DXYN 10-K
Dixie Group Inc (DXYN)
10-K
2026-03-26
For: 2025-12-27
View Original
Added on
April 06, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
For the fiscal year ended December 27 , 2025
OR
For the transition period from _________ to ________.
Commission File Number 0-2585
(Exact name of registrant as specified in its charter)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ¨ Yes þ No
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. þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations 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). þ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ 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. ¨
Indicate by check mark whether the registrant has filed a report on attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes þ No
The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 27, 2025 (the last business day of the registrant's most recently completed fiscal second quarter) was $5,348,312 . The aggregate market value was computed by reference to the closing price of the Common Stock on such date. In making this calculation, the registrant has assumed, without admitting for any purpose, that all executive officers, directors, and holders of more than 10% of a class of outstanding Common Stock, and no other persons, are affiliates. No market exists for the shares of Class B Common Stock, which is neither registered under Section 12 of the Act nor subject to Section 15(d) of the Act.
Indicate the number of shares outstanding of each of the registrant's classes of Common Stock as of the latest practicable date.
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DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the following document are incorporated by reference:
Proxy Statement of the registrant for annual meeting of shareholders to be held May 6, 2026 (Part III).
THE DIXIE GROUP, INC.
Index to Annual Report
on Form 10-K for
Year Ended December 27, 2025
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FORWARD-LOOKING INFORMATION
This Report contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include the use of terms or phrases such as "expects," "estimates," "projects," "believes," "anticipates," "intends," and similar terms and phrases. Such forward-looking statements relate to, among other matters, our future financial performance, business prospects, growth strategies or liquidity. The following important factors may affect our future results and could cause those results to differ materially from our historical results; these factors include, in addition to those "Risk Factors" detailed in Item 1A of this report, and described elsewhere in this document, the cost and availability of capital, raw material and transportation costs related to petroleum price levels, the cost and availability of energy supplies, the loss of a significant customer or group of customers, the ability to attract, develop and retain qualified personnel, materially adverse changes in economic conditions generally in carpet, rug and floorcovering markets we serve and other risks detailed from time to time in our filings with the Securities and Exchange Commission.
PART I.
Item 1. BUSINESS
General
Our business consists principally of marketing, manufacturing and selling floorcovering products to high-end residential customers through our various sales forces and brands. We focus exclusively on the upper-end of the floorcovering market where we believe we have strong brands and competitive advantages with our style and design capabilities and customer relationships. Our Fabrica, Masland, DH Floors and TRUCOR™ brands have a significant presence in the high-end residential floorcovering markets. Our business participates in markets for soft floorcoverings, which include broadloom carpet and rugs, and hard surfaces, which include luxury vinyl flooring (LVF) and engineered wood.
We have one reportable segment, Floorcovering.
Our Brands
Our brands are well known, highly regarded and offer meaningful alternatives to the discriminating customer.
Fabrica markets and manufactures luxurious residential carpet, custom rugs, and engineered wood at selling prices that we believe are approximately five times the average for the residential soft floorcovering industry. Its primary customers are interior decorators and designers, selected retailers and furniture stores, luxury home builders and manufacturers of luxury motor coaches and yachts. Fabrica is among the leading premium brands in the domestic marketplace and is known for styling innovation and unique colors and patterns. Fabrica consists of extremely high quality carpets and area rugs in both nylon and wool, with a wide variety of patterns and textures. Fabrica is viewed by the trade as the premier quality brand for very high-end carpet and enjoys an established reputation as a styling trendsetter and a market leader in providing both custom and designer products to the very high-end residential sector.
Masland, founded in 1866, markets and manufactures design-driven specialty carpets and rugs for the high-end residential marketplace. In addition, it offers luxury vinyl flooring products to the marketplace it serves. Its residential broadloom carpet products are marketed at selling prices that we believe are over three times the average for the residential soft floorcovering industry. Its products are marketed through the interior design community, as well as to consumers through specialty floorcovering retailers. Masland Residential has strong brand recognition within the upper-end residential market. Masland Residential competes through innovative styling, color, product design, quality and service.
DH Floors provides stylishly designed, differentiated products that offer affordable fashion to residential consumers. DH Floors markets an array of residential tufted broadloom carpet and rugs to selected retailers and home centers under the DH Floors and private label brands. In addition, it offers luxury vinyl flooring products to the marketplace it serves. Its objective is to make the DH Floors brand the choice for styling, service and quality in the more moderately priced sector of the high-end residential market. Its products are marketed at selling prices which we believe average two times the soft floorcovering industry's average selling price.
TRUCOR™ delivers rigid vinyl flooring options that capture the beauty of hardwood and stone, yet are designed to take the demands of active home and work environments at a fraction of the cost. With a 100% waterproof core each design is engineered to perform in both residential or commercial environments. With our TRUWEAR™ acrylic coating, each design is protected against dirt, moisture, stains and scratches. TRUCOR™ is engineered to provide warmth underfoot as well as a cushioned feel. TRUCOR's advanced performance IXPE attached pad also helps to insulate sound, providing the perfect solution for high traffic areas.
Industry
We are a flooring manufacturer in an industry composed of a wide variety of companies from small privately held firms to large multinationals. In 2024, according to the most recent information available, the U.S. floorcovering industry reported $33.2 billion in sales, down approximately 2.6% from the 2023 sales total. In 2024, the primary categories of flooring in the U.S., based on sales dollars, were carpet and rug (34%), luxury vinyl flooring (LVF) (27%), wood (13%), ceramic tile (13%), stone (6%), vinyl (4%), and laminate and other (3%). In 2024, the primary categories of flooring in the U.S., based on square feet, were carpet and rug (40%), luxury vinyl flooring (LVF) (30%), ceramic tile (11%), vinyl (7%), wood (5%), laminate (3%), and stone and other (4%). Each of these categories is influenced by the residential construction, commercial construction, and residential remodeling markets. These markets are influenced by many factors including consumer confidence, spending for durable goods, turnover in housing and the overall strength of the economy.
The carpet and rug category has two primary markets, residential and commercial, with the residential market making up the largest portion of the industry's sales. A substantial portion of industry shipments is made in response to replacement demand. Residential products consist of broadloom carpets and rugs in a broad range of styles, colors and textures and hard surface products such as wood, luxury vinyl flooring, stone and ceramic tile. Commercial products consist primarily of broadloom carpet and modular carpet tile for a variety of institutional applications such as office buildings, restaurant chains, schools and other commercial establishments. The carpet industry also manufactures carpet for the automotive, recreational vehicle, small boat and other industries.
The Carpet and Rug Institute (the "CRI") is the national trade association representing carpet and rug manufacturers. Information compiled by the CRI suggests that the domestic carpet and rug industry is comprised of fewer than 100 manufacturers, with a significant majority of the industry's production concentrated in a limited number of manufacturers focused on the lower end of the price curve. We believe that this industry focus provides us with opportunities to capitalize on our competitive strengths in selected markets where innovative styling, design, product differentiation, focused service and limited distribution add value.
Competition
The floorcovering industry is highly competitive. We compete with other carpet, rug and hard surface manufacturers. In addition, the industry provides multiple floorcovering surfaces such as luxury vinyl tile and wood. Though soft floorcovering is still the dominant floorcovering surface, it has gradually lost market share to hard floorcovering surfaces over the last 25 years. We believe our products are among the leaders in styling and design in the high-end residential carpet markets. However, a number of manufacturers produce competitive products and some of these manufacturers have greater financial resources than we do.
We believe the principal competitive factors in our primary floorcovering markets are styling, color, product design, quality and service. In the high-end residential markets, we compete with various other floorcovering suppliers. Nevertheless, we believe we have competitive advantages in several areas. We have an attractive portfolio of brands that we believe are well known, highly regarded by customers and complementary; by being differentiated, we offer meaningful alternatives to the discriminating customer. We believe our investment in new yarns and innovative tufting and dyeing technologies, strengthens our ability to offer product differentiation to our customers. In addition, we have established longstanding relationships with key suppliers of luxury vinyl flooring and with significant customers in most of our markets. Finally, our reputation for innovative design excellence and our experienced management team enhance our competitive position. See "Risk Factors" in Item 1A of this report.
Backlog
Sales order backlog is not material to understanding our business, due to relatively short lead times for order fulfillment in the markets for the vast majority of our products.
Trademarks
Our floorcovering businesses own a variety of trademarks under which our products are marketed. Among such trademarks, the names "Fabrica", "Masland", "DH Floors" and TRUCOR™ are of greatest importance to our business. We believe that we have taken adequate steps to protect our interest in all significant trademarks.
Customer and Product Concentration
No customer was more than 10 percent of our net sales during the periods presented. During 2025, sales to our top ten customers accounted for approximately 7% of our sales and our top 20 customers accounted for approximately 10% of our sales. We do not have a material amount of sales in foreign countries.
We do not have any single class of products that accounts for more than 10% of our sales.
Seasonality
Our sales historically have normally reached their highest level in the second quarter (approximately 26% of our annual sales) and their lowest levels in the first quarter (approximately 24% of our annual sales), with the remaining sales being distributed relatively equally between the third and fourth quarters. Working capital requirements have normally reached their highest levels in the second and third quarters of the fiscal year.
Environmental
Our operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. The costs of complying with environmental protection laws and regulations have not had a material adverse impact on our financial condition or results of operations in the past. See "Risk Factors” in Item 1A of this report.
Raw Materials
Our primary raw material is continuous filament yarn. Nylon is the primary yarn we utilize and, to a lesser extent, wool and polyester yarn is used. Additionally, we utilize polypropylene carpet backing, latex, dyes and chemicals, and man-made topical applications in the construction of our products. The volatility of petroleum prices could adversely affect our supply and cost of synthetic fibers. Our synthetic yarns are purchased primarily from domestic fiber suppliers and wool is purchased from a number of international sources. Our other raw materials are purchased primarily from domestic suppliers, although the majority of our luxury vinyl tile is sourced outside the United States. Normally, we pass raw material price increases through to our customers; however, there can be no assurance that cost increases can be passed through to customers and that increases in raw material prices will not have an adverse effect on our profitability. See "Risk Factors” in Item 1A of this report. There are multiple sources of nylon yarn; however, an unanticipated termination or interruption of our supply arrangements could adversely affect our supplies of raw materials and could have a material effect on our operations. See "Risk Factors” in Item 1A of this report.
Utilities
We use electricity as our principal energy source, with oil or natural gas used in some facilities for dyeing and finishing operations as well as heating. We have not experienced any significant problems or issues in obtaining adequate supplies of electricity, natural gas or oil. Energy shortages of extended duration could have an adverse effect on our operations, and price volatility could negatively impact future earnings. See "Risk Factors” in Item 1A of this report.
Working Capital
We are required to maintain significant levels of inventory in order to provide the enhanced service levels demanded by the nature of our business and our customers, and to ensure timely delivery of our products. Consistent and dependable sources of liquidity are required to maintain such inventory levels. Failure to maintain appropriate levels of inventory could materially adversely affect our relationships with our customers and adversely affect our business. See "Risk Factors” in Item 1A of this report.
Human Capital Resources
At December 27, 2025, our total employed associates was 928.
As stated in the Company's Code of Ethics, Company policy is to promote diversity, prohibit discrimination and harassment in the workplace and to provide a safe and healthy workplace for Company associates.
Available Information
Our internet address is www.thedixiegroup.com. We make the following reports filed by us with the Securities and Exchange Commission available, free of charge, on our website under the heading "Investor Relations":
1.annual reports on Form 10-K;
2. quarterly reports on Form 10-Q;
3. current reports on Form 8-K; and
4. amendments to the foregoing reports.
The contents of our website are not a part of this report.
Item 1A. Risk Factors
In addition to the other information provided in this Report, the following risk factors should be considered when evaluating the results of our operations, future prospects and an investment in shares of our Common Stock. Any of these factors could cause our actual financial results to differ materially from our historical results, and could give rise to events that might have a material adverse effect on our business, financial condition and results of operations.
We have significant levels of indebtedness that includes covenants that we must comply with and if unable to comply with such covenants, it could cause us to be unable to continue as a going concern.
We have a significant amount of indebtedness relative to our equity. Insufficient cash flow, profitability, or the value of our assets securing our loans could have a material adverse effect on our ability to generate sufficient funds to satisfy the terms of our senior loan agreement and other debt obligations. Our senior loan agreement and term loans include certain compliance, affirmative, and financial covenants. The impact of continued operating losses on our liquidity position could affect our ability to comply with these covenants and could cause us to be unable to continue to operate as a going concern. Additionally, the inability to access debt or equity markets at competitive rates in sufficient amounts to satisfy our obligations could adversely impact our business. Significant increases in interest rates tied to our floating rate debt could have a material adverse effect on
our financial results. Further, our trade relations depend on our economic viability and insufficient capital could harm our ability to attract and retain customers and or supplier relationships.
Additional tariffs on product imported to the U.S., retaliatory trade actions taken by other countries and resulting trade wars may have a material adverse impact on our business.
Our business is subject to risks related to tariffs and other trade policies put in place by the U.S. or other countries. The recent enactment of tariffs by the U.S. government, along with the unpredictability of such rates, pose a significant risk to our business operations and may materially increase our costs and reduce our margins. The tariffs may also lead to higher pricing for our products, potentially reducing consumer demand and impacting our sales volume. We are actively monitoring the impact of any tariffs that become effective, as well as potential retaliatory tariffs imposed by other countries. We are currently analyzing strategies that can be taken to moderate or minimize the effects of these trade actions, including evaluating the country of origin for sourcing product into the U.S., negotiating with suppliers and raising prices. However, there can be no assurance that these measures will be successful, or that they will offset the negative impact of the tariffs on our business.
Given the uncertainty regarding scope and duration of the current and potential tariffs, as well as the potential for additional trade actions by the U.S. or other countries, the specific impact to our business, results of operations, cash flows and financial condition is uncertain but could be material.
The floorcovering industry is sensitive to changes in general economic conditions and a further decline in residential activity or home remodeling and refurbishment could have a material adverse effect on our business.
The floorcovering industry, in which we participate, is highly dependent on general economic conditions, such as interest rate levels, consumer confidence and income, corporate and government spending, availability of credit and demand for housing. We derive a majority of our sales from the replacement segment of the market. Therefore, unfavorable economic changes, such as an economic recession, could result in a significant or prolonged decline in spending for remodeling and replacement activities which could have a material adverse effect on our business and results of operations.
The residential floorcovering market is highly dependent on housing activity, including remodeling. The U.S. and global economies, along with the residential markets in such economies, can negatively impact the floorcovering industry and our business. Although the impact of a decline in new housing activity is typically accompanied by an increase in remodeling and replacement activity, these activities typically lag during a cyclical downturn. Additional or extended downturns could cause prolonged deterioration. A significant or prolonged decline in residential housing activity could have a material adverse effect on our business and results of operations.
Our Common Stock was delisted from the Nasdaq Stock Market, which could make trading in our Common Stock more difficult for investors, potentially leading to declines in our share price and liquidity and could limit our ability to raise additional capital.
Nasdaq Marketplace Rule 5550(a)(2) required that, for continued listing on the exchange, we had to maintain a minimum bid price of $1 per share. We received notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted, an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025.
Our delisting from Nasdaq could make trading in our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. Shareholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock will likely be made more difficult and the trading volume and liquidity of our stock could decline. Our delisting from Nasdaq could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely impact the acceptance of our Common Stock as currency or the value accorded by other parties.
Uncertainty in the credit market or downturns in the economy and our business could affect our overall availability and cost of credit.
Economic factors, including an economic recession, could have a material adverse effect on demand for our products and on our financial condition and operating results. Uncertainty in the credit markets could affect the availability and cost of credit. If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash and cash equivalents to the extent those funds are not
insured or otherwise protected by the FDIC. Market conditions could impact our ability to obtain financing in the future, including any financing necessary to refinance existing indebtedness. The cost and terms of such financing is uncertain. Continued operating losses could affect our ability to continue to access the credit markets under our current terms and conditions.
Our stock price has been and could remain volatile, which could further adversely affect the market price of our stock, our ability to raise additional capital.
The market price of our common stock has historically experienced and may continue to experience significant volatility. Our progress in restructuring our business, our quarterly operating results, our perceived prospects, lack of securities analysts’ recommendations or earnings estimates, changes in general conditions in the economy or the financial markets, adverse events related to our strategic relationships, significant sales of our common stock by existing stockholders, and other developments affecting us or our competitors could cause the market price of our common stock to fluctuate substantially. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has affected the market prices of securities issued by many companies for reasons unrelated to their operating performance and may adversely affect the price of our common stock. Such market price volatility could adversely affect our ability to raise additional capital.
We face intense competition in our industry, which could decrease demand for our products and could have a material adverse effect on our profitability.
