10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

Form 10-Q

(Mark One)

R    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2014

OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________

Commission File Number: 0-2585

THE DIXIE GROUP, INC.

(Exact name of Registrant as specified in its charter)

Tennessee		62-0183370
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
104 Nowlin Lane, Suite 101, Chattanooga, TN	37421	(423) 510-7000
(Address of principal executive offices)	(zip code)	(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  R Yes  o No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.  See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  

o	Large accelerated filer	R	Accelerated filer
o	Non-accelerated filer (Do not check if a smaller reporting company)	o	Smaller reporting company

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

The number of shares outstanding of each of the issuer's classes of Common Stock as of the latest practicable date.

Class	Outstanding as of April 25, 2014
Common Stock, $3 Par Value	12,536,062 shares
Class B Common Stock, $3 Par Value	898,884 shares
Class C Common Stock, $3 Par Value	0 shares

Table of Contents1

THE DIXIE GROUP, INC.

Table of Contents

PART I.  FINANCIAL INFORMATION			Page
	Item 1.	Financial Statements	3
		Consolidated Condensed Balance Sheets - March 29, 2014 (Unaudited) and December 28, 2013	3
		Consolidated Condensed Statements of Operations - Three Months Ended March 29, 2014 (Unaudited) and March 30, 2013 (Unaudited)	4
		Consolidated Condensed Statements of Comprehensive Income - Three Months Ended March 29, 2014 (Unaudited) and March 30, 2013 (Unaudited)	5
		Consolidated Condensed Statements of Cash Flows - Three Months Ended March 29, 2014 (Unaudited) and March 30, 2013 (Unaudited)	6
		Notes to Consolidated Condensed Financial Statements (Unaudited)	7
	Item 2.	Management's Discussion and Analysis of Results of Operations and Financial Condition	22
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
	Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 3.	Defaults Upon Senior Securities	30
	Item 4.	Mine Safety Disclosures	30
	Item 5.	Other information	30
	Item 6.	Exhibits	30
		Signatures	31

Table of Contents2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE DIXIE GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(dollars in thousands, except share data)

	March 29, 2014			December 28, 2013
ASSETS	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	355		$	255
Receivables, net	50,017			44,063
Inventories	106,826			93,219
Prepaid expenses	7,563			5,630
Deferred income taxes	7,433			6,622
Assets held for sale	3,250			—
TOTAL CURRENT ASSETS	175,444			149,789
PROPERTY, PLANT AND EQUIPMENT, NET	82,843			74,485
OTHER ASSETS	28,110			24,592
TOTAL ASSETS	$	286,397		$	248,866
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	24,618		$	21,679
Accrued expenses	30,500			26,202
Current portion of long-term debt	12,330			6,229
TOTAL CURRENT LIABILITIES	67,448			54,110
LONG-TERM DEBT	120,277			101,759
DEFERRED INCOME TAXES	6,421			4,072
OTHER LONG-TERM LIABILITIES	18,467			18,154
TOTAL LIABILITIES	212,613			178,095
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share):  Authorized 80,000,000 shares, issued and outstanding - 12,522,462 shares for 2014 and 12,441,356 shares for 2013	37,567			37,324
Class B Common Stock ($3 par value per share): Authorized 16,000,000 shares, issued and outstanding - 898,884 shares for 2014 and 870,287 shares for 2013	2,697			2,611
Additional paid-in capital	137,135			137,170
Accumulated deficit	(103,282		)	(106,550		)
Accumulated other comprehensive income (loss)	(333		)	216
TOTAL STOCKHOLDERS' EQUITY	73,784			70,771
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	286,397		$	248,866

See accompanying notes to the consolidated condensed financial statements.

Table of Contents3

THE DIXIE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

(dollars in thousands, except per share data)

	Three Months Ended
	March 29, 2014			March 30, 2013
NET SALES	$	85,313		$	75,440
Cost of sales	67,306			57,028
GROSS PROFIT	18,007			18,412
Selling and administrative expenses	20,251			16,895
Other operating (income) expense, net	152			(160		)
Facility consolidation expenses	73			—
OPERATING INCOME (LOSS)	(2,469		)	1,677
Interest expense	1,012			995
Other (income) expense, net	10			8
Gain on purchase of business	(8,744		)	—
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES	5,253			674
Income tax provision	1,945			23
INCOME FROM CONTINUING OPERATIONS	3,308			651
Loss from discontinued operations, net of tax	(40		)	(15		)
NET INCOME	$	3,268		$	636
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations	$	0.25		$	0.05
Discontinued operations	(0.00		)	(0.00		)
Net income	$	0.25		$	0.05
BASIC SHARES OUTSTANDING	12,789			12,674
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations	$	0.24		$	0.05
Discontinued operations	(0.00		)	(0.00		)
Net income	$	0.24		$	0.05
DILUTED SHARES OUTSTANDING	13,017			12,739
DIVIDENDS PER SHARE:
Common Stock	$	—		$	—
Class B Common Stock	—			—

See accompanying notes to the consolidated condensed financial statements.

Table of Contents4

THE DIXIE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(dollars in thousands)

	Three Months Ended
	March 29, 2014			March 30, 2013
NET INCOME	$	3,268		$	636
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized gain (loss) on interest rate swaps	(582		)	12
Reclassification of loss into earnings from interest rate swaps	53			22
Amortization of unrealized loss on dedesignated interest rate swaps	—			68
Reclassification of net actuarial gain into earnings from postretirement benefit plans	(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans	(14		)	(14		)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	(549		)	82
COMPREHENSIVE INCOME	$	2,719		$	718

See accompanying notes to the consolidated condensed financial statements.

Table of Contents5

THE DIXIE GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(dollars in thousands)

	Three Months Ended
	March 29, 2014			March 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations	$	3,308		$	651
Loss from discontinued operations	(40		)	(15		)
Net income	3,268			636
Adjustments to reconcile net income to net cash used in operating activities, net of acquisition:
Depreciation and amortization	2,988			2,513
Provision (benefit) for deferred income taxes	1,875			(53		)
Net loss on property, plant and equipment disposals	—			10
Gain on purchase of business	(8,744		)	—
Stock-based compensation expense	196			201
Excess tax benefits from stock-based compensation	—			(41		)
Changes in operating assets and liabilities:
Receivables	(1,650		)	(7,731		)
Inventories	(2,096		)	106
Other current assets	(977		)	173
Accounts payable and accrued expenses	1,758			1,696
Other operating assets and liabilities	(202		)	(233		)
NET CASH USED IN OPERATING ACTIVITIES	(3,584		)	(2,723		)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	(2,812		)	(2,052		)
Net cash paid in business acquisition	(14,077		)	—
NET CASH USED IN INVESTING ACTIVITIES	(16,889		)	(2,052		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on revolving credit facility	23,158			3,076
Payments on mortgage note payable	—			(185		)
Payments on note payable related to acquisition	(233		)	(237		)
Payments on equipment financing	(419		)	(297		)
Payments on capital leases	(216		)	(134		)
Borrowings on notes payable	745			—
Payments on notes payable	(307		)	(246		)
Change in outstanding checks in excess of cash	(2,169		)	2,847
Proceeds from stock option exercises	172			—
Repurchases of Common Stock	(74		)	(204		)
Excess tax benefits from stock-based compensation	—			41
Payments for debt issuance costs	(84		)	—
NET CASH PROVIDED BY FINANCING ACTIVITIES	20,573			4,661
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	100			(114		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	255			491
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	355		$	377
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	789		$	865
Income taxes paid, net of tax refunds	58			62
Equipment purchased under capital leases	1,487			552
Assets acquired in acquisition, net of cash acquired	30,873			—
Liabilities assumed in acquisition	(5,726		)	—
Accrued consideration for working capital adjustment in acquisition	(1,403		)	—
Accrued consideration for holdbacks in acquisition	(923		)	—

See accompanying notes to the consolidated condensed financial statements.

Table of Contents6

THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") for interim financial statements which do not include all the information and footnotes required by such accounting principles for annual financial statements.  In the opinion of management, all adjustments (generally consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying financial statements.  The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 28, 2013.  Operating results for the three-month period ended March 29, 2014 are not necessarily indicative of the results that may be expected for the entire 2014 year.

The Company reclassified certain amounts in 2013 to conform to the 2014 presentation including the reclassification of the Company's spare parts inventory from inventory to prepaid expenses in the Consolidated Condensed Balance Sheets.

The Company has one reportable segment, carpet and rug manufacturing.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

In December 2011, the Financial Accounting Standards Board ("FASB") issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” The amendments in this ASU required an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity was required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity had to provide the disclosures required by those amendments retrospectively for all comparative periods presented. In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210)—Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities". The ASU clarified that ordinary trade receivables and payables were not in the scope of ASU No. 2011-11. ASU No. 2011-11 applied only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that were either offset in accordance with specific criteria contained in the Codification or subject to a master netting arrangement or similar agreement. The effective date was the same as the effective date of ASU 2011-11. The adoption of these ASUs did not have a material effect on the Company's Consolidated Condensed Financial Statements.

In February 2013, the FASB issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date". This ASU provided guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance was fixed at the reporting date, except for obligations addressed within existing guidance in GAAP. For public entities, the ASU was effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The ASU shall be applied retrospectively to all prior periods presented for those obligations within the scope of this Subtopic that existed at the beginning of an entity's fiscal year of adoption. Early adoption was permitted. The adoption of this ASU did not have a material effect on the Company's Consolidated Condensed Financial Statements.

In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This ASU required an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward was not available at the reporting date, the unrecognized tax benefit will be presented in the financial statements as a liability and not combined with deferred tax assets. This ASU was effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted. The adoption of this ASU did not have a material effect on the Company's Consolidated Condensed Financial Statements.

In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity". The ASU was issued to change the requirements for reporting discontinued operations and to enhance the disclosures in this area. The ASU requires a disposal of a component of an entity or a group of components of an entity to be reported in discontinued operations if the disposal represents a strategic shift and will have a major effect on an entity's operations and financial results. The ASU will be effective prospectively for interim and annual reporting periods beginning after December 15, 2014. The adoption of this ASU will only impact the reporting and disclosures of future disposals, if any.

Table of Contents7

THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 3 - RECEIVABLES, NET

Receivables are summarized as follows:

	March 29, 2014			December 28, 2013
Customers, trade	$	48,142		$	41,898
Other receivables	2,072			2,306
Gross receivables	50,214			44,204
Less allowance for doubtful accounts	(197		)	(141		)
Receivables, net	$	50,017		$	44,063

NOTE 4 - INVENTORIES

Inventories are summarized as follows:

	March 29, 2014			December 28, 2013
Raw materials	$	41,547		$	31,864
Work-in-process	21,030			16,880
Finished goods	57,449			57,983
Supplies and other	131			118
LIFO reserve	(13,331		)	(13,626		)
Inventories	$	106,826		$	93,219

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following:

	March 29, 2014			December 28, 2013
Land and improvements	$	7,231		$	7,231
Buildings and improvements	51,042			50,627
Machinery and equipment	159,853			149,040
	218,126			206,898
Accumulated depreciation	(135,283		)	(132,413		)
Property, plant and equipment, net	$	82,843		$	74,485

NOTE 6 - ACQUISITION

Effective March 19, 2014, the Company acquired all outstanding stock of Atlas Carpet Mills, Inc. ("Atlas") for total purchase price consideration of $18,869, including a cash payment of $16,543, accrued consideration relating to holdbacks for certain inventories and customer claims of $923 and accrued consideration for a working capital adjustment of $1,403. The Company financed the transaction with availability under its amended credit facility. The Company has incurred direct incremental costs of approximately $425 related to this acquisition. These incremental costs are classified in selling and administrative expenses in the Company's Consolidated Condensed Statements of Operations.

Atlas is a California-based manufacturer and marketer of high-end commercial broadloom and tile carpeting serving soft floorcovering markets. Atlas has a strong reputation for exceptional design, quality and service. This brand will be sold through the existing Atlas sales force and will serve to broaden the Company's product offerings for commercial applications along with the Company's Masland Contract brand.

Table of Contents8

THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

The purchase price consideration was as follows:

Cash paid	$	16,543
Accrued consideration for holdbacks	923
Accrued consideration for working capital adjustment	1,403
Total purchase price consideration	$	18,869

The acquisition has been accounted for as a business combination which generally requires, among other things, that assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The acquisition did not represent a significant business combination. The Company has not yet completed its evaluation and determination of the fair value, or fair value less cost to sell as applicable, of certain assets and liabilities acquired primarily including the final valuation and assessment of (i) amortizable intangible assets acquired, (ii) property, plant and equipment acquired including assets held for sale, and (iii) net working capital acquired. The Company expects these final valuations and assessments will be completed by the end of fiscal 2014, which may result in additional adjustments to the values presented in the following table:

Cash	$	2,466
Receivables	4,304
Inventories	11,511
Other current assets	956
Assets held for sale (1)	3,250
Property, plant and equipment	6,929
Finite intangible asset	3,300
Other assets	623
Accounts payable	(2,286		)
Accrued expenses	(3,036		)
Capital lease obligation	(404		)
Fair value of net assets acquired	$	27,613
Total consideration	18,869
Gain on purchase of business	$	(8,744	)

(1) As part of the acquisition of Atlas, the Company announced that the Atlas dyeing operations would be consolidated into the Company's Santa Ana, California operations. Substantially all of the dye house equipment will either be relocated or disposed of by end of the Company's third fiscal quarter. The land and building has been classified in the Company's Consolidated Condensed Balance Sheet as assets held for sale at fair value less the costs to sell.

The preliminary fair value of the net assets acquired exceeded the purchase price resulting in a bargain purchase. The recorded gain is subject to adjustment as the Company will complete its valuation of certain acquired assets and liabilities assumed at acquisition as described above. The Company believes that several factors were significant in the recognition of a gain from the acquisition of Atlas. Atlas had higher cost of dyeing due to the lack of capacity utilization and therefore needed to lower costs by combining dye facilities with another operation. In addition, Atlas had a higher cost of modular carpet tile manufacturing due to outsourcing the tile manufacturing operations. Therefore, Atlas would have had to make significant investments in product and manufacturing equipment to be competitive in the modular carpet manufacturing business. Finally, the Seller had the desire to see Atlas operated as an independent brand and organization in the future. All of these objectives were achieved by combining Atlas with the Company in a mutually advantageous relationship.

The Company determined that it is impracticable to provide comparative pro forma financial information related to the acquisition. Atlas, a private company, did not historically prepare financial statements in accordance with U.S. GAAP for interim financial reporting. Accordingly, significant estimates of amounts to be included in pro forma financial information would be required and subject to an inordinate level of subjectivity. Net sales related to Atlas included in the Company’s Consolidated Condensed Statement of Operations for the period from the date of acquisition through March 29, 2014 were $1,666, or 2.0% of the Company’s net sales, for the quarter ended March 29, 2014.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amounts of goodwill are as follows:

	Goodwill		Accumulated Impairment Losses		Net
Balance at December 29, 2012	$	1,680	$	—	$	1,680
Additional goodwill recognized during the period (1)	1,709		—		1,709
Impairment losses recognized during the period	—		—		—
Other changes in the carrying amounts during the period	—		—		—
Balance at December 28, 2013	3,389		—		3,389
Additional goodwill recognized during the period	—		—		—
Impairment losses recognized during the period	—		—		—
Other changes in the carrying amounts during the period	—		—		—
Balance at March 29, 2014	$	3,389	$	—	$	3,389

(1) During 2013, the Company recorded goodwill related to the Robertex acquisition.

The following table represents the details of the Company's intangible assets:

Intangible assets subject to amortization:

	March 29, 2014							December 28, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	1,062	$	(55	)	$	1,007	$	1,062	$	(40	)	$	1,022
Rug design coding	144		(18		)	126		144		(14		)	130
Trade names	4,668		(59		)	4,609		1,368		(34		)	1,334
Total	$	5,874	$	(132	)	$	5,742	$	2,574	$	(88	)	$	2,486

Amortization expense for intangible assets is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Customer relationships	$	15	$	4
Rug design coding	4		4
Trade names	25		—
Amortization expense	$	44	$	8

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 8 - ACCRUED EXPENSES

Accrued expenses are summarized as follows:

	March 29, 2014		December 28, 2013
Compensation and benefits	$	10,086	$	8,233
Provision for customer rebates, claims and allowances	6,360		6,202
Advanced customer deposits	4,239		1,862
Outstanding checks in excess of cash	1,704		3,873
Other	8,111		6,032
Accrued expenses	$	30,500	$	26,202

NOTE 9 - 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 Condensed Financial Statements. The following is a summary of the Company's product warranty activity.

	Three Months Ended
	March 29, 2014			March 30, 2013
Product warranty reserve at beginning of period	$	1,850		$	1,297
Warranty reserve assumed in business combination	209			—
Warranty liabilities accrued	1,014			900
Warranty liabilities settled	(1,208		)	(830		)
Changes for pre-existing warranty liabilities	136			(78		)
Product warranty reserve at end of period	$	2,001		$	1,289

NOTE 10 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS

Long-term debt consists of the following:

	March 29, 2014			December 28, 2013
Revolving credit facility - Tranche A	$	103,052		$	85,274
Revolving credit facility - Tranche B	5,380			—
Obligation to Development Authority of Gordon County	4,194			4,447
Note payable - Robertex acquisition	3,809			3,789
Equipment notes payable	7,568			7,987
Notes payable	2,648			2,210
Capital lease obligations	5,956			4,281
Total long-term debt	132,607			107,988
Less: current portion of long-term debt	(12,330		)	(6,229		)
Long-term debt	$	120,277		$	101,759

Amended Revolving Credit Facility

On March 14, 2014, the Company amended its senior credit facility ("amended senior credit facility"), effective as of March 19, 2014 to permit the acquisition of Atlas Carpet Mills, Inc. by means of an over advance ("Tranche B Advance") of $5,438 maturing on June 30, 2014. The Tranche B Advance bears interest at a rate of 3.50% plus LIBOR, subject also to various availability percentages, limitations, covenants and conditions. In addition, the revolving portion of the facility ("Tranche A Advance") provides for a maximum of $150,000 of revolving credit, subject to borrowing base availability. The borrowing base is currently equal to specified percentages of the Company's eligible accounts receivable, inventories, fixed assets and real property less

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

reserves established, from time to time, by the administrative agent under the facility. In addition, the term of the amended senior credit facility was extended from August 1, 2018 to March 14, 2019.

At the Company's election, Tranche A Advances of the amended senior credit facility bear interest at annual rates equal to either (a) LIBOR for 1, 2 or 3 month periods, as selected by the Company, plus an applicable margin of either 1.50%, 1.75% or 2.00%, or (b) the higher of the prime rate, the Federal Funds rate plus 0.5%, or a daily LIBOR rate plus 1.00%, plus an applicable margin of either 0.50%, 0.75% or 1.00%. The applicable margin is determined based on availability under the amended senior credit facility with margins increasing as availability decreases. The Company continues to pay an unused line fee on the average amount by which the aggregate commitments exceed utilization of the senior credit facility equal to 0.375% per annum.

The amended senior credit facility continues to include certain affirmative and negative covenants that impose restrictions on the Company's financial and business operations. The amended senior credit facility requires the Company to maintain a fixed charge coverage ratio of 1.1 to 1.0 during any period that borrowing availability is less than $14,440 through May 31, 2014 and increases to $16,500 from and after June 1, 2014. The amendment also provided for a waiver of the measurement and application of the fixed charge coverage ratio that would otherwise be required by a reduction in excess availability from March 14, 2014 through and including April 13, 2014. As of March 29, 2014, the unused borrowing availability under the amended senior credit facility was $20,634.

Obligation to Development Authority of Gordon County

On November 2, 2012, the Company signed a 6.00% seller-financed note of $5,500 with Lineage PCR, Inc. (“Lineage”) related to the acquisition of the continuous carpet dyeing facility in Calhoun, Georgia. Effective December 28, 2012 through a series of agreements between the Company, the Development Authority of Gordon County, Georgia (the “Authority”) and Lineage, obligations with identical payment terms as the original note to Lineage are now payment obligations to the Authority. These transactions were consummated in order to provide a tax abatement to the Company related to the real estate and equipment at this facility. The tax abatement plan provides for abatement for certain components of the real and personal property taxes for up to ten years. At any time, the Company has the option to pay off the obligation, plus a nominal amount. The debt to the Authority bears interest at 6.00% and is payable in equal monthly installments of principal and interest of $106 over 57 months.

Note Payable - Robertex Acquisition

On July 1, 2013, the Company signed a 4.50% seller-financed note of $4,000, which was recorded at a fair value of $3,749, with Robert P. Rothman related to the acquisition of Robertex Associates, LLC ("Robertex") in Calhoun, Georgia. The note is payable in five annual installments of principal of $800 plus interest. The note matures June 30, 2018.

Equipment Notes Payable

The Company's equipment financing notes have terms ranging from four to seven years, bear interest ranging from 1.00% to 7.72% and are due in monthly installments through their maturity dates. In connection with certain of the notes, the Company is required to maintain funds in a separate escrow account. At March 29, 2014 and December 28, 2013, the balances held were $793 and $1,401, respectively, and are included in other current assets on the Company’s Consolidated Condensed Balance Sheets. The Company's equipment financing notes are secured by the specific equipment financed and do not contain any financial covenants.

Capital Lease Obligations

The Company's capital lease obligations have terms ranging from four to seven years, bear interest ranging from 2.90% to 7.40% and are due in monthly or quarterly installments through their maturity dates. The Company's capital lease obligations are secured by the specific equipment leased.

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

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

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

The following table reflects the fair values of assets and liabilities measured and recognized at fair value on a recurring basis on the Company's Consolidated Condensed Balance Sheets as of March 29, 2014 and December 28, 2013:

	March 29, 2014		December 28, 2013		Fair Value Hierarchy Level
Assets:
Rabbi trust (1)	$	14,317	$	14,242	Level 2
Interest rate swaps (2)	92		556		Level 2
Liabilities:
Interest rate swaps (2)	$	1,203	$	813	Level 2
Deferred compensation plan (3)	13,013		13,210		Level 1
Contingent consideration (4)	2,738		2,751		Level 3

(1) The Company maintains a rabbi trust that serves as an investment designed to offset its deferred compensation plan liability. The investment assets of the trust consist of life insurance policies for which the Company recognizes income or expense based upon changes in cash surrender value.

(2) The fair value of the interest rate swaps was obtained from external sources. The interest rate swaps were valued using observable inputs (e.g., LIBOR yield curves, credit spreads). Valuations of interest rate swaps may fluctuate considerably from period-to-period due to volatility in underlying interest rates, which are driven by market conditions and the duration of the instrument. Credit adjustments could have a significant impact on the valuations due to changes in credit ratings of the Company or its counterparties.

(3) Senior management and other highly compensated associates may defer a specified percentage of their compensation into a non-qualified deferred compensation plan. Changes in the value of the deferred compensation under this plan is recognized each period based on the fair value of the underlying measurement funds.

(4) As a result of the Colormaster and Crown Rug acquisitions in 2012 and the Robertex acquisition in 2013, the Company recorded contingent consideration liabilities at fair value. These fair value measurements were based on calculations that utilize significant inputs not observable in the market including forecasted revenues, gross margins and discount rates and thus represent Level 3 measurements. These fair value measurements are directly impacted by the Company's estimates. Accordingly, if the estimates are higher or lower than the estimates within the fair value measurement, the Company would record additional charges or benefits, respectively, as appropriate.

Changes in the fair value measurements using significant unobservable inputs (Level 3) during the three months ending March 29, 2014 and March 30, 2013 were as follows:

	March 29, 2014			March 30, 2013
Beginning balance	$	2,751		$	1,928
Fair value adjustments	45			42
Settlements	(58		)	(107		)
Ending balance	$	2,738		$	1,863

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the three months ending March 29, 2014 or March 30, 2013. If any, the Company recognizes the transfers in or transfers out at the end of the reporting period.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:

	March 29, 2014				December 28, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	355	$	355	$	255	$	255
Notes receivable, including current portion	282		282		282		282
Interest rate swaps	92		92		556		556
Financial Liabilities:
Long-term debt and capital leases, including current portion	132,607		129,539		107,988		101,752
Interest rate swaps	1,203		1,203		813		813

The fair values of the Company's long-term debt and capital 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 notes receivable approximate their carrying amounts due to the short-term nature of the financial instruments.

NOTE 12 - DERIVATIVES

The Company's earnings, cash flows and financial position are exposed to market risks relating to interest rates.  It is the Company's policy to minimize its exposure to adverse changes in interest rates and manage interest rate risks inherent in funding the Company with debt.  The Company addresses this risk by maintaining a mix of fixed and floating rate debt and entering into interest rate swaps for a portion of its variable rate debt to minimize interest rate volatility.

