|        |
|--------|
|        |  |  |
|   | Form 10-Q |   |

|                                                                                    |
|------------------------------------------------------------------------------------|
|                                                                                    |  |  |  |  |
| 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) |

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

|                                    |
|------------------------------------|
|                                    |  |  |
| Class                              |              | Outstanding as of April 26, 2011 |
| Common Stock, $3 Par Value         |   | 12,023,839 shares |
| Class B Common Stock, $3 Par Value |   | 882,644 shares |
| Class C Common Stock, $3 Par Value |   | 0 shares |

----

|                                     |
|-------------------------------------|
|                                     |  |  |  |  |
| PART I.  FINANCIAL INFORMATION | Page |
|                                |   |   |   |
|                                | Item 1. | Financial Statements |  3 |
|                                |   | Consolidated Condensed Balance Sheets - April 2, 2011 and December 25, 2010 | 3 |
|                                |   | Consolidated Condensed Statements of Operations - Three Months Ended April 2, 2011 and March 27, 2010 | 4 |
|                                |   | Consolidated Condensed Statements of Cash Flows - Three Months Ended April 2, 2011 and March 27, 2010 | 5 |
|                                |   | Notes to Consolidated Condensed Financial Statements | 6 |
|                                | Item 2. | Management's Discussion and Analysis of Results of Operations and Financial Condition | 16 |
|                                | Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 19 |
|                                | Item 4. | Controls and Procedures | 19 |
|                                |   |   |   |   |
| PART II. OTHER INFORMATION          |   |
|                                |   |   |   |
|                                | Item 1. | Legal Proceedings | 20 |
|                                | Item 1A. | Risk Factors | 20 |
|                                | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
|                                | Item 3. | Defaults Upon Senior Securities | 22 |
|                                | Item 4. | (Removed and Reserved) | 22 |
|                                | Item 5. | Other information | 22 |
|                                | Item 6. | Exhibits | 22 |
|                                |   |   |   |
|                                |   | Signatures | 22 |

