statements.
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Table of Contents    8    


THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial statements which do not include all the information and notes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (generally consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying financial statements. The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Dixie Group, Inc.'s and its wholly-owned subsidiaries (the "Company") 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2022. The balance sheet as of December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. Operating results for the three and nine month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for the entire 2023 year.

Based on applicable accounting standards, the Company has determined that it has one reportable segment, Floorcovering. The Company's Floorcovering products have similar economic characteristics and are similar in all of the following areas: (a) the nature of the products and services; (b) the nature of the production processes; (c) the type or class of customer for their products and services; (d) the methods used to distribute their products or provide their services; and (e) the nature of the regulatory environment.

The consolidated condensed financial statements separately report discontinued operations and the results of continuing operations. Unless specifically noted otherwise, footnote disclosures reflect the results of continuing operations only. The results of discontinued operations are presented in Note 20.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was further amended by additional accounting standards updates issued by the FASB. The new standard replaced the incurred loss impairment methodology for recognizing credit losses with a new methodology that requires recognition of lifetime expected credit losses when a financial asset is originated or purchased, even if the risk of loss is remote. The new methodology (referred to as the current expected credit losses model, or "CECL") applies to most financial assets measured at amortized cost, including trade receivables, and requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses. The Company adopted the new standard effective January 1, 2023 using a modified retrospective transition approach, with the cumulative impact of $198 recorded as an increase in the accumulated deficit.

NOTE 3 - REVENUE

Revenue Recognition Policy

The Company derives its revenues primarily from the sale of floorcovering products and processing services. Revenues are recognized when control of these products or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and services. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. The Company determined revenue recognition through the following steps:

Identification of the contract with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the performance obligation is satisfied

Table of Contents    9    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
Disaggregation of Revenue from Contracts with Customers

The following table disaggregates the Company’s revenue by end-user markets for the three and nine month periods ended September 30, 2023 and September 24, 2022:
Three Months EndedNine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Residential floorcovering products$67,659 $70,125 $206,515 $227,610 
Other services917 1,637 3,154 5,424 
Total net sales$68,576 $71,762 $209,669 $233,034 

Residential floorcovering products. Residential floorcovering products include broadloom carpet, rugs, luxury vinyl flooring and engineered hardwood. These products are sold into the designer, retailer, mass merchant and builder markets.

Other services. Other services include carpet yarn processing and carpet dyeing services.

Contract Balances

Other than receivables that represent an unconditional right to consideration, which are presented in Note 4, the Company does not recognize any contract assets which give conditional rights to receive consideration, because the Company does not incur costs to obtain customer contracts that are recoverable. The Company often receives cash payments from customers in advance of the Company’s performance for limited production run orders resulting in contract liabilities. These contract liabilities are classified in accrued expenses in the consolidated condensed balance sheets based on the timing of when the Company expects to recognize revenue, which is typically less than a year. The net decrease or increase in the contract liabilities is primarily driven by order activity for limited runs requiring deposits offset by the recognition of revenue and the application of deposit on the receivables ledger for such activity during the period.

The activity in the advanced deposits for the three and nine month periods ended September 30, 2023 and September 24, 2022 is as follows:
Three Months EndedNine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Beginning contract liability$1,034 $1,122 $1,055 $1,285 
Revenue recognized from contract liabilities included in the beginning balance(742)(797)(862)(1,096)
Increases due to cash received, net of amounts recognized in revenue during the period785 760 884 896 
Ending contract liability$1,077 $1,085 $1,077 $1,085 
Performance Obligations

For performance obligations related to residential floorcovering products, control transfers at a point in time. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer and the customer must have the significant risks and rewards of ownership. The Company’s principal terms of sale are FOB Shipping Point and FOB Destination and the Company transfers control and records revenue for product sales either upon shipment or delivery to the customer, respectively. Revenue is allocated to each performance obligation based on its relative stand-alone selling prices. Stand-alone selling prices are based on observable prices at which the Company separately sells the products or services.