The following is a summary of the Company's interest rate swaps as of March 29, 2014:

Type	Notional Amount		Effective Date	Fixed Rate	Variable Rate
Interest rate swap	$	10,000	October 3, 2011 through September 1, 2016	1.330%	1 Month LIBOR
Interest rate swap	$	10,000	March 1, 2013 through September 1, 2016	1.620%	1 Month LIBOR
Interest rate swap	$	5,000	June 1, 2013 through September 1, 2016	1.700%	1 Month LIBOR
Interest rate swap	$	25,000	September 1, 2016 through September 1, 2021	3.105%	1 Month LIBOR
Interest rate swap	$	25,000	September 1, 2015 through September 1, 2021	3.304%	1 Month LIBOR

The following table summarizes the fair values of derivative instruments included in the Company's Consolidated Condensed Balance Sheets:

	Location on Consolidated Balance Sheets	Fair Value
		March 29, 2014		December 28, 2013
Asset Derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps	Other Assets	$	92	$	556
Total Asset Derivatives		$	92	$	556
Liability Derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps, current portion	Accrued Expenses	$	336	$	328
Interest rate swaps, long term portion	Other Long-Term Liabilities	867		485
Total Liability Derivatives		$	1,203	$	813

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

The following tables summarize the pre-tax impact of derivative instruments on the Company's financial statements:

	Amount of Gain or (Loss) Recognized in AOCIL on the effective portion of the Derivative
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(940	)	$	20
	Amount of Gain or (Loss) Reclassified from AOCIL on the effective portion into Income (1)(2)
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(86	)	$	(145	)
	Amount of Gain or (Loss)  Recognized on the ineffective portion in Income on Derivative (3)
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	—		$	—

(1) The amount of gain (loss) reclassified from AOCIL is included in interest expense on the Company's Consolidated Condensed Statements of Operations.

(2) The amount of loss expected to be reclassified from AOCIL into earnings during the next 12 months subsequent to fiscal 2013 is $336.

(3) The amount of gain (loss) recognized in income on the ineffective portion of interest rate swaps is included in other (income) expense, net on the Company's Consolidated Condensed Statements of Operations.

NOTE 13 - EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsors a 401(k) defined contribution plan that covers a significant portion, or approximately 70% 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 $232 and $143 for the three months ended March 29, 2014 and March 30, 2013, respectively.

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 17% 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 $18 and $17 for the three months ended March 29, 2014 and March 30, 2013, respectively.

Non-Qualified Retirement Savings Plan

The Company sponsors a non-qualified retirement savings plan that allows eligible associates to defer a specified percentage of their compensation.  The obligations owed to participants under this plan were $13,013 at March 29, 2014 and $13,210 at December 28, 2013 and are included in other long-term liabilities in the Company's Consolidated Condensed Balance Sheets. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors.  The Company utilizes a Rabbi Trust to hold, invest and reinvest

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

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 was $14,317 at March 29, 2014 and $14,242 at December 28, 2013 and is included in other assets in the Company's Consolidated Condensed Balance Sheets.

Multi-Employer Pension Plan

The Company contributes to a multi-employer pension plan under the terms of a collective-bargaining agreement that covers its union-represented employees. Expenses related to the multi-employer pension plan were $67 and $61 for the three months ended March 29, 2014 and March 30, 2013, respectively.

Postretirement Plans

The Company sponsors a legacy postretirement benefit plan that provides life insurance to a limited number of associates as a result of a prior acquisition.  The Company also sponsors a postretirement benefit plan that provides medical insurance for a limited number of associates who retired prior to January 1, 2003 and life insurance to a limited number of associates upon retirement.

Components of net periodic benefit cost (credit) for all postretirement plans are summarized as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Service cost	$	2		$	2
Interest cost	5			6
Amortization of prior service credits	(22		)	(22		)
Recognized net actuarial gains	(10		)	(10		)
Net periodic benefit cost (credit)	$	(25	)	$	(24	)

NOTE 14 - INCOME TAXES

The Company's effective income tax rate for the period ending March 29, 2014 is based upon the projected estimated annual income tax rate. The effective income tax rate in the first quarter of 2014 was 37.0%, which approximates the Company's statutory tax rate. The difference between the effective tax rate and the statutory tax rate for the three months ended March 29, 2014 was affected by certain non-deductible expenses and a tax benefit for tax deductible goodwill. In addition, the Company realized a tax benefit for the use of certain state net operating losses that had a valuation allowance. On March 19, 2014, the Company acquired Atlas which was accounted for as a bargain purchase. The tax effect of the related bargain purchase gain is included in the Company's effective tax rate.

The difference between the effective rates and the statutory rates for the three months ended March 30, 2013 was affected by the inclusion of a $202 non-taxable settlement gain associated with a company-owned insurance policy. In addition, $157 in federal tax credits were recognized as a result of tax legislation passed in January 2013.

The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits were $291 at March 29, 2014 and December 28, 2013.  There were no significant interest or penalties accrued as of March 29, 2014 or December 28, 2013.  Such benefits, if recognized, would affect the Company's effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly during the next twelve months.

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 2009 remain open to examination for U.S. federal income taxes.  The majority of state jurisdictions remain open for tax years subsequent to 2009.  A few state jurisdictions remain open to examination for tax years subsequent to 2008.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 15 - EARNINGS 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 accounting guidance requires additional 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 per share from continuing operations:

	Three Months Ended
	March 29, 2014			March 30, 2013
Basic earnings per share:
Income from continuing operations	$	3,308		$	651
Less: Allocation of earnings to participating securities	(135		)	(24		)
Income from continuing operations available to common shareholders - basic	$	3,173		$	627
Basic weighted-average shares outstanding (1)	12,789			12,674
Basic earnings per share - continuing operations	$	0.25		$	0.05
Diluted earnings per share:
Income from continuing operations available to common shareholders - basic	$	3,173		$	627
Add: Undistributed earnings reallocated to unvested shareholders	2			—
Income from continuing operations available to common shareholders - basic	$	3,175		$	627
Basic weighted-average shares outstanding (1)	12,789			12,674
Effect of dilutive securities:
Stock options (2)	166			2
Directors' stock performance units (2)	62			63
Diluted weighted-average shares outstanding (1)(2)	13,017			12,739
Diluted earnings per share - continuing operations	$	0.24		$	0.05

(1) Includes Common and Class B Common shares, in thousands.

(2) Because their effects are anti-dilutive, 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. Aggregate shares excluded for the three months ended March 29, 2014 and March 30, 2013 were 123 and 691, respectively.

NOTE 16 - 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 Condensed Financial Statements.  The number of shares to be issued is determined by dividing the specified dollar value of the award by the market value per share on the grant date.  The Company's stock compensation expense for the three months ended March 29, 2014 and March 30, 2013 was $196 and $201, respectively.

On March 12, 2014, the Company issued 101,315 shares of restricted stock to officers and other key employees. The grant-date fair value of the awards was $1,588, or $15.675 per share, and will be recognized as stock compensation expense over the vesting periods which range from 2 to 13 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.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 17 - OTHER COMPREHENSIVE INCOME (LOSS)

Components of other comprehensive income (loss) are as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swaps:
Before income taxes	$	(940	)	$	20
Income taxes	(358		)	8
Net of taxes	(582		)	12
Reclassification of loss into earnings from interest rate swaps (1):
Before income taxes	86			35
Income taxes	33			13
Net of taxes	53			22
Amortization of unrealized loss on dedesignated interest rate swaps (1):
Before income taxes	—			110
Income taxes	—			42
Net of taxes	—			68
Reclassification of net actuarial gain into earnings from postretirement benefit plans (2):
Before income taxes	(10		)	(10		)
Income taxes	(4		)	(4		)
Net of taxes	(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans (2):
Before income taxes	(22		)	(22		)
Income taxes	(8		)	(8		)
Net of taxes	(14		)	(14		)
Other comprehensive income (loss)	$	(549	)	$	82

(1) Amounts for cash flow hedges reclassified from accumulated other comprehensive income (loss) to net income were included in interest expense in the Company's Consolidated Condensed Statement of Operations.

(2) Amounts for postretirement plans reclassified from accumulated other comprehensive income (loss) to net income were included in selling and administrative expenses in the Company's Consolidated Condensed Statement of Operations.

Components of accumulated other comprehensive income (loss), net of tax, are as follows:

	Interest Rate Swaps			Post-Retirement Liabilities			Total
Balance at December 28, 2013	(144		)	360			216
Unrealized gain (loss) on interest rate swaps, net of tax of $358	(582		)	—			(582		)
Reclassification of loss into earnings from interest rate swaps, net of tax of $33	53			—			53
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $4	—			(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans, net of tax of $8	—			(14		)	(14		)
Balance at March 29, 2014	$	(673	)	$	340		$	(333	)

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 18 - OTHER (INCOME) EXPENSE

Other operating (income) expense, net is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Other operating (income) expense, net:
Insurance proceeds (1)	$	—	$	(202	)
Loss on property, plant and equipment disposals	—		10
Loss on currency exchanges	120		37
Retirement expenses	31		39
Miscellaneous (income) expense	1		(44		)
Other operating (income) expense, net	$	152	$	(160	)

(1) The Company recognized a settlement gain of $202 from a company-owned insurance policy during the three months ended March 30, 2013.

Other (income) expense, net is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Other (income) expense, net:
Miscellaneous (income) expense	$	10	$	8
Other (income) expense, net	$	10	$	8

NOTE 19 - FACILITY CONSOLIDATION EXPENSES

2014 Warehousing, Distribution & Manufacturing Consolidation Plan

On January 20, 2014, the Company developed a plan to align its warehousing, distribution and manufacturing to support its growth and manufacturing strategy resulting in better cost structure and improved distribution capabilities and customer service ("2014 Warehousing, Distribution & Manufacturing Consolidation Plan"). The key element and first major step of this plan is the leasing of a facility that will serve as a finished goods warehouse and a cut-order and distribution center in Adairsville, Georgia; such lease commencing on May 1, 2014. Costs related to the consolidation include moving and relocation expenses, information technology expenses and expenses relating to conversion and realignment of equipment. Estimated costs to complete this restructuring plan are expected to be approximately $2,400.

2014 Atlas Integration Plan

As a part of the March 19, 2014 acquisition of Atlas, the Company developed a plan to close the operations of the Atlas dyeing facility in Los Angeles and move the carpet dyeing of their products to the Company's dyeing operation located in Santa Ana, California ("2014 Atlas Integration Plan"). Costs related to the consolidation include equipment relocation, computer systems modifications and severance costs and should be completed in fiscal 2015. Total estimated costs to complete this restructuring plan are approximately $1,500. During the three months ended March 29, 2014, the Company incurred costs of $73 associated with this plan. There are approximately $1,427 remaining costs to be incurred under this plan.

Expenses incurred under these plans are classified in "facility consolidation expenses" in the Company's Consolidated Condensed Statements of Operations.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 20 - 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.

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. Should 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 21)

NOTE 21 - DISCONTINUED OPERATIONS

The Company has previously either sold or discontinued certain operations that are accounted for as "Discontinued Operations" under applicable accounting guidance. The Company has certain contingent obligations directly related to such operations, primarily related to self-insured workers' compensation and environmental liabilities. Costs related to these obligations for those businesses are classified as discontinued operations.  Discontinued operations are summarized as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Loss from discontinued operations:
Workers' compensation costs	$	(38	)	$	(12	)
Environmental remediation costs	(23		)	(9		)
Loss from discontinued operations, before taxes	(61		)	(21		)
Income tax benefit	(21		)	(6		)
Loss from discontinued operations, net of tax	$	(40	)	$	(15	)

Workers' Compensation

Undiscounted reserves are maintained for the self-insured workers' compensation obligations. 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

Reserves for environmental remediation obligations are established on an undiscounted basis. The Company has ongoing obligations at five previously owned sites that were associated with its discontinued textile businesses. Each of these sites contains relatively low levels of ground or ground water contaminants. Each site has a Corrective Action Plan ("CAP") with the applicable authoritative state regulatory body responsible for oversight for environmental compliance and the Company contracts with third party qualified environmental specialists for related remediation, monitoring and reporting for each location. The CAP for four of these sites involves natural attenuation (degradation of the contaminants through naturally occurring events) over periods currently estimated at 10 to 20 years and the CAP on the remaining site involves a pump and treat remediation process, currently estimated to remediate over a period of 25 years. Additionally, the Company has an environmental liability related to the property of a facility and related business that was sold in 2004. The CAP, involving an oxidation-based remediation plan, was approved in 2010 and is currently estimated to remediate over a 7 year period beginning in 2010. The Company has an accrual for environmental remediation obligations of $1,824 and $1,830 as of March 29, 2014 and December 28, 2013, respectively. 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 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.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars in thousands, except per share data) (Continued)

NOTE 22 - SUBSEQUENT EVENTS

Joint Venture and Debt Amendment

Effective April 16, 2014, TDG Operations, LLC, a subsidiary of the Company, and Desso (USA), Inc., a subsidiary of Desso B.V., a Netherlands based company, completed the formation of the previously announced joint venture, Desso Masland Hospitality, LLC. The purpose of the joint venture is to sell and distribute hospitality floorcovering products in the United States market, and such other territories as the parties may determine from time to time. The joint venture is intended to build the Company’s presence in the upscale hospitality market by combining the parties’ sales forces and product offerings. The Company entered into a Ninth Amendment to its senior credit facility to permit an investment up to $500 in the joint venture and permit the Company to sell inventory to the joint venture up to certain amounts.

Table of Contents21

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is presented to update the discussion of results of operations and financial condition included in our 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies were outlined in Management's Discussion and Analysis of Results of Operations and Financial Condition in our 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission. There have been no significant changes to those critical accounting policies subsequent to the date of that report.

OVERVIEW

We believe that since 2011, increased resales and remodeling of existing homes and commercial facilities, have positively affected our sales growth to a greater extent than the industry in general because of the higher-end markets where our products are concentrated. While our business was more deeply affected by the economic downturn in 2008 through 2010, we believe our position in the upper end of the markets has permitted us to benefit from improved conditions and will allow us to take advantage of further anticipated growth in the upper-end markets. Our residential and commercial sales growth rate has been significantly above that of the industry as the economy rebounded subsequent to the downturn.

We believe our business was severely negatively impacted by the extreme weather conditions that affected much of the country during January and February. Although our sales growth continued to outpace the carpet industry in our first quarter 2014 year-over-year period, our comparative growth in January and February of 2014 was significantly below the growth we were experiencing in the more recent historical periods and the growth we anticipated during this period. We did see our sales growth rate increase in March compared with the same period in 2013 and, during the first four weeks of April, have seen higher rates of sales growth versus 2013, returning to levels we anticipated.

During 2013 and 2012, we embarked upon several strategic and tactical initiatives that we believe will permit us to strengthen future results. These items, further discussed below, include the investment in the development of certain new products, the acquisition of a continuous dyeing facility in North Georgia, the acquisition of certain rug manufacturing equipment and related business, realignment of certain of our broadloom tufting technologies from Atmore, Alabama into our North Georgia Eton facility, an opportunistic purchase of certain products from an industry competitor to incorporate into our product line and changes in both manufacturing and commercial business management. We expanded our yarn processing capabilities at our Roanoke, Alabama yarn processing facility to support our growth with internal supply and lessen our dependence on externally supplied yarn and acquired a wool manufacturing facility in Calhoun, Georgia that has permitted us to enhance our wool processing capabilities and related product offerings. In addition, we acquired certain dyeing technology we did not previously have that will further enhance our ability to provide a broader array of differentiated products.

As we have modified and enhanced our continuous dye line in Calhoun, Georgia, our capacity and capabilities have expanded. We continue to assess all of our dyeing and ancillary assets to determine whether, and to what extent, further rationalization of assets may be prudent.

On June 30, 2013, we completed the acquisition of Robertex Associates, Inc., a high-end manufacturer of specialty wool floorcovering products marketed under the names of “Robertex” and “Carousel”. This acquisition was designed to strengthen our position in our wool product line where we have seen continued growth. In order to appropriately support the increased wool business, we are realigning certain manufacturing equipment in this facility and infrastructure across our Company related to wool products. As our wool production capabilities are being expanded and enhanced, we are developing new products and investing in increased product sampling for these products. The implementation of these initiatives has had a negative effect on our results during the latter part of 2013 and the first quarter of 2014. We are nearing the new product launch for a number of wool products and the equipment realignment.

On January 20, 2014, our Board of Directors approved a 2014 Warehousing/Distribution/Manufacturing Restructuring Plan intended to align our warehousing, distribution and manufacturing to support our growth and manufacturing strategy. The plan is intended to create a better cost structure and improve distribution capabilities and customer service. The key element and first major step of this plan is leasing a 292,000 square foot facility that will serve as a finished goods warehouse and a cut-order and distribution center in Adairsville, Georgia; such lease commencing on May 1, 2014.

We expect the plan to be substantially completed by mid-part of fiscal 2015. We currently expect the implementation of this plan to result in total restructuring expenses of approximately $2.4 million, with approximately $1.4 million of such expenses during the fiscal 2014 and approximately $1.0 million of such expenses during the fiscal 2015. These expenses primarily consist of moving and relocation expenses, information technology expenses and expenses relating to conversion and realignment of equipment.

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Effective March 19, 2014, we acquired Atlas Carpet Mills, Inc. (“Atlas”). Total consideration for the acquisition was approximately $18.9 million. Atlas is a California based manufacturer and marketer of high-end commercial broadloom and tile carpeting serving soft floorcovering markets. Atlas has a strong reputation for exceptional design, quality and service. This brand will be sold through the existing Atlas sales force and will serve to broaden our product offerings for commercial applications along with our Masland Contract brand. The existing management of Atlas will continue with the Company. Prior to the acquisition, we were a long-time supplier of yarn to Atlas through our Candlewick Yarn operation and provided certain tile manufacturing services for their tile product line.

We recognized a gain of $8.7 million on the purchase of Atlas. We believe that several factors were significant in the recognition of a gain from the acquisition of Atlas. Atlas had higher cost of dyeing due to the lack of capacity utilization and therefore needed to lower costs by combining dye facilities with another operation. In addition, Atlas had a higher cost of modular carpet tile manufacturing due to outsourcing the tile manufacturing operations. Therefore, Atlas would have had to make significant investments in product and manufacturing equipment to be competitive in the modular carpet manufacturing business. Finally, the Seller had the desire to see Atlas operated as an independent brand and organization in the future. All of these objectives were achieved by combining Atlas with us in a mutually advantageous relationship.

As a part of the Atlas acquisition, we will discontinue operations at the Atlas dyeing facility in Los Angeles and move the carpet dyeing of their products to our Susan Street dyeing operation located in Santa Ana, California. We adopted a formal plan to accommodate the dyeing move and address the modification of computer systems. The costs of these initiatives are expected to be approximately $1.5 million and should be completed in fiscal 2015. During the quarter ended March 29, 2014, we incurred costs of $73 thousand associated with this plan.

We remain optimistic about conditions that affect the higher-end residential markets we serve and continue to address initiatives in our commercial offerings related to our products, manufacturing processes and distribution alternatives. We believe the actions discussed above have been, and are, necessary to position us to more fully take advantage of the markets we serve and have helped to facilitate the growth we have experienced and that we anticipate in the future.

RESULTS OF OPERATIONS

The following table sets forth certain elements of our continuing operations as a percentage of net sales for the periods indicated:

	March 29, 2014		March 30, 2013
Net sales	100.0	%	100.0	%
Cost of sales	78.9	%	75.6	%
Gross profit	21.1	%	24.4	%
Selling and administrative expenses	23.7	%	22.4	%
Other operating (income) expense, net	0.2	%	(0.2	)%
Facility consolidation expenses	0.1	%	—	%
Operating income (loss)	(2.9	)%	2.2	%

Net Sales. Net sales for the quarter ended March 29, 2014 was $85.3 million, an increase of 13.1% compared with net sales of $75.4 million for the year-earlier quarter. In the first quarter of 2014, residential carpet sales increased 9.4% and net sales of commercial carpet increased 18.0% compared with the first quarter of 2013, or an increase in commercial sales of 9.6% excluding the sales attributable to Atlas for the period of March 20, 2014 through March 29, 2014. We believe our sales were negatively affected by the extreme weather conditions during the first quarter of 2014.

Cost of Sales. Cost of sales as a percentage of net sales was 78.9% in the first quarter of 2014 compared with 75.6% in the first quarter of 2013. The 2014 period included $1.5 million of costs directly attributable to the adverse weather conditions and manufacturing inefficiencies related to replacement of the dryer at our Colormaster continuous dyeing facility. Additionally, the adverse weather conditions during the first quarter impacted our production resulting in under absorption of fixed costs. The 2013 period was negatively affected by integration and expansion costs of $1.3 million related to the acquisition of the Colormaster continuous dyeing facility in late 2012, the integration of the Crown Rug assets and startup expenses related to the continued expansion of our tufting operation in Eton, Georgia.

Gross Profit. Gross profit was $18.0 million in the first quarter of 2014 compared with $18.4 million in the year-earlier period. Our gross profit was impacted from the weather in the first quarter of 2014 due to both lower sales and higher per unit costs of production.

Selling and Administrative Expenses. Selling and administrative expenses increased 1.3 percentage points as a percentage of sales in the first quarter of 2014 compared with the first quarter of 2013. The first quarter of 2014 included $455 thousand of

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costs related to the Atlas acquisition and the formation of the joint venture and $620 thousand related to the rebranding of certain wool products and other marketing initiatives.

Other Operating (Income) Expense, Net. Other operating (income) expense, net was an expense of $152 thousand in the first quarter of 2014 and income of $160 thousand in the first quarter of 2013. The first quarter of 2014 included currency valuation losses of $83 thousand in excess of such losses in the prior-year period. The 2013 period included a gain of $202 thousand related to settlement of a company-owned insurance policy.

Facility Consolidation Expenses. These expenses are related to the Atlas dye house consolidation subsequent to the Atlas acquisition on March 19, 2014 (see discussion in overview commentary above).

Operating Income (Loss). We reported an operating loss of $2.5 million in the first quarter of 2014compared with operating income of $1.7 million in the first quarter of 2013. Operating results in the 2014 reporting period were negatively affected by the weather-related costs discussed, manufacturing inefficiencies related to the replacement of the dryer at Colormaster, the Atlas acquisition-related expenses and market-related expenses.

Interest Expense. Interest expense increased $17 thousand in the first quarter of 2014 compared with the first quarter of 2013. Although debt was higher in the first quarter of 2014 compared with the first quarter of 2013, our effective interest rates were lower.

Other Expense, Net. Other expense, net was not significant in the first quarter of 2014 or 2013.

Income Tax Provision. Our effective income tax rate is based upon estimated annual income tax rates. The effective income tax rate in the first quarter of 2014 was 37.0%, which approximates the Company's statutory tax rate. The difference between the effective tax rate and the statutory tax rate for the three months ended March 29, 2014 was affected by certain non-deductible expenses and a tax benefit for tax deductible goodwill. In addition, the Company realized a tax benefit for the use of certain state net operating losses that had a valuation allowance. The effective tax rate in the first quarter of 2013 differed from statutory rates primarily due to the effect of the domestic manufacturing deduction inherent in development of the 2013 estimated tax rate, benefits of certain 2012 federal tax credits required to be recognized in the first quarter of 2013 as the law had not been passed until January 2013 and as a result of a non-taxable settlement gain related to company-owned insurance.

Income from Continuing Operations. We had income from continuing operations of $3.3 million, or $0.24 per diluted share in the first quarter of 2014 compared with income from continuing operations of $651 thousand, or $0.05 per diluted share in the first quarter of 2013. The pretax gain of $8.7 million on the purchase of Atlas had a positive effect on income from continuing operations of approximately $5.5 million after-tax, or $0.42 per diluted share.

Net Income. Discontinued operations reflected a loss of $40 thousand, or $0.00 per diluted share, in the first quarter of 2014 compared with a loss of $15 thousand, or $0.00 per diluted share, in the same period in 2013. Including discontinued operations, we had net income of $3.3 million, or $0.24 per diluted share, in the first quarter of 2014 compared with net income of $636 thousand, or $0.05 per diluted share, in the first quarter of 2013. The pretax gain of $8.7 million on the purchase of Atlas had a positive effect on net income of approximately $5.5 million after-tax, or $0.42 per diluted share.

LIQUIDITY AND CAPITAL RESOURCES

During the three months ended March 29, 2014, debt increased $23.1 million under our senior credit line and equipment financing agreements and an additional $1.5 million related to assets acquired under capital leases for a total increase in debt of $24.6 million. These funds were used to finance our operations; including $3.6 million in operating activities, $14.1 million related to the Atlas acquisition, $2.8 million in property, plant and equipment purchases, $2.2 million to fund outstanding checks and $158 thousand for miscellaneous cash outlays.

Excluding assets acquired and liabilities assumed in the Atlas acquisition and the change in the current portion of debt, working capital increased $1.3 million in the first three months of 2014. The increase was principally attributable to an increase in inventories commensurate with the higher level of business.

