The Dixie Group, Inc.

Thank you, Joyce, and welcome everyone to our third quarter conference call. I have with me Jon Faulkner, our Chief Financial Officer.

Our Safe Harbor statement is included by reference to both our website and the press release. For the industry in Dixie this year seems to be a replay of the past.

The year began with great promise, but has retreated as the year has progressed.

The third quarter was weaker than the second, and the industry appeared to be in a wait-and-see attitude. Despite the weaker environment, our residential business, exclusive of home centers continued to gain market share.

Our residential brands had sales increases through the retail and design channels and were up 6.5% over last year.

Our commercial business which is about 25% of our total sales continued to underperform the industry with sales down 10.6%. We replaced the management team in August and are already seeing improved results and have developed new growth plans for the commercial business with greater emphasis on modular products.

Masland Contract has an excellent reputation with the design community and a history of style, design, and color leadership. Lee Martin is the new leader of this business, and David Hobbs is running the operations, both have extensive commercial carpet experience and have hit the ground running.

Jon Faulkner now will review our third quarter financial results. After which, I will continue further to discuss Dixie and current business conditions.

Thank you, Dan. Looking at sales, our third quarter sales were $65.8 million, down 5.4% versus last year.

Without the rollbar special that we had last year we were up 1%, while the industry was up marginally. Commercial products were down 10.6%, while the industry was up in the low single-digit.

Residential products were down 2.9%, while the industry was flat, however, residential products without the rollbar special last year was up 6.5%.

For the quarter, Fabrica, Masland Residential and Dixie Home retail were up 6.8%, while our mass merchant business was down, without the rollbar special of the previous year mass merchant was down 17%.

Our commercial sector was down 6.1% versus 2011, however, we are very excited by the new Speak line of performance modular carpet tile has been developed our new commercial management team.

For the quarter, gross profit margin of 25.2% was 2.5% better than the same quarter a year ago. Our margin was impacted by approximately $312,000 in manufacturing re-alignment expense, relative to moving the tufting equipment to Eton.

And effort has proven successful in improving output and lowering our costs.

SG&A was 24% of sales was above last year, which was at 20.8%, without the rollbar special SG&A present would have been 22.2%. Operating income in the quarter was $820,000 compared to operating income of $1.2 million last year.

The gain of $189,000 other operating income came from the sale of excess land. Our interest expense at $781,000 for the quarter reflected lower interest rates, as compared to $904,000 in the prior year quarter.

Our income tax for the period was a benefit of $41,000. Tax benefit was due to a true up with the tax rate for the year, to-date as well as reversal of state tax valuation allowances where we had net operating carry loss forward.

Our normal operating rate going forward at reasonable levels of profitability should be in a 35% range. Earnings from continuing operations in the quarter was gaining of $269,000 or $0.02 per diluted share.

Looking at our balance sheet receivables increased $1.1 million during the quarter. Our inventories decreased $2.2 million during the period.

Capital leases and expenditures were $2.6 million for the year-to-date, while depreciation and amortization was $7.1 million for the period today.

We anticipate capital leases and expenditures for 2012 of approximately $4 million for normal operations, as well as $5.5 million for the acquisition of the Colormaster dyeing facility. It will be impacted in the fourth quarter by transition cost as we ramp up production to Colormaster facility.

The impacted net income we estimate will be $600,000 approximately for the quarter.

The payback starts once we move our production volumes into the plant over the next several quarters. Total investing activities are estimated $9.5 million while depreciation and amortization of the year should be $9.5 million.

Our debt has increased $200,000 for the quarter and we ended the quarter with availability under our loan agreement to $20.2 million.

Our updated investor presentation is on our website at www.thedixiegroup.com. Dan?

Thank you, Jon. During the third quarter we continued the movement of tufting machines to North Georgia from our Atmore, Alabama facility.

The cost of the move that impacted our results negatively, the decline is proving worthwhile. We already have achieved significant quality and cost improvements as we simplify and streamline our production capacity.

It has also enhanced our customer service and turnaround times. We believe these changes help drive the improvement in our gross margin for the quarter and the future.

This year we have made a significant investment in new residential products, which we feel will set the stage for further sales increases and market share gains. Our new Permaset wool products which enable us to offer virtually unlimited color capability in wool products is adverse for the industry and we believe we will help continue our double-digit growth in wool.

The Stainmaster launch of their new TruSoft fiber began hitting the marketplace in late September and is off to a great start. We are one of only 2 mills with product in the market and are getting good reaction of the products we have launched.

We think the fiber will be the new standard for soft product in the marketplace. The new Stainmaster SolarMax fiber is also being well received and our products are off to a strong start.

We will continue building on these products as we move into the New Year. So far in the fourth quarter despite the impact of Sandy, our residential sales are above last year.

Our financial results have been impacted by the cost of introducing a large number of new fibers and products, but we feel this is the best way for us to invest in the future and continue market share gains. On the commercial side of the house, I’ve already spoken to the new momentum from our management changes.

Our sales in the fourth quarter are well ahead of last year. As we have previously stated the Chrome Collection has been extremely well received and selling well.

And the new Speak Collection of high-performance modular tiles is currently being introduced.

From an operations perspective the acquisition of the Colormaster continues dyeing will enable us to further lower costs and improve inventory turns. Again it is an investment in the future to enhance our product capability and enable us to be more competitive.

In the third quarter, we also finished our yard mill expansion giving us greater capacity to grow.

The housing industry finally appears to be bottomed and is beginning to show signs of improvement that should lead to sustain market growth. The units of both new homes and home re-sales are above year ago levels, and pricing is moving up as well.

These conditions are leading to higher forecasted sales for the housing industry, which historically means better conditions in the carpet industry at some point next year.

The fourth quarter is difficult to predict due to the storm in the East and the election, both of which have been tremendous attractions. And Sandy certainly curtailed business in the East.

Despite these unusual events our sales for the quarter to-date are up in the mid single-digit area. With our continued investment in talented people, differentiated equipment and beautiful product, we’re well positioned to take advantage of any improvement in the marketplace.

At this time, we’d like to open the call for questions.

Thank you, Joyce. We appreciate you're being with us today.

We look forward to our fourth quarter in next year. Good bye.