The floorcovering industry is highly competitive. We face competition from a number of domestic manufacturers and independent distributors of floorcovering products and, in certain product areas, foreign manufacturers. Significant consolidation within the floorcovering industry has caused a number of our existing and potential competitors to grow significantly larger and have greater access to resources and capital than we do. Maintaining our competitive position may require us to make substantial additional investments in our product development efforts, manufacturing facilities, distribution network and sales and marketing activities. These additional investments may be limited by our access to capital, as well as restrictions set forth in our credit facilities. Competitive pressures and the accelerated growth of hard surface alternatives have resulted in decreased demand for our soft floorcovering products and in the loss of market share to hard surface products. As a result, competition from providers of other soft surfaces has intensified and may result in lower demand for our products. In addition, we face, and will continue to face, competitive pressures on our sales prices and cost of our products. As a result of any of these factors, there could be a material adverse effect on our sales and profitability.
If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products, we may not be able to maintain or increase our net revenues and profitability.
Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner. All of our products are subject to changing consumer preferences that cannot be predicted with certainty. In addition, long lead times for certain products may make it hard for us to quickly respond to changes in consumer demands. New products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of flooring products or away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower sales and excess inventory levels, which could have a material adverse effect on our financial condition.
Raw material prices will vary and the inability to either offset or pass on such cost increases or avoid passing on decreases larger than the cost decrease to our customers could have a material adverse effect on our business, results of operations and financial condition.
We require substantial amounts of raw materials to produce our products, including nylon and polyester yarn, as well as wool yarns, synthetic backing, latex, and dyes. Substantially all of the raw materials we require are purchased from outside sources. The prices of raw materials and fuel-related costs have increased significantly due to market conditions and inflationary pressures, the duration and extent of which is difficult to predict. The fact that we source a significant amount of raw materials means that several months of raw materials and work in process are moving through our supply chain at any point in time. We are sourcing the majority of our new luxury vinyl flooring and wood product lines from overseas. We are not able to predict whether commodity costs will significantly increase or decrease in the future. If commodity costs continue to increase in the future and we are not able to reduce or eliminate the effect of the cost increases by reducing production costs or implementing price increases, our profit margins could decrease. If commodity costs decline, we may experience pressures from customers to reduce our selling prices. The timing of any price reductions and decreases in commodity costs may not align. As a result, our margins could be affected.
Disruption to suppliers of raw materials could have a material adverse effect on us.
Nylon yarn is the principal raw material used in our floorcovering products. The supply of all nylon yarn and yarn systems has been negatively impacted by a variety of overall market factors. The cost of nylon yarns has risen significantly and availability of nylon yarns has been restricted. An interruption in the supply of these or other raw materials or sourced products used in our business or in the supply of suitable substitute materials or products would disrupt our operations, which could have a material
adverse effect on our business. Supply constraints may impact our ability to successfully develop products and effectively service our customers. We have developed and are developing products and product offerings using fiber systems from multiple external fiber suppliers as well as from vertically integrated production of our yarn supply through dedicated internal extrusion operations. There can be no certainty as to the success of our efforts to develop and market such products. We continually evaluate our sources of yarn and other raw materials for competitive costs, performance characteristics, brand value, and diversity of supply.
We rely on information systems in managing our operations and any system failure, cyber incident or deficiencies of such systems may have an adverse effect on our business.
Our businesses rely on sophisticated systems to obtain, rapidly process, analyze and manage data. We rely on these systems to, among other things, facilitate the purchase, manufacture and distribution of our products; receive, process and ship orders on a timely basis; and to maintain accurate and up-to-date operating and financial data for the compilation of management information. We rely on our computer hardware, software and network for the storage, delivery and transmission of data to our sales and distribution systems, and certain of our production processes are managed and conducted by computer. Any damage by unforeseen events or system failure which causes interruptions to the input, retrieval and transmission of data or increase in the service time, whether caused by human error, natural disasters, power loss, computer viruses, intentional acts of vandalism, various forms of cyber crimes including and not limited to hacking, ransomware, intrusions and malware or otherwise, could disrupt our normal operations. Depending upon the severity of the incident, there can be no assurance that we can effectively carry out our disaster recovery plan to handle a failure of our information systems, or that we will be able to restore our operational capacity within sufficient time to avoid material disruption to our business. The occurrence of any of these events could cause unanticipated disruptions in service, decreased customer service and customer satisfaction and harm to our reputation, which could result in loss of customers, increased operating expenses and financial losses. Any such events could in turn have a material adverse effect on our business, financial condition, results of operations, and prospects.
The long-term performance of our business relies on our ability to attract, develop and retain qualified personnel.
To be successful, we must attract, develop and retain qualified and talented personnel in management, sales, marketing, product design and operations. We compete with other floorcovering companies for these employees and invest resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect our business, financial condition and results of operations.
We are subject to various governmental actions that may interrupt our supply of materials.
We import most of our luxury vinyl flooring ("LVF"), some of our wood offering, some of our rugs and broadloom offerings. Though currently a small part of our business, the growth in LVF products is an important product offering to provide our customers a complete selection of flooring alternatives. There have been trade proposals that threatened these product categories with added tariffs which would make our offerings less competitive compared to those manufactured in other countries or produced domestically. These proposals, if enacted, or if expanded, or imposed for a significant period of time, would materially interfere with our ability to successfully enter into these product categories and could have a material adverse effect upon our cost of sales and results of operations.
Regulatory efforts to monitor political, social, and environmental conditions in foreign countries that produce products or components of products purchased by us will necessarily add complexity and cost to our products and processes and may reduce the availability of certain products. Regulatory efforts to prevent or reduce the risk that certain flooring products or elements of such products are produced in regions where forced or involuntary labor are known or believed to occur will result in increased cost to us as we attempt to ensure that none of our products or components of our products are produced in such regions. Such increased cost may make our products less competitive.
We may experience certain risks associated with internal expansion, acquisitions, joint ventures and strategic investments.
We continually look for strategic and tactical initiatives, including internal expansion, acquisitions and investment in new products, to strengthen our future and to enable us to return to sustained growth and to achieve profitability. Growth through expansion and acquisition involves risks, many of which may continue to affect us after the acquisition or expansion. An acquired company, operation or internal expansion may not achieve the levels of revenue, profitability and production that we expect. The combination of an acquired company’s business with ours involves risks. Further, internally generated growth that involves expansion involves risks as well. Such risks include the integration of computer systems, alignment of human resource policies and the retention of valued talent. Reported earnings may not meet expectations because of goodwill and intangible asset impairment, other asset impairments, increased interest costs and issuance of additional securities or debt as a result of these acquisitions. We may also face challenges in consolidating functions and integrating our organizations, procedures, operations and product lines in a timely and efficient manner.
The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on our revenues, level of expenses and operating results. Failure to successfully manage and integrate an acquisition with our existing operations or expansion of our existing operations could lead to the potential loss of customers of
the acquired or existing business, the potential loss of employees who may be vital to the new or existing operations, the potential loss of business opportunities or other adverse consequences that could have a material adverse effect on our business, financial condition and results of operations. Even if integration occurs successfully, failure of the expansion or acquisition to achieve levels of anticipated sales growth, profitability or productivity, or otherwise perform as expected, may have a material adverse effect on our business, financial condition and results of operations.
We are subject to various environmental, safety and health regulations that may subject us to costs, liabilities and other obligations, which could have a material adverse effect on our business, results of operations and financial condition.
We are subject to various environmental, safety and health and other regulations that may subject us to costs, liabilities and other obligations which could have a material adverse effect on our business. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations of agencies or courts. We could incur material expenditures to comply with new or existing regulations, including fines and penalties and increased costs of our operations. Additionally, future laws, ordinances, regulations or regulatory guidelines could give rise to additional compliance or remediation costs that could have a material adverse effect on our business, results of operations and financial condition. For example, producer responsibility regulations regarding end-of-life disposal could impose additional cost and complexity to our business.
The Environmental Protection Agency ("EPA") has declared an intent to focus on perceived risks posed by certain chemicals (principally PFOA and PFOAS) previously used by the carpet industry. Recently, such chemicals have been declared to be hazardous substances by the EPA. New or revised regulatory actions could result in requirements that industry participants, including us, incur costs related to testing and cleanup of areas affected by such chemical usage. Other chemicals or materials historically used by the industry and us could become the focus of similar governmental action.
Various federal, state and local environmental laws govern the use of our current and former facilities. These laws govern such matters as:
•Discharge to air and water;
•Handling and disposal of solid and hazardous substances and waste, and
•Remediation of contamination from releases of hazardous substances in our facilities and off-site disposal locations.
We are a manufacturer and distributor of flooring products which require processes and materials that necessarily utilize substantial amounts of carbon-based energy and accordingly involve the emission of “greenhouse gasses.” Regulatory monitoring, reporting and, more generally, efforts to eliminate or substantially reduce “greenhouse gasses” will necessarily add complexity and cost to our products and processes decreasing profitability and consumer demand. Additionally, consumer preferences may be affected by publicly announced issues related to “greenhouse gasses” which may negatively affect demand for our products. There can be no assurance that we can cost effectively respond to any such regulatory efforts or that demand for our products can be sustained under such pressures.
Our operations also are governed by laws relating to workplace safety and worker health, which, among other things, establish noise standards and regulate the use of hazardous materials and chemicals in the workplace. We have taken, and will continue to take, steps to comply with these laws. If we fail to comply with present or future environmental or safety regulations, we could be subject to future liabilities. However, we cannot ensure that complying with these environmental or health and safety laws and requirements will not adversely affect our business, results of operations and financial condition.
We may be exposed to litigation, claims and other legal proceedings in the ordinary course of business relating to our products or business, which could have a material adverse effect on our business, results of operations and financial condition.
In the ordinary course of business, we are subject to a variety of work-related and product-related claims, lawsuits and legal proceedings, including those relating to product liability, product warranty, product recall, personal injury, and other matters that are inherently subject to many uncertainties regarding the possibility of a loss to our business. Such matters could have a material adverse effect on our business, results of operations and financial condition if we are unable to successfully defend against or resolve these matters or if our insurance coverage is insufficient to satisfy any judgments against us or settlements relating to these matters. Although we have product liability insurance, the policies may not provide coverage for certain claims against us or may not be sufficient to cover all possible liabilities. Further, we may not be able to maintain insurance at commercially acceptable premium levels. Additionally, adverse publicity arising from claims made against us, even if the claims are not successful, could adversely affect our reputation or the reputation and sales of our products.
Since 2016, the Company has been named as a defendant in multiple lawsuits filed by various individual plaintiffs against chemical manufacturers, distributors, and several other carpet manufacturers and finishers in connection with the past use of surfactants containing or alleged to contain chemicals associated with PFAS and PFOS. Additionally, and as noted above, there
is an increased regulatory focus on the use and past use of such chemicals. Such regulatory focus may result in governmental litigation related to use of such chemicals.
To date, the Company has managed the defense and settlement of lawsuits related to the alleged past use of PFOA, PFOS and related chemicals by expenditure of amounts deemed not to be material. Nevertheless, the future costs of such litigation are unpredictable. The management time spent on such matters and the distraction caused by such litigation has been and is likely to be significant. Accordingly, there can be no assurance that costs related to defending such lawsuits will not be material in the future and will not have a material adverse impact upon the Company.
Our business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events.
Many of our business activities involve substantial investments in manufacturing facilities and many products are produced at a limited number of locations. These facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes and earthquakes, or by fire or other unexpected events such as adverse weather conditions or other disruptions to our facilities, supply chain or our customer's facilities. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition and results of operations.
Our financial condition and results of operations have been and could likely be adversely impacted in the future by COVID-19 or other pandemics and the related negative impact on economic conditions.
Global and/or local pandemics, such as COVID-19, could negatively impacted areas where we operate and sell our products and services. The COVID-19 outbreak in the 2020 had a material adverse effect on our ability to operate and our results of operations as public health organizations recommended, and many governments implemented, measures to slow and limit the transmission of the virus, including shelter in place and social distancing ordinances. Although the accessibility of vaccines and other preventive measures have lessened the impact, new variants or other pandemics may necessitate a return of such restrictive, preventive measures which may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain locations, decreased employee availability, disruptions to the businesses of our selling channel partners, and others. Our suppliers and customers may also face these and other challenges, which could lead to a disruption in our supply chain as well as decreased construction and renovation spending and consumer demand for our products and services.
Item 1B.UNRESOLVED STAFF COMMENTS
None.
Item 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We recognize cybersecurity as a critical aspect of our overall risk management program and are committed to maintaining a cybersecurity program to protect our information assets, systems, and operations. Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational and financial risks areas . We continuously evaluate and enhance our cybersecurity program based on lessons learned, industry best practices and feedback from internal and external stakeholders.
Key aspects of our cybersecurity risk management program include:
•risk assessments designed to help identify, prioritize and mitigate potential material cybersecurity risks to our critical systems and information;
•an internal Information Technology staff responsible for managing our cybersecurity risk assessment processes, our security controls and our response to cybersecurity incidents;
•the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
•cybersecurity awareness training of our associates, incident response personnel and senior management;
•a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
•a third-party risk management process for key service providers, suppliers, and vendors.
Cybersecurity Governance
Item 2. PROPERTIES
The following table lists our facilities according to location, type of operation and approximate total floor space as of March 6, 2026:
| Location | Type of Operation | Approximate Square Feet | ||||||||||||
| Administrative: | ||||||||||||||
| Saraland, AL* | Administrative | 29,000 | ||||||||||||
| Santa Ana, CA* | Administrative | 4,000 | ||||||||||||
| Calhoun, GA | Administrative | 10,600 | ||||||||||||
| Dalton, GA* | Administrative | 50,800 | ||||||||||||
| Total Administrative | 94,400 | |||||||||||||
| Manufacturing and Distribution: | ||||||||||||||
| Atmore, AL | Distribution / Warehouse | 610,000 | ||||||||||||
| Roanoke, AL | Carpet Yarn Processing | 204,000 | ||||||||||||
| Saraland, AL* | Warehouse | 384,000 | ||||||||||||
| Porterville, CA* | Carpet Yarn Processing | 249,000 | ||||||||||||
| Santa Ana, CA* | Carpet and Rug Manufacturing, Distribution | 200,000 | ||||||||||||
| Adairsville, GA* | Samples and Rug Manufacturing, Distribution | 292,000 | ||||||||||||
| Calhoun, GA | Carpet Dyeing & Processing | 193,300 | ||||||||||||
| Eton, GA | Carpet Manufacturing, Distribution | 408,000 | ||||||||||||
| Chatsworth, GA* | Samples Warehouse and Distribution | 244,400 | ||||||||||||
| Total Manufacturing and Distribution | 2,784,700 | |||||||||||||
| * Leased properties | TOTAL | 2,879,100 | ||||||||||||
In our opinion, our manufacturing facilities are well maintained and our machinery is efficient and competitive. Operations of our facilities generally vary between 120 and 168 hours per week. Substantially all of our owned properties are subject to mortgages, which secure the outstanding borrowings under these mortgages.
Item 3. LEGAL PROCEEDINGS
As previously disclosed, we are currently defending five lawsuits based generally on alleged damages related to historical use of certain products alleged to have contained PFAS chemicals in our manufacturing processes. Following the end of the quarter, we engaged in settlement discussions with the plaintiffs in four of these pending claims. These pending matters are those styled: Moss Land Company, LLC, et al. v. City of Calhoun, et al., in the Superior Court of Gordon County, Georgia, Case No. 24CV73929; The City of Calhoun, Georgia v. Daikin America, Inc., et al., in the Superior County of Gordon County, Georgia, Case No. 24CV73929; William Hartwell Brooks v. City of Calhoun, Georgia, et al., in the Superior Court of Gordon County, Georgia, Case No. 24CV74289; and James Haley Stephens v. 3M Company, et al., in the Superior Court of Gordon County, Georgia, Case No. 25CV75072. As a result of those discussions, we have reached a memorandum of understanding to settle the Moss claims subject to certain conditions and negotiation of a final settlement agreement with the plaintiffs and have settled all claims with respect to The City of Calhoun in such matters. Accordingly, we have estimated and recorded a liability for such anticipated settlement amounts and payments. That amount is deemed to be immaterial due to the anticipated terms of the settlement agreements. No final settlement agreement has been entered into with respect to the Brooks and Stephens matters and discussions concerning the terms of those final settlement agreements are ongoing.