Capital asset acquisitions for the three months ended March 29, 2014 were $4.3 million; $2.8 million through funded debt and $1.5 million of equipment acquired under capital leases, while depreciation and amortization was $3.0 million. We expect capital expenditures and capital leases combined to be approximately $18.0 million in 2014 for normal capital expenditures while depreciation and amortization is expected to be approximately $12.5 million. Planned capital expenditures in 2014 are primarily for new equipment.

Debt Facilities

On March 14, 2014, we amended the senior credit facility ("amended senior credit facility"), effective as of March 19, 2014 to permit the acquisition of Atlas by means of an over advance ("Tranche B Advance") of $5.4 million maturing on June 30, 2014. The Tranche B Advance bears interest at a rate of 3.50% plus LIBOR, subject also to various availability percentages, limitat

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ions, covenants and conditions. In addition, the revolving portion of the facility ("Tranche A Advance") provides for a maximum of $150 million of revolving credit, subject to borrowing base availability. The borrowing base is currently equal to specified percentages of our eligible accounts receivable, inventories, fixed assets and real property less reserves established, from time to time, by the administrative agent under the facility. In addition, the term of the facility was extended to March 14, 2019.

At our election, Tranche A Advances of the amended senior credit facility bear interest at annual rates equal to either (a) LIBOR for 1, 2 or 3 month periods, as we may select, plus an applicable margin of either 1.50%, 1.75% or 2.00%, or (b) the higher of the prime rate, the Federal Funds rate plus 0.5%, or a daily LIBOR rate plus 1.00%, plus an applicable margin of either 0.50%, 0.75% or 1.00%. The applicable margin is determined based on availability under the amended senior credit facility with margins increasing as availability decreases. We continue to pay an unused line fee on the average amount by which the aggregate commitments exceed utilization of the senior credit facility equal to 0.375% per annum.

The amended senior credit facility continues to include certain affirmative and negative covenants that impose restrictions on our financial and business operations. The amended senior credit facility requires us to maintain a fixed charge coverage ratio of 1.1 to 1.0 during any period that borrowing availability is less than $14.44 million through May 31, 2014 and increases to $16.5 million from and after June 1, 2014. The amendment also provided for a waiver of the measurement and application of the fixed charge coverage ratio that would otherwise be required by a reduction in excess availability from March 14, 2014 through, and including, April 13, 2014. As of March 29, 2014, the unused borrowing availability under the amended senior credit facility was $20.6 million.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2011, the Financial Accounting Standards Board ("FASB") issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” The amendments in this ASU required an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity was required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity had to provide the disclosures required by those amendments retrospectively for all comparative periods presented. In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210)-Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities". The ASU clarified that ordinary trade receivables and payables were not in the scope of ASU No. 2011-11. ASU No. 2011-11 applied only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that were either offset in accordance with specific criteria contained in the Codification or subject to a master netting arrangement or similar agreement. The effective date was the same as the effective date of ASU 2011-11. The adoption of these ASUs did not have a material effect on our Consolidated Condensed Financial Statements.

In February 2013, the FASB issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date". This ASU provided guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance was fixed at the reporting date, except for obligations addressed within existing guidance in GAAP. For public entities, the ASU was effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The ASU shall be applied retrospectively to all prior periods presented for those obligations within the scope of this Subtopic that existed at the beginning of an entity's fiscal year of adoption. Early adoption was permitted. The adoption of this ASU did not have a material effect on our Consolidated Condensed Financial Statements.

In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This ASU required an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward was not available at the reporting date, the unrecognized tax benefit will be presented in the financial statements as a liability and not combined with deferred tax assets. This ASU was effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted. The adoption of this ASU did not have a material effect on our Consolidated Condensed Financial Statements.

In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity". The ASU was issued to change the requirements for reporting discontinued operations and to enhance the disclosures in this area. The ASU requires a disposal of a component of an entity or a group of components of an entity to be reported in discontinued operations if the disposal represents a strategic shift and will have a major effect on an entity's operations and financial results. The ASU will be effective prospectively for interim and annual reporting periods beginning after December 15, 2014. The adoption of this ASU will only impact our reporting and disclosures of future disposals, if any.

CERTAIN FACTORS AFFECTING THE COMPANY'S PERFORMANCE

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In addition to the other information provided in this Report, the risk factors included in Item 1A 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.

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. These statements include the use of terms or phrases that include such terms 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, materially adverse changes in economic conditions generally in carpet, rug and floor covering markets we serve and other risks detailed from time to time in our filings with the Securities and Exchange Commission.

Item 3. 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 use of interest rate swap agreements (See Note 12 to the Consolidated Condensed Financial Statements).

At March 29, 2014, $83,432, or approximately 63% of our total debt, was subject to floating interest rates.  A 10% fluctuation in the variable interest rates applicable to this floating rate debt would have an annual after-tax impact of approximately $8.

Item 4. 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 March 29, 2014, the date of the financial statements included in this Form 10-Q (the “Evaluation Date”). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the Evaluation Date.

We acquired Atlas Carpet Mills, Inc. (“Atlas”) on March 19, 2014. Since the date of acquisition, we have been analyzing and evaluating procedures and controls of Atlas to determine their effectiveness and to make them consistent with our disclosure controls and procedures. We will continue to analyze Atlas' procedures and controls and expect to make additional changes to those controls in the future. Prior to our acquisition, Atlas was not required to maintain disclosure controls and procedures or document and assess internal control over financial reporting, in each case as required under the rules and regulations of the U.S. Securities and Exchange Commission. As permitted by guidance issued by the staff of the U.S. Securities and Exchange Commission, Atlas has been excluded from the scope of our quarterly discussion of material changes in internal control over financial reporting below. Atlas was included in our results of operations subsequent to our acquisition on March 19, 2014 and constituted 2.0% of our consolidated revenues for the first three months of 2014 and 11.4% of consolidated assets as of March 29, 2014.

No changes in our internal control over financial reporting occurred during the quarter covered by this report that materially affected, or are reasonably likely to affect, our internal control over financial reporting except as described above with respect to Atlas. Changes to processes, information technology systems, and other components of internal control over financial reporting resulting from the acquisition of Atlas, as described above, are expected as the integration proceeds.

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

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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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

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.

The floor covering industry is sensitive to changes in general economic conditions and a decline in residential or commercial construction activity or corporate remodeling and refurbishment could have a material adverse effect on our business.

The floor covering industry, in which the Company participates, is highly dependent on general economic conditions, such as consumer confidence and income, corporate and government spending, interest rate levels, availability of credit and demand for housing. The Company derives a majority of its sales from the replacement segment of the market. Therefore, economic changes that result in a significant or prolonged decline in spending for remodeling and replacement activities could have a material adverse effect on the Company’s business and results of operations.

The floor covering industry is highly dependent on construction activity, including new construction, which is cyclical in nature, and recently experienced a downturn. The downturn in the U.S. and global economies, along with the residential and commercial markets in such economies, negatively impacted the floor covering industry and the Company’s business. Although the impact of a decline in new construction activity is typically accompanied by an increase in remodeling and replacement activity, these activities lagged during the downturn. Although the difficult economic conditions have improved, there may be additional downturns that could cause the industry to deteriorate in the foreseeable future. A significant or prolonged decline in residential or commercial construction activity could have a material adverse effect on the Company’s business and results of operations.

We have significant levels of sales in certain channels of distribution and reduction in sales through these channels could adversely affect our business.

A significant amount of our sales are generated through certain retail and mass merchant channels of distribution. Because we depend on such certain channels of distribution, a significant reduction of sales through these channels could adversely affect our business.

We have significant levels of indebtedness that could result in negative consequences to us.

We have a significant amount of indebtedness relative to our equity. In addition, as part of the acquisition of Atlas Carpet Mills, Inc., we incurred additional indebtedness that must be repaid by June 30, 2014. Insufficient cash flow, profitability or the value of our assets securing our loans could materially adversely affect our ability to generate sufficient funds to satisfy the terms of our senior loan agreements and other debt obligations. Additionally, the inability to access debt or equity markets at competitive rates in sufficient amounts to satisfy our obligations could adversely impact our business.

Uncertainty in the credit market or downturns in the economy and our business could affect our overall availability and cost of credit.

Uncertainty in the credit markets could affect the overall availability and cost of credit. Despite recent improvement in overall economic conditions, market conditions could impact our ability to obtain financing in the future, including any financing necessary to refinance existing indebtedness, and the cost and terms of it, remains uncertain. These and other economic factors could have a material adverse effect on demand for our products and on its financial condition and operating results.

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 floor covering industry is highly competitive. We face competition from a number of domestic manufacturers and independent distributors of floor covering products and, in certain product areas, foreign manufacturers. Significant consolidation within the floor covering industry has caused a number of our existing and potential competitors to grow significantly larger and

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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 may also result in decreased demand for our products and in the loss of market share. In addition, we face, and will continue to face, pressure on sales prices of our products from competitors. 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 of our products may make it hard for us to quickly respond to changes in consumer demands. Our 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 may increase and the inability to pass any such increases to our customers could materially adversely affect our business, results of operations and financial condition.

The prices of raw materials and fuel-related costs vary significantly with market conditions. In particular, our business requires the purchase of large volumes of nylon and polyester yarn, as well as wool yarns, synthetic backing, latex, and dyes. Increases in the cost of these raw materials could materially adversely affect our business, results of operations and financial condition if we are unable to pass these increases through to our customers. Although we generally attempt to pass on increases in raw material, energy and fuel-related costs to our customers, our ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for our products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be recovered. During such periods of time, our business may be materially adversely affected.

Unanticipated termination or interruption of our arrangements with third-party suppliers of nylon yarn could have a material adverse effect on us.

Nylon yarn is the principal raw material used in our floor covering products. A significant portion of such yarn is purchased from one supplier. Our yarn supplier is one of the leading fiber suppliers within the industry and is the exclusive supplier of certain innovative branded fiber technology upon which we rely. We believe our offerings of this innovative fiber technology contribute materially to the competiveness of our products. While we believe there are other sources of nylon yarns, an unanticipated termination or interruption of our current supply of nylon yarn could have a material adverse effect on our ability to supply our product to our customers and have a material adverse impact on our competitiveness if we are unable to replace our nylon supplier with another supplier that can offer similar innovative fiber products. An extended interruption in the supply of these or other raw materials or sourced products used in the Company’s business or in the supply of suitable substitute materials or products would disrupt the Company’s operations, which could have a material adverse effect on the Company’s business.

We may experience certain risks associated with acquisitions, joint ventures and strategic investments.

We have recently embarked on several strategic and tactical initiatives, including acquisitions and investment in new products, to strengthen our future and to enable us to return to sustained growth and profitability. Growth through acquisitions involves risks, many of which may continue to affect us after the acquisition. An acquired company 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. 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 could lead to the potential loss of customers of the acquired business, the potential loss of employees who may be vital to the new 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 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.

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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 its operations. Additionally, future laws, ordinances or regulations 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.

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.

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 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.

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 either 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.

Table of Contents29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding our repurchases of shares of our Common Stock during the three months ended March 29, 2014:

Month Ending	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or approximate dollar value) of Shares That May Yet Be Purchased Under Plans or Programs
February 1, 2014	—	$	—	—
March 1, 2014	5,352	13.81		5,352
March 29, 2014	10	15.78		10
Three Months Ended March 29, 2014	5,362	$	13.64	5,362	$	4,237,965

(1)  On August 8, 2007, we announced a program to repurchase up to $10.0 million of our Common Stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a.) Exhibits

10.1 Seventh Amendment to Credit Agreement dated as of January 20, 2014, by and among The Dixie Group Inc., certain of its subsidiaries and Wells Fargo Capital Finance, LLC, as Agent and the persons identified as Lenders therein, Incorporated by reference to Exhibit (10.1) to Dixie's Current Report on Form 8-K dated January 21, 2014.

10.2 Stock Purchase Agreement by and between TDG Operations, LLC and James Horwich dated March 19, 2014, Incorporated by reference to Exhibit (10.1) to Dixie's Current Report on Form 8-K dated March 20, 2014.

10.3 Eighth Amendment to Credit Agreement dated as of March 14, 2014, by and among The Dixie Group Inc., certain of its subsidiaries and Wells Fargo Capital Finance, LLC, as Agent and the persons identified as Lenders therein, Incorporated by reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated March 20, 2014.

10.4 Ninth Amendment to Credit Agreement dated as of March 26, 2014, by and among The Dixie Group Inc., certain of its subsidiaries and Wells Fargo Capital Finance, LLC, as Agent and the persons identified as Lenders therein, Incorporated by reference to Exhibit (10.1) to Dixie's Current Report on Form 8-K dated April 17, 2014.

31.1 CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 CFO Certification pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1 Limited Liability Company Agreement of Desso Masland Hospitality LLC and Desso (U.S.A.), Inc. is filed herewith.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE DIXIE GROUP, INC.
	(Registrant)
Date: May 7, 2014	By: /s/ JON A. FAULKNER
	Jon A. Faulkner Vice President and Chief Financial Officer
Date: May 7, 2014	By: /s/ D. EUGENE LASATER
	D. Eugene Lasater Controller

Table of Contents31

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Daniel K. Frierson, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Dixie Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2014	/s/ DANIEL K. FRIERSON
	Daniel K. Frierson
	Chief Executive Officer
	The Dixie Group, Inc.

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jon A. Faulkner, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Dixie Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2014	/s/ JON A. FAULKNER
	Jon A. Faulkner
	Chief Financial Officer
	The Dixie Group, Inc.

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Dixie Group, Inc. (the "Company") on Form 10-Q for the quarter ended March 29, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel K. Frierson, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DANIEL K. FRIERSON

Daniel K. Frierson, Chief Executive Officer

Date: May 7, 2014

A signed original of this written statement required by Section 906 has been provided to The Dixie Group, Inc. and will be retained by The Dixie Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Dixie Group, Inc. (the "Company") on Form 10-Q for the quarter ended March 29, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jon A. Faulkner, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JON A. FAULKNER

Jon A. Faulkner, Chief Financial Officer

Date: May 7, 2014

A signed original of this written statement required by Section 906 has been provided to The Dixie Group, Inc. and will be retained by The Dixie Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

EXHIBIT 99.1

LIMITED LIABILITY COMPANY AGREEMENT

OF

DESSO MASLAND HOSPITALITY LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT (“Agreement”) is entered into as of April 14, 2014, by and between TDG Operations, LLC,a Georgia limited liability company (“Masland”), and Desso (U.S.A.), Inc., a Pennsylvania corporation (“Desso”). Masland and Desso and any other persons or entities who shall in the future execute and deliver this Agreement pursuant to the provisions hereof shall hereinafter collectively be referred to as the “Members.”

Masland and Desso propose to form a joint venture to facilitate the selling of hospitality carpet products of each Member to the upscale hospitality market in the Americas and, as agreed in the Annual Business Plan (as defined below), in other geographic areas (collectively, the “Trading Area”) (collectively, the “Business”). Masland and Desso further propose that the joint venture take the form of a limited liability company organized pursuant to the provisions of the Tennessee Revised Limited Liability Company Act (the “Tennessee LLC Act”) under the name “Desso Masland Hospitality LLC” (the “LLC”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Members hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

Unless the context otherwise specifies or requires, capitalized terms used herein shall have the respective meanings assigned thereto in Addendum I, attached hereto and incorporated herein by reference, for all purposes of this Agreement (such definitions to be equally applicable to both the singular and the plural forms of the terms defined). Unless otherwise specified, all references herein to Articles or Sections are to Articles or Sections of this Agreement.

ARTICLE II

FORMATION; NAME; PLACE OF BUSINESS

2.01    Formation of LLC; Certificate of Formation. The Members of the LLC hereby:

(a)authorize the formation of the LLC by the Members as a limited liability company pursuant to the Tennessee LLC Act, and further authorize the filing of the Certificate of Formation (the “Certificate of Formation”) with the Secretary of State as required under the Tennessee LLC Act;

(b)confirm and agree to their status as Members of the LLC;

(c)execute this Agreement for the purpose of confirming the existence of the LLC and establishing the rights, duties and relationship of the Members; and

1

(d)(i) agree that if the laws of any jurisdiction in which the LLC transacts business so require, the LLC shall file with the appropriate office in that jurisdiction any documents necessary for the LLC to qualify to transact business under such laws; and (ii) agree to execute, acknowledge, and cause to be filed, in the place or places and manner prescribed by law, any amendments to the Certificate of Formation as may be required, either by the Tennessee LLC Act, by the laws of any jurisdiction in which the LLC transacts business or by this Agreement, to reflect changes in the information contained therein or otherwise to comply with the requirements of law for the continuation, preservation, and operation of the LLC as a limited liability company under the Tennessee LLC Act.

2.02    Name of LLC. The name under which the LLC shall conduct its business is “Desso Masland Hospitality LLC.” The business of the LLC may be conducted under any other name permitted by the Tennessee LLC Act that is selected by the Board of Directors. The LLC promptly shall execute, file, and record any assumed or fictitious name certificates required by the laws of the State of Tennessee or any state in which the LLC conducts business.

2.03    Place of Business. The location of the principal place of business of the LLC shall be at c/o Desso (U.S.A.), Inc., 10 Corbin Drive, Floor #2, Darien, Connecticut 06820. The Board of Directors may change the principal place of business of the LLC to such other place or places within the United States as the Board of Directors may from time to time determine, provided that the Board of Directors shall give written notice of the change to the Members within thirty (30) days after the effective date of the change and, if necessary, the Board of Directors shall amend the Certificate of Formation in accordance with the applicable requirements of the Tennessee LLC Act. The Board of Directors may establish and maintain such other offices and additional places of business of the LLC, either within or without the State of Connecticut, as it deems appropriate.

2.04    Registered Office; Registered Agent and Place of Business. The registered office of the LLC in the State of Tennessee shall be located at 104 Nowlin Lane, Suite 101, Chattanooga, TN 37421. Jon A. Faulkner shall be the registered agent of the LLC in the State of Tennessee for service of process.

2.05    Title to LLC Property. All property owned by the LLC, whether real or personal, tangible or intangible, shall be deemed to be owned by the LLC as an entity, and no Member individually shall own or have any interest in such property.

ARTICLE III

PURPOSES AND POWERS OF LLC

3.01    Purposes. The purposes of the LLC shall be:

(a)    to engage in the Business;

(b)    to acquire, hold, own, operate, manage, finance, encumber, sell, or otherwise dispose of and otherwise use the LLC Assets; and

2

(c)    to enter into any lawful transaction and engage in any lawful activities in furtherance of the foregoing purposes and as may be necessary, incidental or convenient to carry out the Business of the LLC as contemplated by this Agreement.

3.02    Powers. The LLC shall have the power to do any and all acts and things necessary, appropriate, advisable, or convenient for the furtherance and accomplishment of the purposes of the LLC, including, without limitation, to engage in any kind of activity and to enter into and perform obligations of any kind necessary to or in connection with, or incidental to, the accomplishment of the purposes of the LLC, so long as said activities and obligations may be lawfully engaged in or performed by a limited liability company under the Tennessee LLC Act.

ARTICLE IV

TERM OF LLC

The LLC commenced on the date upon which the Certificate of Formation was duly filed with the Tennessee Secretary of State’s Office and shall continue in perpetuity, unless dissolved and liquidated in accordance with the provisions of Article XII.

ARTICLE V

CAPITAL; LIABILITY OF MEMBERS

5.01    Initial Capital Contributions of the Members; Trademark License. Concurrently with the execution of this Agreement, each of Masland and Desso shall contribute the items set forth on Schedule 1 (each such contribution an “Initial Capital Contribution”). The Initial Capital Contribution of each Member, to the extent it consists of cash, shall be made in immediately available funds payable to the order of the LLC or its designated agent. The Members shall not be required to make any Capital Contributions to the LLC other than as set forth in this Section 5.01. Each Member’s percentage share of the total LLC Interests (a Member’s “Percentage Interest”) shall be as follows:

• Masland’s Percentage Interest is 50%.

• Desso’s Percentage Interest is 50%.

In addition to the Initial Capital Contribution, each of Masland and Desso hereby licenses to the LLC the brand names, trademarks, logos and service marks associated with the products of such Members sold by such Members to the LLC, for the LLC’s use in marketing, promoting, distributing and offering for sale and selling such products, such license to be non-transferable, royalty-free and limited to use in the Business and the use of such brand names, trademarks, logos and service marks to be consistent with the applicable Member’s guidelines thereon (collectively, the “Trademark Licenses”). Upon the dissolution of the LLC or other cessation of sale of a Member’s products by the LLC, all rights of the LLC with respect to the applicable Trademark License shall terminate.

5.02    Capital Accounts. A separate capital account (a “Capital Account”) shall be established and maintained for each Member. The Capital Account of each Member shall be (a) increased by the amount of any contributions made to the LLC by the Member, (b) increased or decreased by items of Net Income

3

or Net Loss allocated to the Member pursuant to Article VI, and (c) decreased by any distributions made by the LLC to the Member.

5.03    No Interest on Capital Contributions or Capital Accounts. No Member shall be entitled to receive any interest on its Capital Contributions or its outstanding Capital Account balance.

5.04    Financing; Loans to the LLC. Funds required by the LLC for the conduct of its business shall be provided through profits and cash flow of the LLC derived from its business. Nevertheless, the parties recognize that, from time to time, it may be appropriate to provide the LLC with funding from its Members or from external sources. When funding is so required, the Board of Directors will determine the best way to meet such funding requirements. The Board of Directors may determine that each of the Members shall provide a loan to the LLC, in equal amounts. If either Member fails to loan its allocated portion, the other Member may loan such allocated portion. The amounts of such loans shall be a debt of the LLC to the lending Member(s) and shall be payable or collectible only out of the profits and cash flow of the LLC derived from its business or in accordance with terms and conditions agreed upon by the Board of Directors and the lending Member(s). Those terms and conditions will be as set forth in any applicable debt instrument, and may provide that the debt shall be payable over a term and/or on demand and for such interest and security as the Board of Directors and the lending Member(s) may agree.

5.05    Return of Capital. Except upon the dissolution of the LLC or as may be specifically provided in this Agreement, no Member shall have the right to demand or to receive the return of all or any part of its Capital Account or its Capital Contributions to the LLC.

5.06    Liability of Members, Directors and officers for Debts of LLC. Except as otherwise provided in the Tennessee LLC Act, the debts, obligations and liabilities of the LLC, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the LLC, and none of the Members, Directors or officers shall be obligated personally for any such debt, obligation or liability of the LLC solely by reason of being a Member, Director or officer. The failure of the LLC to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under the Tennessee LLC Act or this Agreement shall not be grounds for imposing personal liability on the Members or the Directors for liabilities of the LLC.

5.07    Representations and Warranties by the Members. By execution and delivery of this Agreement each of the Members represents and warrants to the LLC and acknowledges that:

(a)    the Membership Interests have not been registered under the Securities Act or the securities laws of any other jurisdiction, are issued in reliance upon federal and state exemptions for transactions not involving a public offering and cannot be disposed of unless (i) they are subsequently registered or exempted from registration under the Securities Act and (ii) the provisions of this Agreement have been complied with;

(b)    such Member is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act, as amended by Section 413(a) of the Dodd-Frank Wall Street

4

Reform and Consumer Protection Act, and agrees that it will not take any action that could have an adverse effect on the availability of the exemption from registration provided by Rule 501 promulgated under the Securities Act with respect to the offer and sale of the Membership Interests;

(c)    such Member's Membership Interests are being acquired for its own account solely for investment and not with a view to resale or distribution thereof;

(d)    the execution, delivery and performance of this Agreement have been duly authorized by such Member and do not require such Member to obtain any consent or approval that has not been obtained and do not contravene or result in a default in any material respect under any provision of any law or regulation applicable to such Member or other governing documents or any agreement or instrument to which such Member is a party or by which such Member is bound; and

(e)    this Agreement is valid, binding and enforceable against such Member in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general applicability relating to or affecting creditors' rights or general equity principles (regardless of whether considered at law or in equity).

ARTICLE VI

ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAXES

6.01    Allocation of Net Income or Net Loss. Except as otherwise provided in Section 6.04, the Net Income or Net Loss, other items of income, gains, losses, deductions and credits, and the taxable income, gains, losses, deductions and credits of the LLC, if any, for each Fiscal Year (or portion thereof) shall be allocated to the Members in proportion to their Percentage Interests.

6.02    Allocation of Income and Loss With Respect to LLC Interests Transferred. If any LLC Interest is transferred during any Fiscal Year, the Net Income or Net Loss (and other items referred to in Section 6.01) attributable to such LLC Interest for such Fiscal Year shall be allocated between the transferor and the transferee in accordance with Article X.

