Dixie Group’s credit rating downgraded
The ratings remain on CreditWatch with negative implications, where they were placed on Oct. 12, 2000. Total rated debt is about $40 million.
The rating action reflects continued deterioration of profitability and cash flow measures and Standard & Poor's concern that Dixie will continue to be challenged by a difficult operating environment in most of its business units.
Weakness in the factory-built housing segment -- which experienced about a 25% decline year over year -- and higher unabsorbed fixed costs as Dixie curtailed production to reduce inventory levels contributed to the significant decline in operating profits. Softness in Dixie's other business units during the quarter further compounded the operating profit decline.
As a result of weakened operating performance, Dixie violated its bank covenants, which were subsequently waived through June 15, 2001. The company expects to obtain a permanent amendment to its bank facility before then. To further reduce its costs and improve profitability, Dixie closed a dyeing plant, sold other non-essential assets, and is exploring alternatives for some of the firm's other non-strategic assets.