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|                                                                                                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                               |  |  |  |  |  |  |  |
|                                                                                                                                          | April 2, 2011 |   | December 25, 2010 |
| ASSETS                                                                                                                                        | (Unaudited) |   |   |   |
| CURRENT ASSETS                                                                                                                                |   |   |   |
| Cash and cash equivalents                                                                                                                     | $ | 281 |   |   | $ | 244 |   |
| Receivables (less allowance for doubtful accounts of $667 for 2011 and $466 for 2010)                                                         | 29,881 |   |   | 28,550 |   |
| Inventories                                                                                                                                   | 66,750 |   |   | 58,289 |   |
| Deferred income taxes                                                                                                                         | 5,487 |   |   | 5,527 |   |
| Other current assets                                                                                                                          | 2,809 |   |   | 1,416 |   |
| TOTAL CURRENT ASSETS                                                                                                                          | 105,208 |   |   | 94,026 |   |
|                                                                                                                                          |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                                                                                                                 | 179,105 |   |   | 178,019 |   |
| Less accumulated depreciation and amortization                                                                                                | (110,227 | ) |   | (107,773 | ) |
| NET PROPERTY, PLANT AND EQUIPMENT                                                                                                             | 68,878 |   |   | 70,246 |   |
| OTHER ASSETS                                                                                                                                  | 14,101 |   |   | 13,830 |   |
| TOTAL ASSETS                                                                                                                                  | $ | 188,187 |   |   | $ | 178,102 |   |
|                                                                                                                                          |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                          |   |   |   |
| CURRENT LIABILITIES                                                                                                                           |   |   |   |
| Accounts payable                                                                                                                              | $ | 16,778 |   |   | $ | 11,939 |   |
| Accrued expenses                                                                                                                              | 20,283 |   |   | 18,446 |   |
| Current portion of long-term debt                                                                                                             | 6,541 |   |   | 7,145 |   |
| TOTAL CURRENT LIABILITIES                                                                                                                     | 43,602 |   |   | 37,530 |   |
|                                                                                                                                          |   |   |   |
| LONG-TERM DEBT                                                                                                                                |   |   |   |
| Senior indebtedness                                                                                                                           | 51,562 |   |   | 47,876 |   |
| Capital lease obligations                                                                                                                     | 494 |   |   | 532 |   |
| Convertible subordinated debentures                                                                                                           | 9,662 |   |   | 9,662 |   |
| TOTAL LONG-TERM DEBT                                                                                                                          | 61,718 |   |   | 58,070 |   |
|                                                                                                                                          |   |   |   |
| DEFERRED INCOME TAXES                                                                                                                         | 4,578 |   |   | 4,759 |   |
| OTHER LONG-TERM LIABILITIES                                                                                                                   | 14,601 |   |   | 15,313 |   |
| TOTAL LIABILITIES                                                                                                                             | 124,499 |   |   | 115,672 |   |
|                                                                                                                                          |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                 | — |   |   | — |   |
|                                                                                                                                          |   |   |   |
| STOCKHOLDERS' EQUITY                                                                                                                          |   |   |   |
| Common Stock ($3 par value per share):  Authorized 80,000,000 shares, issued - 15,998,937 shares for 2011 and 15,922,480 shares for 2010 | 47,997 |   |   | 47,767 |   |
| Class B Common Stock ($3 par value per share): Authorized 16,000,000 shares, issued - 882,644 shares for 2011 and 867,761 shares for 2010     | 2,648 |   |   | 2,604 |   |
| Additional paid-in capital                                                                                                                    | 137,628 |   |   | 137,235 |   |
| Accumulated deficit                                                                                                                           | (66,127 | ) |   | (66,750 | ) |
| Accumulated other comprehensive income (loss)                                                                                                 | 64 |   |   | (31 | ) |
|                                                                                                                                          | 122,210 |   |   | 120,825 |   |
| Less Common Stock in treasury at cost - 3,975,098 shares for 2011 and 3,947,327 shares for 2010                                          | (58,522 | ) |   | (58,395 | ) |
| TOTAL STOCKHOLDERS' EQUITY                                                                                                                    | 63,688 |   |   | 62,430 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                    | $ | 188,187 |   |   | $ | 178,102 |   |

Table of Contents

----

|                                                       |
|-------------------------------------------------------|
|                                                       |  |  |  |  |  |  |  |
|                                                  | Three Months Ended |
|                                                  | April 2, 2011 |   | March 27, 2010 |
| NET SALES                                             | $ | 65,954 |   |   | $ | 50,454 |   |
| Cost of sales                                         | 49,384 |   |   | 38,101 |   |
| GROSS PROFIT                                          | 16,570 |   |   | 12,353 |   |
|                                                  |   |   |   |
| Selling and administrative expenses                   | 15,393 |   |   | 14,358 |   |
| Other operating income                                | (574 | ) |   | (59 | ) |
| Other operating expense                               | 83 |   |   | 129 |   |
| Facility consolidation and severance expenses         | — |   |   | 211 |   |
| OPERATING INCOME (LOSS)                               | 1,668 |   |   | (2,286 | ) |
|                                                  |   |   |   |
| Interest expense                                      | 932 |   |   | 1,235 |   |
| Other income                                          | (24 | ) |   | (11 | ) |
| Other expense                                         | 7 |   |   | 9 |   |
| INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES | 753 |   |   | (3,519 | ) |
| Income tax provision (benefit)                        | 109 |   |   | (1,060 | ) |
| INCOME (LOSS) FROM CONTINUING OPERATIONS              | 644 |   |   | (2,459 | ) |
| Loss from discontinued operations, net of tax         | (21 | ) |   | (70 | ) |
| NET INCOME (LOSS)                                     | $ | 623 |   |   | $ | (2,529 | ) |
|                                                  |   |   |   |
| BASIC EARNINGS (LOSS) PER SHARE:                      |   |   |   |
| Continuing operations                                 | $ | 0.05 |   |   | $ | (0.20 | ) |
| Discontinued operations                               | — |   |   | — |   |
| Net income (loss)                                     | $ | 0.05 |   |   | $ | (0.20 | ) |
|                                                  |   |   |   |
| BASIC SHARES OUTSTANDING                              | 12,856 |   |   | 12,496 |   |
|                                                  |   |   |   |
| DILUTED EARNINGS (LOSS) PER SHARE:                    |   |   |   |
| Continuing operations                                 | $ | 0.05 |   |   | $ | (0.20 | ) |
| Discontinued operations                               | — |   |   | — |   |
| Net income (loss)                                     | $ | 0.05 |   |   | $ | (0.20 | ) |
|                                                  |   |   |   |
| DILUTED SHARES OUTSTANDING                            | 12,902 |   |   | 12,496 |   |
|                                                  |   |   |   |
| DIVIDENDS PER SHARE:                                  |   |   |   |
| Common Stock                                          | — |   |   | — |   |
| Class B Common Stock                                  | — |   |   | — |   |

