CHATTANOOGA, Tenn. -- The Dixie Group Inc. reported a net loss of $2.7 million, or 24 cents per diluted share, for the first quarter ended March 31, compared with a net loss of $1.2 million, or 10 cents per diluted share, for the first quarter of 2000.

The net loss for first quarter 2001 included $1.5 million ($900,000 after-tax), or 8 cents per diluted share, of unusual charges for severance and an asset write-down. The asset write-down is related to the pending sale of a small dyeing facility. Sales for the 2001 quarter, including $12.3 million from the July 1, 2000 acquisition of Fabrica international, were $133.1 million, down from $136.4 million in 2000. The first quarter 2001 reporting period covered 13 weeks vs. 14 weeks reported in the prior year. On a weekly basis, sales improved 5.1% in the 2001 quarter.

The company also announced that its senior lenders waived compliance with the financial covenants of The Dixie Group's senior credit agreement until June 15, 2001. The company said it anticipates a longer-term amendment to the credit facility prior to that date.

"Our sales to home centers and mass merchants were very soft in the first quarter and factory-built housing production continued to decline, lowering our sales to that market," said Daniel K. Frierson, chairman and CEO. "Sales from our high-end business at Masland and Fabrica continue to be consistent and encouraging.

"Internally, we have made most of the progress we expected in consolidating our North Georgia operations, improving operating efficiencies and reducing cost. However, the lower-than-expected sales volume prohibited full realization of these improvements on our bottom line."

Frierson also said that the company has increased its focus on generating cash to reduce debt and improve our balance sheet, amid uncertain economic conditions.

"We are optimistic that sales volume will improve and that the cost reductions we have made should return us to profitability in the second quarter of 2001. Due to the uncertainty of the economy, we will not comment beyond the second quarter," he said.