Variable Consideration

The nature of the Company’s business gives rise to variable consideration, including rebates, allowances, and returns that generally decrease the transaction price, which reduces revenue. These variable amounts are generally credited to the customer, based on product returns, price concessions or achieving certain levels of sales activity.

Variable consideration is estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. Estimates of variable consideration are based upon historical experience and known trends.

Table of Contents    10    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
Warranties

The Company generally provides product warranties related to manufacturing defects and specific performance standards for its products for a period of up to two years. The Company accrues for estimated future assurance warranty costs in the period in which the sale is recorded. The costs are included in cost of sales in the consolidated condensed statements of operations and the product warranty reserve is included in accrued expenses in the consolidated condensed balance sheets. The Company calculates its accrual using the portfolio approach based upon historical experience and known trends. The Company does not provide an additional service-type warranty.

NOTE 4 - RECEIVABLES, NET

The Company grants credit to its customers with defined payment terms, performs ongoing evaluations of the credit worthiness of its customers and generally does not require collateral. Accounts receivable are carried at their outstanding principal amounts, less an anticipated amount for discounts and an allowance for expected credit losses. The Company's allowance for credit losses is computed using a number of factors including past credit loss experience and the aging of amounts due from our customers, in addition to other customer-specific factors. The Company also considered recent trends and developments related to the current macroeconomic environment in determining its ending allowance for credit losses for accounts receivable. If the financial condition of the Company's customers were to deteriorate, resulting in a change in their ability to make payments, or additional changes in macroeconomic factors occur, additional allowances may be required. Receivables are summarized as follows:
September 30,
2023
December 31,
2022
Customers, trade$27,585 $23,111 
Other receivables928 2,009 
Gross receivables28,513 25,120 
Less: allowance for expected credit losses (1)
(439)(111)
Receivables, net$28,074 $25,009 

(1)The Company adopted the new standard, ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2023 using a modified retrospective transition approach, with the cumulative impact being $388 from continuing operations. The Company recognized an expense to the provision for expected credit losses of $49 and $21 and recognized write-offs, net of recoveries of $21 and $82 for the three and nine months ended September 30, 2023, respectively.

NOTE 5 - INVENTORIES, NET

Inventories are summarized as follows:
September 30,
2023
December 31,
2022
Raw materials$26,349 $29,209 
Work-in-process12,034 13,028 
Finished goods61,717 67,018 
Supplies and other64 66 
LIFO reserve(20,224)(25,622)
Inventories, net$79,940 $83,699 

Table of Contents    11    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following:
September 30,
2023
December 31,
2022
Land and improvements$3,417 $3,417 
Buildings and improvements52,049 51,132 
Machinery and equipment155,080 155,317 
Assets under construction1,143 1,606 
211,689 211,472 
Accumulated depreciation(170,737)(166,556)
Property, plant and equipment, net$40,952 $44,916 

Depreciation of property, plant and equipment, including amounts for finance leases, totaled $1,684 and $4,832 in the three and nine months ended September 30, 2023, respectively and $1,959 and $5,933 in the three and nine months ended September 24, 2022, respectively.

NOTE 7 - ACCRUED EXPENSES

Accrued expenses are summarized as follows:
September 30,
2023
December 31,
2022
Compensation and benefits$5,062 $5,579 
Provision for customer rebates, claims and allowances7,496 6,465 
Advanced customer deposits1,077 1,055 
Outstanding checks in excess of cash1,468 1,711 
Other3,748 2,857 
Accrued expenses$18,851 $17,667 

NOTE 8 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS

Long-term debt consists of the following:
September 30,
2023
December 31,
2022
Revolving credit facility$51,266 $51,794 
Term loans24,376 24,547 
Notes payable - buildings10,466 10,752 
Notes payable - equipment and other919 1,342 
Finance lease - buildings10,383 10,597 
Finance lease obligations140 2,063 
Deferred financing costs, net(1,657)(1,797)
Total debt95,893 99,298 
Less: current portion of long-term debt3,197 4,573 
Long-term debt$92,696 $94,725 

Revolving Credit Facility

On October 30, 2020, the Company entered into a $75,000 Senior Secured Revolving Credit Facility with Fifth Third Bank National Association as lender. The loan is secured by a first priority security interest on all accounts receivable, cash, and inventory, and provides for borrowing limited by certain percentages of values of the accounts receivable and inventory. The revolving credit facility matures on October 30, 2025.