Table of Contents

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|                                                                                                    |
|----------------------------------------------------------------------------------------------------|
|                                                                                                    |  |  |  |  |  |  |  |
|                                                                                               | Three Months Ended |
|                                                                                               | April 2, 2011 |   |   | March 27, 2010 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                               |   |   |   |   |   |
| Income (loss) from continuing operations                                                           | $ | 644 |   |   | $ | (2,459 | ) |
| Loss from discontinued operations                                                                  | (21 | ) |   | (70 | ) |
| Net income (loss)                                                                                  | 623 |   |   | (2,529 | ) |
|                                                                                               |   |   |   |
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |   |   |   |
| Depreciation and amortization                                                                      | 2,519 |   |   | 2,964 |   |
| Change in deferred income taxes                                                                    | (199 | ) |   | (367 | ) |
| Net gain on property, plant and equipment disposals                                                | (1 | ) |   | — |   |
| Stock-based compensation expense                                                                   | 173 |   |   | 235 |   |
| Changes in operating assets and liabilities:                                                       |   |   |   |
| Receivables                                                                                        | (1,331 | ) |   | 4,253 |   |
| Inventories                                                                                        | (8,461 | ) |   | (681 | ) |
| Other current assets                                                                               | (1,393 | ) |   | (41 | ) |
| Accounts payable and accrued expenses                                                              | 5,668 |   |   | 2,673 |   |
| Other operating assets and liabilities                                                             | (386 | ) |   | 342 |   |
| NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                                | (2,788 | ) |   | 6,849 |   |
|                                                                                               |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                               |   |   |   |
| Net proceeds from sales of property, plant and equipment                                           | 1 |   |   | — |   |
| Purchase of property, plant and equipment                                                          | (1,101 | ) |   | (91 | ) |
| NET CASH USED IN INVESTING ACTIVITIES                                                              | (1,100 | ) |   | (91 | ) |
|                                                                                               |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                               |   |   |   |
| Net borrowings (payments) on credit line                                                           | 4,678 |   |   | (5,087 | ) |
| Payments on term loan                                                                              | (502 | ) |   | (377 | ) |
| Payments on equipment financing                                                                    | (759 | ) |   | (776 | ) |
| Payments on capitalized leases                                                                     | (110 | ) |   | (364 | ) |
| Payments on mortgage note payable                                                                  | (98 | ) |   | (69 | ) |
| Payments on note payable                                                                           | (165 | ) |   | (115 | ) |
| Change in outstanding checks in excess of cash                                                     | 1,008 |   |   | 210 |   |
| Common stock acquired for treasury                                                                 | (127 | ) |   | (45 | ) |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                                | 3,925 |   |   | (6,623 | ) |
|                                                                                               |   |   |   |
| INCREASE IN CASH AND CASH EQUIVALENTS                                                              | 37 |   |   | 135 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                   | 244 |   |   | 56 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                         | $ | 281 |   |   | $ | 191 |   |
|                                                                                               |   |   |   |
| Supplemental Cash Flow Information:                                                                |   |   |   |
| Interest paid                                                                                      | $ | 800 |   |   | $ | 932 |   |
| Income taxes paid (received), net of tax refunds                                                   | — |   |   | (6,711 | ) |