Additionally, we have obtained an agreement in principle from the Plaintiffs in the pending Chatsworth matter styled, The City of Chatsworth, Georgia v. 3M Company, et al., in the Superior Court of Murray County, Georgia, Case No. 25-C10245 to dismiss without prejudice that lawsuit and the claims against us asserted therein.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Pursuant to instruction G of Form 10-K the following is included as an unnumbered item to PART I.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and offices held by the executive officers of the registrant as of March 6, 2026, are listed below along with their business experience during the past five years.
| Name, Age and Position | Business Experience During Past Five Years | |||||||
| Daniel K. Frierson, 84 Chairman of the Board, and Chief Executive Officer, Director | Director since 1973, Chairman of the Board since 1987 and Chief Executive Officer since 1980. He is the Chairman of the Company's Executive Committee. He is past Chairman of The Carpet and Rug Institute. | |||||||
| D. Kennedy Frierson, Jr., 59 Vice President and Chief Operating Officer, Director | Director since 2012 and Vice President and Chief Operating Officer since August 2009. Vice President and President Masland Residential from February 2006 to July 2009. President Masland Residential from December 2005 to January 2006. Executive Vice President and General Manager, Dixie Home, 2003 to 2005. Business Unit Manager, Bretlin, 2002 to 2003. | |||||||
| Allen L. Danzey, 56 Vice President and Chief Financial Officer | Chief Financial Officer since January 2020. Director of Accounting from May 2018 to December 2019. Commercial Division Controller from July 2009 to May 2018. Residential Division Controller and Senior Accountant from February 2005 to July 2009. | |||||||
| Thomas M. Nuckols, Jr., 58 Vice President and President, Dixie Residential | Vice President and President of Dixie Residential since November 2017. Executive Vice President, Dixie Residential from February 2017 to November 2017. Dupont/Invista, from 1989 to 2017, Senior Director of Mill Sales and Product Strategy from 2015 to 2017. | |||||||
| Daniel M. Phelan, 59 Vice President, Human Resources | Vice President of Human Resources since June 2024; Vice President of Marketing 2007–May 2024; Vice President of Hard Surfaces 2016–2018; Regional Vice President, Mountain West 2004–2015; Vice President of National Accounts 1999–2007 | |||||||
The executive officers of the registrant are generally elected annually by the Board of Directors at its first meeting held after each annual meeting of our shareholders.
PART II.
Item 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Effective at the opening of business on October 3, 2024, our Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol "DXYN". Effective October 4, 2024, we were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol "DXYN". Before October 3, 2024, our Common Stock traded on Nasdaq under the ticker symbol "DXYN". No market exists for our Class B Common Stock.
As of March 6, 2026, the total number of holders of our Common Stock was approximately 2,500 including an estimated 2,050 shareholders who hold our Common Stock in nominee names. The total number of holders of our Class B Common Stock was 10.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
| Fiscal Month Ending | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or approximate dollar value) of Shares That May Yet Be Purchased Under Plans or Programs | ||||||||||||||||||||||
| November 1, 2025 | — | $ | — | — | — | |||||||||||||||||||||
| November 29, 2025 | 1,563 | 0.56 | — | — | ||||||||||||||||||||||
| December 27, 2025 | — | — | — | — | ||||||||||||||||||||||
| Three Fiscal Months Ended December 27, 2025 | 1,563 | $ | 0.56 | — | $ | — | ||||||||||||||||||||
(1)During the three months ended December 27, 2025, 1,563 shares were withheld from an employee in lieu of cash payments for withholding taxes due for a total amount of $875 pursuant to the terms of the applicable incentive plans.
Dividends and Price Range of Common Stock
There is a restriction on the payment of dividends under our revolving credit facility and we have not paid any dividends in the years ended December 27, 2025 and December 28, 2024.
The following table provides the price range of common stock for the four fiscal quarterly periods in the years ended December 27, 2025 and December 28, 2024. Since October 3, 2024, our Common Stock has been traded on the OTC markets. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.
| FISCAL QUARTER | ||||||||||||||||||||||||||
| 2025 | 1ST | 2ND | 3RD | 4TH | ||||||||||||||||||||||
| Common Stock Prices: | ||||||||||||||||||||||||||
| High | $ | 0.76 | $ | 0.73 | $ | 0.75 | $ | 0.75 | ||||||||||||||||||
| Low | 0.42 | 0.38 | 0.45 | 0.45 | ||||||||||||||||||||||
| 2024 | 1ST | 2ND | 3RD | 4TH | ||||||||||||||||||||||
| Common Stock Prices: | ||||||||||||||||||||||||||
| High | $ | 0.74 | $ | 1.00 | $ | 0.94 | $ | 1.05 | ||||||||||||||||||
| Low | 0.50 | 0.47 | 0.54 | 0.45 | ||||||||||||||||||||||
Shareholder Return Performance Presentation
We compare our performance to two different industry indices published by Dow Jones, Inc. The first of these is the Dow Jones US Furnishings Index, which is composed of publicly traded companies classified by Dow Jones in the furnishings industry. The second is the Dow Jones US Building Materials & Fixtures Index, which is composed of publicly traded companies classified by Dow Jones in the building materials and fixtures industry.
Set forth below is a line graph comparing the yearly change in the cumulative total shareholder return on our Common Stock against the total return of the Standard & Poor's Small Cap 600 Stock Index, plus both the Dow Jones US Furnishings Index and the Dow Jones US Building Materials & Fixtures Index, in each case for the five year period ended December 27, 2025. The comparison assumes that $100.00 was invested on December 26, 2020, in our Common Stock, the S&P Small Cap 600 Index, and each of the two Peer Groups, and assumes the reinvestment of dividends.
The foregoing shareholder performance presentation shall not be deemed "soliciting material" or to be "filed" with the Commission subject to Regulation 14A, or subject to the liabilities of Section 18 of the Exchange Act.
Item 6. [RESERVED]
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report.
OVERVIEW
Our business consists principally of marketing, manufacturing and selling floorcovering products to high-end customers through our various sales forces and brands. We focus primarily on the upper end of the floorcovering market where we believe we have strong brands and competitive advantages with our style and design capabilities and customer relationships. Our Fabrica, Masland, DH Floors and TRUCOR brands have a significant presence in the high-end residential floorcovering markets. Dixie International sells all of our brands outside of the North American market.
Our sales volumes continue to be impacted by softness in U.S. housing turnover and sluggish new home construction. Weak consumer confidence continues to hinder consumer discretionary spending, which has caused consumers to postpone large purchases of durable goods such as flooring. Macroeconomic factors continue to impact new home construction and residential renovation and remodeling activity. Residential remodeling is a primary sales driver of flooring products, and most flooring is replaced before a home is listed for sale or just after a home purchase is completed. The current housing market conditions have suppressed remodeling activity as home sales remain soft. Housing turnover rates remain near historically low levels, driven by affordability challenges and broader economic uncertainty. We have, to some extent, offset the impact of a soft housing market and decreased renovation activity through cost containment, price increases, improved productivity and lower input costs. Due to low housing availability, aging stock and greater household formation, we believe demand in our markets will accelerate when consumer confidence improves and home mortgage interest rates decline. However, the ongoing impact of soft consumer demand, inflationary pressures and high interest rates to our business, financial condition, and results of operations cannot be determined at this time.
We continue to actively monitor trade policy and tariff announcements, including various executive orders issued by the current U.S. presidential administration. We have taken steps to mitigate the implemented tariffs through managing inventory of sourced products and adjusting prices as the tariff trade policy evolves. We continue to monitor changing tariff levels and adjust its strategies to mitigate their impact as trade policy evolves. These tariff actions, retaliatory measures, or other trade restrictions could materially and adversely impact our business, financial condition and results of operations.
Nasdaq Marketplace Rule 5550(a)(2) requires that, for continued listing on the exchange, we must maintain a minimum bid price of $1 per share. We received notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted, an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025.
RESULTS OF OPERATIONS
Fiscal Year Ended December 27, 2025 Compared with Fiscal Year Ended December 28, 2024
| Fiscal Year Ended (amounts in thousands) | ||||||||||||||||||||||||||
| December 27, 2025 | % of Net Sales | December 28, 2024 | % of Net Sales | Increase (Decrease) | % Change | |||||||||||||||||||||
| Net sales | $ | 257,429 | 100.0 | % | $ | 265,026 | 100.0 | % | $ | (7,597) | (2.9) | % | ||||||||||||||
| Cost of sales | 187,880 | 73.0 | % | 199,515 | 75.3 | % | (11,635) | (5.8) | % | |||||||||||||||||
| Gross profit | 69,549 | 27.0 | % | 65,511 | 24.7 | % | 4,038 | 6.2 | % | |||||||||||||||||
| Selling and administrative expenses | 67,673 | 26.3 | % | 69,850 | 26.4 | % | (2,177) | (3.1) | % | |||||||||||||||||
| Other operating expense, net | 1,209 | 0.5 | % | 200 | — | % | 1,009 | 504.5 | % | |||||||||||||||||
| Facility consolidation and severance expenses, net | 549 | 0.2 | % | 1,327 | 0.5 | % | (778) | (58.6) | % | |||||||||||||||||
| Operating income (loss) | 118 | — | % | (5,866) | (2.2) | % | 5,984 | (102.0) | % | |||||||||||||||||
| Interest expense | 7,309 | 2.8 | % | 6,380 | 2.4 | % | 929 | 14.6 | % | |||||||||||||||||
| Other (income) expense, net | 11 | — | % | (7) | — | % | 18 | (257.1) | % | |||||||||||||||||
| Loss from continuing operations before taxes | (7,202) | (2.8) | % | (12,239) | (4.6) | % | 5,037 | (41.2) | % | |||||||||||||||||
| Income tax provision (benefit) | 73 | — | % | (29) | — | % | 102 | (351.7) | % | |||||||||||||||||
| Loss from continuing operations | (7,275) | (2.8) | % | (12,210) | (4.6) | % | 4,935 | (40.4) | % | |||||||||||||||||
| Loss from discontinued operations, net of tax | (340) | (0.2) | % | (790) | (0.3) | % | 450 | (57.0) | % | |||||||||||||||||
| Net loss | $ | (7,615) | (3.0) | % | $ | (13,000) | (4.9) | % | $ | 5,385 | (41.4) | % | ||||||||||||||
Net Sales. Net sales for the year ended December 27, 2025 were $257.4 million compared with $265.0 in the prior period, a decrease of 2.9% for the year-over-year comparison. The lower net sales were attributed to continued lower demand within the floorcovering industry and related markets driven by continued high interest rates and inflation.
Gross Profit. Gross profit, as a percentage of net sales, increased 2.3 percentage points in 2025 compared with 2024. The increase in gross profit percentage in 2025 was primarily driven by lower raw material costs and cost reductions in our operations.
Selling and Administrative Expenses. Selling and administrative expenses were $67.7 million in 2025 compared with $69.9 million in 2024. Selling and administrative expenses as a percent of the net sales for 2025 and 2024 were 26.3% and 26.4% respectively. The decrease in selling and administrative expenses was primarily due to a reduction in sample and marketing expenses offset by an increase in legal expenses.
Other Operating Expense, Net. Net other operating expense was an expense of $1.2 million in 2025 compared with an expense of $200 thousand in 2024. Other operating expense, net includes estimated losses related to certain pending litigation.
Facility Consolidation and Severance Expenses, Net. Facility consolidation expenses were $549 thousand in 2025 compared with $1.3 million in 2024. The facility consolidation expenses incurred during 2025 and 2024 were primarily related to our plan for the consolidation of our east coast manufacturing to better align our production capacity with our sales volume and concentrate production into our lower cost facility.
Operating Income (Loss). The operating income in 2025 was $118 thousand compared to an operating loss of $5.9 million in 2024. The increase in operating income (loss) was primarily the result of cost reductions in our operations.
Interest Expense. Interest expense was $7.3 million in 2025 compared with $6.4 million in 2024. The increase is a result of higher interest rates through out 2025 compared to 2024.
Other (Income) Expense, Net. Net other (income) expense was an expense of $11 thousand in 2025 compared with income of $7 thousand in 2024. The 2025 expense included a loss of $66 thousand related to an extinguishment of a debt arrangement.
Income Tax Provision (Benefit). Our effective income tax rate was a provision of 1.01% in 2025. The provision relates to federal and state cash taxes paid offset by certain federal and state credits. In 2025, we increased our valuation allowance by $2.1 million related to our net deferred tax asset and specific federal and state net operating losses and federal and state tax credit carryforwards.
Our effective income tax rate was a benefit of 0.24% in 2024. The provision relates to federal and state cash taxes paid offset by certain federal and state credits. In 2024, we decreased our valuation allowance by $3.8 million related to our net deferred tax asset and specific federal and state net operating losses and federal and state tax credit carryforwards.
Net Loss. Continuing operations reflected a loss of $7.3 million, or $0.50 per diluted share in 2025, compared with a loss from continuing operations of $12.2 million, or $0.83 per diluted share in 2024. Our discontinued operations reflected a loss of $340 thousand, or $0.02 per diluted share in 2025 compared with a loss of $790 thousand, or $0.05 per diluted share in 2024. Including discontinued operations, we had a net loss of $7.6 million, or $0.52 per diluted share, in 2025 compared with net loss of $13.0 million, or $0.88 per diluted share, in 2024.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
During the year ended December 27, 2025, cash provided by continuing operations was $9.6 million. A reduction in inventories generated $482 thousand and an increase in accounts payable and accrued expenses generated $9.3 million.
Net cash used in investing activities was $473 thousand during the year ended December 27, 2025. This amount was primarily the result of purchases of property, plant and equipment of $598 thousand.
During the year ended December 27, 2025, cash used in financing activities was $1.6 million. We had net borrowings of $2.7 million on our revolving credit facilities. We had payments of $2.1 million on building and other term loans and payments on notes payable, net of borrowings was $280 thousand and payments on finance leases of $152 thousand.
Nasdaq Marketplace Rule 5550(a)(2) requires that, for continued listing on the exchange, we must maintain a minimum bid price of $1 per share. We received notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted, an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025. Our delisting from Nasdaq could make it more difficult for us to raise additional capital if needed.
As described in Note 1 to the consolidated financial statements, we had $52.7 million of outstanding indebtedness under our senior credit facility that is classified as current as of December 27, 2025. As of the date of these financial statements, the Company’s existing cash and cash equivalents would not be sufficient to satisfy this debt in whole and meet the Company’s operating needs for at least one year after the issuance of these financial statements.
We have evaluated our liquidity position over the next twelve months. In our evaluation we considered recent operating losses, reduced availability under our credit facility, covenant violations and macroeconomic pressures. Management has developed plans that are intended to improve liquidity and address these conditions, including profit improvement initiatives and seeking additional debt financing. Our evaluation of these plans, and our assumptions regarding their execution and timing, requires significant judgment and is subject to inherent uncertainty. We believe, after having reviewed various financial scenarios, our operating cash flows, credit availability under our revolving credit facility and other sources of financing are adequate to finance our anticipated liquidity requirements under current operating conditions. However, our current forecast projects we may not be able to maintain compliance with certain of our financial covenants under our loan agreements. We have been able to obtain waivers in the past for such violations but it cannot be assured that such waivers will be obtained in the future. Refer to Note 1 in our consolidated financial statements for detail regarding our assessment as a going concern.
Availability under our MidCap Financial Senior Secured Revolving Credit Facility on December 27, 2025 was $8.2 million which is subject to a $6.0 million minimum excess availability requirement. Significant additional cash expenditures above our normal liquidity requirements, significant deterioration in economic conditions or continued operating losses could affect our business and require supplemental financing or other funding sources.
Debt Facilities
Revolving Credit Facility - MidCap Financial IV Trust. On February 25, 2025, we entered into a new $75.0 million revolving credit agreement with MidCap Financial IV Trust, as agent, and lenders from time-to-time party thereto (collectively, "MidCap"). The credit agreement is secured by a security interest on all accounts receivable, inventory, and other assets other than certain excluded assets, including a deed to secure debt lien on our Calhoun and Chatsworth, Georgia facilities. Our borrowing capacity is based on certain percentages of values/sub-limits of the accounts receivable, inventory, and other assets (including the real properties serving as collateral for the loan). The agreement matures on February 25, 2028.
Advances under the revolving credit facility bear interest at annual rates equal to SOFR (plus a 0.11448% SOFR adjustment) for a 1 month period, as defined with a floor of 1.00% or published SOFR, plus an applicable margin ranging between 3.75% and 4.25%. The applicable margin is determined based on the revolving loan availability percentage under the revolving credit facility with margins increasing as availability decreases. We are subject to a minimum excess availability covenant that is based upon a fixed charge coverage ratio which must be above a 1.10 to 1.00 ratio. We are subject to a monthly rolling minimum EBITDA requirement if availability is under 20% of the principal amount of the loan. The credit agreement is subject to customary terms and conditions and annual administrative and unused line fees with pricing varying based on excess availability. As of December 27, 2025, the unused borrowing availability under the MidCap revolving credit agreement was $8.2 million which is subject to a $6.0 million minimum excess availability requirement. (See Note 22 Subsequent Events for information on our amended revolving credit agreement with MidCap Financial IV Trust.)