Table of Contents    12    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
At the Company's election, advances of the revolving credit facility bear interest at annual rates equal to either (a) SOFR (plus a 0.10% SOFR adjustment) for 1 or 3 month periods, as defined with a floor of 0.75% or published SOFR, plus an applicable margin ranging between 1.50% and 2.00%, or (b) the higher of the prime rate plus an applicable margin ranging between 0.50% and 1.00%. The applicable margin is determined based on availability under the revolving credit facility with margins increasing as availability decreases. The applicable margin can be increased by 0.50% if the fixed charge coverage ratio is below a 1.10 to 1.00 ratio. As of September 30, 2023, the applicable margin on the Company's revolving credit facility was 2.50% for SOFR and 1.50% for Prime due to the fixed charge coverage ratio being below 1.10 to 1.00. The Company pays an unused line fee on the average amount by which the aggregate commitments exceed utilization of the revolving credit facility equal to 0.25% per annum. The weighted-average interest rate on borrowings outstanding under the revolving credit facility was 8.08% at September 30, 2023 and 6.81% at December 31, 2022.

The agreement is subject to customary terms and conditions and annual administrative fees with pricing varying on excess availability and a fixed charge coverage ratio. The agreement is also subject to certain compliance, affirmative, and financial covenants. The Company is only subject to the financial covenants if borrowing availability is less than $9,013, which is equal to 12.5% of the lesser of the total loan availability of $75,000 or total collateral available, and remains until the availability is greater than 12.5% for thirty consecutive days. As of September 30, 2023, the unused borrowing availability under the revolving credit facility was $15,855.

Term Loans

Effective October 28, 2020, the Company entered into a $10,000 principal amount USDA Guaranteed term loan with AmeriState Bank as lender. The term of the loan is 25 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset every 5 years at 3.5% above 5-year treasury. The loan is secured by a first mortgage on the Company’s Atmore, Alabama and Roanoke, Alabama facilities and requires certain compliance, affirmative, and financial covenants.

Effective October 29, 2020, the Company entered into a $15,000 principal amount USDA Guaranteed term loan with the Greater Nevada Credit Union as lender. The term of the loan is 10 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset after 5 years at 3.5% above 5-year treasury. Payments on the loan are interest only over the first three years and principal and interest over the remaining seven years. The loan is secured by a first lien on a substantial portion of the Company’s machinery and equipment and a second lien on the Company’s Atmore and Roanoke facilities. The loan requires certain compliance, affirmative, and financial covenants.

Notes Payable - Buildings

On March 16, 2022, the Company entered into a twenty year $11,000 note payable to refinance its existing note payable on its distribution facility in Adairsville, GA (the "Property"). The refinanced note payable bears interest at a fixed annual rate of 3.81%. Concurrent with the closing of this note, the Company paid off the existing loans secured by the Property in the amount of $5,456 and terminated an existing interest rate swap agreement. The refinanced note is secured by the Property and a guarantee of the Company.

Debt Covenant Compliance and Liquidity Considerations

The Company's agreements for its Revolving Credit Facility and its term loans include certain compliance, affirmative, and financial covenants and, as of the reporting date, the Company is in compliance with all such applicable financial covenants or has obtained an appropriate waiver for such applicable financial covenants.

In the Company's self-assessment of going concern, with reflection on the Company's operating loss in 2022, the Company considered its future ability to comply with the financial covenants in its existing debt agreements. ASU 2014-15 as issued by the FASB requires Company management to perform a going concern self-assessment each annual and interim reporting period. In performing its evaluation, management considered known and reasonably knowable information as of the reporting date. The Company also considered the significant unfavorable impact if it were unable to maintain compliance with financial covenants by its primary lenders. As part of the evaluation, the Company considered cost reductions that began in 2022 related to its change to lower cost raw materials, decreased freight expense on imported goods and cost reductions implemented under its East Coast Consolidation Plan, as well as plans for the sale and leaseback of existing assets. The financial statements do not include any adjustments that might result from the outcome of the uncertainty of the ability to maintain compliance with the financial covenants.