Table of Contents

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|                                      |
|--------------------------------------|
|                                      |  |  |  |  |  |  |  |
|                                 | April 2, 2011 |   |   | December 25, 2010 |   |
| Customers, trade                     | $ | 29,242 |   |   | $ | 27,084 |   |
| Income taxes                         | 102 |   |   | 102 |   |
| Other receivables                    | 1,204 |   |   | 1,830 |   |
| Gross receivables                    | 30,548 |   |   | 29,016 |   |
| Less allowance for doubtful accounts | (667 | ) |   | (466 | ) |
| Net receivables                      | $ | 29,881 |   |   | $ | 28,550 |   |

Table of Contents

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|                                  |
|----------------------------------|
|                                  |  |  |  |  |  |  |  |
|                             | April 2, 2011 |   |   | December 25, 2010 |   |
| Raw materials                    | $ | 21,333 |   |   | $ | 18,144 |   |
| Work-in-process                  | 13,370 |   |   | 11,417 |   |
| Finished goods                   | 44,711 |   |   | 36,959 |   |
| Supplies, repair parts and other | 328 |   |   | 326 |   |
| LIFO reserve                     | (12,992 | ) |   | (8,557 | ) |
| Total inventories                | $ | 66,750 |   |   | $ | 58,289 |   |

|                                                       |
|-------------------------------------------------------|
|                                                       |  |  |  |  |  |  |  |
|                                                  | April 2, 2011 |   |   | December 25, 2010 |   |
| Compensation and benefits                             | $ | 5,680 |   |   | $ | 4,587 |   |
| Provision for customer rebates, claims and allowances | 4,066 |   |   | 5,053 |   |
| Outstanding checks in excess of cash                  | 3,371 |   |   | 2,363 |   |
| Other                                                 | 7,166 |   |   | 6,443 |   |
| Total accrued expenses                                | $ | 20,283 |   |   | $ | 18,446 |   |

|                                               |
|-----------------------------------------------|
|                                               |  |  |  |  |  |  |  |
|                                          | Three Months Ended |
|                                          | April 2, 2011 |   |   | March 27, 2010 |   |
| Warranty reserve beginning of period          | $ | 1,472 |   |   | $ | 755 |   |
| Warranty liabilities accrued                  | 785 |   |   | 662 |   |
| Warranty liabilities settled                  | (768 | ) |   | (716 | ) |
| Changes for pre-existing warranty liabilities | (40 | ) |   | 73 |   |
| Warranty reserve end of period                | $ | 1,449 |   |   | $ | 774 |   |

Table of Contents

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|                                                    |
|----------------------------------------------------|
|                                                    |  |  |  |  |  |  |  |
|                                               | April 2, 2011 |   |   | December 25, 2010 |   |
| Senior indebtedness:                               |   |   |   |
| Credit line borrowings                             | $ | 35,181 |   |   | $ | 30,503 |   |
| Term loan                                          | 10,822 |   |   | 11,324 |   |
| Equipment financing                                | 3,383 |   |   | 4,142 |   |
| Capital lease obligations                          | 700 |   |   | 810 |   |
| Mortgage note payable                              | 5,638 |   |   | 5,736 |   |
| Notes payable                                      | 373 |   |   | 538 |   |
| Total senior indebtedness                          | 56,097 |   |   | 53,053 |   |
| Convertible subordinated debentures                | 12,162 |   |   | 12,162 |   |
| Total long-term debt                               | 68,259 |   |   | 65,215 |   |
| Less: current portion of long-term debt            | (6,335 | ) |   | (6,867 | ) |
| Less: current portion of capital lease obligations | (206 | ) |   | (278 | ) |
| Total long-term debt, less current portion         | $ | 61,718 |   |   | $ | 58,070 |   |

|                     |
|---------------------|
|                     |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                | Balance at |   | Fair Value Hierarchy Level |
|                | April 2, 2011 |   | Level 1 |   | Level 2 |   | Level 3 |
| Liabilities:        |   |   |   |   |   |   |   |
| Interest rate swaps | $ | 652 |   |   | — |   |   | $ | 652 |   |   | — |   |