The revolving credit facility requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. GAAP) in the revolving credit facility, requires the balance on the revolving credit facility to be classified as a current liability. The “subjective acceleration clause” allows the lender to declare an event of default if there is a material adverse change in the Company's business or financial condition. Upon the occurrence of an event of default, the lender may, among other things, declare all obligations payable in full. The loan requires certain compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers or amendments for all such financial covenants.
Term Loans. Effective October 28, 2020, we entered into a $10.0 million 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 interest rate reset at 7.11% on October 26, 2025 and will reset every 5 years thereafter. The loan is secured by a first mortgage on our Atmore, Alabama and Roanoke, Alabama facilities. The loan requires certain compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers for all such financial covenants.
Effective October 29, 2020, we entered into a $15.0 million 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. The interest rate reset at 7.11% on October 29, 2025. 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 our machinery and equipment, a certificate of deposit and a second lien on our Atmore and Roanoke facilities. The loan requires certain compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers for all such financial covenants.
Notes Payable - Other. On January 14, 2019, we 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, we sold our Saraland facility, and approximately 17.12 acres of surrounding property located in Saraland, Alabama (the “Property”) to the Purchaser for a purchase price of $11.5 million. Concurrent with the sale of the Property, we and the Purchaser entered into a twenty-year lease agreement (the “Lease Agreement”), whereby we leased back the Property at an annual rental rate of $977 thousand, subject to annual rent increases of 1.25%. Under the Lease Agreement, we have 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. We recorded a liability for the amounts received, continued to depreciate the asset, and 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.
Our other financing notes have terms up to 1 year, bear interest ranging from 6.45% to 6.75% and are due in monthly installments through their maturity dates. Our other notes do not contain any financial covenants.
Finance Lease Obligations. Our finance lease obligations are due in monthly installments through their maturity dates. Our finance lease obligations are secured by the specific equipment leased. (See Note 9 to our Consolidated Financial Statements).
Stock-Based Awards
We recognize compensation expense related to share-based stock awards based on the fair value of the equity instrument over the period of vesting for the individual stock awards that were granted. At December 27, 2025, the total unrecognized compensation expense related to unvested restricted stock awards was $598 thousand with a weighted-average vesting period of 6.3 years.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements at December 27, 2025 or December 28, 2024.
Income Tax Considerations
For the year ended December 27, 2025, we increased our valuation allowances by $2.1 million related to our net deferred tax asset and specific federal and state net operating losses and federal and state credit carryforwards.
During 2026 and 2027, we do not anticipate cash outlays for income taxes to exceed $200 thousand. This is due to our tax loss carryforwards and tax credit carryforwards that will be used to partially offset taxable income. At December 27, 2025, we were in a net deferred tax liability position of $91 thousand, which was included in other long-term liabilities in our Consolidated Balance Sheets.
Discontinued Operations - Environmental Contingencies
We have reserves for environmental obligations established at four previously owned sites that were associated with our discontinued textile businesses. We have a reserve of $2.1 million for environmental liabilities at these sites as of December 27, 2025. The liability established represents our best estimate of loss and is the reasonable amount to which there is any meaningful degree of certainty given the periods of estimated remediation and the dollars applicable to such remediation for those periods. The actual timeline to remediate, and thus, the ultimate cost to complete such remediation through these remediation efforts, may differ significantly from our estimates. Pre-tax cost for environmental remediation obligations classified as discontinued operations were primarily a result of specific events requiring action and additional expense in each period.
Fair Value of Financial Instruments
At December 27, 2025, we had no assets or liabilities measured at fair value that fall under a level 3 classification in the hierarchy (those subject to significant management judgment or estimation).
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements of this Form 10-K for a discussion of new accounting pronouncements which is incorporated herein by reference.
Critical Accounting Policies
Certain estimates and assumptions are made when preparing our consolidated financial statements. Estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict. As a result, actual amounts could differ from estimates made when our financial statements are prepared.
The Securities and Exchange Commission requires management to identify its most critical accounting policies, defined as those that are both most important to the portrayal of our financial condition and operating results and the application of which requires our most difficult, subjective, and complex judgments. Although our estimates have not differed materially from our experience, such estimates pertain to inherently uncertain matters that could result in material differences in subsequent periods.
We believe application of the following accounting policies require significant judgments and estimates and represent our critical accounting policies. Other significant accounting policies are discussed in Note 1 to our Consolidated Financial Statements.
•Going concern and liquidity. Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. Under U.S. GAAP, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. If substantial doubt is raised, management must also assess whether its plans to mitigate those conditions or events will alleviate that substantial doubt.
In performing this assessment, we make significant judgments about our expected liquidity, including projected cash flows from operations, capital expenditure requirements, availability and terms of external financing, compliance with financial covenants in our debt agreements, and other factors that could affect our ability to meet obligations as they become due. These estimates involve assumptions regarding, among other things, future sales volumes and pricing, gross margin performance, timing of collections from customers, payment terms with suppliers, cost‑reduction initiatives, and access to capital markets or other funding sources.
As of December 27, 2025, we had $52.7 million of outstanding indebtedness under our senior credit facility that is classified as a current liability, unrestricted cash and cash equivalents of $3.2 million and unused availability under our senior credit facility of $8.2 million, subject to a $6.0 million minimum excess availability requirement and continued compliance with applicable financial covenants. We are required to maintain certain financial ratios and other covenants, which, if not met, could result in an event of default and an acceleration of our outstanding indebtedness. Our going concern and liquidity assessment therefore requires significant judgment about our ability to meet these covenants over the next 12 months, including the effectiveness and timing of management’s plans.
At the time of issuance of these financial statements, conditions and events, including recent operating losses, reduced availability under our credit facility, covenant violations and macroeconomic pressures, raised substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. Management has developed plans that are intended to improve liquidity and address these conditions, including profit improvement initiatives and seeking additional debt financing. Our evaluation of these plans, and our assumptions regarding their execution and timing, requires significant judgment and is subject to inherent uncertainty.
If our actual operating results, cash flows, or access to capital differ materially from our estimates, or if we are unable to execute our plans as currently contemplated, we may be unable to meet our obligations as they become due or maintain compliance with our debt covenants. In that event, we could be required to seek additional financing on less favorable terms, further reduce or delay capital expenditures and other spending, dispose of assets, or pursue other strategic alternatives. Changes in our judgments or assumptions regarding going concern and liquidity could have a material effect on our consolidated financial statements and related disclosures.
•Revenue recognition. We derive our revenues primarily from the sale of floorcovering products and processing services. Revenues are recognized when control of these products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products and services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. When we transfer control of our products to the customer prior to the related shipping and handling activities, we have adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. Incidental items that are immaterial in the context of the contract are recognized as expense. While we pay sales commissions to certain personnel, we have not capitalized these costs as costs to obtain a contract as we have elected to expense costs as incurred when the expected amortization period is one year or less. We do not have any significant financing components as payment is received at or shortly after the point of sale. We determine 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
•Variable consideration. The nature of our 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 achieving certain levels of sales activity, product returns, or price concessions.
Variable consideration is estimated at the most likely amount using a portfolio approach 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 when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are estimated based upon historical experience and known trends.
•Customer claims and product warranties. We generally provide product warranties related to manufacturing defects and specific performance standards for our products for a period of up to two years. We accrue 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 Statements of Operations and the product warranty reserve is included in accrued expenses in the Consolidated Balance Sheets. We calculate our accrual using the portfolio approach based upon historical experience and known trends. We do not provide an additional service-type warranty.
•Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out method (LIFO), which generally matches current costs of inventory sold with current revenues, for substantially all inventories. Reserves are also established to adjust inventories that are off-quality, aged or obsolete to their lower of cost or market. Additionally, rates of recoverability per unit of off-quality, aged or obsolete inventory are estimated based on historical rates of recoverability and other known conditions or circumstances that may affect future recoverability. Actual results could differ from assumptions used to value our inventory.
•Self-insured accruals. We estimate costs required to settle claims related to our self-insured medical, dental and workers' compensation plans. These estimates include costs to settle known claims, as well as incurred and unreported claims. The estimated costs of known and unreported claims are based on historical experience. Actual results could differ from assumptions used to estimate these accruals.
•Income taxes. Our effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in a future period. We evaluate the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates, including business forecasts and other projections of financial results over an extended period of time. In the event that we are not able to realize all or a portion of our deferred tax assets in the future, a valuation allowance is provided. We recognize such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. We had valuation allowances of $26.8 million at December 27, 2025 and $24.7 million at December 28, 2024. At December 27, 2025, we were in a net deferred tax liability position of $91 thousand. For further information regarding our valuation allowances, see Note 13 to the Consolidated Financial Statements.
•Loss contingencies. We routinely assess our exposure related to legal matters, environmental matters, product liabilities or any other claims against our assets that may arise in the normal course of business. If we determine 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.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in thousands)
Our earnings, cash flows and financial position are exposed to market risks relating to interest rates, among other factors. It is our policy to minimize our exposure to adverse changes in interest rates and manage interest rate risks inherent in funding our Company with debt. We address this financial exposure through a risk management program that includes maintaining a mix of fixed and floating rate debt and the occasional use of interest rate swap agreements.
At December 27, 2025, $72,528, or approximately 87% of our total debt, was subject to floating interest rates. A one-hundred basis point fluctuation in the variable interest rates applicable to this floating rate debt would have an annual pre-tax impact of approximately $725. Included in the $72,528, is the amount outstanding for term loans of $19,822. Both loans bear interest of 5% for the first five years. The interest rates reset at 7.11% for both term loans in 2025. For the 25-year term loan, the rate will continue to reset to reflect the then current 5-year treasury rate plus a margin. The 10-year term loan will not reset again. A one-hundred basis point fluctuation in the interest rates applicable to the term loans debt would have an annual pre-tax impact of approximately $198. See Note 9 for further discussion of these loans.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary financial information required by ITEM 302 of Regulation S-K is included in PART II, ITEM 5 of this report and the Financial Statements are included in a separate section of this report.
Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rules 13(a)-15(e) and 15(d)-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 27, 2025, the date of the financial statements included in this Form 10-K (the “Evaluation Date”). Based on that evaluation, our CEO and CFO concluded that, as of the Evaluation Date, that due to the existence of a material weakness in our internal control over financial reporting described below, that our disclosure controls and procedures were not effective. However, giving full consideration to the deficiency, we have concluded that that the Consolidated Financial Statements included in this annual report present fairly, in all material respects our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted principles.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures, as well as diverse interpretation of U. S. generally accepted accounting principles by accounting professionals. It is also possible that internal control over financial reporting can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. These inherent limitations are known features of the financial reporting process; therefore, while it is possible to design into the process safeguards to reduce such risk, it is not possible to eliminate all risk.
Management, including our principal executive officer and principal financial officer, has used the criteria set forth in the report entitled “Internal Control - Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) to evaluate the effectiveness of its internal control over financial reporting. Management has concluded that, during the period covered by this Report, its internal control over financial reporting was not effective as of December 27, 2025, based on those criteria.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected on a timely basis. During our assessment of internal control over financial reporting in our prior fiscal year and recurring in the current fiscal year, we identified the following material weaknesses:
•Inadequate presentation and disclosure requirements of debt - Our revolving credit facility required a reclassification to a current liability as the refinanced credit facility subsequent to year-end included a subjective acceleration clause and lockbox arrangement which required the financial statement presentation as current. We originally calculated a covenant in a method that differed from the contractual terms, which is included in the our going concern assessment. In preparing the fair value of debt disclosure, we did not formally re-evaluate our credit rating. With the refinance of the revolving credit facility, we had an observable transaction to provide supporting evidence. The current conditions and this transaction indicated a credit rating that was different than was originally used by us and resulted in a re-evaluation of our credit rating used and an adjustment to the disclosure.
•Inadequate evidence of a formal evaluation of lessor accounting - We did not retain a formal assessment of our lessor lease classification evaluation, and associated support, for the operating lease classification determinations under Topic 842 for a lease arrangement. We subsequently performed procedures that included a valuation for the net present value considerations. While the subsequent procedures did not change the lease classification determination, the change in presentation, if necessary, would have resulted in a materially different accounting result.
Remediation Efforts
We are committed to maintaining a strong internal control environment. In response to the material weaknesses described above, we will enhance our processes to evaluate and review debt transactions as they relate to the presentation and disclosure requirements of debt by designating an individual to be responsible for the review who has the expertise in these matters or will consult with outside professionals with the expertise. In addition, the designated individual will perform the necessary formal documentation as it relates to lessor accounting transactions. In order to fully document effective remediation, new transactions similar to the items above would need to occur. Such lessor transactions did not occur in the current year. We continue to evaluate and work to improve our disclosure controls and procedures and internal control over financial reporting. We plan to continue the implementation of these and other remediation efforts, such as the addition of more resources, to address the identified material weaknesses in the future.
Changes in Internal Control over Financial Reporting
Other than the remediation efforts described above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.OTHER INFORMATION
Item 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
PART III.
Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The section entitled "Information about Nominees for Director" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 is incorporated herein by reference. Information regarding the executive officers of the registrant is presented in PART I of this report.
We adopted a Code of Business Conduct and Ethics (the "Code of Ethics") which applies to our principal executive officer, principal financial officer and principal accounting officer or controller, and any persons performing similar functions. A copy of the Code of Ethics is incorporated by reference herein as Exhibit 14 to this report.
We adopted insider trading policies and procedures governing transactions in our securities that are designed to promote compliance with applicable insider trading laws, rules and regulations. A copy of the policy is incorporated by reference therein as Exhibit 19.1 to this report.
Audit Committee Financial Expert
The Board has determined that Michael L. Owens is an audit committee financial expert as defined by Item 407 (e)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended, and is independent within the meaning of the applicable Securities and Exchange Commission rules and NASDAQ standards. For a brief listing of Mr. Owens' relevant experience, please refer to the "Election of Directors" section of the Company's Proxy Statement.
Audit Committee
We have a standing audit committee. At December 27, 2025, members of our audit committee are Michael L. Owens, Chairman, William F. Blue, Jr., Charles E. Brock, and Hilda S. Murray.
Item 11.EXECUTIVE COMPENSATION
The sections entitled "Compensation Discussion and Analysis", "Executive Compensation Information" and "Director Compensation" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 are incorporated herein by reference.
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The section entitled "Principal Shareholders", as well as the beneficial ownership table (and accompanying notes), in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 are incorporated herein by reference.
Equity Compensation Plan Information as of December 27, 2025
The following table sets forth information as to our equity compensation plans as of the end of the 2025 fiscal year:
| (a) | (b) | (c) | ||||||||||||||||||
| Plan Category | Number of securities to be issued upon exercise of the outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) | |||||||||||||||||
| Equity Compensation Plans approved by security holders | 407,819 | (1) | $ | 1.69 | (2) | 748,755 | (3) | |||||||||||||
(1)Includes the options to purchase 315,000 shares of Common Stock under our Omnibus Equity Incentive Plan and 92,819 Performance Units issued under the 2016 Incentive Compensation Plan, each unit being equivalent to one share of Common Stock. Does not include shares of Common Stock issued but not vested pursuant to outstanding restricted stock awards.
(2)Includes the aggregate weighted-average of (i) the exercise price per share for outstanding options to purchase 315,000 shares of Common Stock under our Omnibus Equity Incentive Plan and (ii) the price per share of the Common Stock on the grant date for each of 92,819 Performance Units issued under the 2016 Incentive Compensation Plan (each unit equivalent to one share of Common Stock).
(3)Includes 258,517 shares remaining to be issued under the 2016 Incentive Compensation Plan 490,238 shares remaining to be issued under the Omnibus Equity Incentive Plan.
Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The sections entitled "Certain Transactions Between the Company and Directors and Officers" and "Independent Directors" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 are incorporated herein by reference.
Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
The section entitled "Audit Fees Discussion" in the Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held May 6, 2026 is incorporated herein by reference. The independent registered public accounting firm is Forvis Mazars, LLP (PCAOB Firm ID No. 686 ) located in Atlanta, Georgia.
PART IV.
Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements - The response to this portion of Item 15 is submitted as a separate section of this report.
(2) Financial Statement Schedules - The response to this portion of Item 15 is submitted as a separate section of this report.
(3) Exhibits - Please refer to the Exhibit Index which is attached hereto.
(b)Exhibits - The response to this portion of Item 15 is submitted as a separate section of this report. See Item 15(a)(3) above.
(c)Financial Statement Schedules - The response to this portion of Item 15 is submitted as a separate section of this report. See Item 15(a)(2).
