The Dixie Group — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the quarter ended September 26, 2026, rose 4.6% to $65.2 million, compared to $62.4 million in the same quarter of 2025.
• Gross profit margin improved 180 basis points to 26.6% in Q3 2026 from 24.8% in Q3 2025; for the first nine months of 2026, the margin was 29.4% compared to 27.0% in the prior-year period.
• Operating income was $2.4 million in Q3 2026, a $4.4 million improvement over an operating loss of $2.0 million in Q3 2025.
• Net income for Q3 2026 was $577,000 ($0.04 per diluted share), compared to a net loss of $4.1 million ($0.29 per diluted share) in Q3 2025.
• Income from continuing operations was $0.05 per diluted share in Q3 2026, compared to a loss of $0.28 per diluted share in Q3 2025.
• For the nine months ended September 26, 2026, net sales were $193.2 million, 0.4% below the $193.9 million reported in the prior-year period.
• Operating income for the first nine months of 2026 was $8.7 million, compared to $1.2 million in the same period of 2025.
• Net income from continuing operations for the first nine months of 2026 was $3.2 million ($0.21 per diluted share), compared to a net loss of $4.3 million ($0.30 per diluted share) in the prior-year period.
• Selling and administrative expenses decreased to $14.6 million (22.4% of net sales) in Q3 2026 from $16.4 million (26.2% of net sales) in Q3 2025.
• Receivables increased by $5.3 million to $28.3 million at quarter-end 2026 from fiscal year-end 2025.
• Net inventory value was $67.6 million at the end of Q3 2026, slightly higher than the $66.4 million at fiscal year-end 2025.
• Combined accounts payable and accrued expenses increased by $6.7 million to $45.5 million at quarter-end 2026 compared to year-end 2025.
• Total debt increased by $0.5 million from fiscal year-end 2025 levels.
• Interest expense for the first nine months of 2026 was $5.8 million, compared to $5.4 million in the same period of 2025.
• Capital expenditures for the first nine months of 2026 were $247,000.

Guidance and Future Outlook:

• Management does not anticipate meaningful interest rate relief in the near term.
• The Company believes there is significant pent-up demand in the housing market driven by low housing availability and continued household formation.
• The Company remains focused on introducing new products to the strongest market segments and reducing expenses while maintaining product quality and delivery timeliness.
• The Company continues to monitor sluggish market conditions and remains committed to controlling costs and improving profitability through its Profit Improvement Plan.

Business Segments and Product Lines:

• Soft surface net sales increased 7.1% year-over-year in the third quarter, led by DuraSilkSD polyester and EnVisionSD solution-dyed nylon products.
• The Company introduced 14 new soft surface styles across various price points, including new products in Masland and Fabrica wool collections, four commercial patterns in the Masland Energy collection, and new Affordable Fashion styles in the DH Floors segment.
• The Fabrica wood program grew 15.3% year-over-year in the third quarter.
• Four new hard surface collections were introduced, including WPC, loose lay, and high-end Fabrica wood.
• The Chateau Accent collection was launched, featuring small planks for chevron, herringbone, and parquet designs, color-coordinated with the existing Chateau collection.

Market and Competitive Landscape:

• The flooring industry experienced sluggish conditions during the third quarter.
• Market headwinds included continued high interest rates, increasing inflation, and high oil and energy prices resulting from the war in Iran.
• The midterm election cycle contributed to consumer uncertainty.
• Existing home sales, a key indicator for residential replacement flooring demand, are trending at historic lows for the fourth consecutive year.

Risks and Challenges:

• Forward-looking statements are subject to risks including levels of demand for the Company's products.
• Potential risks include the availability and cost of raw materials and transportation costs related to petroleum prices.
• Risks include the cost and availability of capital, integration of acquisitions, and the ability to attract, develop, and retain qualified personnel.
• General economic and competitive conditions related to the business may affect results.
• Issues related to the availability and price of energy may adversely affect operations.

Management Commentary and Tone:

• Daniel K. Frierson, Chairman and CEO, expressed pleasure at reporting the third consecutive profitable quarter of 2026.
• Management attributed gross margin improvements to cost reductions and improved operating efficiencies.
• Frierson noted the Company's commitment to controlling costs and improving profitability despite prolonged housing market downturns.

Other Key Points:

• The first nine months of 2026 included the benefit of a refund of IEEPA tariffs paid from February 1, 2025, to February 20, 2026.
• Adjusted for the out-of-period effect of the tariff refund, the gross profit margin for the first nine months of 2026 would have been 28.2% (reported margin was 29.4%).
• The Company received payment of substantially all of the tariff refund by the end of the quarter.
• The third quarter was the Company's third consecutive profitable quarter, bringing net income for the first nine months of 2026 to $2.8 million ($0.18 per diluted share), compared to a net loss of $4.6 million ($0.32 per diluted share) in the prior-year period.