Notes Payable - Equipment and Other

On September 15, 2023, the Company entered into a debt amendment on an existing debt arrangement for manufacturing equipment that was previously set to mature on September 30, 2023. The Company's amended equipment and other financing
Table of Contents    13    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
note has a term of 1 year, 3 months, bears interest at 7.84% and is due in monthly installments through its maturity date. The Company's equipment and other financing note does not contain any financial covenants.

In accordance with ASC Topic No. 470, “Debt – Modifications and Extinguishments” (Topic 470), the amendment noted above was determined to be an extinguishment of the existing debt and an issuance of new debt resulting in the addition of a non-cash financing activity of $919 and the removal of a non-cash financing activity of $1,544. As a result, we recorded a gain on the extinguishment of debt in the amount of $625 within “Other income, net ” in our consolidated condensed statements of operations.

Finance Lease - Buildings

On January 14, 2019, the Company, entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Saraland Industrial, LLC, an Alabama limited liability company (the “Purchaser”). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its Saraland facility, and approximately 17.12 acres of surrounding property located in Saraland, Alabama (the “Property”) to the Purchaser for a purchase price of $11,500. Concurrent with the sale of the Property, the Company and the Purchaser entered into a twenty-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of $977, subject to annual rent increases of 1.25%. Under the Lease Agreement, the Company has two (2) consecutive options to extend the term of the Lease by ten years for each such option. This transaction was recorded as a failed sale and leaseback. The Company recorded a liability for the amounts received, will continue to depreciate the asset, and has imputed an interest rate so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Finance Lease Obligations

The Company's finance lease obligations are due in monthly installments through their maturity dates. The Company's finance lease obligations are secured by the specific equipment leased.

NOTE 9 - LEASES

Leases as Lessee

Balance sheet information related to right-of-use assets and liabilities is as follows:
Balance Sheet LocationSeptember 30,
2023
December 31, 2022
Operating Leases:
Operating lease right-of-use assetsOperating lease right-of-use assets$18,780 $20,617 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities$2,824 $2,774 
Noncurrent portion of operating lease liabilitiesOperating lease liabilities16,676 18,802 
Total operating lease liabilities$19,500 $21,576 
Finance Leases:
Finance lease right-of-use assets (1)
Property, plant, and equipment, net$3,445 $5,250 
Current portion of finance lease liabilities (1)
Current portion of long-term debt$320 $2,321 
Noncurrent portion of finance lease liabilities (1)
Long-term debt10,203 10,339 
Total financing lease liabilities$10,523 $12,660 
(1) Includes leases classified as failed sale-leaseback transactions.

Table of Contents    14    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
Lease cost recognized in the consolidated condensed financial statements is summarized as follows:

Three Months EndedNine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Operating lease cost$1,032 $926 $3,100 $3,122 
Finance lease cost:
     Amortization of lease assets (1)
$178 $205 $514 $703 
     Interest on lease liabilities (1)
286 316 943 973 
Total finance lease costs (1)
$464 $521 $1,457 $1,676 
(1) Includes leases classified as failed sale-leaseback transactions.

Other supplemental information related to leases is summarized as follows:
September 30,
2023
September 24,
2022
Weighted average remaining lease term (in years):
     Operating leases5.956.85
     Finance leases (1)
15.1913.70
Weighted average discount rate:
     Operating leases6.40 %6.39 %
     Finance leases (1)
7.06 %9.65 %
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases$3,073 $2,940 
     Operating cash flows from finance leases (1)
943 973 
     Financing cash flows from finance leases (1)
726 881 
(1) Includes leases classified as failed sale-leaseback transactions.