6.03    Distributions. Distributions to the Members shall be made quarterly and in amounts as are determined by the Board of Directors. Distributions shall be made to the Members first to the repayment of accrued and unpaid interest, and all unpaid principal, on any indebtedness owed to the Members, and second in proportion to their Percentage Interests, subject to the following provision: any distributions shall be made as between the Members on the basis of the ratio of the aggregate dollar value of sales of each Member’s products sold by the LLC until the sales of Masland products, in the aggregate, have exceeded forty percent (40%) of all sales by the LLC (with aggregate sales to be determined on a quarterly basis), whereupon any distributions shall be made according to Percentage Interests. Distributions may be made in cash or by distributing property in kind. If the Board of Directors cannot agree upon the amount to be distributed for any quarter, the LLC’s auditors will certify whether and how much the LLC has profits available for distribution, taking into account any legal requirements or restrictions on such distribution, including any restriction in any financing agreement entered into by the LLC, and whether the LLC has sufficient financial resources to meet its anticipated obligations, including working capital

5

requirements, as they become due, whereupon the LLC shall then distribute the amount determined by the auditors to be available for distribution, unless the Members determine otherwise.

6.04    Taxes.

(a)    Reports. As soon as practicable after the end of each Fiscal Year, the LLC shall prepare and mail to each Member a report containing all information necessary for the Member to include its share of taxable income or loss (or items thereof) in its income tax return.

(b)    Nonrecourse Loans.

(i)For federal income tax purposes, any loss attributable to a nonrecourse loan made to the LLC by a Member (i.e., any loss that would be economically borne by such Member in his capacity as lender) shall be allocated to such Member in accordance with Treas. Reg. § 1.704-1(b)(4)(iv)(g). If any allocation of loss is made pursuant to the preceding sentence, subsequent income and gain of the LLC shall first be allocated to such Member until the amount of income and gain so allocated equals the amount of loss previously allocated to the Member pursuant to the preceding sentence.

(ii)For federal income tax purposes, any loss attributable to a nonrecourse loan made to the LLC other than by a Member shall be allocated pursuant to Treas. Reg. §1.704-1(b)(4)(iv) according to the Members’ Percentage Interests in the LLC.

(c)    Contributions of Property. In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, depreciation, amortization, gain and loss, as determined for tax purposes, with respect to any contributed property the book value of which differs from its adjusted basis for federal income tax purposes, shall, for tax purposes, be allocated between the Members so as to take account of any variation between the adjusted basis of such property to the LLC for federal income tax purposes and its book value.

(d)    Purpose of Tax Allocations. Allocations pursuant to this Section 6.04 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, the Capital Account of any Member or such Member’s share of profit, loss, other items, or distributions pursuant to any provision of this Agreement. The provisions of this Section 6.04 relating to federal income tax treatment of an item shall apply for state and local income tax purposes to the extent permitted under applicable law. Any elections or other decisions relating to such allocations shall be made by the Board of Directors or the Tax Matters Member pursuant to Section 6.04(e) of this Agreement.

(e)Federal Income Tax Elections; Tax Matters Member. All elections required or permitted to be made by the LLC under the Code shall be made by the Members. The Tax Matters Member is responsible for all administrative and judicial proceedings for the assessment and collection of tax deficiencies or the refund of tax overpayments arising out of a Member’s distributive share of items of income, deduction, credit and/or of any other Company item (as that term is defined in the Code or in the Treasury Regulations) allocated to the Members affecting any Member’s tax liability. The Members hereby appoint Masland as the initial Tax Matters Member. The Tax Matters Member shall promptly give notice to all Members of any administrative or judicial proceeding pending before the Internal Revenue Service involving any Company item and the progress of any such proceeding. Such notice shall be in compliance with such regulations as are issued by the Internal Revenue Service. The Tax Matters Member

6

shall have all the powers provided to a tax matters partner in Sections 6221 through 6233 of the Code, including the specific power to extend the statute of limitations with respect to any matter which is attributable to any Company item or affecting any item pending before the Internal Revenue Service and to select the forum to litigate any tax issue or liability arising from Company items. The provisions on limitations of liability of the officers and Members and indemnification set forth in Section 7.05 shall be fully applicable to the Tax Matters Member in its capacity as such. The Tax Matters Member may resign at any time by giving written notice to the LLC and each of the other Members. Upon resignation of the Tax Matters Member, a new Tax Matters Member may be elected from among the Members by the Board of Directors. The Tax Matters Member shall be reimbursed by the LLC for any reasonable expenses incurred in its capacity as Tax Matters Member.

(f)Modifications. If the Board of Directors determines that any of the provisions of this Section 6.04 do not comply with the rules of Treas. Reg. § 1.704-1(b)(3) for allocating income, gain, loss, and deductions of the LLC in accordance with the Members’ LLC Interests, the Board of Directors may make any modifications required to cause such provisions to comply with such rules.

ARTICLE VII

MANAGEMENT

7.01    Management of the LLC by the Board of Directors.

(a)    Management by the Board of Directors. The Members hereby unanimously agree that the responsibility for management and direction of the business and affairs of the LLC shall be delegated to a Board of Directors pursuant to the Tennessee LLC Act (the “Board of Directors”). No Member shall have any right to vote on any matter except as set forth in Sections 12.01(a) and 13.10(a) hereof.

(b)    Composition of Board of Directors; Appointment and Removal.

(i)The Board of Directors shall at all times be composed of four (4)Directors (each, a “Director”).

(ii)Two (2) of the Directors shall be appointed by Masland (the “Masland Directors”) and two (2) of the Directors shall be appointed by Desso (the “Desso Directors”). Each such individual shall serve until such time as he or she resigns, retires, dies or is removed. Any Director may be removed with or without cause by the Member who appointed such Director. Upon the resignation, retirement, death or removal of any Director, the Member who appointed such Director shall designate the replacement Director. The initial Masland Directors shall be Jon A. Faulkner and Lee Martin, and the initial Desso Directors will be Alexander Collot d’Escury and Tom Francken RV.

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(c)    Meetings and Actions.

(i)    The Board of Directors shall meet (A) at least once each Fiscal Quarter (unless such meeting shall be waived by all of the Directors) at the principal offices of the LLC, at such other place as may be agreed upon from time to time by the Board of Directors or by telephone, such meeting to take place upon at least ten (10) days’ prior written notice to all Directors from the President; (B) at such other times as may be determined by unanimous agreement of the Board of Directors; or (C) upon the request of at least two (2) Directors or the President and upon at least ten (10) days’ prior written notice to all Directors from such requesting Persons. Meetings may be held by telephone. The Board of Directors shall cause written minutes to be prepared of all actions taken by the Board of Directors and shall cause a copy thereof to be delivered to each Director within fifteen (15) days thereof. Written notice to a Director shall be deemed to have been given if delivered to the Member that appointed such Director.

(ii)    No action may be taken at a meeting of the Board of Directors unless a quorum consisting of at least two (2) of the Masland Directors and one (1) of the Desso Directors, or two (2) of the Desso Directors and one (1) of the Masland Directors, are present.

(iii)Each Director shall be entitled to cast one (1) vote with respect to any decision made by the Board of Directors, except with respect to a determination to seek indemnification pursuant to Section 7.05 hereof, in which event a Director seeking indemnification hereunder shall have no vote with respect to his indemnification. Any action to be taken by the Board of Directors shall require affirmative votes from a Majority of the Directors present, including at least one (1) Masland Director and one (1) Desso Director, except those actions described in subparagraph (d) which require affirmative vote of the Members. The foregoing notwithstanding, any determination to grant indemnification to a Director pursuant to Section 7.05 hereof shall only require affirmative votes of the Directors appointed by the Member who did not appoint the Director to be indemnified. Approval or action by the Board of Directors shall constitute approval or action by the LLC. A Director may grant a proxy entitling another Director appointed by the same Member to exercise his voting rights. Such proxy shall be in writing and shall specify a termination date. The Directors appointed by the other Member shall be entitled to inspect the proxy on demand.

(iv)Any action to be taken by the Board of Directors may be taken without a meeting if consents in writing setting forth the action so taken are signed by the number of Directors required to make a quorum and by the number of Directors required to approve actions at a meeting.

(v)A Chairman chosen from among the Board of Directors will preside at any meeting of the Board of Directors. The Chairmanship role will rotate as between the Masland Directors and the Desso Directors on a yearly basis, with the first Chairman chosen as between the Masland Directors and the Desso Directors on the date of organization of the LLC by a coin toss, and the next Chairman being chosen on the first anniversary of such date of organization.

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(d)    Annual Business Plan. Within sixty (60) days after the end of each Fiscal Year, the President shall prepare and submit or cause to be prepared and submitted to the Board of Directors a strategic plan covering the current year and including the current year’s budget (the “Annual Business Plan”), as well as such other information as may be required by the Board of Directors to be submitted to it to aid in its review of the Annual Business Plan. Each Annual Business Plan shall provide that the Members shall sell products to the LLC at full standard manufacturing costs plus warehousing costs plus freight costs and shall fix for the applicable year such costs that may be charged the LLC by each Member in a master cost list for the various products to be sold to the LLC. Additionally, each Annual Business Plan shall provide for changes that may be made as to such fixed costs through the applicable year and shall set forth the standard product warranties associated with the products to be sold to the LLC by the Members. The Annual Business Plan shall also set forth that the Members shall charge the LLC, on a monthly basis unless otherwise agreed, all selling, general and administrative costs of their respective hospitality organizations, including the costs of all hospitality sales representatives, and shall provide that their direct out-of-pocket costs will be passed along to the LLC and shall fix for the applicable year all other costs which cannot be directly passed on, such as costs for accounting services. Additional topics that shall be covered by the Annual Business Plan include the Trading Area for the applicable year, planned sales, profits, capital expenditures and working capital needs for the applicable year (in other words, the annual budget), the terms and conditions under which either of the Members shall conduct any other business with the LLC during the applicable year (for example, the terms and conditions under which any technologies may be licensed by either Member to the LLC or under which the LLC shall develop or have developed any new technologies and any license to the Members of same), the financing arrangements the LLC shall utilize during the applicable year and any targets and bonus arrangements for the applicable year for the President in his capacity as general manager of the LLC. The Board of Directors shall review, revise and approve the Annual Business Plan. If the President, any member of the Board of Directors or any Member shall propose during any year any amendment of an approved Annual Business Plan (including the authorization of any expenditure exceeding an amount authorized under the Annual Business Plan or any new product to be sold by either Member to the LLC) such amendment shall be submitted to the Board of Directors for approval, and if the Board of Directors cannot agree upon approval or disapproval of such amendment, the decision on such amendment shall be deferred until the meeting of the Board of Directors concerning creation of the next Annual Business Plan. The initial Annual Business Plan is attached hereto as Exhibit A. An initial three (3) year sales plan addressing targeted product sales volumes is attached hereto as Exhibit B (the “Initial Sales Plan”) and shall be considered in connection with the preparation and review of the Annual Business Plan for the first three (3) years of operation of the LLC.

(e)    Matters Reserved for the Members. The Board of Directors (acting on behalf of the LLC), by its own action, but not by delegation to officers or other employees of the LLC, shall have the sole right, power and authority to take the following actions in furtherance of the business of the LLC, provided, however, that no such action will be taken without the approval of each of the Members:

(i)    approving any contract, agreement or commitment outside the ordinary course of business, other than as contemplated in the Annual Business Plan;

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(ii)    approving any issuance of LLC Interests to any Member or other Person or any other sale, issuance, purchase, redemption, reorganization or recapitalization of Membership Interests;

(iii)    approving the selection of or any change in the LLC’s auditors, accounting policies or accounting reference dates;

(iv)    approving all contracts that are proposed to be entered into between the LLC and any Member or Affiliate of a Member, other than those set forth in Section 7.04 or as contemplated in the Annual Business Plan, provided that any amendment of any such contracts set forth in Section 7.04 shall require approval of each of the Members;

(v)    approving all extraordinary distributions to the Members, other than distributions made to the Members in accordance with Section 6.03;

(vi)incurring indebtedness to any Person in an amount in excess of US$25,000.00 or for a period in excess of twelve (12) months, approving the assignment, pledge or encumbrance of, or the granting of a security interest in, the LLC Assets, or guaranteeing any indebtedness of any other Person or guaranteeing any contractual obligations of any other Person, other than as contemplated in the Annual Business Plan;

(vii)instituting litigation to which the LLC is a party;

(viii)approving the acquisition of all or substantially all of any business or business division from any Person, whether by asset purchase, stock purchase, merger or other business combination, other than as contemplated by the Annual Business Plan;

(ix)approving the entry of the LLC into any partnership or joint venture, or the creation of any subsidiary of the LLC or the contribution of any capital by the LLC to any Person or any other acquisition of any equity interests in any Person, or, if any of the foregoing are approved by the Members, approving the termination of any partnership or joint venture, the termination or dissolution of any subsidiary of the LLC or the sale or other disposition of any equity interests in any Person held by the LLC;

(x)approving the sale, conveyance or transfer of any of the LLC Assets, or any interest therein, other than as contemplated by the Annual Business Plan; and

(xi)approving any merger, consolidation, conversion, or sale of all or substantially all of the LLC Assets.

(f)    Third Party Reliance. Third parties dealing with the LLC shall be entitled to rely conclusively upon the power and authority of the Board of Directors and the officers of the LLC as set forth herein.

(g)Fiduciary Relationship. No Director shall be liable to the LLC or its Members for monetary damages for breach of fiduciary duty as a Director or otherwise liable, responsible or accountable to the LLC or its Members for monetary damages or otherwise for any acts performed, or for any failure to act; provided, however, that this provision shall not eliminate or limit the liability of a

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Director (i) for any breach of the Director’s duty of loyalty to the LLC or its Members, (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the Director received any improper personal benefit.

(h)Reimbursement. All expenses incurred with respect to the organization, operation, and management of the LLC shall be borne by the LLC. However, as contemplated by the Annual Business Plan, certain selling, general and administrative functions may be provided by the Members, and the Members shall be entitled to reimbursement from the LLC for expenses borne by the Members allocable to the organization, operation, and management of the LLC, including such selling, general and administration functions. None of the Directors, in their capacity as such, shall be entitled to any fees for services rendered for or on behalf of the LLC.

(i)No Individual Authority. Except as otherwise expressly provided in this Agreement, no Member, acting alone, shall have any authority to act for, or to undertake or to assume any obligation or responsibility on behalf of the other Member or the LLC.

7.02    Officers; Management of Operations. The day-to-day operations of the LLC will be managed by the officers of the LLC.

(a)    President. Subject to the authority of the Board of Directors, the President shall be the chief executive officer and general manager of the LLC, and, as such, shall be primarily responsible for the general management of the business of the LLC in implementation of the policies and directives of the Board of Directors as set forth in each Annual Business Plan. Subject to the foregoing sentence and Section 7.01, the President shall have authority to make contracts on behalf of the LLC, shall be responsible to effect all orders and resolutions of the Board of Directors, and shall perform such other duties as from time to time may be assigned by the Board of Directors. Desso shall have the power and right to appoint the Person who shall become the President, unless the Members agree in writing to waive or terminate such right and power in favor of Desso, and the initial President shall be Desso appointee John Reader, who shall serve until his resignation or removal by the Board of Directors.

(b)    Secretary. The Secretary, at the direction of the Board of Directors, shall prepare and distribute to each Director an agenda in advance of each meeting and shall prepare and distribute promptly to each Director written minutes of all meetings of the Board of Directors. The Secretary shall also be responsible for preparing and distributing to the Directors any notices received by the LLC or otherwise called for by this Agreement to be given by the LLC.

(c)    Other officers. The President may delegate certain authority and responsibilities to other officers of the LLC (including, but not limited to, one or more vice presidents, a treasurer and an assistant secretary) as the President deems necessary and appropriate. Any such officer shall hold his or her respective office unless and until such officer is removed by the President.

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7.03    Other Activities of Members or Affiliates. (i) Any Member or any Affiliate thereof may have other business interests or may engage in other business ventures of any nature or description whatsoever, whether currently existing or hereafter created, and (ii) no Member or Affiliate thereof shall incur any liability to the LLC as a result of its pursuit of such other permitted business interests, ventures and competitive activity, and neither the LLC nor the other Members shall have any right to participate in such other business ventures or to receive or share in any income or profits derived therefrom. The foregoing sentence notwithstanding, as long as any Member is a member of the LLC, to the degree practicable, such Member shall not compete with the LLC in the Business.

7.04    Certain Transactions. The LLC is expressly permitted in the normal course of its business to enter into transactions with any or all Members or with any Affiliate of any or all Members, including those listed below, provided that the price and other terms of such transactions are fair to the LLC and that the price and other terms of such transactions are not less favorable to the LLC than those generally prevailing with respect to comparable transactions between unrelated parties. The effectiveness of this Agreement is expressly conditioned on the execution and delivery of the agreements listed below:

(a)    Supply Agreement with Masland. The LLC and Masland will enter into a Supply Agreement in the form attached hereto as Exhibit A for Masland to supply certain hospitality carpet products to the LLC.

(b)    Supply Agreement with Desso. The LLC and Desso will enter into a Supply Agreement in the form attached hereto as Exhibit B for Dessoto supply certain hospitality carpet products to the LLC.

7.05    Indemnification of the Members, Directors, officers and any Affiliate.

(a)    Right of Indemnification. In accordance with the Tennessee LLC Act, the LLC shall indemnify and hold harmless any Member, Director, officer, or Affiliate of a Member (individually, in each case, an “Indemnitee”) to the fullest extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities (joint or several), expenses of any nature (including attorneys’ fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which the Indemnitee may be involved or threatened to be involved, as a party or otherwise, arising out of or incidental to the business or activities of or relating to the LLC, regardless of whether the Indemnitee continues to be a Member, a Director, an officer or any Affiliate of a Member at the time any such liability or expense is paid or incurred; provided, however, that this provision shall not eliminate or limit the liability of an Indemnitee (i) for any breach of the Indemnitee’s duty of loyalty to the LLC or its Members, (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the Indemnitee received any improper personal benefit.

(b)    Advances of Expenses. Expenses incurred by an Indemnitee in defending any claim, demand, action, suit, or proceeding subject to this Section 7.05 shall, from time to time, upon request by the Indemnitee, be advanced by the LLC prior to the final disposition of such claim, demand,

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action, suit or proceeding upon receipt by the LLC of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined in a judicial proceeding or a binding arbitration that such Indemnitee is not entitled to be indemnified as authorized in this Section 7.05.

(c)    Other Rights. The indemnification provided by this Section 7.05 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, vote of the Board of Directors or otherwise, as a matter of law or equity, both as to an action in the Indemnitee’s capacity as a Member, a Director, an officer or any Affiliate thereof, and as to an action in any other capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, and administrators of the Indemnitee.

(d)    Insurance. The LLC may purchase and maintain insurance on behalf of the Board of Directors and such other Persons as the Board of Directors shall determine against any liability that may be asserted against or expense that may be incurred by such Persons in connection with the offering of interests in the LLC or the business or activities of the LLC, regardless of whether the LLC would have the power to indemnify such Persons against such liability under the provisions of this Agreement.

(e)    Effect of Interest in Transaction. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.05 or otherwise by reason of the fact that the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(f)    No Third Party Rights. The provisions of this Section 7.05 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

ARTICLE VIII

DEADLOCK

8.01    Deadlock.

(a)    “Deadlock” Defined. “Deadlock” shall occur if two (2) successive meetings of the Board of Directors called upon proper notice pass without (i) a quorum being present or (ii) without the Board of Directors reaching a decision on any matter presented for decision, subject to the provisions of Section 7.01(d) concerning amendments to an approved Annual Business Plan. Deadlock also shall occur if the Members cast a tie vote on a matter pursuant to Section 7.01(e), Section 12.01(a) or Section 13.10(a) after such matter is submitted to them in the form of a proposed written consent or Member meeting, and during the sixty (60) day period following this tie vote, the Members are unable to break the tie. (The sixty (60) day period shall commence on the date that the Member who was last to receive the proposed written consent received it or on the date of the Member meeting resulting in the tie vote.)

(b)    Resolution of Deadlock. If a Deadlock occurs, either Member may call for a non-binding mediation to take place to attempt to break the Deadlock. Any such mediation would be conducted according to the rules set forth in Section 13.14. If such mediation does not resolve the Deadlock, the Members may agree to submit the Deadlock to a binding arbitration, in which case such

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arbitration would be conducted according to rules as agreed to by the Members and in a venue as agreed to by the Members. If the Members do not submit the Deadlock to binding arbitration within thirty (30) days of the conclusion of the mediation, then each Member (for this purpose, the “First Member”) shall have the option (the “Buy-Sell Option”), for a period of sixty (60) days immediately following the end of such thirty (30) day period (the “Option Period”), to give written notice to the other Member (for this purpose, the “Second Member”) that the First Member is willing to purchase all of the Membership Interest then owned by such Second Member (the “Offer”). In the event neither Member elects to exercise the Buy-Sell Option within the Option Period, the LLC shall be dissolved in accordance with the provisions of Article XII. In the event either Member elects to exercise the Buy-Sell Option within the Option Period, the chief executive officers of the First Member and Second Member shall then promptly agree in good faith upon and engage an independent, third party appraiser to value the LLC and each Member’s respective Membership Interest. Such Person shall not have previously represented or provided services to either the First Member or Second Member, unless otherwise agreed by the Members. The appraisal costs shall be split equally between the Members. The Second Member shall have the option, for thirty (30) days after delivery of the appraiser’s determination of the value of the LLC (the “Election Period”), to elect to purchase all of the First Member’s Membership Interest for the price and on the terms specified in the Offer, adjusted so that the price is no lower than the value of the First Member’s Membership Interest as determined by the appraiser. In the event the Second Member fails to elect to purchase all of the First Member’s Membership Interest within the Election Period, then the Second Member shall sell its entire Membership Interest to the First Member for the price and on the terms specified in the Offer, adjusted so that the price is no lower than the value of the Second Members’ Membership Interest as determined by the appraiser. The applicable purchase and sale shall be completed within six (6) months of the date the Offer is delivered to the Second Member.

ARTICLE IX

BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS; FISCAL YEAR

9.01    Bank Accounts. All funds of the LLC shall be deposited in its name in such checking and savings accounts, time deposits, certificates of deposit or other accounts at such banks as shall be designated by the Board of Directors from time to time, and the Board of Directors shall arrange for the appropriate conduct of such account or accounts.

9.02    Books and Records. The Board of Directors shall keep, or cause to be kept, accurate, full and complete books and accounts showing assets, liabilities, income, operations, transactions and the financial condition of the LLC. Any Member or its designee shall have access thereto at any reasonable time during regular business hours and shall have the right to copy said records at the expense of the LLC.

9.03    Financial Statements; Annual Business Plan; and Information.

(a)    Preparation. All financial statements prepared pursuant to this Section 9.03 shall present fairly the financial position and operating results of the LLC and shall be prepared in accordance

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with U.S. generally accepted account principles consistently applied, with all monetary amounts expressed in U.S. dollars.

(b)    Quarterly Report. Within sixty (60) days after the end of each quarterly period (the “Fiscal Quarter”) of each Fiscal Year, beginning with the first Fiscal Quarter after commencement of operations, the LLC shall prepare and submit or cause to be prepared and submitted to the Members an unaudited statement of profit and loss for the LLC for such Fiscal Quarter and an unaudited balance sheet of the LLC dated as of the end of such Fiscal Quarter, in each case prepared in accordance with U.S. generally accepted accounting principles consistently applied.

(c)    Annual Reports. Within ninety (90) days after the end of each Fiscal Year after commencement of operations, the President shall cause to be prepared and submitted to the Board of Directors and Members an audited balance sheet, together with statements of profit and loss, Members’ equity and changes in financial position for the LLC during such Fiscal Year, such audit to be performed to the highest standards required of either Member to comply with its regulatory and contractual requirements.

(d)    Other Reports. The Board of Directors shall provide to the Members such other reports and information concerning the business and affairs of the LLC as may be required by the Tennessee LLC Act or by any other law or regulation of any regulatory body applicable to the LLC.

9.04    Accounting Decisions. All decisions as to accounting matters, except as specifically provided to the contrary herein, shall be made by the Board of Directors.

9.05    Where Maintained. The books, accounts and records of the LLC at all times shall be maintained at the Financial Share Service Center in Waalwijk, the Netherlands.

9.06    Fiscal Year. The fiscal year of the LLC for financial, accounting and Federal, state and local income tax purposes shall initially be the calendar year (the “Fiscal Year”). The Board of Directors shall have authority to change the beginning and ending dates of the Fiscal Year if the Board of Directors deems such change to be necessary or appropriate to the business of the LLC, and shall give written notice of any such change to the Members within thirty (30) days after the occurrence thereof.

ARTICLE X

TRANSFER OF MEMBERSHIP INTERESTS AND THE ADDITION, SUBSTITUTION AND WITHDRAWAL OF MEMBERS

10.01    Transfer of LLC Interests.

(a)    Definition of Transfer. The term “transfer,” when used in this Article X with respect to a Membership Interest, shall include any sale, assignment, gift, pledge, hypothecation, mortgage, exchange or other disposition, except that such term shall not include any pledge, mortgage or hypothecation of or granting of a security interest in a Membership Interest in connection with any financing obtained on behalf of the LLC.