Item 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: March 26, 2026 | The Dixie Group, Inc. | |||||||
| /s/ DANIEL K. FRIERSON | ||||||||
| By: Daniel K. Frierson | ||||||||
| Chairman of the Board and Chief Executive Officer | ||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Capacity | Date | ||||||||||||
| /s/ DANIEL K. FRIERSON | Chairman of the Board, Director and Chief Executive Officer | March 26, 2026 | ||||||||||||
| Daniel K. Frierson | ||||||||||||||
| /s/ ALLEN L. DANZEY | Vice President, Chief Financial Officer | March 26, 2026 | ||||||||||||
| Allen L. Danzey | ||||||||||||||
| /s/ D. KENNEDY FRIERSON, JR. | Vice President, Chief Operating Officer and Director | March 26, 2026 | ||||||||||||
| D. Kennedy Frierson, Jr. | ||||||||||||||
| /s/ WILLIAM F. BLUE, JR. | Director | March 26, 2026 | ||||||||||||
| William F. Blue, Jr. | ||||||||||||||
| /s/ CHARLES E. BROCK | Director | March 26, 2026 | ||||||||||||
| Charles E. Brock | ||||||||||||||
| /s/ HILDA S. MURRAY | Director | March 26, 2026 | ||||||||||||
| Hilda S. Murray | ||||||||||||||
| /s/ MICHAEL L. OWENS | Director | March 26, 2026 | ||||||||||||
| Michael L. Owens | ||||||||||||||
ANNUAL REPORT ON FORM 10-K
ITEM 8 AND ITEM 15(a)(1) AND ITEM 15(a)(2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 27, 2025
THE DIXIE GROUP, INC.
DALTON, GEORGIA
FORM 10-K - ITEM 8 and ITEM 15(a)(1) and (2)
THE DIXIE GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and financial statement schedules of The Dixie Group, Inc. and subsidiaries are included in Item 8 and Item 15(a)(1) and 15(c):
| Table of Contents | Page | ||||
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, or the information is otherwise shown in the financial statements or notes thereto, and therefore such schedules have been omitted.
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee
The Dixie Group, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Dixie Group, Inc. (the “Company”) as of December 27, 2025 and December 28, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the two-year period ended December 27, 2025 and the related notes and schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 27, 2025 and December 28, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 27, 2025, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company has suffered recurring losses from operations, reduced availability under its credit facility, covenant violations, and macroeconomic pressures. The Company has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the conditions and events and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Critical Audit Matter – LIFO Reserve
As disclosed in Notes 1 and 5 to the financial statements, the Company recognizes its inventory using the last-in, first-out (“LIFO”) method, which requires a reserve to adjust the historical cost carrying value of inventory to the lower of LIFO or market. As of December 27, 2025, the LIFO reserve was approximately $20,607,000. There is inherent complexity in the accounting for the LIFO reserve including complex calculations based on inventory pools, changes in those pools, and lower of cost or market adjustments.
We identified the LIFO reserve as a critical audit matter. The principal considerations for that determination included the complexity of the calculations, the judgment required for market adjustments, and the nature and extent of audit effort required to address the matter.
Our audit procedures to test the appropriateness of the LIFO Reserve, among others:
•We tested the completeness of the LIFO reserve by evaluating whether all appropriate inventory items were included in the LIFO reserve calculation and in the appropriate category. This included reconciling the inventory used to calculate the LIFO reserve to the inventory subledger.
•We independently recalculated management’s LIFO pool calculation, including pool increases or inventory liquidations.
•We tested the aggregation of the pools used to arrive at the LIFO reserve, and considered whether methodologies were consistently applied, or that changes, if any, were in accordance with U.S. GAAP.
•We selected a sample of inventory items and tested whether the lower of cost or market adjustments made by management were in accordance with U.S. GAAP.
/s/ Forvis Mazars, LLP
We have served as the Company's auditor since 2013.
March 26, 2026
THE DIXIE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
| December 27, 2025 | December 28, 2024 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Receivables, net of allowances for expected credit losses of $ | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses | |||||||||||
| TOTAL CURRENT ASSETS | |||||||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | |||||||||||
| OPERATING LEASE RIGHT-OF-USE ASSETS | |||||||||||
| RESTRICTED CASH | |||||||||||
| OTHER ASSETS | |||||||||||
| LONG-TERM ASSETS OF DISCONTINUED OPERATIONS | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Current liabilities of discontinued operations | |||||||||||
| TOTAL CURRENT LIABILITIES | |||||||||||
| LONG-TERM DEBT, NET | |||||||||||
| OPERATING LEASE LIABILITIES | |||||||||||
| OTHER LONG-TERM LIABILITIES | |||||||||||
| LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| COMMITMENTS AND CONTINGENCIES (See Note 17) | |||||||||||
| STOCKHOLDERS' EQUITY | |||||||||||
Common Stock ($ | |||||||||||
Class B Common Stock ($ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive income | |||||||||||
| TOTAL STOCKHOLDERS' EQUITY | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | |||||||||
See accompanying notes to the consolidated financial statements.
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
| Year Ended | |||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||
| NET SALES | $ | $ | |||||||||
| Cost of sales | |||||||||||
| GROSS PROFIT | |||||||||||
| Selling and administrative expenses | |||||||||||
| Other operating expense, net | |||||||||||
| Facility consolidation and severance expenses, net | |||||||||||
| OPERATING INCOME (LOSS) | ( | ||||||||||
| Interest expense | |||||||||||
| Other (income) expense, net | ( | ||||||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE TAXES | ( | ( | |||||||||
| Income tax provision (benefit) | ( | ||||||||||
| LOSS FROM CONTINUING OPERATIONS | ( | ( | |||||||||
| Loss from discontinued operations, net of tax | ( | ( | |||||||||
| NET LOSS | $ | ( | $ | ( | |||||||
| BASIC LOSS PER SHARE: | |||||||||||
| Continuing operations | $ | ( | $ | ( | |||||||
| Discontinued operations | ( | ( | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
| BASIC SHARES OUTSTANDING | |||||||||||
| DILUTED LOSS PER SHARE: | |||||||||||
| Continuing operations | $ | ( | $ | ( | |||||||
| Discontinued operations | ( | ( | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
| DILUTED SHARES OUTSTANDING | |||||||||||
| DIVIDENDS PER SHARE: | |||||||||||
| Common Stock | $ | $ | |||||||||
| Class B Common Stock | |||||||||||
See accompanying notes to the consolidated financial statements.
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
| Year Ended | |||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||
| NET LOSS | $ | ( | $ | ( | |||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | |||||||||||
| Unrecognized net actuarial gain on postretirement benefit plans | |||||||||||
| Income taxes | |||||||||||
| Unrecognized net actuarial gain on postretirement benefit plans, net | |||||||||||
| Reclassification of net actuarial gain into earnings from postretirement benefit plans (1) | ( | ( | |||||||||
| Income taxes | |||||||||||
| Reclassification of net actuarial gain into earnings from postretirement benefit plans, net | ( | ( | |||||||||
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX | ( | ||||||||||
| COMPREHENSIVE LOSS | $ | ( | $ | ( | |||||||
(1) 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 Statements of Operations.
See accompanying notes to the consolidated financial statements.
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| Year Ended | |||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Loss from continuing operations | $ | ( | $ | ( | |||||||
| Loss from discontinued operations | ( | ( | |||||||||
| Net loss | ( | ( | |||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Net gain loss on property, plant and equipment disposals | ( | ( | |||||||||
| Impairment of assets | |||||||||||
| Stock-based compensation expense | |||||||||||
| Expense for expected credit losses | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables | |||||||||||
| Inventories | |||||||||||
| Prepaid and other current assets | ( | ||||||||||
| Accounts payable and accrued expenses | ( | ||||||||||
| Other operating assets and liabilities | ( | ||||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||||||
| NET CASH USED IN OPERATING ACTIVITIES - DISCONTINUED OPERATIONS | ( | ( | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Net proceeds from sales of property, plant and equipment | |||||||||||
| Purchase of property, plant and equipment | ( | ( | |||||||||
| Joint venture capital distributions | |||||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ( | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Net borrowings (payments) on previous revolving credit facility | ( | ||||||||||
| Borrowings on current revolving credit facility | |||||||||||
| Payments on current revolving credit facility | ( | ||||||||||
| Payments on notes payable - buildings and other term loans | ( | ( | |||||||||
| Borrowings on notes payable - other | |||||||||||
| Payments on notes payable - other | ( | ( | |||||||||
| Payments on finance leases | ( | ( | |||||||||
| Change in outstanding checks in excess of cash | ( | ||||||||||
| Repurchases of Common Stock | ( | ( | |||||||||
| Payments for debt issuance costs | ( | ||||||||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ( | |||||||||
| INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | |||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | $ | |||||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid, net of (tax refunds) | |||||||||||
| Right-of-use assets obtained in exchange for new operating lease | |||||||||||
| Equipment purchased under finance leases | |||||||||||
| Deposits utilized on purchased equipment, net | |||||||||||
See accompanying notes to the consolidated financial statements.
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands, except share data)
| Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Balance at December 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
Common Stock issued - | — | ( | — | — | — | ||||||||||||||||||||||||||||||
Repurchases of Common Stock - | ( | — | — | — | ( | ||||||||||||||||||||||||||||||
Restricted stock grants issued - | ( | — | — | ||||||||||||||||||||||||||||||||
Restricted stock grants forfeited - | ( | — | — | — | |||||||||||||||||||||||||||||||
Class B converted into Common Stock- | ( | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at December 28, 2024 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
Repurchases of Common Stock - | ( | — | — | — | ( | ||||||||||||||||||||||||||||||
Restricted stock grants issued - | — | ( | — | — | |||||||||||||||||||||||||||||||
Restricted stock grants forfeited - | ( | — | — | — | |||||||||||||||||||||||||||||||
Class B converted into Common Stock - | ( | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance at December 27, 2025 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company's businesses consist principally of marketing, manufacturing and selling finished carpet, rugs, luxury vinyl flooring and engineered wood flooring in the domestic floorcovering market. Additionally, the Company provides manufacturing support to its carpet businesses through its separate processing operations.
Basis of Presentation
The Consolidated Financial Statements include the accounts of The Dixie Group, Inc. and its wholly-owned subsidiaries (the "Company") and have been prepared in accordance with U.S. GAAP on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. All intercompany balances and transactions have been eliminated in consolidation.
Unless specifically noted otherwise, footnote disclosures reflect the results of continuing operations only. The results of discontinued operations are presented in Note 20.
Going Concern
The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. Under U.S. GAAP, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. If substantial doubt is raised, management must also assess whether its plans to mitigate those conditions or events will alleviate that substantial doubt.
In performing this assessment, the Company makes significant judgments about its expected liquidity, including projected cash flows from operations, capital expenditure requirements, availability and terms of external financing, compliance with financial covenants in its debt agreements, and other factors that could affect its ability to meet obligations as they become due. These estimates involve assumptions regarding, among other things, future sales volumes and pricing, gross margin performance, timing of collections from customers, payment terms with suppliers, cost‑reduction initiatives, and access to capital markets or other funding sources.
As of December 27, 2025, the Company has $52,706 of outstanding indebtedness under its senior credit facility that is classified as a current liability, unrestricted cash and cash equivalents of $3,204 and unused availability under its senior credit facility of $8,193 , subject to a $6,000 minimum excess availability requirement and continued compliance with applicable financial covenants. The Company is required to maintain certain financial ratios and other covenants, which, if not met, could result in an event of default and an acceleration of its outstanding indebtedness. The Company's going concern and liquidity assessment therefore requires significant judgment about its ability to meet these covenants over the next twelve months, including the effectiveness and timing of management’s plans. The Company received waivers or amendments for certain financial covenant violations prior to, as of and subsequent to fiscal year-end. Compliance with future financial covenants will be dependent on operating performance.
At the time of issuance of these financial statements, conditions and events, including recent operating losses, reduced availability under its credit facility, covenant violations and macroeconomic pressures, raised substantial doubt about its ability to continue as a going concern within twelve months after the date the financial statements are issued. Management has developed plans that are intended to improve liquidity and address these conditions, including profit improvement initiatives and seeking additional debt financing. The Company's evaluation of these plans, and its assumptions regarding their execution and timing, requires significant judgment and is subject to inherent uncertainty, therefore management has concluded that these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include adjustments, if any, that may arise from the outcome of this uncertainty.
If the Company's actual operating results, cash flows, or access to capital differ materially from its estimates, or if the Company is unable to execute its plans as currently contemplated, the Company may be unable to meet its obligations as they become due or maintain compliance with its debt covenants. In that event, the Company could be required to seek additional financing on less favorable terms, further reduce or delay capital expenditures and other spending, dispose of assets, or pursue other strategic alternatives. Changes in the Company's judgments or assumptions regarding going concern and liquidity could have a material effect on its consolidated financial statements and related disclosures.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Variable Interest Entities
The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. At each reporting period, the Company assesses whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.
The Company entered into an arrangement to pool extrusion machinery whereby the Company and an independent entity, "the Entity", separately purchased machinery to concurrently produce fiber to reduce manufacturing costs. The entity purchases the raw materials, employs the staff and owns and manages the facility and the production of the fiber. The Company receives all fiber produced on its own machines and pays the entity an amount equal to the cost of raw materials and an agreed upon allocation of direct and indirect production and overhead costs of the fiber operations. The Company accounts for all amounts paid to the entity as the cost of raw material inventory.
The Company determined that the entity is a VIE and the Company's arrangement represents a variable interest in the entity. The Company has determined that the governance and operating structures of this VIE do not allow it to direct the activities that would significantly affect the Entity's economic performance. In addition, the Company does not have an obligation to absorb losses of the Entity. Therefore, the Company is not the primary beneficiary, and the results of operations and financial position of this VIE are not included in the Company's consolidated financial statements. The Company believes its maximum exposure of this unconsolidated VIE is the current carrying value of the equipment at the Entity's location. The carrying value and maximum exposure of this unconsolidated VIE was $6,630 as of December 27, 2025, and is included within property, plant and equipment, net on the Company’s consolidated balance sheets. Any additional potential losses cannot be determined.
Nasdaq Delisting Notification or Failure to Satisfy a Continued Listing Rule or Standard
Effective at the opening of business on October 3, 2024, the Company's Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, the Company was upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to remove the Company's securities from listing on Nasdaq. The delisting was effective February 21, 2025.
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material.
Fiscal Year
The Company ends its fiscal year on the last Saturday of December. All references herein to "2025" and "2024" mean the fiscal years ended December 27, 2025 and December 28, 2024 respectively. Both fiscal year 2025 and fiscal 2024 contained 52 weeks.
Discontinued Operations
Cash and Cash Equivalents
Highly liquid investments with original maturities of three months or less when purchased are reported as cash equivalents.
Restricted Cash
Restricted cash represents cash serving as collateral for letters of credit issued for the Company's self-insured workers' compensation program, a lease on one of its facilities and an utility deposit.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Market Risk
Receivables and Allowance for Expected Credit Losses
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, which management believes is sufficient to cover potential credit losses based on historical experience and periodic evaluation of the financial condition of the Company's customers. The Company's allowance for expected 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 considers recent trends and developments related to the current macroeconomic environment such as unemployment rates, interest rates and inflation 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 if additional changes in macroeconomic factors occur, additional allowances may be required.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out ("LIFO") method, which generally matches current costs of inventory sold with current revenues, for substantially all inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of cost or impaired value. Provisions for depreciation and amortization of property, plant and equipment have been computed for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets, ranging from 10 to 40 years for buildings and improvements, and 3 to 10 years for machinery and equipment. Costs to repair and maintain the Company's equipment and facilities are expensed as incurred. Such costs typically include expenditures to maintain equipment and facilities in good repair and proper working condition.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be fully recoverable. When the carrying value of the asset exceeds the value of its estimated undiscounted future cash flows, an impairment charge is recognized equal to the difference between the asset's carrying value and its fair value. Fair value is estimated using discounted cash flows, prices for similar assets or other valuation techniques.
Self-Insured Benefit Programs
The Company records liabilities to reflect an estimate of the ultimate cost of claims related to its self-insured medical and dental benefits and workers' compensation. The amounts of such liabilities are based on an analysis of the Company's historical experience for each type of claim.
Income Taxes
The Company recognizes deferred income tax assets and liabilities for the future tax consequences of the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company evaluates the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources. In the event that the Company is not able to realize all or a portion of the deferred tax assets in the future, a valuation allowance is provided. The Company recognizes such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense.
Treasury Stock
The Company classifies treasury stock as a reduction to Common Stock for the par value of such shares acquired and the difference between the par value and the price paid for each share recorded either entirely to retained earnings or to additional
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
paid-in-capital for periods in which the Company does not have retained earnings. This presentation reflects the repurchased shares as authorized but unissued as prescribed by state statute.
Revenue Recognition
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. When the Company transfers control of its products to the customer prior to the related shipping and handling activities, the Company has adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. Incidental items that are immaterial in the context of the contract are recognized as expense. While the Company pays sales commissions to certain personnel, the Company has not capitalized these costs as costs to obtain a contract as the Company has elected to expense costs as incurred when the expected amortization period is one year or less. 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
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 achieving certain levels of sales activity, product returns, or price concessions.