The following table summarizes the Company's future minimum lease payments under non-cancellable contractual obligations for operating and financing liabilities as of September 30, 2023:

Fiscal YearOperating LeasesFinance Leases
2023$999 $182 
20244,001 1,077 
20253,917 1,085 
20263,709 1,098 
20273,760 1,111 
Thereafter7,245 12,859 
Total future minimum lease payments (undiscounted)23,631 17,412 
Less: Present value discount4,131 6,889 
Total lease liability$19,500 $10,523 

Leases as Lessor

The Company leases or subleases certain excess space in its facilities to third parties, which are included as fixed assets. The leases are accounted for as operating leases and the lease or sublease income is included in other operating (income) expense, net. The Company recognizes lease income on a straight-line basis as collectability is probable, including any escalation or lease incentives, as applicable, and the Company continues to recognize the underlying asset. The Company has elected the practical
Table of Contents    15    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
expedient to combine all non-lease components as a combined component. The nature of the Company’s sublease agreements do not provide for variable lease payments, options to purchase, or extensions.

Lease income and sublease income related to fixed lease payments recognized in the consolidated condensed financial statements is summarized as follows:

Three Months EndedNine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Operating lease income$267 $ $329 $ 
The following table summarizes the Company's undiscounted lease payments to be received under operating leases including amounts to be paid by the Company to the head lessor for the next five years and thereafter as of September 30, 2023:

Fiscal YearGross Lease PaymentsPayments to Head LessorNet Lease Payments
2023$370 $63 $308 
20241,305 251 1,054 
20251,253 253 1,000 
20261,278 256 1,022 
20271,303 259 1,044 
Thereafter766 163 603 
Total$6,275 $1,245 $5,031 

NOTE 10 - FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange value of an asset or a liability in an orderly transaction between market participants. The fair value guidance outlines a valuation framework and establishes a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and disclosures. The hierarchy consists of three levels as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities as of the reported date;

Level 2 - Other than quoted market prices in active markets for identical assets or liabilities, quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and other than quoted prices for assets or liabilities and prices that are derived principally from or corroborated by market data by correlation or other means; and

Level 3 - Measurements using management's best estimate of fair value, where the determination of fair value requires significant management judgment or estimation.

The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:
 September 30,
2023
December 31,
2022
 CarryingFairCarryingFair
 AmountValueAmountValue
Financial assets:    
Cash and cash equivalents$173 $173 $363 $363 
Financial liabilities:    
Long-term debt, including current portion$85,370 $76,424 $86,638 $76,684 
Finance leases, including current portion10,523 9,076 12,660 11,576 

The fair values of the Company's long-term debt and finance leases were estimated using market rates the Company believes would be available for similar types of financial instruments and represent level 2 measurements. The fair values of cash and cash equivalents approximate their carrying amounts due to the short-term nature of the financial instruments.
Table of Contents    16    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)

NOTE 11 - DERIVATIVES

The Company's earnings, cash flows and financial position are exposed to market risks relating to interest rates. It is the Company's policy to minimize its exposure to adverse changes in interest rates and manage interest rate risks inherent in funding the Company with debt. The Company addresses this risk by maintaining a mix of fixed and floating rate debt and evaluating opportunities to enter into interest rate swaps for portions of its variable rate debt to minimize interest rate volatility. As of September 30, 2023, the Company had no interest rate swaps outstanding.

The following tables summarize the pre-tax impact of derivative instruments on the Company's consolidated condensed financial statements:
 Amount of Gain (Loss) Reclassified from AOCIL on the effective portion into Earnings (1)
Three Months EndedNine Months Ended
 September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Derivatives designated as hedging instruments:   
Cash flow hedges - interest rate swaps$ $ $ $(7)
Amount of Gain or (Loss) Recognized on the Dedesignated Portion in Income on Derivative (2)
Three Months EndedNine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Derivatives dedesignated as hedging instruments:
Cash flow hedges - interest rate swaps$ $ $ $210 

(1)The amount of gain (loss) reclassified from AOCIL is included in interest expense on the Company's consolidated condensed financial statements.
(2)The amount of gain (loss) recognized in income on the dedesignated and terminated portions of interest rate swaps is included in interest expense on the Company's consolidated condensed statements of operations.