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(b)    Void Transfers. It is understood that transfers of Membership Interests by Members shall be restricted. The LLC Interest or Voting Interest relating to the Membership Interest may not be transferred separately from the Membership Interest. No Membership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article X. Any transfer or purported transfer of any Membership Interest, LLC Interest or Voting Interest not made in accordance with this Article X (an “Unauthorized Transfer”) shall be void ab initio; provided, however, if the LLC is required under the Tennessee LLC Act or other applicable law, as reasonably determined by the Members or by a court of competent jurisdiction, to recognize an Unauthorized Transfer, the Person to whom such Membership Interest, LLC Interest or Voting Interest are transferred shall have only the rights of an assignee with respect to the interests transferred.

10.02    Restrictions on Transfers.

(a)    Consent Required. Except as provided in Section 10.02(b) or Section 10.03, no Member may transfer all or any portion of its Membership Interest or its Capital Account without the express written consent of the non-transferring Member.

(b)    Exempt Transfers. At any time, the Members shall be permitted to transfer all, but not less than all, of their Membership Interest, directly or indirectly, to wholly-owned subsidiaries, but only for so long as they remain wholly-owned. Similarly, the Members may reverse such transfers and transfer, directly or indirectly, the Membership Interest back to themselves. These transfers are referred to as “Exempt Transfers.” Such transfers will not be subject to any “right of first refusal” as defined in this Article X. The transferees in any such sales will be considered “Masland” or “Desso,” as the case may be, for purposes of this Agreement.

10.03    Right of First Refusal.

(a)    Offering Notice. If either Member (an “Offering Member”) desires to transfer all, but not less than all, of such Member’s Membership Interest (the “Offered Membership Interest”) to any Person, other than the other Member, such Offering Member shall give written notice thereof (the “Offering Notice”) to the LLC and the other Member (the “Other Member”). The Offering Notice shall state (i) the name and address of the prospective Person (the “Prospective Assignee”) to whom the Offering Member desires to Transfer such Offered Membership Interest, (ii) the price of the Offered Membership Interest to be paid by the Prospective Assignee, which price must be payable in cash (the “Proposed Purchase Price”), and the other terms and conditions of the offer, (iii) that the proposed purchase of the Offered Membership Interest shall be consummated no later than thirty (30) days after the expiration of the options referred to in Section 10.03(b), (iv) that the offer of the Prospective Assignee has been accepted by the Offering Member, subject to the rights of the Other Member contained in this Section 10.03, (v) that the Prospective Assignee acknowledges and agrees to the rights of the Other Member contained in this Section 10.03 and (vi) that the Prospective Assignee has agreed to become a party to this Agreement and to be bound by the terms and conditions hereof to the same extent and in the same manner as the Offering Member. In addition, the Offering Member shall provide evidence reasonably satisfactory to the LLC and the Other Member as to the Prospective Assignee’s financial ability to consummate the proposed purchase.

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(b)     The Other Member shall have the option (i) to allow the sale to the Prospective Assignee to go forward, or (ii) to cause the LLC to engage an independent, third party appraiser, such appraiser to be agreed upon in good faith by the Members and such costs of appraisal to be split equally between the Members, to determine the value of the LLC and of the Offered Membership Interest (which shall be not less than book value), whereupon the Other Member (x) may cause the LLC to purchase all, but not less than all, of the Offered Membership Interest, or may itself purchase, individually or with the LLC, all, but not less than all, of the Offered Membership Interest, at a price equal to the greater of the Proposed Purchase Price and the value of such Membership Interest as determined by the appraiser, and any such purchase shall be upon substantially the same terms and conditions as contained in the Offering Notice on which the Prospective Assignee has agreed to purchase the Offered Membership Interest (except for the Proposed Purchase Price, if less than the value of such Membership Interest as determined by the appraiser), or (y) allow the sale to the Prospective Assignee to go forward. The Other Member’s option to purchase and/or cause the LLC to purchase the Offered Membership Interest shall be exercisable by delivering written notice to such effect, prior to the expiration of thirty (30) days from receipt of the Offering Notice, to the Offering Member and the LLC. Closing of the purchase by the LLC and/or the Other Member shall be within thirty (30) days of the delivery of determination of value by the appraiser.

(c)    Sale by Offering Member. If the LLC and/or the Other Member does not purchase all of the Offered Membership Interest, then the Offering Member shall be free, up to and including the date specified in the Offering Notice, to transfer all (but not less than all) of the Offered Membership Interest to the Prospective Assignee in accordance with the terms set forth in the Offering Notice, subject to the rights described in Section 10.03(d). If the terms of such sale are changed or if the sale is not consummated by the date specified in the Offering Notice, the restrictions provided for herein shall again become effective, and no transfer of such Offered Membership Interest may be made thereafter by the Offering Member without again offering the same to the Other Member in accordance with this Section 10.03, unless the Other Member waives this requirement in writing.

(d)    Approval of Prospective Assignee. The Other Member shall have the right to approve the transfer of the Offered Membership Interest to the Prospective Assignee. If the Offering Member transfers the Offered Membership Interest to the Prospective Assignee without written approval from the Other Member, then the Other Member shall have the option, to be exercised with sixty (60) days of such transfer, to put all of its Membership Interest to the Offering Member on the same terms and conditions, including price, according to which the Offered Membership Interest was purchased by the Prospective Assignee, whereupon the Offering Member shall purchase such Membership Interest, in cash, within thirty (30) days of receipt of notice of exercise of such put option.

10.04    Conditions to Transfers. A transfer shall not be permitted under this Agreement unless and until the following conditions are satisfied:

(a)    Except in the case of a transfer of Membership Interest involuntarily by operation of law, the transferor and transferee shall execute and deliver to the LLC such documents and instruments of conveyance as the LLC and its counsel may deem necessary or appropriate to effect such transfer and to confirm the agreement of the transferee to be bound by the provisions of this Agreement. In any case not

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described in the preceding sentence, the transfer shall be confirmed by presentation to the LLC of legal evidence of such transfer, in form and substance satisfactory to counsel to the LLC.

(b)    The transferee shall furnish to the LLC the transferee’s taxpayer identification number, sufficient information to determine the transferee’s initial tax basis in the Membership Interest transferred, and any other information reasonably necessary to permit the LLC to file all required federal and state tax returns and other legally required information, statements or returns. The LLC shall not be required to make any distribution otherwise provided for in this Agreement with respect to any transferred Membership Interest until it has received such information.

(c)    Except in the case of a transfer involuntarily by operation of law, either (i) such Membership Interest shall be registered under the Securities Act and any applicable state securities laws, or (ii) the transferor shall provide evidence satisfactory to the LLC and its counsel that such transfer is exempt from all applicable registration requirements and will not violate any applicable laws regulating the transfer of securities.

10.05    Rights of Unadmitted Assignees. An assignee of Membership Interests who is not then a Member or who has not been admitted in accordance with Section 10.06 shall be entitled only to an LLC Interest with respect to the Membership Interest transferred to such assignee. Such an assignee shall (a) have no right to vote or otherwise participate in matters of the LLC, (b) take no part in the management of the LLC’s business and affairs, (c) have no right to become a Member, (d) have no right to any information or accounting of the affairs of the LLC, (e) not be entitled to inspect the books or records of the LLC, and (f) not have any of the Voting Rights of a Member under the Tennessee LLC Act or this Agreement.

10.06    Admission of Assignees as Members. Except in the case of an assignee who purchases the entire Membership Interests of both Members and thereby becomes a sole Member, an assignee who has purchased a Membership Interest in accordance with Section 10.04 shall be admitted to the LLC as a Member upon satisfaction of the following conditions:

(a)    The assignee becomes a party to this Agreement as a Member and executes such documents and instruments as the LLC may reasonably request and as may be necessary or appropriate to confirm such Assignee as a Member in the LLC and such assignee’s agreement to be bound by the terms and conditions hereof;

(b)    The assignee pays or reimburses the LLC for all reasonable legal, filing, and publication costs that the LLC incurs in connection with the admission of the assignee as a Member with respect to the Membership Interest transferred; and

(c)    The assignee provides to the LLC evidence satisfactory to the LLC and its counsel of the authority of the assignee to become a Member and to be bound by the terms and conditions of this Agreement.

10.7    Distributions and Allocations upon Assignment. If any Membership Interests are transferred during any accounting period in compliance with the provisions of this Article X, Net Income,

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Net Losses, each item thereof, and all other items attributable to such Membership Interests for such period shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during the period in accordance with Section 706 of the Code, using any conventions permitted by law and selected by the President. All distributions on or before the date of such transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee. The LLC shall not incur any liability for making allocations and distributions in accordance with the provisions of this Section 10.07, whether or not the LLC has knowledge of any conveyance of ownership of any Membership Interests. In the absence of the admission of a Member in accordance with Section 10.06, any payment to a transferring Member shall acquit the LLC and the Board of Directors of all liability to any other persons who may be interested in such payment by reason of an assignment by such Member.

10.08    Lender Approval. In the event that, pursuant to the terms of any loan agreement, security agreement, mortgage, or other agreement existing at any time between the LLC and any lender, the approval of such lender is required prior to the time that any transfer or assignment of any Membership Interest in the LLC may occur, then, notwithstanding any provision of this Article X to the contrary, no transfer or assignment of any Membership Interest in the LLC shall be effective until all required approvals and/or consents of any such lender have been obtained.

10.09    Dealing with Members. The LLC, each Member, the Board of Directors, the President and any other Person or Persons having business with the LLC need deal only with Members who are admitted as Members or as substituted Members of the LLC pursuant to this Article X, and they shall not be required to deal with any other person by reason of transfer by a Member, except as otherwise provided in this Agreement.

10.10    No Right to Withdraw. No Member shall have any right to resign or otherwise withdraw from the LLC without the express written consent of all the other Members.

ARTICLE XI

ISSUANCE OF ADDITIONAL MEMBERSHIP INTERESTS

The LLC shall not issue or sell additional Membership Interests without the unanimous approval of the Members.

ARTICLE XII

DISSOLUTION AND LIQUIDATION

12.01    Events Causing Dissolution. The LLC shall be dissolved and its affairs wound up upon the occurrence of any of the following events:

(a)    the consent in writing by all of the Members to dissolve and wind up the affairs of the LLC;

(b)    the written notification of either Member if the actual net sales of the LLC do not meet the predefined minimum targets for such net sales and/or “EBIT” as expressed for any of the three

19

(3) initial years of operation of the LLC in the Initial Sales Plan, the first date for evaluation being April 1, 2015.

(c)    the failure of the Distribution Agreement between the Members or their Affiliates concerning the sale of Desso carpet tiles in the U.S. to be converted by the parties thereto into a joint venture agreement for an operational joint venture entity by April 1, 2015, unless Members agree otherwise.

(d)    the sale or other disposition by the LLC of all or substantially all of the LLC Assets and the collection of all amounts derived from any such sale or other disposition, including all amounts payable to the LLC under any promissory notes or other evidences of indebtedness taken by the LLC, and the satisfaction of contingent liabilities of the LLC in connection with such sale or other disposition (unless the Members shall elect to distribute such indebtedness to the Members in liquidation);

(e)    the Bankruptcy, dissolution or liquidation of a Member;

(f)    a Change of Control of Masland or Desso, unless the other Member not undergoing a Change of Control decides not to dissolve the LLC, or Members want to dissolve;

(g)    a Deadlock pursuant to Article VIII which has been submitted to mediation but not resolved thereby, which the Members have not submitted to arbitration and for which neither Member has exercised the Buy-Sell Option (as described in Article VIII) within sixty (60) days of the conclusion of the mediation;

(h)    if a Member fails to perform any of its material obligations under this agreement (an “Event of Default”) which Event of Default is not cured within thirty (30) days of receipt of written notice of such default; or

(i)    the occurrence of any event that, under the Tennessee LLC Act, would cause the dissolution of the LLC or that would make it unlawful for the business of the LLC to be continued.

12.02    Winding Up of LLC.

(a)    Upon the dissolution of the LLC, the Board of Directors and officers (or any other person or entity responsible for winding up the affairs of the LLC) shall proceed without any unnecessary delay to sell or otherwise liquidate the LLC Assets, pay or make due provision for the payment of all debts, liabilities and obligations of the LLC and make provision for the performance of all outstanding orders to be performed by the LLC.

(b)    The Board of Directors and officers (or any other person or entity responsible for winding up the affairs of the LLC) shall distribute the net liquidation proceeds and any other liquid assets of the LLC, after the payment of all debts, liabilities and obligations of the LLC (including, without limitation, all amounts owing to a Member under this Agreement or under any agreement between the LLC and a Member entered into by the Member other than in its capacity as a Member in the LLC), the payment of expenses of liquidation of the LLC, and the establishment of a reasonable reserve in an amount estimated by the Board of Directors to be sufficient to pay any amounts reasonably anticipated to

20

be required to be paid by the LLC, to the Members, first, pro rata, in proportion to the positive balances, if any, in their respective Capital Accounts until such Capital Accounts are reduced to zero sums, and, second, pro rata, in accordance with their respective Percentage Interests.

(c)    Upon the dissolution of the LLC other than due to an Event of Default, the Members may agree upon ongoing access of each Member to intellectual properties of the other Member related to the Business, for up to five (5) years, and ongoing supply of products by each Member to the other Member related to the Business, at then-current full costs of production plus a fifteen percent (15%) markup, for up to three (3) years. For the avoidance of doubt, upon the dissolution of the LLC due to an Event of Default, neither Member shall have access to the intellectual properties or products of the other Member, neither Member shall be allowed to use the marketing materials of the other Member then in existence and each Member can immediately compete in the Business upon failure of the Event of Default to be cured in the thirty (30) day period after notice.

12.03    Capital Account Deficit Balance Restoration Obligation. In no event shall any Member be liable with respect to, or be required to contribute capital to restore, a negative or deficit balance in such Member’s Capital Account upon the dissolution or liquidation of either the LLC or such Member’s Capital Account or at any other time.

12.04    Cancellation of Certificate of Formation. Upon the completion of the winding up and liquidation of the LLC, the Certificate of Formation shall be cancelled in accordance with the provisions of the Tennessee LLC Act.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

13.01    Compliance with Tennessee LLC Act. Each Member agrees not to take any action or fail to take any action which, considered alone or in the aggregate with other actions or events, would result in the termination of the LLC under the Tennessee LLC Act.

13.02    Additional Actions and Documents. Each of the Members hereby agrees to take or cause to be taken such further actions, to execute, acknowledge, deliver and file or cause to be executed, acknowledged, delivered and filed such further documents and instruments, and to use best efforts to obtain such consents, as may be necessary or as may be reasonably requested to fully effectuate the purposes, terms and conditions of this Agreement, whether before, at or after the closing of the transactions contemplated by this Agreement.

13.03    Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing (either by regular mail or electronic mail) and shall be deemed to have been sufficiently given (i) when delivered in person, (ii) on the third (3^rd) business day after mailing by first class United States mail if mailed in the United States to a United States address, (iii) on the next business day after mailing by a nationally recognized overnight courier service if mailed in the United States to a United States address, (iv) on the third (3^rd) business day after mailing by an internationally recognized overnight service if mailed internationally or (v) when delivered via facsimile or electronic mail with the original delivered via one of the preceding methods, to the following address (or to such

21

other address as a party may specify from time to time by written notice to all other parties to this Agreement):

If to Masland:

TDG Operations, LLC

2208 S. Hamilton Street

Dalton, GA 30721-4974

Attn: Jon A. Faulkner

Email:jon.faulkner@dixiegroup.com

with a copy to (which copy shall not constitute notice):

Miller & Martin PLLC

832 Georgia Avenue

Chattanooga, Tennessee 37402

Attn:John F. Henry

Fax:(423) 321-1567

Email:jhenry@millermartin.com

If to Desso:

Desso (U.S.A.), Inc.

10 Corbin Drive, Floor #2

Darien, Connecticut 06820

Attn: Tom Francken RV

Fax: __________________

Email:_________________

With a copy to:

Bencis Capital Partners

WTC Amsterdam Tower H- 9^th floor

Zuidplein 76

1077 XV Amsterdam, the Netherlands

Attn.: Dhr. Robert Falk

Fax: ___________________

Email: _______________________

13.04    Severability. The invalidity of any one or more provisions hereof or of any other agreement or instrument given pursuant to or in connection with this Agreement shall not affect the remaining portions of this Agreement or any such other agreement or instrument or any part thereof, all of which are included subject to the condition that they are held valid in law; and in the event that one or more of the provisions contained herein or therein should be invalid, or should operate to render this Agreement or any such other agreement or instrument invalid, this

22

Agreement and such other agreements and instruments shall be construed as if such invalid provisions had not been inserted.

13.05    Survival. It is the express intention and agreement of the Members that all covenants, agreements, statements, representations, warranties and indemnities made in this Agreement shall survive the execution and delivery of this Agreement.

13.06    Waivers. Neither the waiver by a Member of a breach of or a default under any of the provisions of this Agreement, nor the failure of a Member, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right, remedy or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights, remedies or privileges hereunder.

13.07    Exercise of Rights. No failure or delay on the part of a Member or the LLC in exercising any right, power or privilege hereunder and no course of dealing between the Members or between a Member and the LLC shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any other rights or remedies which a Member or the LLC would otherwise have at law or in equity or otherwise.

13.08    Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon and shall inure to the benefit of the Members and their respective successors and assigns.

13.09    Limitation on Benefits of this Agreement. Subject to Section 7.05, it is the explicit intention of the Members that no person or entity other than the Members and the LLC is or shall be entitled to bring any action to enforce any provision of this Agreement against any Member or the LLC, and that the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the Members (or their respective successors and assigns as permitted hereunder) and the LLC.

13.10    Amendments.

(a)    Amendments Procedure. Except as set forth in Section 2.03, the Certificate of Formation and this Agreement may only be modified or amended by the unanimous written consent of the Members.

(b)    Execution of Amendments. Each amendment to this Agreement shall be executed by all of the Members; and each Member covenants and agrees that it will execute any amendment to this Agreement that has been duly adopted in accordance with the provisions of this Section 13.10; provided, however, that in the event any Member fails to execute (or is unable to execute) any such duly adopted amendment, the President or the Secretary of the LLC may execute such amendment as attorney-in-fact for such Member.

(c)    Power of Attorney. Each Member makes, constitutes and appoints each of the President and the Secretary as its true and lawful attorney-in-fact for it and in its name, place, and stead

23

and for its use and benefit, to sign, execute, certify and deliver any amendment to this Agreement duly adopted by the Members in accordance with the terms of this Section 13.10; and either such attorney-in-fact, acting alone, may sign, execute, certify and deliver any amendment to this Agreement duly adopted by the Members, in accordance with the terms of this Section 13.10.

13.11    Entire Agreement. This Agreement (including the Addenda, Schedules and Exhibits hereto) contains the entire agreement between the Members with respect to the matters set forth herein, and supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein and therein, including but not limited to that certain Letter of Intent dated as of February 7, 2014 between Masland and Desso.

13.12    Regulatory Cooperation. Masland and Desso each agree to notify the other before taking any step relating to regulatory issues, including communicating on a formal or informal basis with any regulatory authority, and agree to cooperate in addressing all regulatory issues that arise. Masland and Desso will mutually agree upon the actions that will require the prior written consent of each of Masland and Desso.

13.13    Headings. Article, Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

13.14    Governing Law; Mediation. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Tennessee, without giving effect to any law that would render such choice of law ineffective. Any mediation among the Members, whether contemplated in connection with a Deadlock or otherwise agreed to among the Members, shall apply such law, shall be non-binding and shall take place within sixty (60) days of the call for such mediation, and the mediation shall be conducted by a mediator agreed upon by the Members, or if they cannot agree, each Member shall choose a mediator and the two mediators shall together choose a third mediator and such third mediator shall conduct the mediation. Any mediation shall take place in the U.S. at a location mutually agreed upon by the Members or, if the Members cannot agree, as chosen by the mediator. Expenses of the mediator will be paid one half by each Member, otherwise the expenses of each Member in connection with the mediation shall be borne by each Member.

13.15    Waiver of Jury Trial. Each of the parties hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or any of the transactions contemplated hereby.

13.16    Jurisdiction, Etc. Each of the parties hereto hereby irrevocably and unconditionally submit, for such party and such party’s property, to the jurisdiction of any Tennessee state court or federal court of the United States of America sitting in Hamilton County, Tennessee and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the transactions

24

contemplated hereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in any such Tennessee state court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

13.17    Execution in Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto.

13.18    Confidentiality.

(a)    Each Member acknowledges that during the term of this Agreement, it will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the LLC and the other Member that are not generally known to the public, including, but not limited to, information concerning business plans, financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, customer lists or other business documents that the LLC and/or the other Member treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, "Confidential Information"). In addition, each Member acknowledges that: (i) the LLC and other Member has invested, and continues to invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (ii) the Confidential Information provides the LLC and the other Member with a competitive advantage over others in the marketplace; and (iii) the LLC and the other Member would be irreparably harmed if its Confidential Information were disclosed to competitors or made available to the public. Without limiting the applicability of any other agreement to which any Member is subject, no Member shall, directly or indirectly, disclose or use (other than solely for the purposes of such Member monitoring and analyzing its investment in the LLC or aiding the operation of the LLC) at any time, including, without limitation, use for personal, commercial or proprietary advantage or profit, either during its association with the LLC or thereafter, any Confidential Information of the LLC or the other Member of which such Member is or becomes aware. Each Member in possession of Confidential Information of the LLC or the other Member shall take all appropriate steps to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft.

(b)    Nothing contained in this Section shall prevent any Member from disclosing Confidential Information: (i) upon the order of any court or administrative agency; (ii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Member; (iii) to the extent compelled by legal process, or required or requested pursuant to subpoena, interrogatories or other

25

discovery requests or required pursuant to securities laws, stock exchange regulation or other applicable laws, regulations or rules; (iv) to the extent necessary in connection with the exercise of any remedy hereunder; (v) to the other Member; (vi) to such Member's representatives who, in the reasonable judgment of such Member, need to know such Confidential Information and are subject to confidentiality agreements at least as restrictive as those in this Section; or (vii) with respect to the Confidential Information of the LLC, to any potential Prospective Assignee in connection with a proposed Transfer of Membership Interests from such Member to such Prospective Assignee, as long as such Prospective Assignee agrees to be bound by the provisions of this Section as if a Member; provided, that in the case of clause (i), (ii) or (iii), such Member shall notify the LLC and other Member of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the LLC and other Member) and use reasonable efforts to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the LLC and the other Member, when and if available.

(c)    The restrictions of this Section shall not apply to Confidential Information that: (i) is or becomes generally available to the public other than as a result of a disclosure by a Member in violation of this Agreement; (ii) is or has been independently developed or conceived by such Member without use of Confidential Information; or (iii) becomes available to such Member or any of its Representatives on a non-confidential basis from a source other than the LLC, the other Member or any of their respective representatives, provided, that such source is not known by the receiving Member to be bound by a confidentiality agreement regarding the Confidential Information.

(d)    The obligations of each Member under this Section shall survive for a period of five (5) years after the (i) the termination, dissolution, liquidation and winding up of the LLC, (ii) the withdrawal of such Member from the LLC, and (iii) such Member's Transfer of its Membership Interests.

13.19    Announcements. Except as required by law or applicable stock exchange regulation, no Member shall make any announcement, press release or other public statement relating in any manner to this Agreement, the terms hereof or the relationship of the parties hereto without first obtaining the consent of the other Member to the disclosure proposed to be made. The other Member hereto shall not unreasonably withhold its consent to any request made by pursuant to this Section 13.19. The Members shall use their best efforts to consult and coordinate with each other before making any announcement, press release or other public statement as required by law or applicable stock exchange regulation.

13.20    Further Assurances. The Members each agree to cooperate, and to execute and deliver in a timely fashion any and all additional documents, to effectuate the purposes of the LLC and this Agreement.

13.21    Specific Performance. Each Member agrees that the LLC and the other Members would be irreparably damaged if any of the provisions of this Agreement are not performed or observed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the LLC and each Member may be entitled, at law or in equity, they shall be entitled to injunctive relief to prevent or remedy

26

breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of competent jurisdiction.

[Signature Page Following]

27

IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability Company Agreement as of the day and year first set forth above.

TDG OPERATIONS, LLC

By:    /s/ Jon Faulkner

Name:    Jon Faulkner            

Title:    President

DESSO (U.S.A.), INC.