Variable consideration is estimated at the most likely amount using a portfolio approach 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 when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are estimated based upon historical experience and known trends.
Advertising Costs
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 statements of operations and the product warranty reserve is included in accrued expenses in the consolidated 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 (See Note 8).
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Cost of Sales
Cost of sales includes all costs related to manufacturing the Company's products, including purchasing and receiving costs, inspection costs, warehousing costs, freight costs, internal transfer costs or other costs of the Company's distribution network.
Selling and Administrative Expenses
Selling and administrative expenses include all costs, not included in cost of sales, related to the sale and marketing of the Company's products and general administration of the Company's business.
Operating Leases
The Company determines if an arrangement is an operating lease or a financing lease at inception. A lease exists if the Company obtains substantially all of the economic benefits of, and has the right to control the use of, an asset for a period of time. Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease agreement. Lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the term of the lease. Right-of-use assets may also be adjusted to reflect any prepayments made or any incentive payments received. Generally, the Company's leases do not provide a readily determinable implicit interest rate, therefore, the Company uses its incremental borrowing rate, which is based on information available at the lease commencement date, to determine the present value of lease payments.
Stock-Based Compensation
The Company recognizes compensation expense relating to stock-based payments based on the fair value of the equity or liability instrument issued. Restricted stock grants with pro-rata vesting are expensed using the straight-line method. (Terms of the Company's awards are specified in Note 15). The Company accounts for forfeitures when they actually occur.
NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
Adopted Accounting Standards
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods beginning after December 15, 2024. The Company adopted this ASU in 2025 and applied it on a prospective basis to annual financial statements. The Company did not adjust prior periods as permitted. The adoption of this ASU did not have a material impact on its financial statements and related disclosures (See Note 13).
Accounting Standards Yet to Be Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosures about certain categories of expenses (including purchases of inventory, employee compensation, depreciation and intangible asset amortization) that are included in the expense captions presented on the face of the income statement, as well as disclosures about selling expenses. This new guidance is intended to provide investors with more detailed expense information in order to better understand an entity's cost structure and forecast future cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027 on a prospective basis. Early adoption and retrospective application is permitted. The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 3 - REVENUE
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates the Company’s revenue by end-user markets:
| 2025 | 2024 | |||||||||||||
| Residential floorcovering products | $ | $ | ||||||||||||
| Other services | ||||||||||||||
| Total net sales | $ | $ | ||||||||||||
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 separately (See Note 4), the Company does not recognize any contract assets which give conditional rights to receive consideration, as the Company does not incur costs to obtain customer contracts that are recoverable. The Company may receive 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 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 continuing operations are as follows:
| 2025 | 2024 | ||||||||||
| Beginning contract liability | $ | $ | |||||||||
| Revenue recognized from contract liabilities included in the beginning balance | ( | ( | |||||||||
| Increases due to cash received, net of amounts recognized in revenue during the period | |||||||||||
| Ending contract liability | $ | $ | |||||||||
NOTE 4 - RECEIVABLES, NET
Receivables are summarized as follows:
| 2025 | 2024 | ||||||||||
| Customers, trade | $ | $ | |||||||||
| Other receivables | |||||||||||
| Gross receivables | |||||||||||
| Less: allowance for expected credit losses | |||||||||||
| Receivables, net | $ | $ | |||||||||
The activity related to the allowance for expected credit losses is as follows:
| 2025 | 2024 | ||||||||||
| Beginning balance | $ | $ | |||||||||
| Expense for expected credit losses | |||||||||||
| Less amounts written-off, net of recoveries | ( | ( | |||||||||
| Ending balance | $ | $ | |||||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 5 - INVENTORIES, NET
Inventories are summarized as follows:
| 2025 | 2024 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Supplies and other | |||||||||||
| LIFO reserve | ( | ( | |||||||||
| Inventories, net | $ | $ | |||||||||
Reduction of inventory quantities in 2025 and 2024 resulted in liquidations of LIFO inventories carried at prevailing costs established in prior years and decreased cost of sales by $144 and $494 in 2025 and 2024, respectively.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
| 2025 | 2024 | ||||||||||
| Land and improvements | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Machinery and equipment | |||||||||||
| Assets under construction | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
NOTE 7 - ACCRUED EXPENSES
Accrued expenses are summarized as follows:
| 2025 | 2024 | ||||||||||
| Compensation and benefits (1) | $ | $ | |||||||||
| Provision for customer rebates, claims and allowances | |||||||||||
| Advanced customer deposits | |||||||||||
| Outstanding checks in excess of cash | |||||||||||
| Other | |||||||||||
| Accrued expenses | $ | $ | |||||||||
(1)Includes a liability related to the Company's self-insured Workers' Compensation program. This program is collateralized by letters of credit in the aggregate amount of $3,008 . The Company has other letters of credit outstanding totaling $852 .
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 8 - PRODUCT WARRANTY RESERVES
The Company generally provides product warranties related to manufacturing defects and specific performance standards for its products. Product warranty reserves are included in accrued expenses in the Company's consolidated balance sheets. The following is a summary of the Company's product warranty activity for continuing operations:
| 2025 | 2024 | ||||||||||
| Product warranty reserve at beginning of period | $ | $ | |||||||||
| Warranty liabilities accrued | |||||||||||
| Warranty liabilities settled | ( | ( | |||||||||
| Product warranty reserve at end of period | $ | $ | |||||||||
NOTE 9 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
| 2025 | 2024 | |||||||
| Revolving credit facility - Fifth Third Bank | $ | $ | ||||||
| Revolving credit facility - MidCap Financial IV Trust | ||||||||
| Term loans | ||||||||
| Notes payable - other | ||||||||
| Finance lease obligations | ||||||||
| Deferred financing costs, net | ( | ( | ||||||
| Total debt | ||||||||
| Less: current portion of long-term debt | ||||||||
| Long-term debt | $ | $ | ||||||
Revolving Credit Facility - Fifth Third Bank
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 was secured by a first priority security interest on all accounts receivable, cash, and inventory, and provided for borrowing limited by certain percentages of values of the accounts receivable and inventory. The revolving credit facility was due to mature on October 30, 2025; however, on February 25, 2025, the Company refinanced its senior revolving credit facility with MidCap Financial IV Trust and the Company's existing revolving credit facility with Fifth Third was terminated in accordance with its terms. The Company recognized a $66 loss on the extinguishment of the Fifth Third debt which was included in other expense, net in the Company's consolidated statement of operations.
Under the Fifth Third revolving credit facility, at the Company's election, advances of the revolving credit facility bore 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 was determined based on availability under the revolving credit facility with margins increasing as availability decreased. The applicable margin could be increased by 0.50 % if the fixed charge coverage ratio was below a 1.10 to 1.00 ratio. The Company paid an unused line fee on the average amount by which the aggregate commitments exceeded 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 were 7.18 % for December 28, 2024.
The agreement was subject to customary terms and conditions and annual administrative fees with pricing varying on excess availability and a fixed charge coverage ratio. The agreement was also subject to certain compliance, affirmative, and financial covenants. The Company was only subject to the financial covenants if borrowing availability was less than 12.5 % of the lesser of the total loan availability of $75,000 or total collateral available, and remained until the availability was greater than 12.5 % for consecutive days.
Revolving Credit Facility - MidCap Financial IV Trust
On February 25, 2025, the Company entered into a new $75,000 revolving credit agreement with MidCap Financial IV Trust, as agent, and lenders from time-to-time party thereto (collectively, "MidCap"). The credit agreement is secured by a security interest on all accounts receivable, inventory, and other assets other than certain excluded assets, including a deed to secure debt lien on the Company's Calhoun and Chatsworth, Georgia facilities. The Company's borrowing capacity is based on certain
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
percentages of values/sub-limits of the accounts receivable, inventory, and other assets (including the real properties serving as collateral for the loan). The agreement matures on February 25, 2028.
Advances under the revolving credit facility bear interest at annual rates equal to SOFR (plus a 0.11448 % SOFR adjustment) for a 1 month period, as defined with a floor of 1.00 % or published SOFR, plus an applicable margin ranging between 3.75 % and 4.25 %. The applicable margin is determined based on the revolving loan availability percentage under the revolving credit facility with margins increasing as availability decreases. The Company is subject to a minimum excess availability covenant that is based upon a fixed charge coverage ratio which must be above a 1.10 to 1.00 ratio. The Company is subject to a monthly rolling minimum EBITDA requirement if availability is under 20 % of the principal amount of the loan. The credit agreement is subject to customary terms and conditions and annual administrative and unused line fees with pricing varying based on excess availability. The weighted-average interest rate on borrowings outstanding under the revolving credit facility was 8.24 % for December 27, 2025. As of December 27, 2025, the unused borrowing availability under the MidCap revolving credit agreement was $8,193 which is subject to a $6,000 minimum excess availability requirement. (See Note 22 for information on the Company's amended revolving credit agreement with MidCap.)
The revolving credit facility requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. GAAP) in the revolving credit facility, requires the balance on the revolving credit facility to be classified as a current liability. The “subjective acceleration clause” allows the lender to declare an event of default if there is a material adverse change in the Company's business or financial condition. Upon the occurrence of an event of default, the lender may, among other things, declare all obligations payable in full.
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 U.S. treasury, to be reset every 5 years at 3.5 % above 5-year U.S. treasury. The interest rate reset at 7.11 % on October 26, 2025 and will reset every 5 years thereafter. The loan is secured by a first mortgage on the Company’s Atmore, Alabama and Roanoke, Alabama facilities.
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 U.S. treasury, to be reset after 5 years at 3.5 % above 5-year U.S. treasury. The interest rate rest at 7.11 % on October 29, 2025. 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.
Debt Covenant Compliance
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 or has received waivers or amendments for all such applicable financial covenants.
Notes Payable - Other
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 of 7.07 % so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the -year lease term.
The Company's other financing notes have terms up to 1 year, bear interest ranging from 6.45 % to 6.75 % and are due in monthly installments through their maturity dates. The Company's other notes do not contain any financial covenants.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Finance Lease Obligations
The Company's financed lease obligations are due in monthly installments through their maturity dates. The Company's finance lease obligations are secured by the specific equipment leased.
Debt Maturities
| Long-Term Debt | Finance Leases (See Note 10) | Total | |||||||||||||||
| 2026 | $ | $ | $ | ||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| 2029 | |||||||||||||||||
| 2030 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| Total maturities of long-term debt | $ | $ | $ | ||||||||||||||
| Deferred financing costs, net | ( | ( | |||||||||||||||
| Total long-term debt | $ | $ | $ | ||||||||||||||
NOTE 10 - LEASES
Leases as Lessee
Balance sheet information related to right-of-use assets and liabilities is as follows:
| Balance Sheet Location | 2025 | 2024 | |||||||||||||||
| Operating Leases: | |||||||||||||||||
| Operating lease right-of-use assets | Operating lease right-of-use assets | $ | $ | ||||||||||||||
| Current portion of operating lease liabilities | Current portion of operating lease liabilities | $ | $ | ||||||||||||||
| Noncurrent portion of operating lease liabilities | Operating lease liabilities | ||||||||||||||||
| Total operating lease liabilities | $ | $ | |||||||||||||||
| Finance Leases: | |||||||||||||||||
| Finance lease right-of-use assets | $ | $ | |||||||||||||||
| Current portion of finance lease liabilities | $ | $ | |||||||||||||||
| Noncurrent portion of finance lease liabilities | |||||||||||||||||
| Total financing lease liabilities | $ | $ | |||||||||||||||
Lease cost recognized in the consolidated financial statements is summarized as follows:
| 2025 | 2024 | ||||||||||||||||
| Operating lease cost | $ | $ | |||||||||||||||
| Variable lease cost | |||||||||||||||||
| Total lease cost | $ | $ | |||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of lease assets | $ | $ | |||||||||||||||
| Interest on lease liabilities | |||||||||||||||||
| Total finance lease costs | $ | $ | |||||||||||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Other supplemental information related to leases is summarized as follows:
| 2025 | 2024 | |||||||||||||
| Weighted average remaining lease term (in years): | ||||||||||||||
| Operating leases | ||||||||||||||
| Finance leases | ||||||||||||||
| Weighted average discount rate: | ||||||||||||||
| Operating leases | % | % | ||||||||||||
| Finance leases | % | % | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash flows from operating leases | $ | $ | ||||||||||||
| Operating cash flows from finance leases | ||||||||||||||
| Financing cash flows from finance leases | ||||||||||||||
The following table summarizes the Company's undiscounted future minimum lease payments under non-cancellable contractual obligations for operating and financing lease liabilities as of year end:
| Fiscal Year | Operating Leases | Finance Leases | |||||||||
| 2026 | $ | $ | |||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| 2030 | |||||||||||
| Thereafter | |||||||||||
| Total future minimum lease payments (undiscounted) | |||||||||||
| Less: Present value discount | ( | ( | |||||||||
| Total lease liability | $ | $ | |||||||||
Leases as Lessor
The Company leases or subleases to third parties certain excess space in its facilities, 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 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 which is included in property, plant and equipment, net on the Company's consolidated balance sheets. The leases do not have any residual value guarantees. The Company has elected the practical 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 or options to purchase.
Lease income and sublease income related to fixed lease payments is recognized in other operating expense, net in the in the consolidated statements of operations because they are not ordinary activities of the Company and is summarized as follows:
| 2025 | 2024 | ||||||||||
| Operating lease income | $ | $ | |||||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
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 2025:
| Fiscal Year | Gross Lease Payments | Payments to Head Lessor | Net Lease Payments | ||||||||
| 2026 | $ | $ | $ | ||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| 2030 | |||||||||||
| Thereafter | |||||||||||
| Total | $ | $ | $ | ||||||||
NOTE 11 - 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:
| 2025 | 2024 | ||||||||||||||||||||||
| Carrying | Fair | Carrying | Fair | ||||||||||||||||||||
| Amount | Value | Amount | Value | ||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Restricted cash | |||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Long-term debt, including current portion | |||||||||||||||||||||||
| Finance leases, including current portion | |||||||||||||||||||||||
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 and restricted cash approximate their carrying amounts due to the short-term nature of the financial instruments.
NOTE 12 - EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
The Company sponsors a 401(k) defined contribution plan that covers a significant portion, or approximately 98 % of the Company's 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 $657 in 2025 and $335 in 2024.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Additionally, the Company sponsors a 401(k) defined contribution plan that covers those associates at one facility who are under a collective-bargaining agreement, or approximately 2 % of the Company's 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 $5 in 2025 and $5 in 2024.
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 $16,350 at December 27, 2025 and $16,411 at December 28, 2024 and are included in other long-term liabilities in the Company's Consolidated 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 $16,225 at December 27, 2025 and $16,537 at December 28, 2024 and is included in other assets in the Company's Consolidated 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. These union-represented employees represented approximately 2 % of the Company's total employees. The risks of participating in multi-employer plans are different from single-employer plans. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company's participation in the multi-employer pension plan for 2025 is provided in the table below. The "EIN/Pension Plan Number" column provides the Employee Identification Number (EIN) and the three digit plan number. The most recent Pension Protection Act (PPA) zone status available in 2025 and 2024 is for the plan's year-end at 2024 and 2023, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The "FIP/RP Status Pending/Implemented" column indicates a plan for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date of the collective-bargaining agreement to which the plan is subject.
| Pension Fund | EIN/Pension Plan Number | Pension Protection Act Zone Status | FIP/RP Status Pending/Implemented (1) | Contributions (2) | Surcharge Imposed (1) | Expiration Date of Collective-Bargaining Agreement | |||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2023 | |||||||||||||||||||||||||
| The Pension Plan of the National Retirement Fund | 13-6130178 - 001 | Red | Red | Implemented | $ | $ | $ | Yes | 6/6/2026 | ||||||||||||||||||||
(1) The collective-bargaining agreement requires the Company to contribute to the plan at the rate of $0.47 per compensated hour for each covered employee. The Company will make additional contributions, as mandated by law, in accordance with the fund's 2010 Rehabilitation Plan which required a surcharge equal to $0.03 per hour (from $0.47 to $0.50 ) effective June 1, 2014 to May 31, 2015, a surcharge equal to $0.03 per hour (from $0.50 to $0.53 ) effective June 1, 2015 to May 31, 2016, a surcharge equal to $0.02 per hour (from $0.53 to $0.55 ) effective June 1, 2016 to May 31, 2017, a surcharge equal to $0.03 per hour (from $0.55 to $0.58 ) effective June 1, 2017 to May 31, 2018, a surcharge equal to $0.02 per hour (from $0.58 to $0.60 ) effective June 1, 2018 to May 31, 2019, a surcharge equal to $0.03 per hour (from $0.60 to $0.63 ) effective June 1, 2019 to May 31, 2020, a surcharge equal to $0.03 per hour (from $0.63 to $0.66 ) effective June 1, 2020 to May 31, 2021, a surcharge equal to $0.03 per hour (from $0.66 to $0.69 ) effective June 1, 2021 to May 31, 2022, a surcharge equal to $0.03 per hour (from $0.69 to $0.72 ) effective June 1, 2022 to May 31, 2023, a surcharge equal to $0.03 per hour (from $0.72 to $0.75 ) effective June 1, 2023 to May 31, 2024 a surcharge equal to $0.03 per hour (from $0.75 to $0.78 ) effective June 1, 2024 to May 31, 2025 and a surcharge equal to $0.04 per hour (from $0.78 to $0.82 effective June 1, 2025 to May 31, 2026. Based upon current employment and benefit levels, the Company's contributions to the multi-employer pension plan are expected to be approximately $27 for 2026.