On March 16, 2022, the Company terminated an interest rate swap agreement tied to a note payable secured by its facility in Adairsville, Georgia. The settlement payment to terminate the swap agreement was $73. Because it was probable that none of the remaining forecasted interest payments that were being hedged will occur, the related losses in the amount of $177, net of tax, that had been deferred in AOCIL were reclassified into interest expense.
NOTE 12 - EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsors a 401(k) defined contribution plan that covers approximately 98% of the Company's current associates. This plan includes a mandatory Company match on the first 1% of participants' contributions. The Company matches the next 2% of participants' contributions if the Company meets prescribed earnings levels. The plan also provides for additional Company contributions above the 3% level if the Company attains certain additional performance targets. Matching contribution expense for this 401(k) plan was $63 and $94 for the three months ended September 30, 2023 and September 24, 2022, respectively and $230 and $189 for the nine months ended September 30, 2023 and September 24, 2022, respectively.

Additionally, the Company sponsors a 401(k) defined contribution plan that covers associates at one facility who are under a collective-bargaining agreement. The number of associates under the plan represents approximately 2% of the Company's total current associates. Under this plan, the Company generally matches participants' contributions, on a sliding scale, up to a maximum of 2.75% of the participant's earnings. Matching contribution expense for the collective-bargaining 401(k) plan was $2 and $14 for the three months ended September 30, 2023 and September 24, 2022, respectively and $8 and $60 for the nine months ended September 30, 2023 and September 24, 2022, respectively.

Non-Qualified Retirement Savings Plan

The Company sponsors a non-qualified retirement savings plan that allows eligible associates to defer a specified percentage of their compensation. The obligations for continuing operations owed to participants under this plan were $12,804 at September 30, 2023 and $12,346 at December 31, 2022 and are included in other long-term liabilities in the Company's consolidated condensed balance sheets. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The Company utilizes a Rabbi Trust to hold, invest and reinvest deferrals and contributions under the plan. Amounts are invested in Company-owned life insurance in the Rabbi Trust and the cash surrender value of the policies for continuing operations was $13,396 at September 30, 2023 and $12,296 at December 31, 2022 and is included in other assets in the Company's consolidated condensed balance sheets.

Multi-Employer Pension Plan

The Company contributes to a multi-employer pension plan under the terms of a collective-bargaining agreement that covers its union-represented employees. Expenses related to the multi-employer pension plan were $6 and $38 for the three months ended September 30, 2023 and September 24, 2022, respectively and $16 and $141 for the nine months ended September 30, 2023 and September 24, 2022, respectively. If the Company were to withdraw from the multi-employer plan, a withdrawal liability would be due, the amount of which would be determined by the plan. The withdrawal liability, as determined by the plan, would be a function of contribution rates, fund status, discount rates and various other factors at the time of any such withdrawal.

NOTE 13 - INCOME TAXES
TE 13 - INCOME TAXES
The effective income tax rate for the nine months ending September 30, 2023 was 3.04% compared with a benefit rate of 0.59% for the nine months ending September 24, 2022. Because the Company maintains a full valuation allowance against its deferred income tax balances, the Company is only able to recognize refundable credits and a small amount of state taxes in the tax expense for the first nine months of 2023. The Company is in a net deferred tax liability position of $91 at September 1, 2023 and December 31, 2022, which is included in other long-term liabilities in the Company's consolidated condensed balance sheets.

The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits were $549 and $518 at September 30, 2023 and December 31, 2022, respectively. Such benefits, if recognized, would affect the Company's effective tax rate. There were no significant interest or penalties accrued as of September 30, 2023 and December 31, 2022.

The Company and its subsidiaries are subject to United States federal income taxes, as well as income taxes in a number of state jurisdictions. The tax years subsequent to 2018 remain open to examination for U.S. federal income taxes. The majority of state jurisdictions remain open for tax years subsequent to 2018. A few state jurisdictions remain open to examination for tax years subsequent to 2017.