By:    /s/ John Reader

Name:    John Reader            

Title:    Managing Director

28

XML

Employee Benefit Plans (Tables)

3 Months Ended

Mar. 29, 2014

Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

Components of net periodic benefit cost (credit) for all postretirement plans are summarized as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Service cost	$	2		$	2
Interest cost	5			6
Amortization of prior service credits	(22		)	(22		)
Recognized net actuarial gains	(10		)	(10		)
Net periodic benefit cost (credit)	$	(25	)	$	(24	)

XML

Long-Term Debt and Credit Arrangements (Obligation to Development Authority of Gordon County) (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 29, 2014	Dec. 28, 2013	Mar. 29, 2014 Note payable, Development Authority [Member] M	Nov. 02, 2012 Note payable, Development Authority [Member] Rate
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage				6.00%
Obligation to Development Authority of Gordon County	$ 4,194	$ 4,447		$ 5,500
Debt Instrument, Periodic Payment			$ 106
Term of Obligation to Development Authority of Gordon County (in months)			57

XML

Goodwill and Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 29, 2014	Dec. 28, 2013		Dec. 29, 2012
Goodwill [Line Items]
Goodwill	$ 3,389	$ 1,680
Additional goodwill recognized during period	0	1,709	[1]
Impairment losses recognized during the period	0	0
Other changes in the carrying amounts during the period	0	0
Goodwill	3,389	3,389
Goodwill	3,389	3,389		1,680
Accumulated impairment losses	$ 0	$ 0		$ 0

[1] During 2013, the Company recorded goodwill related to the Robertex acquisition.

XML

Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 29, 2014		Mar. 30, 2013
Basic earnings (loss) per share:
Income from continuing operations	$ 3,308		$ 651
Less: Allocation of earnings to participating securities	(135)		(24)
Income from continuing operations available to common shareholders - basic	3,173		627
Basic weighted-average shares outstanding (1)	12,789	[1]	12,674	[1]
Basic earnings per share - continuing operations	$ 0.25		$ 0.05
Diluted earnings (loss) per share:
Income from continuing operations available to common shareholders - basic	3,173		627
Add: Undistributed earnings reallocated to unvested shareholders	2		0
Income from continuing operations available to common shareholders - basic	$ 3,175		$ 627
Effect of dilutive securities:
Stock options (2)	166	[2]	2	[2]
Directors' stock performance units (2)	62	[2]	63	[2]
Diluted weighted-average shares outstanding (1)(2)	13,017	[1],[2]	12,739	[1],[2]
Diluted earnings per share - continuing operations	$ 0.24		$ 0.05
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	123		691

[1] Includes Common and Class B Common shares, in thousands.

[2] Because their effects are anti-dilutive, 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. Aggregate shares excluded for the three months ended March 29, 2014 and March 30, 2013 were 123 and 691, respectively.

XML

Long-Term Debt and Credit Arrangements (Note Payable - Robertex Acquisition) (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 29, 2014	Dec. 28, 2013	Mar. 29, 2014 Note Payable - Robertex Acquisition [Member] Y	Jul. 01, 2013 Note Payable - Robertex Acquisition [Member] Rate
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage				4.50%
Note payable - Robertex acquisition	$ 3,809	$ 3,789	$ 3,749	$ 4,000
Term of Note Payable			5
Debt Instrument, Annual Principal Payment			$ 800

XML

Discontinued Operations (Environmental Remediation) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014 sites	Dec. 28, 2013
Site Contingency [Line Items]
Previously Owned Sites with Environmental Obligations	5
Sites that Require Natural Attenuation	4
Accrual for Environmental Loss Contingencies	$ 1,824	$ 1,830
Sites with Oxidation-Based Remediation [Member]
Site Contingency [Line Items]
Years to Remediate Environmental Obligations	7
Sites with Pump and Treat Remediation [Member]
Site Contingency [Line Items]
Years to Remediate Environmental Obligations	25
Sites with Natural Attenuation [Member] | Minimum [Member]
Site Contingency [Line Items]
Years to Remediate Environmental Obligations	10
Sites with Natural Attenuation [Member] | Maximum [Member]
Site Contingency [Line Items]
Years to Remediate Environmental Obligations	20

XML

Property, Plant and Equipment, Net (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Property, Plant and Equipment [Line Items]
Land and improvements	$ 7,231	$ 7,231
Buildings and improvements	51,042	50,627
Machinery and equipment	159,853	149,040
Property, plant and equipment, gross	218,126	206,898
Accumulated depreciation	(135,283)	(132,413)
Property, plant and equipment, net	$ 82,843	$ 74,485

XML

Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 29, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

The changes in the carrying amounts of goodwill are as follows:

	Goodwill		Accumulated Impairment Losses		Net
Balance at December 29, 2012	$	1,680	$	—	$	1,680
Additional goodwill recognized during the period (1)	1,709		—		1,709
Impairment losses recognized during the period	—		—		—
Other changes in the carrying amounts during the period	—		—		—
Balance at December 28, 2013	3,389		—		3,389
Additional goodwill recognized during the period	—		—		—
Impairment losses recognized during the period	—		—		—
Other changes in the carrying amounts during the period	—		—		—
Balance at March 29, 2014	$	3,389	$	—	$	3,389

Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]

The following table represents the details of the Company's intangible assets:

Intangible assets subject to amortization:

	March 29, 2014							December 28, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	1,062	$	(55	)	$	1,007	$	1,062	$	(40	)	$	1,022
Rug design coding	144		(18		)	126		144		(14		)	130
Trade names	4,668		(59		)	4,609		1,368		(34		)	1,334
Total	$	5,874	$	(132	)	$	5,742	$	2,574	$	(88	)	$	2,486

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

Amortization expense for intangible assets is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Customer relationships	$	15	$	4
Rug design coding	4		4
Trade names	25		—
Amortization expense	$	44	$	8

XML

Subsequent Events (Details) (Subsequent Event [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014
Subsequent Event [Member]
Subsequent Event [Line Items]
Payments to Acquire Equity Method Investments	$ 500

XML

Other Comprehensive Income (Loss) (Accumulated Other Comprehensive Income (Loss)) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Abstract]
Accumulated other comprehensive loss - interest rate swaps	$ (144)
Accumulated other comprehensive - postretirement liabilities	360
Accumulated other comprehensive loss - total	216
Unrealized gain (loss) on interest rate swaps	(582)	12
Reclassification of loss into earnings from interest rate swaps	53	22
Amortization of unrealized loss on dedesignated interest rate swaps	0	68
Reclassification of net actuarial gain into earnings from postretirement benefit plans	(6)	(6)
Reclassification of prior service credits into earnings from postretirement benefit plans	(14)	(14)
Accumulated other comprehensive loss - interest rate swaps	(673)
Accumulated other comprehensive - postretirement liabilities	340
Accumulated other comprehensive loss - total	(333)
Unrealized gain (loss) on interest rate swaps - income taxes	(358)	8
Reclassification of loss into earnings from interest rate swaps - income taxes	33	13
Amortization of unrealized loss on dedesignated interest rate swap - income taxes	0	42
Reclassification of net actuarial gain into earnings from postretirement benefit plans - income taxes	(4)	(4)
Reclassification of prior service credits into earnings from postretirement benefit plans - income taxes	$ (8)	$ (8)

XML

Long-Term Debt and Credit Arrangements (Capital Lease Obligations) (Details) (Capital Lease Obligations [Member])	3 Months Ended
	Mar. 29, 2014 Y Rate
Minimum [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.90%
Term of Capital Lease Obligation (in months)	4
Maximum [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	7.40%
Term of Capital Lease Obligation (in months)	7

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Facility Consolidation Expenses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014
2014 Warehousing Distribution and Manufacturing Consolidation Plan [Member]
Restructuring Cost and Reserve [Line Items]
Expected Cost	$ 2,400
2014 Atlas Integration Plan [Member]
Restructuring Cost and Reserve [Line Items]
Incurred Cost for the Period	73
Expected Cost	1,500
Expected Cost Remaining	$ 1,427

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Discontinued Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Workers' compensation costs	$ (38)	$ (12)
Environmental remediation costs	(23)	(9)
Loss from discontinued operations, before taxes	(61)	(21)
Income tax benefit	(21)	(6)
Loss from discontinued operations, net of tax	$ (40)	$ (15)

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Stock Compensation Expense (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 29, 2014 Y	Mar. 30, 2013	Mar. 12, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 196	$ 201
Restricted Stock Granted in Period			101,315
Grant Date Fair Value of Restricted Stock			$ 1,588
Weighted Average Grant Date Fair Value of Resticted Stock			$ 15.675
Minimum Award Vesting Period of Restricted Stock Issued	2
Maximum Award Vesting Period of Restricted Stock Issued	13

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Facility Consolidation Expenses

3 Months Ended

Mar. 29, 2014

Restructuring and Related Activities [Abstract]

Facility Consolidation Expenses

FACILITY CONSOLIDATION EXPENSES

2014 Warehousing, Distribution & Manufacturing Consolidation Plan

On January 20, 2014, the Company developed a plan to align its warehousing, distribution and manufacturing to support its growth and manufacturing strategy resulting in better cost structure and improved distribution capabilities and customer service ("2014 Warehousing, Distribution & Manufacturing Consolidation Plan"). The key element and first major step of this plan is the leasing of a facility that will serve as a finished goods warehouse and a cut-order and distribution center in Adairsville, Georgia; such lease commencing on May 1, 2014. Costs related to the consolidation include moving and relocation expenses, information technology expenses and expenses relating to conversion and realignment of equipment. Estimated costs to complete this restructuring plan are expected to be approximately $2,400.

2014 Atlas Integration Plan

As a part of the March 19, 2014 acquisition of Atlas, the Company developed a plan to close the operations of the Atlas dyeing facility in Los Angeles and move the carpet dyeing of their products to the Company's dyeing operation located in Santa Ana, California ("2014 Atlas Integration Plan"). Costs related to the consolidation include equipment relocation, computer systems modifications and severance costs and should be completed in fiscal 2015. Total estimated costs to complete this restructuring plan are approximately $1,500. During the three months ended March 29, 2014, the Company incurred costs of $73 associated with this plan. There are approximately $1,427 remaining costs to be incurred under this plan.

Expenses incurred under these plans are classified in "facility consolidation expenses" in the Company's Consolidated Condensed Statements of Operations.

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Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Payables and Accruals [Abstract]
Compensation and benefits	$ 10,086	$ 8,233
Provision for customer rebates, claims and allowances	6,360	6,202
Advanced customer deposits	4,239	1,862
Outstanding checks in excess of cash	1,704	3,873
Other	8,111	6,032
Accrued expenses	$ 30,500	$ 26,202

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Other (Income) Expense (Tables)

3 Months Ended

Mar. 29, 2014

Other (Income) Expense [Abstract]

Schedule of Other Operating Cost and Expense, by Component [Table Text Block]

Other operating (income) expense, net is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Other operating (income) expense, net:
Insurance proceeds (1)	$	—	$	(202	)
Loss on property, plant and equipment disposals	—		10
Loss on currency exchanges	120		37
Retirement expenses	31		39
Miscellaneous (income) expense	1		(44		)
Other operating (income) expense, net	$	152	$	(160	)

(1) The Company recognized a settlement gain of $202 from a company-owned insurance policy during the three months ended March 30, 2013.

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

Other (income) expense, net is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Other (income) expense, net:
Miscellaneous (income) expense	$	10	$	8
Other (income) expense, net	$	10	$	8

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Other (Income) Expense (Components of Other Nonoperating (Income) Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Other (income) expense, net:
Miscellaneous (income) expense	$ 10	$ 8
Other (income) expense, net	$ 10	$ 8

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 29, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table reflects the fair values of assets and liabilities measured and recognized at fair value on a recurring basis on the Company's Consolidated Condensed Balance Sheets as of March 29, 2014 and December 28, 2013:

	March 29, 2014		December 28, 2013		Fair Value Hierarchy Level
Assets:
Rabbi trust (1)	$	14,317	$	14,242	Level 2
Interest rate swaps (2)	92		556		Level 2
Liabilities:
Interest rate swaps (2)	$	1,203	$	813	Level 2
Deferred compensation plan (3)	13,013		13,210		Level 1
Contingent consideration (4)	2,738		2,751		Level 3

(1) The Company maintains a rabbi trust that serves as an investment designed to offset its deferred compensation plan liability. The investment assets of the trust consist of life insurance policies for which the Company recognizes income or expense based upon changes in cash surrender value.

(2) The fair value of the interest rate swaps was obtained from external sources. The interest rate swaps were valued using observable inputs (e.g., LIBOR yield curves, credit spreads). Valuations of interest rate swaps may fluctuate considerably from period-to-period due to volatility in underlying interest rates, which are driven by market conditions and the duration of the instrument. Credit adjustments could have a significant impact on the valuations due to changes in credit ratings of the Company or its counterparties.

(3) Senior management and other highly compensated associates may defer a specified percentage of their compensation into a non-qualified deferred compensation plan. Changes in the value of the deferred compensation under this plan is recognized each period based on the fair value of the underlying measurement funds.

(4) As a result of the Colormaster and Crown Rug acquisitions in 2012 and the Robertex acquisition in 2013, the Company recorded contingent consideration liabilities at fair value. These fair value measurements were based on calculations that utilize significant inputs not observable in the market including forecasted revenues, gross margins and discount rates and thus represent Level 3 measurements. These fair value measurements are directly impacted by the Company's estimates. Accordingly, if the estimates are higher or lower than the estimates within the fair value measurement, the Company would record additional charges or benefits, respectively, as appropriate.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Changes in the fair value measurements using significant unobservable inputs (Level 3) during the three months ending March 29, 2014 and March 30, 2013 were as follows:

	March 29, 2014			March 30, 2013
Beginning balance	$	2,751		$	1,928
Fair value adjustments	45			42
Settlements	(58		)	(107		)
Ending balance	$	2,738		$	1,863

Fair Value, by Balance Sheet Grouping [Table Text Block]

The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:

	March 29, 2014				December 28, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	355	$	355	$	255	$	255
Notes receivable, including current portion	282		282		282		282
Interest rate swaps	92		92		556		556
Financial Liabilities:
Long-term debt and capital leases, including current portion	132,607		129,539		107,988		101,752
Interest rate swaps	1,203		1,203		813		813

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Long-Term Debt and Credit Arrangements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Debt Instrument [Line Items]
Revolving credit facility - Tranche A	$ 103,052	$ 85,274
Revolving credit facility - Tranche B	5,380	0
Obligation to Development Authority of Gordon County	4,194	4,447
Note payable - Robertex acquisition	3,809	3,789
Equipment notes payable	7,568	7,987
Notes payable	2,648	2,210
Capital lease obligations	5,956	4,281
Total long-term debt	132,607	107,988
Less: current portion of long-term debt	(12,330)	(6,229)
Long-term debt	$ 120,277	$ 101,759

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Employee Benefit Plans (Other Postretirement Plans - Funded Status) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract]
Service cost	$ 2	$ 2
Interest cost	5	6
Amortization of prior service credits	(22)	(22)
Recognized net actuarial gains	(10)	(10)
Net periodic benefit cost (credit)	$ (25)	$ (24)

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Derivatives (Summary of Derivative Instruments) (Details) (Interest Rate Swap [Member], USD $) In Thousands, unless otherwise specified	Mar. 29, 2014 Rate
Effective October 3, 2011 through September 1, 2016 [Member]
Derivative [Line Items]
Notional Amount	$ 10,000
Fixed Interest Rate	1.33%
Effective March 1, 2013 through September 1, 2016 [Member]
Derivative [Line Items]
Notional Amount	10,000
Fixed Interest Rate	1.62%
Effective June 1, 2013 through September 1, 2016 [Member]
Derivative [Line Items]
Notional Amount	5,000
Fixed Interest Rate	1.70%
Effective September 1, 2016 through September 1, 2021 [Member]
Derivative [Line Items]
Notional Amount	25,000
Fixed Interest Rate	3.105%
Effective September 1, 2015 through September 1, 2021 [Member]
Derivative [Line Items]
Notional Amount	$ 25,000
Fixed Interest Rate	3.304%

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Acquisition (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Dec. 28, 2013	Mar. 29, 2014 Atlas Carpet Mills [Member] Rate	Mar. 19, 2014 Atlas Carpet Mills [Member]
Business Acquisition [Line Items]
Transaction costs of acquisition					$ 425
Cash paid				16,543
Accrued consideration for working capital adjustment in acquisition	(1,403)	0		1,403
Accrued consideration for holdbacks				923
Total purchase price consideration				18,869
Cash					2,466
Receivables					4,304
Inventories					11,511
Other current assets					956
Assets held for sale	3,250		0		3,250
Property, plant and equipment					6,929
Finite intangible assets					3,300
Other assets					623
Accounts payable					(2,286)
Accrued expenses					(3,036)
Capital lease obligation					(404)
Fair value of net assets acquired					27,613
Gain on purchase of business	8,744	0		(8,744)
Revenue of Atlas since acquisition date				$ 1,666
Percentage of revenue of Atlas since acquisition date				2.00%

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Receivables, Net

3 Months Ended

Mar. 29, 2014

Receivables [Abstract]

Receivables, Net

RECEIVABLES, NET

Receivables are summarized as follows:

	March 29, 2014			December 28, 2013
Customers, trade	$	48,142		$	41,898
Other receivables	2,072			2,306
Gross receivables	50,214			44,204
Less allowance for doubtful accounts	(197		)	(141		)
Receivables, net	$	50,017		$	44,063

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Derivatives (Derivatives - Fair Value and Designation) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Derivative Asset, Fair Value, Net [Abstract]
Interest rate swaps	$ 92	$ 556
Derivative Liability, Fair Value, Net [Abstract]
Interest rate swaps	1,203	813
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other Assets [Member]
Derivative Asset, Fair Value, Net [Abstract]
Interest rate swaps	92	556
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Accrued Liabilities [Member]
Derivative Liability, Fair Value, Net [Abstract]
Interest rate swaps	336	328
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other Liabilities [Member]
Derivative Liability, Fair Value, Net [Abstract]
Interest rate swaps	$ 867	$ 485

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Discontinued Operations (Tables)

3 Months Ended

Mar. 29, 2014

Discontinued Operations [Abstract]

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]

Discontinued operations are summarized as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Loss from discontinued operations:
Workers' compensation costs	$	(38	)	$	(12	)
Environmental remediation costs	(23		)	(9		)
Loss from discontinued operations, before taxes	(61		)	(21		)
Income tax benefit	(21		)	(6		)
Loss from discontinued operations, net of tax	$	(40	)	$	(15	)

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Receivables, Net (Tables)

3 Months Ended

Mar. 29, 2014

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Receivables are summarized as follows:

	March 29, 2014			December 28, 2013
Customers, trade	$	48,142		$	41,898
Other receivables	2,072			2,306
Gross receivables	50,214			44,204
Less allowance for doubtful accounts	(197		)	(141		)
Receivables, net	$	50,017		$	44,063

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Subsequent Events

3 Months Ended

Mar. 29, 2014

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Joint Venture and Debt Amendment

Effective April 16, 2014, TDG Operations, LLC, a subsidiary of the Company, and Desso (USA), Inc., a subsidiary of Desso B.V., a Netherlands based company, completed the formation of the previously announced joint venture, Desso Masland Hospitality, LLC. The purpose of the joint venture is to sell and distribute hospitality floorcovering products in the United States market, and such other territories as the parties may determine from time to time. The joint venture is intended to build the Company’s presence in the upscale hospitality market by combining the parties’ sales forces and product offerings. The Company entered into a Ninth Amendment to its senior credit facility to permit an investment up to $500 in the joint venture and permit the Company to sell inventory to the joint venture up to certain amounts.

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Long-Term Debt and Credit Arrangements (Equipment Notes Payable) (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 29, 2014	Dec. 28, 2013	Mar. 29, 2014 Minimum [Member] Equipment Note Payable [Member] Y Rate	Mar. 29, 2014 Maximum [Member] Equipment Note Payable [Member] Y Rate
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			1.00%	7.72%
Term of Note Payable			4	7
Escrow Deposit	$ 793	$ 1,401

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Receivables, Net (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Customers, trade	$ 48,142	$ 41,898
Other receivables	2,072	2,306
Gross receivables	50,214	44,204
Less allowance for doubtful accounts	(197)	(141)
Receivables, net	$ 50,017	$ 44,063

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Inventories (Tables)

3 Months Ended

Mar. 29, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories are summarized as follows:

	March 29, 2014			December 28, 2013
Raw materials	$	41,547		$	31,864
Work-in-process	21,030			16,880
Finished goods	57,449			57,983
Supplies and other	131			118
LIFO reserve	(13,331		)	(13,626		)
Inventories	$	106,826		$	93,219

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Property, Plant and Equipment, Net (Tables)

3 Months Ended

Mar. 29, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property, plant and equipment consists of the following:

	March 29, 2014			December 28, 2013
Land and improvements	$	7,231		$	7,231
Buildings and improvements	51,042			50,627
Machinery and equipment	159,853			149,040
	218,126			206,898
Accumulated depreciation	(135,283		)	(132,413		)
Property, plant and equipment, net	$	82,843		$	74,485

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Recent Accounting Pronouncements

3 Months Ended

Mar. 29, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2011, the Financial Accounting Standards Board ("FASB") issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” The amendments in this ASU required an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity was required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity had to provide the disclosures required by those amendments retrospectively for all comparative periods presented. In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210)—Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities". The ASU clarified that ordinary trade receivables and payables were not in the scope of ASU No. 2011-11. ASU No. 2011-11 applied only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that were either offset in accordance with specific criteria contained in the Codification or subject to a master netting arrangement or similar agreement. The effective date was the same as the effective date of ASU 2011-11. The adoption of these ASUs did not have a material effect on the Company's Consolidated Condensed Financial Statements.

In February 2013, the FASB issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date". This ASU provided guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance was fixed at the reporting date, except for obligations addressed within existing guidance in GAAP. For public entities, the ASU was effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The ASU shall be applied retrospectively to all prior periods presented for those obligations within the scope of this Subtopic that existed at the beginning of an entity's fiscal year of adoption. Early adoption was permitted. The adoption of this ASU did not have a material effect on the Company's Consolidated Condensed Financial Statements.

In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This ASU required an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward was not available at the reporting date, the unrecognized tax benefit will be presented in the financial statements as a liability and not combined with deferred tax assets. This ASU was effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted. The adoption of this ASU did not have a material effect on the Company's Consolidated Condensed Financial Statements.

In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity". The ASU was issued to change the requirements for reporting discontinued operations and to enhance the disclosures in this area. The ASU requires a disposal of a component of an entity or a group of components of an entity to be reported in discontinued operations if the disposal represents a strategic shift and will have a major effect on an entity's operations and financial results. The ASU will be effective prospectively for interim and annual reporting periods beginning after December 15, 2014. The adoption of this ASU will only impact the reporting and disclosures of future disposals, if any.

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Acquisition (Tables) (Atlas Carpet Mills [Member])

3 Months Ended

Mar. 29, 2014

Atlas Carpet Mills [Member]

Business Acquisition [Line Items]

Business Acquisition, Cost of Acquired Entity, Description of Purchase Price Components

The purchase price consideration was as follows:

Cash paid	$	16,543
Accrued consideration for holdbacks	923
Accrued consideration for working capital adjustment	1,403
Total purchase price consideration	$	18,869

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The Company expects these final valuations and assessments will be completed by the end of fiscal 2014, which may result in additional adjustments to the values presented in the following table:

Cash	$	2,466
Receivables	4,304
Inventories	11,511
Other current assets	956
Assets held for sale (1)	3,250
Property, plant and equipment	6,929
Finite intangible asset	3,300
Other assets	623
Accounts payable	(2,286		)
Accrued expenses	(3,036		)
Capital lease obligation	(404		)
Fair value of net assets acquired	$	27,613
Total consideration	18,869
Gain on purchase of business	$	(8,744	)

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Earnings Per Share (Tables)

3 Months Ended

Mar. 29, 2014

Earnings Per Share, Basic and Diluted [Abstract]

Schedule of Earnings Per Share Reconciliation [Table Text Block]

The following table sets forth the computation of basic and diluted earnings per share from continuing operations:

	Three Months Ended
	March 29, 2014			March 30, 2013
Basic earnings per share:
Income from continuing operations	$	3,308		$	651
Less: Allocation of earnings to participating securities	(135		)	(24		)
Income from continuing operations available to common shareholders - basic	$	3,173		$	627
Basic weighted-average shares outstanding (1)	12,789			12,674
Basic earnings per share - continuing operations	$	0.25		$	0.05
Diluted earnings per share:
Income from continuing operations available to common shareholders - basic	$	3,173		$	627
Add: Undistributed earnings reallocated to unvested shareholders	2			—
Income from continuing operations available to common shareholders - basic	$	3,175		$	627
Basic weighted-average shares outstanding (1)	12,789			12,674
Effect of dilutive securities:
Stock options (2)	166			2
Directors' stock performance units (2)	62			63
Diluted weighted-average shares outstanding (1)(2)	13,017			12,739
Diluted earnings per share - continuing operations	$	0.24		$	0.05

(1) Includes Common and Class B Common shares, in thousands.

(2) Because their effects are anti-dilutive, 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. Aggregate shares excluded for the three months ended March 29, 2014 and March 30, 2013 were 123 and 691, respectively.