(2) The Company's contributions to the plan do not represent more than 5% of the total contributions to the plan for the most recent plan year available.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Postretirement Plans
The Company sponsors a postretirement benefit plan that provides life insurance to a limited number of associates upon retirement as part of a collective bargaining agreement.
Information about the benefit obligation and funded status of the Company's postretirement benefit plan is summarized as follows:
| 2025 | 2024 | ||||||||||
| Change in benefit obligation: | |||||||||||
| Benefit obligation at beginning of year | $ | $ | |||||||||
| Service cost | |||||||||||
| Interest cost | |||||||||||
| Actuarial gain | ( | ( | |||||||||
| Benefits paid | ( | ( | |||||||||
| Benefit obligation at end of year | |||||||||||
| Change in plan assets: | |||||||||||
| Fair value of plan assets at beginning of year | |||||||||||
| Employer contributions | |||||||||||
| Benefits paid | ( | ( | |||||||||
| Fair value of plan assets at end of year | |||||||||||
| Unfunded amount | $ | ( | $ | ( | |||||||
The balance sheet classification of the Company's liability for the postretirement benefit plan is included in discontinued operations and is summarized as follows:
| 2025 | 2024 | ||||||||||
| Current liabilities of discontinued operations | $ | $ | |||||||||
| Long-term liabilities of discontinued operations | |||||||||||
| Total liability | $ | $ | |||||||||
Benefits expected to be paid on behalf of associates for the postretirement benefit plan during the period 2026 through 2035 are summarized as follows:
| Years | Postretirement Plan | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031-35 | |||||
Assumptions used to determine the benefit obligation of the Company's postretirement benefit plan are summarized as follows:
| 2025 | 2024 | ||||||||||
| Weighted-average assumptions as of year-end: | |||||||||||
| Discount rate (benefit obligation) | % | % | |||||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Components of net periodic benefit cost (credit) for the postretirement plan are summarized as follows:
| 2025 | 2024 | ||||||||||
| Service cost | $ | $ | |||||||||
| Interest cost | |||||||||||
| ( | ( | ||||||||||
| Net periodic benefit credit | $ | ( | $ | ( | |||||||
Pre-tax amounts included in accumulated other comprehensive income for the Company's postretirement benefit plan at 2025 are summarized as follows:
| Postretirement Benefit Plan | |||||||||||
| Balance at 2025 | 2026 Expected Amortization | ||||||||||
| Unrecognized actuarial gains | $ | $ | |||||||||
| Totals | $ | $ | |||||||||
NOTE 13 - INCOME TAXES
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change was effective for annual periods beginning after December 15, 2024. The Company adopted this ASU in 2025 and applied it on a prospective basis to annual financial statements. The Company did not adjust prior periods as permitted.
The provision (benefit) for income taxes on income (loss) from continuing operations consists of the following:
| 2025 | 2024 | ||||||||||
| Current | |||||||||||
| Federal | $ | $ | ( | ||||||||
| State | |||||||||||
| Total current | ( | ||||||||||
| Deferred | |||||||||||
| Federal | |||||||||||
| State | |||||||||||
| Total deferred | |||||||||||
| Income tax provision (benefit) | $ | $ | ( | ||||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
The reconciliation of the tax provision (benefit) at the U.S. federal statutory rate to income tax expense (benefit) is presented in the following table.
| 2025 | 2024 | ||||||||||||||||
| U.S. federal statutory tax rate | $ | ( | % | $ | ( | % | |||||||||||
State and local income tax, net of federal income tax effect (1) | ( | % | ( | % | |||||||||||||
| Tax Credits | |||||||||||||||||
| Federal tax credits | ( | % | ( | % | |||||||||||||
| State tax credits | % | ( | % | ||||||||||||||
| Change in valuation allowance | ( | % | ( | % | |||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||
| Nondeductible meals and entertainment | ( | % | ( | % | |||||||||||||
| Executive compensation limitation | % | ( | % | ||||||||||||||
| Stock-based compensation | ( | % | ( | % | |||||||||||||
| Changes in unrecognized tax benefits | ( | % | ( | % | |||||||||||||
| Other items | ( | % | ( | % | |||||||||||||
| Income tax provision (benefit) | $ | ( | % | $ | ( | % | |||||||||||
(1) State taxes in Oregon and Texas comprised the majority (greater than 50%) of the tax effect in this category in 2025.
The Company has a full valuation allowance against its deferred tax assets. The Company intends to maintain this position until there is sufficient evidence to support the reversal of all or some portion of these allowances. The Company also has certain assets with indefinite lives for which the basis is different for book and tax. In accordance with ASC 740-10-30-18, the deferred tax liability related to these intangible assets cannot be used to offset deferred tax assets when determining the amount of the valuation allowance for deferred tax assets which are not more-likely-than-not to be realized. The result is that the Company is in a net deferred tax liability position of $91
Due to its full valuation allowance against its deferred tax balances, the Company is only able to recognize refundable credits and a small amount of federal and state taxes in the tax provision (benefit) for 2025 and 2024.
Significant components of the Company's deferred tax assets and liabilities are as follows:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Inventories | $ | $ | |||||||||
| Retirement benefits | |||||||||||
| State net operating losses | |||||||||||
| Federal net operating losses | |||||||||||
| Federal tax credit carryforwards | |||||||||||
| Allowances for bad debts, claims and discounts | |||||||||||
| Other | |||||||||||
| Total deferred tax assets | |||||||||||
| Valuation allowance | ( | ( | |||||||||
| Net deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | |||||||||||
| Total deferred tax liabilities | |||||||||||
| Net deferred tax liability | $ | ( | $ | ( | |||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
At December 27, 2025, the Company had approximately $32,299 of federal net operating loss carryforwards and approximately $65,185 of state net operating loss carryforwards available from both continuing and discontinued operations. In addition, $4,958 of federal tax credit carryforwards were available to the Company. The federal tax credit carryforwards will expire between 2030 and 2045. The federal net operating loss carryforwards have no expiration date. The state net operating loss carryforwards will expire between 2025 and 2045. A valuation allowance is recorded to reflect the estimated amount of deferred tax assets attributable to continuing operations that are estimated not to be realizable based on the available evidence. At December 27, 2025, the Company is in a net deferred tax liability position of $91 which is included in other long-term liabilities in the Company's Consolidated Balance Sheets.
Beginning in 2022, the Tax Cuts and Jobs Act (the "TCJA") amended Section 174 to eliminate current year deductibility of research and experimentation ("R&E") expenditures and software development costs (collectively, "R&E expenditures") and instead requires taxpayers to charge their R&E expenditures to a capital account amortized over 5 years. With the passage of the One Big Beautiful Bill Act signed into law on July 4, 2025, taxpayers have the option to deduct previously capitalized domestic research costs in the first tax year after December 31, 2024 or take the deduction over the first two tax years beginning after December 31, 2024. Total unamortized cost at December 28, 2024 were $9,085 . The Company has tentatively chosen to deduct the expenses over two years starting in 2025.
Tax Uncertainties
The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits, if recognized, would affect the Company's effective tax rate. There were no
The following is a summary of the change in the Company's unrecognized tax benefits:
| 2025 | 2024 | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Additions based on tax positions taken during a current period | |||||||||||
| Balance at end of year | $ | $ | |||||||||
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 2021 remain open to examination for U.S. federal income taxes. The majority of state jurisdictions remain open for tax years subsequent to 2021. A few state jurisdictions remain open to examination for tax years subsequent to 2020.
NOTE 14 - COMMON STOCK AND EARNINGS (LOSS) PER SHARE
Common & Preferred Stock
The Company's charter authorizes 80,000,000 shares of Common Stock with a $3 par value per share and 16,000,000 shares of Class B Common Stock with a $3 par value per share. Holders of Class B Common Stock have the right to twenty votes per share on matters that are submitted to Shareholders for approval and to dividends in an amount not greater than dividends declared and paid on Common Stock. Class B Common Stock is restricted as to transferability and may be converted into Common Stock on a one share for one share basis. The Company's charter also authorizes 200,000,000 shares of Class C Common Stock, $3 par value per share, and 16,000,000 shares of Preferred Stock. No shares of Class C Common Stock or Preferred Stock have been issued.
Repurchases of Common Stock
On May 1, 2024, the Company's Board of Directors approved the repurchase of up to $2,800 of the Company's Common Stock. The repurchases were made pursuant to that authorization, and under a plan restructured to mee the requirements of Rule 10b-5-1 of the Securities and Exchange Act ("Plan"). The Company repurchased 676,071 shares under the Plan at a cost of $549 in 2024. The Plan was terminated on August 22, 2024. In addition, during fiscal 2025 and 2024, 63,192 and 56,817 shares were withheld from employees in lieu of cash payments for withholding taxes due for a total amount of $27 and $35 , respectively, pursuant to the terms of the applicable incentive plans.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
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 per share. The Company calculates basic and diluted earnings per common share using the two-class method. The accounting guidance requires disclosure of EPS 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.
The following table sets forth the computation of basic and diluted earnings (loss) per share from continuing operations:
| 2025 | 2024 | ||||||||||
| Basic earnings (loss) per share: | |||||||||||
| Loss from continuing operations | $ | ( | $ | ( | |||||||
| Less: Allocation of earnings to participating securities | |||||||||||
| Loss from continuing operations available to common shareholders - basic | $ | ( | $ | ( | |||||||
| Basic weighted-average shares outstanding (1) | |||||||||||
| Basic earnings (loss) per share - continuing operations | $ | ( | $ | ( | |||||||
| Diluted earnings (loss) per share: | |||||||||||
| Loss from continuing operations available to common shareholders - basic | $ | ( | $ | ( | |||||||
| Add: Undistributed earnings reallocated to unvested shareholders | |||||||||||
| Loss from continuing operations available to common shareholders - basic | $ | ( | $ | ( | |||||||
| Basic weighted-average shares outstanding (1) | |||||||||||
| Effect of dilutive securities: | |||||||||||
| Stock options (2) | |||||||||||
| Directors' stock performance units (2) | |||||||||||
| Diluted weighted-average shares outstanding (1)(2) | |||||||||||
| Diluted earnings (loss) per share - continuing operations | $ | ( | $ | ( | |||||||
(1)Includes Common and Class B Common shares, excluding 637 and 880 unvested participating securities, in thousands, for 2025 and 2024, respectively.
(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. Aggregate shares, in thousands, excluded were 408 in 2025 and 474 in 2024.
NOTE 15 - STOCK PLANS AND STOCK 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 Statements of Operations. The Company's stock compensation expense was $240 in 2025 and $494 in 2024.
Omnibus Equity Incentive Plan
On May 4, 2022, the Company's shareholders' approved and adopted the Company's Omnibus Equity Incentive Plan (the "Omnibus Equity Incentive Plan" or the "2022 Plan") which provides for the issuance of a maximum of 1,300,000 shares of Common Stock and/or Class B Common Stock for the grant of options, and/or other stock-based or stock-denominated awards to employees, officers, directors and agents of the Company and its participating subsidiaries. There are 490,238 shares remaining under the 2022 Plan.
2016 Incentive Compensation Plan
On May 3, 2016, the Company's shareholders' approved and adopted the Company's 2016 Incentive Compensation Plan (the "2016 Incentive Compensation Plan") which provided for the issuance of a maximum of 800,000 shares of Common Stock and/or Class B Common Stock for the grant of options, and/or other stock-based or stock-denominated awards to employees, officers, directors, and agents of the Company and its participating subsidiaries. The 2016 Incentive Compensation Plan and the
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
allocation of shares thereunder superseded and replaced The Dixie Group, Inc. Stock Awards Plan, as amended (the "2006 Plan") and the allocation of shares thereunder. Awards previously granted under the 2006 Plan continue to be governed by the terms of that plan and are not affected by its termination. On May 6, 2020, the board approved an amendment of the Company's 2016 Incentive Compensation Plan to increase the original number of shares by an additional 500,000 . There are 258,517 shares remaining under the 2016 Incentive Plan due to forfeiture or cancellation of unvested awards outstanding under that plan.
Restricted Stock Awards
Pursuant to the Company's Omnibus Equity Incentive Plan, the Company's practice has been to adopt an annual incentive plan which provides for the grant of restricted stock awards denominated as Long-Term Incentive Stock Awards and Career Share awards. Under the plan adopted for 2023, each executive officer has the opportunity to earn a Primary Long-Term Incentive Award of restricted stock and separately receive an award of restricted stock denominated as “Career Shares.” The number of shares issued, if any, is based on the market price of the Company’s Common Stock at the time of grant of the award, subject to a $5.00 per share minimum value. Primary Long-Term Incentive Awards vest over three years . For participants over age 60 , Career Shares awards fully vest when the participant becomes (i) qualified to retire from the Company and (ii) has retained such shares two years following the grant date. For the participants under age 60 , Career Shares vest ratably over five years beginning on the participant's 61st birthday.
Restricted stock activity for the two years ended are summarized as follows:
| Number of Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
| Outstanding at December 30, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Outstanding at December 28, 2024 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Outstanding at December 27, 2025 | $ | ||||||||||
As of December 27, 2025, unrecognized compensation cost related to unvested restricted stock was $598 . That cost is expected to be recognized over a weighted-average period of 6.3 years. The total fair value of shares vested was approximately $107 and $147 during 2025 and 2024, respectively.
Stock Performance Units
Prior to 2021, the Company's non-employee directors received an annual retainer of $18 in cash and $18 in value of Stock Performance Units (subject to a $5.00 minimum per unit). If market value at the date of the grants was above $5.00 per share; there was no reduction in the number of units issued. However, if the market value at the date of the grants was below $5.00 , units would be reduced to reflect the $5.00 per share minimum. Upon retirement, the Company will issue the number of shares of Common Stock equivalent to the number of Stock Performance Units held by non-employee directors at that time. As of December 27, 2025, there were 92,819 Stock Performance Units were outstanding under this plan. As of December 27, 2025, there was no unrecognized compensation cost related to Stock Performance Units.
Stock Options
Options granted under the Company's Omnibus Equity Incentive Plan were exercisable for periods determined at the time the awards are granted. Effective 2009, the Company established a $5.00 minimum price for calculating the number of options to be granted.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Option activity for the two years ended is summarized as follows:
| Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life (in years) | Weighted-Average Fair Value of Options Granted During the Year | ||||||||||||||||||||
| Outstanding at December 30, 2023 | $ | $ | — | ||||||||||||||||||||
| Granted | — | ||||||||||||||||||||||
| Expired | ( | — | — | ||||||||||||||||||||
| Outstanding at December 28, 2024 | — | ||||||||||||||||||||||
| Granted | — | ||||||||||||||||||||||
| Forfeited | ( | — | — | ||||||||||||||||||||
| Outstanding at December 27, 2025 | $ | $ | — | ||||||||||||||||||||
| Options exercisable at December 27, 2025 | $ | — | $ | — | |||||||||||||||||||
At December 27, 2025, there was no intrinsic value of outstanding stock options and no intrinsic value of exercisable stock options. At December 27, 2025, there was no unrecognized compensation expense related to unvested stock options.
NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME
Components of accumulated other comprehensive income, net of tax, are as follows:
| Post-Retirement Liabilities | Total | |||||||||||||
| Balance at December 30, 2023 | $ | $ | ||||||||||||
Unrecognized net actuarial gain on postretirement benefit plans, net of tax of $ | ||||||||||||||
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $ | ( | ( | ||||||||||||
| Balance at December 28, 2024 | $ | $ | ||||||||||||
Unrecognized net actuarial gain on postretirement benefit plans, net of tax of $ | ||||||||||||||
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $ | ( | ( | ||||||||||||
| Balance at December 27, 2025 | $ | $ | ||||||||||||
NOTE 17 - COMMITMENTS AND CONTINGENCIES
Commitments
The Company had purchase commitments of $48 at December 27, 2025, primarily related to computer software. The Company enters into fixed-price contracts with suppliers to purchase natural gas to support certain manufacturing processes. The Company had contract purchases of $717 in 2025 and $743 in 2024. At December 27, 2025, the Company has commitments to purchase natural gas of $179 for 2026.