NOTE 14 - EARNINGS (LOSS) PER SHARE

The Company's unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities and are included in the computation of earnings (loss) per share. Accounting guidance requires additional disclosure of earnings (loss) per share for common stock and unvested share-based payment awards, separately disclosing distributed and undistributed earnings. Undistributed earnings represent earnings that were available for distribution but were not distributed. Common stock and unvested share-based payment awards earn dividends equally.  All earnings were undistributed in all periods presented.

Table of Contents    17    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
The following table sets forth the computation of basic and diluted earnings (loss) per share from continuing operations:
Three Months EndedNine Months Ended
 September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Basic earnings (loss) per share:
Loss from continuing operations$(2,211)$(8,372)$(5,382)$(15,734)
Less: Allocation of earnings to participating securities    
Loss from continuing operations available to common shareholders - basic$(2,211)$(8,372)$(5,382)$(15,734)
Basic weighted-average shares outstanding (1)14,824 15,226 14,769 15,196 
Basic earnings (loss) per share - continuing operations$(0.15)$(0.55)$(0.36)$(1.04)
Diluted earnings (loss) per share:
Loss from continuing operations available to common shareholders - basic$(2,211)$(8,372)$(5,382)$(15,734)
Add: Undistributed earnings reallocated to unvested shareholders    
Loss from continuing operations available to common shareholders - basic$(2,211)$(8,372)$(5,382)$(15,734)
Basic weighted-average shares outstanding (1)14,824 15,226 14,769 15,196 
Effect of dilutive securities:   
Stock options (2)    
Directors' stock performance units (2)    
Diluted weighted-average shares outstanding (1)(2)14,824 15,226 14,769 15,196 
Diluted earnings (loss) per share - continuing operations$(0.15)$(0.55)$(0.36)$(1.04)

(1)Includes Common and Class B Common shares, excluding unvested participating securities of 732 thousand as of September 30, 2023 and 944 thousand as of September 24, 2022.
(2)Shares issuable under stock option plans where the exercise price is greater than the average market price of the Company's Common Stock during the relevant period and directors' stock performance units have been excluded to the extent they are anti-dilutive. There were 574 thousand and 130 thousand aggregate shares excluded for the three and nine months ended September 30, 2023 and September 24, 2022, respectively.

NOTE 15 - STOCK-BASED COMPENSATION EXPENSE

The Company recognizes compensation expense relating to share-based payments based on the fair value of the equity instrument issued and records such expense in selling and administrative expenses in the Company's consolidated condensed statements of operations. The Company's stock compensation expense was $182 and $207 for the three months ended September 30, 2023 and September 24, 2022, respectively. The Company's stock compensation expense was $550 and $559 for the nine months ended September 30, 2023 and September 24, 2022, respectively.

On May 3, 2023, the Company issued 40,000 shares of restricted stock to the Company's non-employee directors. The grant-date fair value of the awards was $28, or $0.70 per share, and is expected to be recognized as stock compensation expense over a weighted-average period of 1.0 year from the date the awards were granted. Each award is subject to a continued service condition. The fair value of each restricted stock awarded was equal to the market value of a share of the Company's Common Stock on the grant date.

On May 25, 2023, the Company granted 444,000 options with a market condition to certain key employees of the Company at a weighted-average exercise price of $1.00. The grant-date fair value of these options was $186. These options vest over a two-year period and require the Company's stock to trade at or above $3.00 for five consecutive trading days during the term of the option to meet the market condition.

The fair value of each option was estimated on the date of grant using a lattice model. Expected volatility was based on historical volatility of the Company's stock, using the most recent period equal to the expected life of the options. The risk-free interest rate was based on the U.S. Treasury yield for a term equal to the expected life of the option at the time of grant. The Company uses historical exercise behavior data of similar employee groups to determine the expected life of the options.
Table of Contents    18    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)

The following weighted-average assumptions were used to estimate the fair value of stock options granted during nine months ended September 30, 2023:

Risk-free interest rate3.80 %
Expected volatility97.96 %
Expected dividends %
Expected life of options5 years

NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME

Components of accumulated other comprehensive income, net of tax, are as follows:
Post-Retirement Liabilities
Balance at December 31, 2022$219 
Reclassification of net actuarial gain into earnings from postretirement benefit plans(16)
Balance at September 30, 2023$203 

NOTE 17 - COMMITMENTS AND CONTINGENCIES

Contingencies

The Company assesses its exposure related to legal matters, including those pertaining to product liability, safety and health matters and other items that arise in the regular course of its business. If the Company determines that it is probable a loss has been incurred, the amount of the loss, or an amount within the range of loss, that can be reasonably estimated will be recorded. The Company has not identified any legal matters that could have a material adverse effect on its consolidated condensed results of operations, financial position or cash flows.