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Long-Term Debt and Credit Arrangements (Amended Revolving Credit Facility) (Details) (Amended Revolving Credit Facility [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014 Rate
Line of Credit Facility [Line Items]
Proceeds from Lines of Credit	$ 5,438
Maximum Borrowing Capacity	150,000
Basis Spread on Variable Rate	3.50%
Commitment Fee Percentage	0.375%
Minimum Borrowing Capacity for No Financial Covenants	14,440
Line of Credit Facility, Amended Minimum Borrowing Capacity for No Financial Covenants	16,500
Remaining Borrowing Capacity	$ 20,634
Minimum [Member]
Line of Credit Facility [Line Items]
Fixed Charge Coverage Ratio	1.1
Alternative [Member] | Minimum [Member] | Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	1.50%
Alternative [Member] | Midpoint [Member] | Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	1.75%
Alternative [Member] | Maximum [Member] | Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	2.00%
Alternative B [Member] | Federal Funds [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	0.50%
Alternative B [Member] | Daily Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	1.00%
Alternative B [Member] | Minimum [Member] | Daily Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	0.50%
Alternative B [Member] | Midpoint [Member] | Daily Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	0.75%
Alternative B [Member] | Maximum [Member] | Daily Libor [Member]
Line of Credit Facility [Line Items]
Basis Spread on Variable Rate	1.00%

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Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014		Mar. 30, 2013
Unrealized gain (loss) on interest rate swaps:
Before income taxes	$ (940)		$ 20
Income taxes	(358)		8
Net of taxes	(582)		12
Reclassification of loss into earnings from interest rate swaps (1):
Before income taxes	86	[1]	35	[1]
Income taxes	33		13
Net of taxes	53		22
Amortization of unrealized loss on dedesignated interest rate swaps (1):
Before income taxes	0	[1]	110	[1]
Income taxes	0		42
Net of taxes	0		68
Reclassification of net actuarial gain into earnings from postretirement benefit plans (2):
Before income taxes	(10)	[2]	(10)	[2]
Income taxes	(4)		(4)
Net of taxes	(6)		(6)
Reclassification of prior service credits into earnings from postretirement benefit plans (2):
Before income taxes	(22)	[2]	(22)	[2]
Income taxes	(8)		(8)
Net of taxes	(14)		(14)
Other comprehensive income (loss)	$ (549)		$ 82

[1] Amounts for cash flow hedges reclassified from accumulated other comprehensive income (loss) to net income were included in interest expense in the Company's Consolidated Condensed Statement of Operations.

[2] Amounts for postretirement plans reclassified from accumulated other comprehensive income (loss) to net income were included in selling and administrative expenses in the Company's Consolidated Condensed Statement of Operations.

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Consolidated Condensed Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 355	$ 255
Receivables, net	50,017	44,063
Inventories	106,826	93,219
Prepaid expenses	7,563	5,630
Deferred income taxes	7,433	6,622
Assets held for sale	3,250	0
TOTAL CURRENT ASSETS	175,444	149,789
PROPERTY, PLANT AND EQUIPMENT, NET	82,843	74,485
OTHER ASSETS	28,110	24,592
TOTAL ASSETS	286,397	248,866
CURRENT LIABILITIES
Accounts payable	24,618	21,679
Accrued expenses	30,500	26,202
Current portion of long-term debt	12,330	6,229
TOTAL CURRENT LIABILITIES	67,448	54,110
LONG-TERM DEBT	120,277	101,759
DEFERRED INCOME TAXES	6,421	4,072
OTHER LONG-TERM LIABILITIES	18,467	18,154
TOTAL LIABILITIES	212,613	178,095
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized 80,000,000 shares, issued and outstanding - 12,522,462 shares for 2014 and 12,441,356 shares for 2013	37,567	37,324
Class B Common Stock ($3 par value per share): Authorized 16,000,000 shares, issued and outstanding - 898,884 shares for 2014 and 870,287 shares for 2013	2,697	2,611
Additional paid-in capital	137,135	137,170
Accumulated deficit	(103,282)	(106,550)
Accumulated other comprehensive income (loss)	(333)	216
TOTAL STOCKHOLDERS' EQUITY	73,784	70,771
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 286,397	$ 248,866

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Inventory Disclosure [Abstract]
Raw materials	$ 41,547	$ 31,864
Work-in-process	21,030	16,880
Finished goods	57,449	57,983
Supplies and other	131	118
LIFO reserve	(13,331)	(13,626)
Inventories	$ 106,826	$ 93,219

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Consolidated Condensed Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations	$ 3,308	$ 651
Loss from discontinued operations	(40)	(15)
Net income	3,268	636
Adjustments to reconcile net income to net cash used in operating activities, net of acquisition:
Depreciation and amortization	2,988	2,513
Provision (benefit) for deferred income taxes	1,875	(53)
Net loss on property, plant and equipment disposals	0	10
Gain on purchase of business	(8,744)	0
Stock-based compensation expense	196	201
Excess tax benefits from stock-based compensation	0	(41)
Changes in operating assets and liabilities:
Receivables	(1,650)	(7,731)
Inventories	(2,096)	106
Other current assets	(977)	173
Accounts payable and accrued expenses	1,758	1,696
Other operating assets and liabilities	(202)	(233)
NET CASH USED IN OPERATING ACTIVITIES	(3,584)	(2,723)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	(2,812)	(2,052)
Net cash paid in business acquisition	(14,077)	0
NET CASH USED IN INVESTING ACTIVITIES	(16,889)	(2,052)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on revolving credit facility	23,158	3,076
Payments on mortgage note payable	0	(185)
Payments on note payable related to acquisition	(233)	(237)
Payments on equipment financing	(419)	(297)
Payments on capital leases	(216)	(134)
Borrowings on notes payable	745	0
Payments on notes payable	(307)	(246)
Change in outstanding checks in excess of cash	(2,169)	2,847
Proceeds from stock option exercises	172	0
Repurchases of Common Stock	(74)	(204)
Excess tax benefits from stock-based compensation	0	41
Payments for debt issuance costs	(84)	0
NET CASH PROVIDED BY FINANCING ACTIVITIES	20,573	4,661
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	100	(114)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	255	491
CASH AND CASH EQUIVALENTS AT END OF PERIOD	355	377
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	789	865
Income taxes paid, net of tax refunds	58	62
Equipment purchased under capital leases	1,487	552
Assets acquired in acquisition, net of cash acquired	30,873	0
Liabilities assumed in acquisition	(5,726)	0
Accrued consideration for working capital adjustment in acquisition	(1,403)	0
Accrued consideration for holdbacks in acquisition	$ (923)	$ 0

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Fair Value Measurements (Fair Value Measurements - Liabilities Measured on Recurring Basis Unobservable Input Reconciliation) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 2,751	$ 1,928
Fair value adjustments	45	42
Settlements	(58)	(107)
Ending balance	$ 2,738	$ 1,863

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Product Warranty Reserves (Tables)

3 Months Ended

Mar. 29, 2014

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability [Table Text Block]

The following is a summary of the Company's product warranty activity.

	Three Months Ended
	March 29, 2014			March 30, 2013
Product warranty reserve at beginning of period	$	1,850		$	1,297
Warranty reserve assumed in business combination	209			—
Warranty liabilities accrued	1,014			900
Warranty liabilities settled	(1,208		)	(830		)
Changes for pre-existing warranty liabilities	136			(78		)
Product warranty reserve at end of period	$	2,001		$	1,289

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Employee Benefit Plans (Nonqualified Retirement Savings Plan) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Compensation and Retirement Disclosure [Abstract]
Liability to Participants	$ 13,013	$ 13,210
Cash Surrender Value of Life Insurance	$ 14,317	$ 14,242

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Stock Compensation Expense

3 Months Ended

Mar. 29, 2014

Share-based Compensation [Abstract]

Stock Compensation Expense

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 Condensed Financial Statements.  The number of shares to be issued is determined by dividing the specified dollar value of the award by the market value per share on the grant date.  The Company's stock compensation expense for the three months ended March 29, 2014 and March 30, 2013 was $196 and $201, respectively.

On March 12, 2014, the Company issued 101,315 shares of restricted stock to officers and other key employees. The grant-date fair value of the awards was $1,588, or $15.675 per share, and will be recognized as stock compensation expense over the vesting periods which range from 2 to 13 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.

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Long-Term Debt and Credit Arrangements (Tables)

3 Months Ended

Mar. 29, 2014

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

Long-term debt consists of the following:

	March 29, 2014			December 28, 2013
Revolving credit facility - Tranche A	$	103,052		$	85,274
Revolving credit facility - Tranche B	5,380			—
Obligation to Development Authority of Gordon County	4,194			4,447
Note payable - Robertex acquisition	3,809			3,789
Equipment notes payable	7,568			7,987
Notes payable	2,648			2,210
Capital lease obligations	5,956			4,281
Total long-term debt	132,607			107,988
Less: current portion of long-term debt	(12,330		)	(6,229		)
Long-term debt	$	120,277		$	101,759

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Other (Income) Expense

3 Months Ended

Mar. 29, 2014

Other Income and Expenses [Abstract]

Other (Income) Expense

OTHER (INCOME) EXPENSE

Other operating (income) expense, net is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Other operating (income) expense, net:
Insurance proceeds (1)	$	—	$	(202	)
Loss on property, plant and equipment disposals	—		10
Loss on currency exchanges	120		37
Retirement expenses	31		39
Miscellaneous (income) expense	1		(44		)
Other operating (income) expense, net	$	152	$	(160	)

(1) The Company recognized a settlement gain of $202 from a company-owned insurance policy during the three months ended March 30, 2013.

Other (income) expense, net is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Other (income) expense, net:
Miscellaneous (income) expense	$	10	$	8
Other (income) expense, net	$	10	$	8

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Income Taxes Income Tax Reconciliation, Narrative (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014 Rate	Mar. 30, 2013
Income Tax Disclosure [Abstract]
Effective income tax rate	37.00%
Gain on life insurance proceeds	$ 0	$ 202	[1]
Federal tax credits		$ 157

[1] The Company recognized a settlement gain of $202 from a company-owned insurance policy during the three months ended March 30, 2013.

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Basis of Presentation

3 Months Ended

Mar. 29, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") for interim financial statements which do not include all the information and footnotes required by such accounting principles for annual financial statements.  In the opinion of management, all adjustments (generally consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying financial statements.  The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 28, 2013.  Operating results for the three-month period ended March 29, 2014 are not necessarily indicative of the results that may be expected for the entire 2014 year.

The Company reclassified certain amounts in 2013 to conform to the 2014 presentation including the reclassification of the Company's spare parts inventory from inventory to prepaid expenses in the Consolidated Condensed Balance Sheets.

The Company has one reportable segment, carpet and rug manufacturing.

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Consolidated Condensed Balance Sheets (Parentheticals) (USD $)	Mar. 29, 2014	Dec. 28, 2013
Common stock, par value	$ 3.00	$ 3.00
Common stock, shares authorized	80,000,000	80,000,000
Common stock, shares issued	12,522,462	12,441,356
Class B Common stock, par value	$ 3.00	$ 3.00
Class B Common stock, shares authorized	16,000,000	16,000,000
Class B Common stock, shares issued	898,884	870,287

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Fair Value Measurements

3 Months Ended

Mar. 29, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 following table reflects the fair values of assets and liabilities measured and recognized at fair value on a recurring basis on the Company's Consolidated Condensed Balance Sheets as of March 29, 2014 and December 28, 2013:

	March 29, 2014		December 28, 2013		Fair Value Hierarchy Level
Assets:
Rabbi trust (1)	$	14,317	$	14,242	Level 2
Interest rate swaps (2)	92		556		Level 2
Liabilities:
Interest rate swaps (2)	$	1,203	$	813	Level 2
Deferred compensation plan (3)	13,013		13,210		Level 1
Contingent consideration (4)	2,738		2,751		Level 3

(1) The Company maintains a rabbi trust that serves as an investment designed to offset its deferred compensation plan liability. The investment assets of the trust consist of life insurance policies for which the Company recognizes income or expense based upon changes in cash surrender value.

(2) The fair value of the interest rate swaps was obtained from external sources. The interest rate swaps were valued using observable inputs (e.g., LIBOR yield curves, credit spreads). Valuations of interest rate swaps may fluctuate considerably from period-to-period due to volatility in underlying interest rates, which are driven by market conditions and the duration of the instrument. Credit adjustments could have a significant impact on the valuations due to changes in credit ratings of the Company or its counterparties.

(3) Senior management and other highly compensated associates may defer a specified percentage of their compensation into a non-qualified deferred compensation plan. Changes in the value of the deferred compensation under this plan is recognized each period based on the fair value of the underlying measurement funds.

(4) As a result of the Colormaster and Crown Rug acquisitions in 2012 and the Robertex acquisition in 2013, the Company recorded contingent consideration liabilities at fair value. These fair value measurements were based on calculations that utilize significant inputs not observable in the market including forecasted revenues, gross margins and discount rates and thus represent Level 3 measurements. These fair value measurements are directly impacted by the Company's estimates. Accordingly, if the estimates are higher or lower than the estimates within the fair value measurement, the Company would record additional charges or benefits, respectively, as appropriate.

Changes in the fair value measurements using significant unobservable inputs (Level 3) during the three months ending March 29, 2014 and March 30, 2013 were as follows:

	March 29, 2014			March 30, 2013
Beginning balance	$	2,751		$	1,928
Fair value adjustments	45			42
Settlements	(58		)	(107		)
Ending balance	$	2,738		$	1,863

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the three months ending March 29, 2014 or March 30, 2013. If any, the Company recognizes the transfers in or transfers out at the end of the reporting period.

The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:

	March 29, 2014				December 28, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	355	$	355	$	255	$	255
Notes receivable, including current portion	282		282		282		282
Interest rate swaps	92		92		556		556
Financial Liabilities:
Long-term debt and capital leases, including current portion	132,607		129,539		107,988		101,752
Interest rate swaps	1,203		1,203		813		813

The fair values of the Company's long-term debt and capital 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 notes receivable approximate their carrying amounts due to the short-term nature of the financial instruments.

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Document and Entity Information	3 Months Ended
	Mar. 29, 2014	Apr. 25, 2014 Common Class A [Member]	Apr. 25, 2014 Common Class B [Member]	Apr. 25, 2014 Common Class C [Member]
Entity Information [Line Items]
Entity Registrant Name	DIXIE GROUP INC
Entity Central Index Key	0000029332
Current Fiscal Year End Date	--12-27
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 29, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		12,536,062	898,884	0

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Derivatives

3 Months Ended

Mar. 29, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

The Company's earnings, cash flows and financial position are exposed to market risks relating to interest rates.  It is the Company's policy to minimize its exposure to adverse changes in interest rates and manage interest rate risks inherent in funding the Company with debt.  The Company addresses this risk by maintaining a mix of fixed and floating rate debt and entering into interest rate swaps for a portion of its variable rate debt to minimize interest rate volatility.

The following is a summary of the Company's interest rate swaps as of March 29, 2014:

Type	Notional Amount		Effective Date	Fixed Rate	Variable Rate
Interest rate swap	$	10,000	October 3, 2011 through September 1, 2016	1.330%	1 Month LIBOR
Interest rate swap	$	10,000	March 1, 2013 through September 1, 2016	1.620%	1 Month LIBOR
Interest rate swap	$	5,000	June 1, 2013 through September 1, 2016	1.700%	1 Month LIBOR
Interest rate swap	$	25,000	September 1, 2016 through September 1, 2021	3.105%	1 Month LIBOR
Interest rate swap	$	25,000	September 1, 2015 through September 1, 2021	3.304%	1 Month LIBOR

The following table summarizes the fair values of derivative instruments included in the Company's Consolidated Condensed Balance Sheets:

	Location on Consolidated Balance Sheets	Fair Value
		March 29, 2014		December 28, 2013
Asset Derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps	Other Assets	$	92	$	556
Total Asset Derivatives		$	92	$	556
Liability Derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps, current portion	Accrued Expenses	$	336	$	328
Interest rate swaps, long term portion	Other Long-Term Liabilities	867		485
Total Liability Derivatives		$	1,203	$	813

The following tables summarize the pre-tax impact of derivative instruments on the Company's financial statements:

	Amount of Gain or (Loss) Recognized in AOCIL on the effective portion of the Derivative
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(940	)	$	20
	Amount of Gain or (Loss) Reclassified from AOCIL on the effective portion into Income (1)(2)
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(86	)	$	(145	)
	Amount of Gain or (Loss)  Recognized on the ineffective portion in Income on Derivative (3)
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	—		$	—

(1) The amount of gain (loss) reclassified from AOCIL is included in interest expense on the Company's Consolidated Condensed Statements of Operations.

(2) The amount of loss expected to be reclassified from AOCIL into earnings during the next 12 months subsequent to fiscal 2013 is $336.

(3) The amount of gain (loss) recognized in income on the ineffective portion of interest rate swaps is included in other (income) expense, net on the Company's Consolidated Condensed Statements of Operations.

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Consolidated Condensed Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 29, 2014		Mar. 30, 2013
NET SALES	$ 85,313		$ 75,440
Cost of sales	67,306		57,028
GROSS PROFIT	18,007		18,412
Selling and administrative expenses	20,251		16,895
Other operating (income) expense, net	152		(160)
Facility consolidation expenses	73		0
OPERATING INCOME (LOSS)	(2,469)		1,677
Interest expense	1,012		995
Other (income) expense, net	10		8
Gain on purchase of business	(8,744)		0
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES	5,253		674
Income tax provision	1,945		23
INCOME FROM CONTINUING OPERATIONS	3,308		651
Loss from discontinued operations, net of tax	(40)		(15)
NET INCOME	$ 3,268		$ 636
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations	$ 0.25		$ 0.05
Discontinued operations	$ 0.00		$ 0.00
Net income	$ 0.25		$ 0.05
BASIC SHARES OUTSTANDING	12,789	[1]	12,674	[1]
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations	$ 0.24		$ 0.05
Discontinued operations	$ 0.00		$ 0.00
Net income	$ 0.24		$ 0.05
DILUTED SHARES OUTSTANDING	13,017	[1],[2]	12,739	[1],[2]
Dividends Per Share:
Common Stock	$ 0.00		$ 0.00
Class B Common Stock	$ 0.00		$ 0.00

[1] Includes Common and Class B Common shares, in thousands.

[2] Because their effects are anti-dilutive, 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. Aggregate shares excluded for the three months ended March 29, 2014 and March 30, 2013 were 123 and 691, respectively.

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Acquisition

3 Months Ended

Mar. 29, 2014

Business Combinations [Abstract]

Acquisition

ACQUISITION

Effective March 19, 2014, the Company acquired all outstanding stock of Atlas Carpet Mills, Inc. ("Atlas") for total purchase price consideration of $18,869, including a cash payment of $16,543, accrued consideration relating to holdbacks for certain inventories and customer claims of $923 and accrued consideration for a working capital adjustment of $1,403. The Company financed the transaction with availability under its amended credit facility. The Company has incurred direct incremental costs of approximately $425 related to this acquisition. These incremental costs are classified in selling and administrative expenses in the Company's Consolidated Condensed Statements of Operations.

Atlas is a California-based manufacturer and marketer of high-end commercial broadloom and tile carpeting serving soft floorcovering markets. Atlas has a strong reputation for exceptional design, quality and service. This brand will be sold through the existing Atlas sales force and will serve to broaden the Company's product offerings for commercial applications along with the Company's Masland Contract brand.

The purchase price consideration was as follows:

Cash paid	$	16,543
Accrued consideration for holdbacks	923
Accrued consideration for working capital adjustment	1,403
Total purchase price consideration	$	18,869

The acquisition has been accounted for as a business combination which generally requires, among other things, that assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The acquisition did not represent a significant business combination. The Company has not yet completed its evaluation and determination of the fair value, or fair value less cost to sell as applicable, of certain assets and liabilities acquired primarily including the final valuation and assessment of (i) amortizable intangible assets acquired, (ii) property, plant and equipment acquired including assets held for sale, and (iii) net working capital acquired. The Company expects these final valuations and assessments will be completed by the end of fiscal 2014, which may result in additional adjustments to the values presented in the following table:

Cash	$	2,466
Receivables	4,304
Inventories	11,511
Other current assets	956
Assets held for sale (1)	3,250
Property, plant and equipment	6,929
Finite intangible asset	3,300
Other assets	623
Accounts payable	(2,286		)
Accrued expenses	(3,036		)
Capital lease obligation	(404		)
Fair value of net assets acquired	$	27,613
Total consideration	18,869
Gain on purchase of business	$	(8,744	)

(1) As part of the acquisition of Atlas, the Company announced that the Atlas dyeing operations would be consolidated into the Company's Santa Ana, California operations. Substantially all of the dye house equipment will either be relocated or disposed of by end of the Company's third fiscal quarter. The land and building has been classified in the Company's Consolidated Condensed Balance Sheet as assets held for sale at fair value less the costs to sell.

The preliminary fair value of the net assets acquired exceeded the purchase price resulting in a bargain purchase. The recorded gain is subject to adjustment as the Company will complete its valuation of certain acquired assets and liabilities assumed at acquisition as described above. The Company believes that several factors were significant in the recognition of a gain from the acquisition of Atlas. Atlas had higher cost of dyeing due to the lack of capacity utilization and therefore needed to lower costs by combining dye facilities with another operation. In addition, Atlas had a higher cost of modular carpet tile manufacturing due to outsourcing the tile manufacturing operations. Therefore, Atlas would have had to make significant investments in product and manufacturing equipment to be competitive in the modular carpet manufacturing business. Finally, the Seller had the desire to see Atlas operated as an independent brand and organization in the future. All of these objectives were achieved by combining Atlas with the Company in a mutually advantageous relationship.

The Company determined that it is impracticable to provide comparative pro forma financial information related to the acquisition. Atlas, a private company, did not historically prepare financial statements in accordance with U.S. GAAP for interim financial reporting. Accordingly, significant estimates of amounts to be included in pro forma financial information would be required and subject to an inordinate level of subjectivity. Net sales related to Atlas included in the Company’s Consolidated Condensed Statement of Operations for the period from the date of acquisition through March 29, 2014 were $1,666, or 2.0% of the Company’s net sales, for the quarter ended March 29, 2014.

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Property, Plant and Equipment, Net

3 Months Ended

Mar. 29, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment, Net

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following:

	March 29, 2014			December 28, 2013
Land and improvements	$	7,231		$	7,231
Buildings and improvements	51,042			50,627
Machinery and equipment	159,853			149,040
	218,126			206,898
Accumulated depreciation	(135,283		)	(132,413		)
Property, plant and equipment, net	$	82,843		$	74,485

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Other Comprehensive Income (Loss)

3 Months Ended

Mar. 29, 2014

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Other Comprehensive Income (Loss)

OTHER COMPREHENSIVE INCOME (LOSS)

Components of other comprehensive income (loss) are as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swaps:
Before income taxes	$	(940	)	$	20
Income taxes	(358		)	8
Net of taxes	(582		)	12
Reclassification of loss into earnings from interest rate swaps (1):
Before income taxes	86			35
Income taxes	33			13
Net of taxes	53			22
Amortization of unrealized loss on dedesignated interest rate swaps (1):
Before income taxes	—			110
Income taxes	—			42
Net of taxes	—			68
Reclassification of net actuarial gain into earnings from postretirement benefit plans (2):
Before income taxes	(10		)	(10		)
Income taxes	(4		)	(4		)
Net of taxes	(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans (2):
Before income taxes	(22		)	(22		)
Income taxes	(8		)	(8		)
Net of taxes	(14		)	(14		)
Other comprehensive income (loss)	$	(549	)	$	82

(1) Amounts for cash flow hedges reclassified from accumulated other comprehensive income (loss) to net income were included in interest expense in the Company's Consolidated Condensed Statement of Operations.

(2) Amounts for postretirement plans reclassified from accumulated other comprehensive income (loss) to net income were included in selling and administrative expenses in the Company's Consolidated Condensed Statement of Operations.

Components of accumulated other comprehensive income (loss), net of tax, are as follows:

	Interest Rate Swaps			Post-Retirement Liabilities			Total
Balance at December 28, 2013	(144		)	360			216
Unrealized gain (loss) on interest rate swaps, net of tax of $358	(582		)	—			(582		)
Reclassification of loss into earnings from interest rate swaps, net of tax of $33	53			—			53
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $4	—			(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans, net of tax of $8	—			(14		)	(14		)
Balance at March 29, 2014	$	(673	)	$	340		$	(333	)

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Employee Benefit Plans

3 Months Ended

Mar. 29, 2014

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsors a 401(k) defined contribution plan that covers a significant portion, or approximately 70% 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 $232 and $143 for the three months ended March 29, 2014 and March 30, 2013, respectively.

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 17% 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 $18 and $17 for the three months ended March 29, 2014 and March 30, 2013, respectively.