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. There are no pending or threatened legal matters for which a reasonably estimated range of losses can be determined except as described below, and accordingly, the Company has not identified any such legal matters that could have a material adverse effect on its consolidated results of operations, financial position or cash flows.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Legal Proceedings
As previously disclosed, the Company is currently defending five lawsuits based generally on alleged damages related to historical use of certain products alleged to have contained PFAS chemicals in its manufacturing processes. During the fourth quarter, the Company engaged in settlement discussions with the plaintiffs in four of these pending claims. These pending matters are those styled: Moss Land Company, LLC, et al. v. City of Calhoun, et al., in the Superior Court of Gordon County, Georgia, Case No. 24CV73929; The City of Calhoun, Georgia v. Daikin America, Inc., et al., in the Superior County of Gordon County, Georgia, Case No. 24CV73929; William Hartwell Brooks v. City of Calhoun, Georgia, et al., in the Superior Court of Gordon County, Georgia, Case No. 24CV74289; and James Haley Stephens v. 3M Company, et al., in the Superior Court of Gordon County, Georgia, Case No. 25CV75072. . As a result of those discussions, the Company has reached a memorandum of understanding to settle the Moss claims subject to certain conditions and negotiation of a final settlement agreement with the plaintiffs and have settled all claims with respect to The City of Calhoun in such matters. Accordingly, the Company has estimated and recorded a liability for such anticipated settlement amounts and payments. That amount is deemed to be immaterial due to the anticipated terms of the settlement agreements. No final settlement agreement has been entered into with respect to the Brooks and Stephens matters and discussions concerning the terms of those final settlement agreements are ongoing.
Additionally, the Company has obtained an agreement in principle from the Plaintiffs in the pending Chatsworth matter styled, The City of Chatsworth, Georgia v. 3M Company, et al., in the Superior Court of Murray County, Georgia, Case No. 25-C10245 to dismiss without prejudice that lawsuit and the claims against us asserted therein.
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 expense, net is summarized as follows:
| 2025 | 2024 | ||||||||||
| Other operating expense, net: | |||||||||||
| Lease income | $ | ( | $ | ( | |||||||
| Lease expense | |||||||||||
| Insurance proceeds | ( | ||||||||||
| Net gain on property, plant and equipment disposals | ( | ( | |||||||||
| Loss on currency exchanges | |||||||||||
| Retirement expenses | |||||||||||
| Miscellaneous (income) expense | ( | ||||||||||
| Other operating expense, net | $ | $ | |||||||||
Beginning in fiscal 2024, the Company began to allocate direct expenses associated with the leases to lease expense in other operating expense, net. Miscellaneous (income) expense includes estimated losses related to certain pending litigation matters.
Other (income) expense, net is summarized as follows:
| 2025 | 2024 | ||||||||||
| Other (income) expense, net: | |||||||||||
| Loss on extinguishment of debt | $ | $ | |||||||||
| Miscellaneous income | ( | ( | |||||||||
| Other (income) expense, net | $ | $ | ( | ||||||||
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
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 will consolidate its East Coast tufting operations into one plant in North Georgia and relocate the distribution of luxury vinyl flooring from its Saraland, Alabama facility to its Atmore, Alabama facility. Costs for the plan will include machinery and equipment relocation, inventory relocation, staff reductions and unabsorbed fixed costs during conversion of the Atmore facility. Costs related to the facility consolidation plan is summarized as follows:
| As of December 27, 2025 | |||||||||||||||||||||||||||||||||||
| Accrued Balance at December 28, 2024 | 2025 Expenses (1) | 2025 Cash Payments | Accrued Balance at December 27, 2025 | Total Costs Incurred to Date | Total Expected Costs | ||||||||||||||||||||||||||||||
| Consolidation of East Coast Manufacturing Plan | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Asset Impairments/Non-cash items | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Accrued Balance at December 30, 2023 | 2024 Expenses (1) | 2024 Cash Payments | Accrued Balance at December 28, 2024 | ||||||||||||||||||||||||||||||||
| Consolidation of East Coast Manufacturing Plan | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Asset Impairments/Non-cash items | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
(1)Costs incurred under these plans are classified as "" in the Company's Consolidated Statements of Operations.
NOTE 20 - DISCONTINUED OPERATIONS
The Company has either sold or discontinued certain operations that are accounted for as "Discontinued Operations" under applicable accounting guidance. Discontinued operations are summarized as follows:
| 2025 | 2024 | ||||||||||
| Workers' compensation costs from former textile operations | $ | ( | $ | ( | |||||||
| Environmental remediation costs from former textile operations | |||||||||||
| Commercial business operations | ( | ( | |||||||||
| Loss from discontinued operations, before taxes | $ | ( | $ | ( | |||||||
| Income tax benefit | |||||||||||
| Loss from discontinued operations, net of tax | $ | ( | $ | ( | |||||||
Workers' compensation costs from former textile operations
Undiscounted reserves are maintained for the self-insured workers' compensation obligations related to the Company's former textile operations. These reserves are administered by a third-party workers' compensation service provider under the supervision of Company personnel. Such reserves are reassessed on a quarterly basis. Pre-tax cost incurred for workers' compensation as a component of discontinued operations primarily represents a change in estimate for each period from unanticipated medical costs associated with the Company's obligations.
Environmental remediation costs from former textile operations
Reserves for environmental remediation obligations are established on an undiscounted basis. The Company has an accrual for environmental remediation obligations related to discontinued operations of $2,120 as of December 27, 2025 and $2,174 as of December 28, 2024. The liability established represents the Company's best estimate of possible loss and is the reasonable amount to which there is any meaningful degree of certainty given the periods of estimated remediation and the dollars applicable to such remediation for those periods. The actual timeline to remediate, and thus, the ultimate cost to complete such remediation through these remediation efforts, may differ significantly from the Company's estimates. Pre-tax cost for
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
environmental remediation obligations classified as were primarily a result of specific events requiring action and additional expense in each period.
Commercial business operations
In accordance with the Asset Purchase Agreement dated September 13, 2021, the Company sold assets that include certain inventory, certain items of machinery and equipment used exclusively in the Commercial Business, and related intellectual property. Additionally, the Company agreed not to compete with the specified commercial business and the Atlas|Masland markets for a period of five years following September 13, 2021. The agreement allowed for the Company to sell the commercial inventory retained by the company after the divestiture.
The Company reclassified the following assets and liabilities for discontinued operations in the accompanying Consolidated Balance Sheets:
| 2025 | 2024 | ||||||||||
| Long Term Assets of Discontinued Operations: | |||||||||||
| Other assets | $ | $ | |||||||||
| Long Term Assets Held for Discontinued Operations | $ | $ | |||||||||
| Current Liabilities of Discontinued Operations: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Current Liabilities Held for Discontinued Operations | $ | $ | |||||||||
| Long Term Liabilities of Discontinued Operations: | |||||||||||
| Other long term liabilities | $ | $ | |||||||||
| Long Term Liabilities Held for Discontinued Operations | $ | $ | |||||||||
For the twelve months ended December 27, 2025 and December 28, 2024, the Company reclassified the following operations of the Commercial business included in discontinued operations in the accompanying Consolidated Statements of Operations:
| 2025 | 2024 | ||||||||||
| Net sales | $ | $ | |||||||||
| Cost of sales | |||||||||||
| Gross profit (loss) | ( | ( | |||||||||
| Selling and administrative expenses | ( | ||||||||||
| Other operating expense, net | |||||||||||
| Loss from discontinued Commercial business before taxes | $ | ( | $ | ( | |||||||
NOTE 21 - SEGMENT REPORTING
Based on applicable accounting standards, the Company has determined that it has one reportable segment, Floorcovering. The Floorcovering segment derives revenues from customers through the sale of residential floorcovering products which include broadloom carpet, rugs, luxury vinyl flooring and engineered hardwood. These products are sold into the designer, retailer, mass merchant and builder markets. The Company derives revenues primarily in the United States and Canada and manages the business activities on a consolidated basis. No customer accounted for more than 10% of net sales in 2025 or 2024, nor did the Company make a significant amount of sales to foreign countries outside of Canada during 2025 or 2024.
The accounting policies of the Floorcovering segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker ("CODM"), which is the Company's Chief Executive Officer, assesses performance of the Floorcovering segment and decides how to allocate resources based on segment operating income (loss). The CODM uses segment operating income (loss) to monitor budget versus actual results and is used in assessing the performance of the segment. The measure of segment assets is reported on the balance sheet as total assets.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
The following table outlines information about the reported segment including net sales, significant segment expenses, and segment operating income (loss) for fiscal years 2025 and 2024.
| Floorcovering | |||||||||||
| 2025 | 2024 | ||||||||||
| Net sales | $ | $ | |||||||||
| Less: significant segment expenses (1) | |||||||||||
| Cost of sales | |||||||||||
| Selling expenses | |||||||||||
| Administrative expenses | |||||||||||
| Segment operating income (loss) | ( | ||||||||||
| Reconciliation of segment operating income (loss) to operating income (loss) | |||||||||||
| Other operating expense, net | |||||||||||
| Facility consolidation and severance expenses, net | |||||||||||
| Operating income (loss) | $ | $ | ( | ||||||||
(1)Significant segment expense categories and amounts align with information that is regularly provided to the CODM, included in the measure of segment profit, and considered to be significant. Amounts include the allocation of corporate overhead.
Geographical Disclosures
| 2025 | 2024 | ||||||||||
| Geographic net sales: | |||||||||||
| United States | $ | $ | |||||||||
| Canada | |||||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
Long-lived assets: (1) | |||||||||||
| United States | $ | $ | |||||||||
| Other | |||||||||||
| Total | $ | $ | |||||||||
NOTE 22 - SUBSEQUENT EVENT
On March 12, 2026, the Company granted 247,458 shares of restricted stock to certain key employees of the Company. The grant-date fair value of the awards was $105 , or $0.425 per share, and will be recognized as stock compensation expense over a weighted-average period of 5.7 years from the date the awards were granted. Each award is subject to a continued service condition. The fair value of each share of restricted stock awarded was equal to the market value of a share of the Company's Common Stock on the grant date.
On March 24, 2026, the Company entered into its First Amendment to its Senior Secured Revolving Credit Facility (the “Amendment”). The Amendment, among other things, amends the Defined Periods for a certain financial covenant and amends availability requirements and provides for the payment of an amendment fee.
THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Under the Amendment, the lenders amended the springing minimum trailing twelve-month EBITDA covenant such that the covenant will not be tested for the Defined Periods ending August 30, 2025, November 1, 2025, November 29, 2025, December 27, 2025, January 31, 2026 and February 28, 2026. Accordingly, during these Defined Periods, the springing EBITDA test is not applicable. The Amendment does not otherwise change the minimum trailing twelve‑fiscal‑month EBITDA requirement of $8,969 for each Defined Period ending after February 28, 2026.
The Amendment also adds a new minimum Availability requirement that applies at all times, including when the Company is not in a “Minimum Excess Availability Period.” Prior to the real estate financing trigger date (as defined in the Credit Agreement), the Company is required to maintain Availability of at least $3,000 . On and after the real estate financing trigger date, the Company is required to maintain Availability of at least 6.25 % of the revolving commitment.
During any Minimum Excess Availability Period (as defined in the Credit Agreement), the existing higher Availability thresholds continue to apply and are unchanged by the Amendment. In such periods, the Company must maintain Availability of at least the greater of (i) $6,000 and (ii) 12.5 % of the revolving commitment.
In addition, the Amendment increases the minimum Fixed Charge Coverage Ratio that applies in connection with the Availability‑based covenant regime from 1.10 to 1.00 to 1.25 to 1.00, effective as of the Amendment date.
Item 15(a)(2)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE DIXIE GROUP, INC.
(dollars in thousands)
| Description | Balance at Beginning of Year | Additions - Charged to Costs and Expenses | Additions - Charged to Other Account - Describe | Deductions - Describe | Balance at End of Year | |||||||||||||||||||||||||||
| Year ended December 27, 2025: | ||||||||||||||||||||||||||||||||
| Reserves classified as liabilities: | ||||||||||||||||||||||||||||||||
| Provision for claims, allowances and warranties | $ | $ | $ | $ | (1) | $ | ||||||||||||||||||||||||||
| Year ended December 28, 2024: | ||||||||||||||||||||||||||||||||
| Reserves classified as liabilities: | ||||||||||||||||||||||||||||||||
| Provision for claims, allowances and warranties | $ | $ | $ | $ | (1) | $ | ||||||||||||||||||||||||||
(1)Net reserve reductions for claims, allowances and warranties settled. The provision for claims, allowances and warranties is included in Accrued Expenses under Current Liabilities on the Consolidated Balance Sheet and included, along with the accrual of rebates, within the Provision for customer rebates, claims and allowances in Note 7 - Accrued Expenses.
ANNUAL REPORT ON FORM 10-K
ITEM 15(b)
EXHIBITS
YEAR ENDED DECEMBER 27, 2025
THE DIXIE GROUP, INC.
DALTON, GEORGIA
Exhibit Index
| EXHIBIT NO. | DESCRIPTION | ||||
| (3.1)* | |||||
| (3.2)* | |||||
| (5.1)* | |||||
| (10.1)* | The Dixie Group, Inc. New Non-qualified Retirement Savings Plan effective August 1, 1999. (Incorporated by Reference to Exhibit (10.1) to Dixie's Quarterly Report on Form 10-Q for the quarter ended June 26, 1999.)** | ||||
| (10.2)* | |||||
| (10.3)* | |||||
| (10.4)* | |||||
| (10.5)* | |||||
| (10.6)* | |||||
| (10.7)* | |||||
| (10.8)* | |||||
| (10.9)* | |||||
| (10.10)* | |||||
| (10.11)* | |||||
| (10.12)* | |||||
| (10.13)* | |||||
| (10.14)* | |||||
| (10.15)* | |||||
| (10.16)* | |||||
| (10.17)* | |||||
| (10.18)* | |||||
| (10.19)* | |||||
| (10.20)* | |||||
| (10.21)* | |||||
| (10.22)* | |||||
| (10.23)* | |||||
| (10.24)* | |||||
| (10.25)* | |||||
| (10.26)* | |||||
| (10.27)* | |||||
| (10.28)* | |||||
| (10.29)* | |||||
| (10.30)* | |||||
| (10.31)* | |||||
| (10.32)* | |||||
| (10.33)* | |||||
| (10.34)* | |||||
| (10.35)* | |||||
| (10.36)* | |||||
| (10.37)* | |||||
| (10.38)* | |||||
| (10.39)* | |||||
| (10.40)* | |||||
| (10.41)* | |||||
| (10.42)* | |||||
| (10.43)* | |||||
| (10.44)* | |||||
| (10.45)* | |||||
| (10.46)* | |||||
| (10.47)* | |||||
| (10.48)* | |||||
| (10.49)* | |||||
| (10.50)* | |||||
| (10.51)* | |||||
| (10.52)* | |||||
| (10.53)* | |||||
| (10.54)* | |||||
| (10.55)* | |||||
| (10.56)* | |||||
| (10.57)* | |||||
| (10.58)* | |||||
| (10.59)* | |||||
| (10.60)* | Credit, Security and Guaranty Agreement dated as of February 25, 2025 by and among TDG Operations, LLC and The Dixie Group Inc., and MidCap Funding IV Trust, as Agent and The Lenders from time to time party hereto. (Incorporated by Reference to Exhibit (10.60) to Dixie's Annual Report on Form 10-K for year ended December 27, 2025.) | ||||
| (10.61)* | |||||
| (10.62)* | |||||
| (10.63)* | |||||
| (10.64)* | |||||
| (10.65)* | |||||
| (10.66)* | |||||
| (10.67)* | |||||
| (10.68)* | |||||
| (10.69)* | |||||
| (10.70)* | |||||
| (10.71)* | |||||
| (14)* | |||||
| (16)* | |||||
| (19.1)* | |||||
| (21) | |||||
| (23) | |||||
| (31.1) | |||||
| (31.2) | |||||
| (32.1) | |||||
| (32.2) | |||||
| (97)* | |||||
| (101.INS) | XBRL Instance Document. (Filed herewith.) | ||||
| (101.SCH) | XBRL Taxonomy Extension Schema Document. (Filed herewith.) | ||||
| (101.CAL) | XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.) | ||||
| (101.DEF) | XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.) | ||||
| (101.LAB) | XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.) | ||||
| (101.PRE) | XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.) | ||||
* Commission File No. 0-2585.
** Indicates a management contract or compensatory plan or arrangement.