Environmental Remediation

The Company accrues for losses associated with environmental remediation obligations when such losses are probable and estimable. Remediation obligations are accrued based on the latest available information and are recorded at undiscounted amounts. The Company regularly monitors the progress of environmental remediation. If studies indicate that the cost of remediation has changed from the previous estimate, an adjustment to the liability would be recorded in the period in which such determination is made (see Note 20).

NOTE 18 - OTHER (INCOME) EXPENSE, NET

Other operating (income) expense, net is summarized as follows:
Three Months EndedNine Months Ended
 September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Other operating (income) expense, net:
Gain on property, plant and equipment disposals$ $(30)$(1)$(40)
(Gain) loss on currency exchanges(7)34 35 120 
Retirement expense63 105 176 451 
Insurance proceeds  (246)(199)
Lease income(267) (329) 
Miscellaneous (income) expense64 4 52 (74)
Other operating (income) expense, net$(147)$113 $(313)$258 

Included in the $622 and $634 other income, net for the three and nine months ended September 30, 2023 is a gain of $625 related to an extinguishment of a debt arrangement.

Table of Contents    19    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
NOTE 19 - FACILITY CONSOLIDATION AND SEVERANCE EXPENSES, NET

2022 Consolidation of East Coast Manufacturing Plan

During 2022, the Company implemented a plan to consolidate its East Coast manufacturing in order to reduce its manufacturing costs. Under this plan, the Company consolidated its East Coast tufting operations into one plant in North Georgia, relocated the distribution of luxury vinyl flooring from its Saraland, Alabama facility to its Atmore, Alabama facility and identified space in its Saraland, Alabama and Atmore, Alabama facilities as available for lease or sublease. Costs for the plan include machinery and equipment relocation, inventory relocation, staff reductions and unabsorbed fixed costs during conversion of the Atmore facility.
2020 COVID-19 Continuity Plan

As the extent of the COVID-19 pandemic became apparent, the Company implemented a continuity plan to maintain the health and safety of associates, preserve cash, and minimize the impact on customers. The response included restrictions on travel, implementation of telecommuting where appropriate and limiting contact and maintaining social distancing between associates and with customers. Cost reductions were implemented including cutting non-essential expenditures, reducing capital expenditures, rotating layoffs and furloughs, selected job eliminations and temporary salary reductions.
Costs related to the facility consolidation plans are summarized as follows:
   As of September 30, 2023
 Accrued Balance at December 31, 2022
2023 Expenses To Date (1)
2023 Cash PaymentsAccrued Balance at September 30, 2023Total Costs Incurred To DateTotal Expected Costs
Consolidation of East Coast Manufacturing Plan$1,011 $2,320 $3,271 $60 $6,169 $6,667 
COVID-19 Continuity Plan    2,533 2,533 
Total All Plans$1,011 $2,320 $3,271 $60 $8,702 $9,200 
Asset Impairments$ $ $ $ $4,059 $4,059 
 Accrued Balance at December 25, 2021
2022 Expenses To Date (1)
2022 Cash PaymentsAccrued Balance at September 24, 2022
Consolidation of East Coast Manufacturing Plan$ $968 $968 $ 
COVID-19 Continuity Plan78  78  
Totals$78 $968 $1,046 $ 
Asset Impairments$ $ $ $ 

(1) Costs incurred under these plans are classified as "facility consolidation and severance expenses, net" in the Company's consolidated
condensed statements of operations.


THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(amounts in thousands, except per share data) (Continued)
NOTE 20 - DISCONTINUED OPERATIONS