Non-Qualified Retirement Savings Plan

The Company sponsors a non-qualified retirement savings plan that allows eligible associates to defer a specified percentage of their compensation.  The obligations owed to participants under this plan were $13,013 at March 29, 2014 and $13,210 at December 28, 2013 and are included in other long-term liabilities in the Company's Consolidated Condensed Balance Sheets. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors.  The Company utilizes a Rabbi Trust to hold, invest and reinvest deferrals and contributions under the plan.  Amounts are invested in Company-owned life insurance in the Rabbi Trust and the cash surrender value of the policies was $14,317 at March 29, 2014 and $14,242 at December 28, 2013 and is included in other assets in the Company's Consolidated Condensed Balance Sheets.

Multi-Employer Pension Plan

The Company contributes to a multi-employer pension plan under the terms of a collective-bargaining agreement that covers its union-represented employees. Expenses related to the multi-employer pension plan were $67 and $61 for the three months ended March 29, 2014 and March 30, 2013, respectively.

Postretirement Plans

The Company sponsors a legacy postretirement benefit plan that provides life insurance to a limited number of associates as a result of a prior acquisition.  The Company also sponsors a postretirement benefit plan that provides medical insurance for a limited number of associates who retired prior to January 1, 2003 and life insurance to a limited number of associates upon retirement.

Components of net periodic benefit cost (credit) for all postretirement plans are summarized as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Service cost	$	2		$	2
Interest cost	5			6
Amortization of prior service credits	(22		)	(22		)
Recognized net actuarial gains	(10		)	(10		)
Net periodic benefit cost (credit)	$	(25	)	$	(24	)

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Product Warranty Reserves

3 Months Ended

Mar. 29, 2014

Product Warranties Disclosures [Abstract]

Product Warranty Reserves

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 Condensed Financial Statements. The following is a summary of the Company's product warranty activity.

	Three Months Ended
	March 29, 2014			March 30, 2013
Product warranty reserve at beginning of period	$	1,850		$	1,297
Warranty reserve assumed in business combination	209			—
Warranty liabilities accrued	1,014			900
Warranty liabilities settled	(1,208		)	(830		)
Changes for pre-existing warranty liabilities	136			(78		)
Product warranty reserve at end of period	$	2,001		$	1,289

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Fair Value Measurements (Fair Value Measurements - Carrying Amount and Fair Value) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Cash and cash equivalents	$ 355	$ 255
Notes receivable, including current portion	282	282
Interest rate swaps	92	556
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Long-term debt and capital leases, including current portion	132,607	107,988
Interest rate swaps	1,203	813
Estimate of Fair Value, Fair Value Disclosure [Member]
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Cash and cash equivalents	355	255
Notes receivable, including current portion	282	282
Interest rate swaps	92	556
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Long-term debt and capital leases, including current portion	129,539	101,752
Interest rate swaps	$ 1,203	$ 813

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Goodwill and Other Intangible Assets

3 Months Ended

Mar. 29, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amounts of goodwill are as follows:

	Goodwill		Accumulated Impairment Losses		Net
Balance at December 29, 2012	$	1,680	$	—	$	1,680
Additional goodwill recognized during the period (1)	1,709		—		1,709
Impairment losses recognized during the period	—		—		—
Other changes in the carrying amounts during the period	—		—		—
Balance at December 28, 2013	3,389		—		3,389
Additional goodwill recognized during the period	—		—		—
Impairment losses recognized during the period	—		—		—
Other changes in the carrying amounts during the period	—		—		—
Balance at March 29, 2014	$	3,389	$	—	$	3,389

(1) During 2013, the Company recorded goodwill related to the Robertex acquisition.

The following table represents the details of the Company's intangible assets:

Intangible assets subject to amortization:

	March 29, 2014							December 28, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer relationships	$	1,062	$	(55	)	$	1,007	$	1,062	$	(40	)	$	1,022
Rug design coding	144		(18		)	126		144		(14		)	130
Trade names	4,668		(59		)	4,609		1,368		(34		)	1,334
Total	$	5,874	$	(132	)	$	5,742	$	2,574	$	(88	)	$	2,486

Amortization expense for intangible assets is summarized as follows:

	Three Months Ended
	March 29, 2014		March 30, 2013
Customer relationships	$	15	$	4
Rug design coding	4		4
Trade names	25		—
Amortization expense	$	44	$	8

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Accrued Expenses

3 Months Ended

Mar. 29, 2014

Payables and Accruals [Abstract]

Accrued Expenses

ACCRUED EXPENSES

Accrued expenses are summarized as follows:

	March 29, 2014		December 28, 2013
Compensation and benefits	$	10,086	$	8,233
Provision for customer rebates, claims and allowances	6,360		6,202
Advanced customer deposits	4,239		1,862
Outstanding checks in excess of cash	1,704		3,873
Other	8,111		6,032
Accrued expenses	$	30,500	$	26,202

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Long-Term Debt and Credit Arrangements

3 Months Ended

Mar. 29, 2014

Debt Disclosure [Abstract]

Long-Term Debt and Credit Arrangements

LONG-TERM DEBT AND CREDIT ARRANGEMENTS

Long-term debt consists of the following:

	March 29, 2014			December 28, 2013
Revolving credit facility - Tranche A	$	103,052		$	85,274
Revolving credit facility - Tranche B	5,380			—
Obligation to Development Authority of Gordon County	4,194			4,447
Note payable - Robertex acquisition	3,809			3,789
Equipment notes payable	7,568			7,987
Notes payable	2,648			2,210
Capital lease obligations	5,956			4,281
Total long-term debt	132,607			107,988
Less: current portion of long-term debt	(12,330		)	(6,229		)
Long-term debt	$	120,277		$	101,759

Amended Revolving Credit Facility

On March 14, 2014, the Company amended its senior credit facility ("amended senior credit facility"), effective as of March 19, 2014 to permit the acquisition of Atlas Carpet Mills, Inc. by means of an over advance ("Tranche B Advance") of $5,438 maturing on June 30, 2014. The Tranche B Advance bears interest at a rate of 3.50% plus LIBOR, subject also to various availability percentages, limitations, covenants and conditions. In addition, the revolving portion of the facility ("Tranche A Advance") provides for a maximum of $150,000 of revolving credit, subject to borrowing base availability. The borrowing base is currently equal to specified percentages of the Company's eligible accounts receivable, inventories, fixed assets and real property less reserves established, from time to time, by the administrative agent under the facility. In addition, the term of the amended senior credit facility was extended from August 1, 2018 to March 14, 2019.

At the Company's election, Tranche A Advances of the amended senior credit facility bear interest at annual rates equal to either (a) LIBOR for 1, 2 or 3 month periods, as selected by the Company, plus an applicable margin of either 1.50%, 1.75% or 2.00%, or (b) the higher of the prime rate, the Federal Funds rate plus 0.5%, or a daily LIBOR rate plus 1.00%, plus an applicable margin of either 0.50%, 0.75% or 1.00%. The applicable margin is determined based on availability under the amended senior credit facility with margins increasing as availability decreases. The Company continues to pay an unused line fee on the average amount by which the aggregate commitments exceed utilization of the senior credit facility equal to 0.375% per annum.

The amended senior credit facility continues to include certain affirmative and negative covenants that impose restrictions on the Company's financial and business operations. The amended senior credit facility requires the Company to maintain a fixed charge coverage ratio of 1.1 to 1.0 during any period that borrowing availability is less than $14,440 through May 31, 2014 and increases to $16,500 from and after June 1, 2014. The amendment also provided for a waiver of the measurement and application of the fixed charge coverage ratio that would otherwise be required by a reduction in excess availability from March 14, 2014 through and including April 13, 2014. As of March 29, 2014, the unused borrowing availability under the amended senior credit facility was $20,634.

Obligation to Development Authority of Gordon County

On November 2, 2012, the Company signed a 6.00% seller-financed note of $5,500 with Lineage PCR, Inc. (“Lineage”) related to the acquisition of the continuous carpet dyeing facility in Calhoun, Georgia. Effective December 28, 2012 through a series of agreements between the Company, the Development Authority of Gordon County, Georgia (the “Authority”) and Lineage, obligations with identical payment terms as the original note to Lineage are now payment obligations to the Authority. These transactions were consummated in order to provide a tax abatement to the Company related to the real estate and equipment at this facility. The tax abatement plan provides for abatement for certain components of the real and personal property taxes for up to ten years. At any time, the Company has the option to pay off the obligation, plus a nominal amount. The debt to the Authority bears interest at 6.00% and is payable in equal monthly installments of principal and interest of $106 over 57 months.

Note Payable - Robertex Acquisition

On July 1, 2013, the Company signed a 4.50% seller-financed note of $4,000, which was recorded at a fair value of $3,749, with Robert P. Rothman related to the acquisition of Robertex Associates, LLC ("Robertex") in Calhoun, Georgia. The note is payable in five annual installments of principal of $800 plus interest. The note matures June 30, 2018.

Equipment Notes Payable

The Company's equipment financing notes have terms ranging from four to seven years, bear interest ranging from 1.00% to 7.72% and are due in monthly installments through their maturity dates. In connection with certain of the notes, the Company is required to maintain funds in a separate escrow account. At March 29, 2014 and December 28, 2013, the balances held were $793 and $1,401, respectively, and are included in other current assets on the Company’s Consolidated Condensed Balance Sheets. The Company's equipment financing notes are secured by the specific equipment financed and do not contain any financial covenants.

Capital Lease Obligations

The Company's capital lease obligations have terms ranging from four to seven years, bear interest ranging from 2.90% to 7.40% and are due in monthly or quarterly installments through their maturity dates. The Company's capital lease obligations are secured by the specific equipment leased.

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Employee Benefit Plans (Defined Contribution Plans) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014 Rate	Mar. 30, 2013
Non-Collective-Bargaining Plan [Member]
Defined Contribution Plans [Line Items]
Percentage of Employees Covered	70.00%
Employer Matching Contribution, Percentage	1.00%
Employer Matching Contribution, Discretionary Percentage	2.00%
Maximum Annual Contribution Per Employee, Percentage	3.00%
Cost Recognized	$ 232	$ 143
Collective-Bargaining Plan [Member]
Defined Contribution Plans [Line Items]
Percentage of Employees Covered	17.00%
Maximum Annual Contribution Per Employee, Percentage	2.75%
Cost Recognized	$ 18	$ 17

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Employee Benefit Plans (Multi-Employer Pension Plan) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Multiemployer Plans [Line Items]
Contributions	$ 67	$ 61

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Derivatives (Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance) (Details) (Designated as Hedging Instrument [Member], Interest Rate Swap [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014		Mar. 30, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion	$ (940)		$ 20
Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion	(86)	[1],[2]	(145)	[1],[2]
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	336
Other Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on Cash Flow Hedge Ineffectiveness	$ 0	[3]	$ 0	[3]

[1] The amount of loss expected to be reclassified from AOCIL into earnings during the next 12 months subsequent to fiscal 2013 is $336.

[2] The amount of gain (loss) reclassified from AOCIL is included in interest expense on the Company's Consolidated Condensed Statements of Operations.

[3] The amount of gain (loss) recognized in income on the ineffective portion of interest rate swaps is included in other (income) expense, net on the Company's Consolidated Condensed Statements of Operations.

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Accrued Expenses (Tables)

3 Months Ended

Mar. 29, 2014

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Accrued expenses are summarized as follows:

	March 29, 2014		December 28, 2013
Compensation and benefits	$	10,086	$	8,233
Provision for customer rebates, claims and allowances	6,360		6,202
Advanced customer deposits	4,239		1,862
Outstanding checks in excess of cash	1,704		3,873
Other	8,111		6,032
Accrued expenses	$	30,500	$	26,202

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Product Warranty Reserves (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Product Warranties Disclosures [Abstract]
Product warranty reserve at beginning of period	$ 1,850	$ 1,297
Warranty reserve assumed in business combination	209	0
Warranty liabilities accrued	1,014	900
Warranty liabilities settled	(1,208)	(830)
Changes for pre-existing warranty liabilities	136	(78)
Product warranty reserve at end of period	$ 2,001	$ 1,289

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Earnings Per Share

3 Months Ended

Mar. 29, 2014

Earnings Per Share, Basic and Diluted [Abstract]

Earnings Per Share

EARNINGS 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 accounting guidance requires additional 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 per share from continuing operations:

	Three Months Ended
	March 29, 2014			March 30, 2013
Basic earnings per share:
Income from continuing operations	$	3,308		$	651
Less: Allocation of earnings to participating securities	(135		)	(24		)
Income from continuing operations available to common shareholders - basic	$	3,173		$	627
Basic weighted-average shares outstanding (1)	12,789			12,674
Basic earnings per share - continuing operations	$	0.25		$	0.05
Diluted earnings per share:
Income from continuing operations available to common shareholders - basic	$	3,173		$	627
Add: Undistributed earnings reallocated to unvested shareholders	2			—
Income from continuing operations available to common shareholders - basic	$	3,175		$	627
Basic weighted-average shares outstanding (1)	12,789			12,674
Effect of dilutive securities:
Stock options (2)	166			2
Directors' stock performance units (2)	62			63
Diluted weighted-average shares outstanding (1)(2)	13,017			12,739
Diluted earnings per share - continuing operations	$	0.24		$	0.05

(1) Includes Common and Class B Common shares, in thousands.

(2) Because their effects are anti-dilutive, 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. Aggregate shares excluded for the three months ended March 29, 2014 and March 30, 2013 were 123 and 691, respectively.

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Contingencies

3 Months Ended

Mar. 29, 2014

Commitments and Contingencies Disclosure [Abstract]

Contingencies

CONTINGENCIES

The Company assesses its exposure related to legal matters, including those pertaining to product liability, safety and health matters and other items that arise in the regular course of its business. If the Company determines that it is probable a loss has been incurred, the amount of the loss, or an amount within the range of loss, that can be reasonably estimated will be recorded.

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. Should 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 21)

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Goodwill and Other Intangible Assets Schedule of Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013	Dec. 28, 2013
Finite-Lived Intangible Assets [Line Items]
Gross	$ 5,874		$ 2,574
Accumulated Amortization	(132)		(88)
Net	5,742		2,486
Amortization expense	44	8
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	1,062		1,062
Accumulated Amortization	(55)		(40)
Net	1,007		1,022
Amortization expense	15	4
Rug Design Coding [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	144		144
Accumulated Amortization	(18)		(14)
Net	126		130
Amortization expense	4	4
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	4,668		1,368
Accumulated Amortization	(59)		(34)
Net	4,609		1,334
Amortization expense	$ 25	$ 0

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Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 29, 2014

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Comprehensive Income (Loss) [Table Text Block]

Components of other comprehensive income (loss) are as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swaps:
Before income taxes	$	(940	)	$	20
Income taxes	(358		)	8
Net of taxes	(582		)	12
Reclassification of loss into earnings from interest rate swaps (1):
Before income taxes	86			35
Income taxes	33			13
Net of taxes	53			22
Amortization of unrealized loss on dedesignated interest rate swaps (1):
Before income taxes	—			110
Income taxes	—			42
Net of taxes	—			68
Reclassification of net actuarial gain into earnings from postretirement benefit plans (2):
Before income taxes	(10		)	(10		)
Income taxes	(4		)	(4		)
Net of taxes	(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans (2):
Before income taxes	(22		)	(22		)
Income taxes	(8		)	(8		)
Net of taxes	(14		)	(14		)
Other comprehensive income (loss)	$	(549	)	$	82

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

Components of accumulated other comprehensive income (loss), net of tax, are as follows:

	Interest Rate Swaps			Post-Retirement Liabilities			Total
Balance at December 28, 2013	(144		)	360			216
Unrealized gain (loss) on interest rate swaps, net of tax of $358	(582		)	—			(582		)
Reclassification of loss into earnings from interest rate swaps, net of tax of $33	53			—			53
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $4	—			(6		)	(6		)
Reclassification of prior service credits into earnings from postretirement benefit plans, net of tax of $8	—			(14		)	(14		)
Balance at March 29, 2014	$	(673	)	$	340		$	(333	)

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Consolidated Condensed Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
NET INCOME	$ 3,268	$ 636
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized gain (loss) on interest rate swaps	(582)	12
Reclassification of loss into earnings from interest rate swaps	53	22
Amortization of unrealized loss on dedesignated interest rate swaps	0	68
Reclassification of net actuarial gain into earnings from postretirement benefit plans	(6)	(6)
Reclassification of prior service credits into earnings from postretirement benefit plans	(14)	(14)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	(549)	82
COMPREHENSIVE INCOME	$ 2,719	$ 718

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Inventories

3 Months Ended

Mar. 29, 2014

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

Inventories are summarized as follows:

	March 29, 2014			December 28, 2013
Raw materials	$	41,547		$	31,864
Work-in-process	21,030			16,880
Finished goods	57,449			57,983
Supplies and other	131			118
LIFO reserve	(13,331		)	(13,626		)
Inventories	$	106,826		$	93,219

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Fair Value Measurements (Fair Value Measurements - Assets and Liabilities Measured on Recurring and Nonrecurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Mar. 29, 2014		Dec. 28, 2013
Fair Value, Inputs, Level 1 [Member]
Liabilities, Fair Value Disclosure [Abstract]
Deferred compensation plan	$ 13,013	[1]	$ 13,210	[1]
Fair Value, Inputs, Level 2 [Member]
Assets, Fair Value Disclosure [Abstract]
Rabbi trust	14,317	[2]	14,242	[2]
Interest rate swaps	92	[3]	556	[3]
Liabilities, Fair Value Disclosure [Abstract]
Interest rate swaps	1,203	[3]	813	[3]
Fair Value, Inputs, Level 3 [Member]
Liabilities, Fair Value Disclosure [Abstract]
Contingent consideration	$ 2,738	[4]	$ 2,751	[4]

[1] Senior management and other highly compensated associates may defer a specified percentage of their compensation into a non-qualified deferred compensation plan. Changes in the value of the deferred compensation under this plan is recognized each period based on the fair value of the underlying measurement funds.

[2] The Company maintains a rabbi trust that serves as an investment designed to offset its deferred compensation plan liability. The investment assets of the trust consist of life insurance policies for which the Company recognizes income or expense based upon changes in cash surrender value.

[3] The fair value of the interest rate swaps was obtained from external sources. The interest rate swaps were valued using observable inputs (e.g., LIBOR yield curves, credit spreads). Valuations of interest rate swaps may fluctuate considerably from period-to-period due to volatility in underlying interest rates, which are driven by market conditions and the duration of the instrument. Credit adjustments could have a significant impact on the valuations due to changes in credit ratings of the Company or its counterparties.

[4] As a result of the Colormaster and Crown Rug acquisitions in 2012 and the Robertex acquisition in 2013, the Company recorded contingent consideration liabilities at fair value. These fair value measurements were based on calculations that utilize significant inputs not observable in the market including forecasted revenues, gross margins and discount rates and thus represent Level 3 measurements. These fair value measurements are directly impacted by the Company's estimates. Accordingly, if the estimates are higher or lower than the estimates within the fair value measurement, the Company would record additional charges or benefits, respectively, as appropriate.

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Income Taxes (Unrecognized Tax Benefits) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 29, 2014	Dec. 28, 2013
Income Tax Contingency [Line Items]
Unrecognized tax benefits	$ 291	$ 291
Unrecognized tax benefits, income tax penalties and interest accrued	$ 0	$ 0

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Discontinued Operations

3 Months Ended

Mar. 29, 2014

Discontinued Operation, Income (Loss) from Discontinued Operation Disclosures [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

The Company has previously either sold or discontinued certain operations that are accounted for as "Discontinued Operations" under applicable accounting guidance. The Company has certain contingent obligations directly related to such operations, primarily related to self-insured workers' compensation and environmental liabilities. Costs related to these obligations for those businesses are classified as discontinued operations.  Discontinued operations are summarized as follows:

	Three Months Ended
	March 29, 2014			March 30, 2013
Loss from discontinued operations:
Workers' compensation costs	$	(38	)	$	(12	)
Environmental remediation costs	(23		)	(9		)
Loss from discontinued operations, before taxes	(61		)	(21		)
Income tax benefit	(21		)	(6		)
Loss from discontinued operations, net of tax	$	(40	)	$	(15	)

Workers' Compensation

Undiscounted reserves are maintained for the self-insured workers' compensation obligations. 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

Reserves for environmental remediation obligations are established on an undiscounted basis. The Company has ongoing obligations at five previously owned sites that were associated with its discontinued textile businesses. Each of these sites contains relatively low levels of ground or ground water contaminants. Each site has a Corrective Action Plan ("CAP") with the applicable authoritative state regulatory body responsible for oversight for environmental compliance and the Company contracts with third party qualified environmental specialists for related remediation, monitoring and reporting for each location. The CAP for four of these sites involves natural attenuation (degradation of the contaminants through naturally occurring events) over periods currently estimated at 10 to 20 years and the CAP on the remaining site involves a pump and treat remediation process, currently estimated to remediate over a period of 25 years. Additionally, the Company has an environmental liability related to the property of a facility and related business that was sold in 2004. The CAP, involving an oxidation-based remediation plan, was approved in 2010 and is currently estimated to remediate over a 7 year period beginning in 2010. The Company has an accrual for environmental remediation obligations of $1,824 and $1,830 as of March 29, 2014 and December 28, 2013, respectively. 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 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.

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Other (Income) Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 29, 2014	Mar. 30, 2013
Other operating (income) expense, net:
Insurance proceeds (1)	$ 0	$ (202)	[1]
Loss on property, plant and equipment disposals	0	10
Loss on currency exchanges	120	37
Retirement expenses	31	39
Miscellaneous (income) expense	1	(44)
Other operating (income) expense, net	$ 152	$ (160)

[1] The Company recognized a settlement gain of $202 from a company-owned insurance policy during the three months ended March 30, 2013.

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Derivatives (Tables)

3 Months Ended

Mar. 29, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments [Table Text Block]

The following is a summary of the Company's interest rate swaps as of March 29, 2014:

Type	Notional Amount		Effective Date	Fixed Rate	Variable Rate
Interest rate swap	$	10,000	October 3, 2011 through September 1, 2016	1.330%	1 Month LIBOR
Interest rate swap	$	10,000	March 1, 2013 through September 1, 2016	1.620%	1 Month LIBOR
Interest rate swap	$	5,000	June 1, 2013 through September 1, 2016	1.700%	1 Month LIBOR
Interest rate swap	$	25,000	September 1, 2016 through September 1, 2021	3.105%	1 Month LIBOR
Interest rate swap	$	25,000	September 1, 2015 through September 1, 2021	3.304%	1 Month LIBOR

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following table summarizes the fair values of derivative instruments included in the Company's Consolidated Condensed Balance Sheets:

	Location on Consolidated Balance Sheets	Fair Value
		March 29, 2014		December 28, 2013
Asset Derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps	Other Assets	$	92	$	556
Total Asset Derivatives		$	92	$	556
Liability Derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps, current portion	Accrued Expenses	$	336	$	328
Interest rate swaps, long term portion	Other Long-Term Liabilities	867		485
Total Liability Derivatives		$	1,203	$	813

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The following tables summarize the pre-tax impact of derivative instruments on the Company's financial statements:

	Amount of Gain or (Loss) Recognized in AOCIL on the effective portion of the Derivative
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(940	)	$	20
	Amount of Gain or (Loss) Reclassified from AOCIL on the effective portion into Income (1)(2)
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	(86	)	$	(145	)
	Amount of Gain or (Loss)  Recognized on the ineffective portion in Income on Derivative (3)
	Three Months Ended
	March 29, 2014			March 30, 2013
Derivatives designated as hedging instruments:
Cash flow hedges - interest rate swaps	$	—		$	—

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Income Taxes

3 Months Ended

Mar. 29, 2014

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company's effective income tax rate for the period ending March 29, 2014 is based upon the projected estimated annual income tax rate. The effective income tax rate in the first quarter of 2014 was 37.0%, which approximates the Company's statutory tax rate. The difference between the effective tax rate and the statutory tax rate for the three months ended March 29, 2014 was affected by certain non-deductible expenses and a tax benefit for tax deductible goodwill. In addition, the Company realized a tax benefit for the use of certain state net operating losses that had a valuation allowance. On March 19, 2014, the Company acquired Atlas which was accounted for as a bargain purchase. The tax effect of the related bargain purchase gain is included in the Company's effective tax rate.

The difference between the effective rates and the statutory rates for the three months ended March 30, 2013 was affected by the inclusion of a $202 non-taxable settlement gain associated with a company-owned insurance policy. In addition, $157 in federal tax credits were recognized as a result of tax legislation passed in January 2013.

The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits were $291 at March 29, 2014 and December 28, 2013.  There were no significant interest or penalties accrued as of March 29, 2014 or December 28, 2013.  Such benefits, if recognized, would affect the Company's effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly during the next twelve months.

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 2009 remain open to examination for U.S. federal income taxes.  The majority of state jurisdictions remain open for tax years subsequent to 2009.  A few state jurisdictions remain open to examination for tax years subsequent to 2008.