Table of Contents

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|                                                              |
|--------------------------------------------------------------|
|                                                              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                         | April 2, 2011 |   | December 25, 2010 |
|                                                         | Carrying |   | Fair |   | Carrying |   | Fair |
|                                                         | Amount |   | Value |   | Amount |   | Value |
| Financial assets:                                            |   |   |   |   |   |   |   |
| Cash and cash equivalents                                    | $ | 281 |   |   | $ | 281 |   |   | $ | 244 |   |   | $ | 244 |   |
| Notes receivable, including current portion                  | 373 |   |   | 373 |   |   | 419 |   |   | 419 |   |
| Financial Liabilities:                                       |   |   |   |   |   |   |   |
| Long-term debt and capital leases, including current portion | 68,259 |   |   | 70,664 |   |   | 65,215 |   |   | 67,609 |   |
| Interest rate swaps                                          | 652 |   |   | 652 |   |   | 873 |   |   | 873 |   |

Table of Contents

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|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |
|                                           | Liability Derivatives |
|                                           | April 2, 2011 |   |   | December 25, 2010 |   |
| Derivatives designated as hedging instruments: |   |   |   |
| Interest rate swaps:                           |   |   |   |
| Accrued expenses                               | $ | 497 |   |   | $ | 495 |   |
| Other long-term liabilities                    | 155 |   |   | 378 |   |
| Total                                          | 652 |   |   | 873 |   |

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |
|                                           | Three Months Ended |
|                                           | Amount of Gain or (Loss) Recognized in AOCI on Derivative (effective portion) |
|                                           | April 2, 2011 |   |   | March 27, 2010 |   |
| Derivatives designated as hedging instruments: |   |   |   |
| Cash flow hedges - interest rate swaps         | $ | 44 |   |   | $ | (97 | ) |

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |
|                                           | Three Months Ended |
|                                           | Amount of Gain or (Loss) Reclassified from AOCI into Income (effective portion) (1) (2) |
|                                           | April 2, 2011 |   |   | March 27, 2010 |   |
| Derivatives designated as hedging instruments: |   |   |   |
| Cash flow hedges - interest rate swaps         | $ | (140 | ) |   | $ | (410 | ) |

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |
|                                           | Three Months Ended |
|                                           | Amount of Gain or (Loss)  Recognized in Income on Derivative (ineffective portion)(3) |
|                                           | April 2, 2011 |   |   | March 27, 2010 |   |
| Derivatives designated as hedging instruments: |   |   |   |
| Cash flow hedges - interest rate swaps         | $ | 2 |   |   | $ | — |   |

|     |                                                                                                                                                     |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| (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 April 2, 2011 is $497. |

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

Table of Contents

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|                                       |
|---------------------------------------|
|                                       |  |  |  |  |  |  |  |
|                                  | Three Months Ended |
|                                  | April 2, 2011 |   |   | March 27, 2010 |   |
| Service cost                          | $ | 2 |   |   | $ | — |   |
| Interest cost                         | 7 |   |   | — |   |
| Amortization of prior service credits | (23 | ) |   | (22 | ) |
| Recognized net actuarial gains        | (8 | ) |   | (13 | ) |
| Net periodic benefit credit           | $ | (22 | ) |   | $ | (35 | ) |

|                                                                    |
|--------------------------------------------------------------------|
|                                                                    |  |  |  |  |  |  |  |
|                                                               | Three Months Ended |
|                                                               | April 2, 2011 |   |   | March 27, 2010 |   |
| Balance at beginning of period                                     | $ | 47 |   |   | $ | 52 |   |
| Additions based on tax positions taken during a prior period       | — |   |   | — |   |
| Reductions related to settlement of tax matters                    | — |   |   | — |   |
| Reductions related to a lapse of applicable statute of limitations | — |   |   | — |   |
| Balance at end of period                                           | $ | 47 |   |   | $ | 52 |   |

----

|                                                          |
|----------------------------------------------------------|
|                                                          |  |  |  |  |  |  |  |
|                                                     | Three Months Ended |
|                                                     | April 2, 2011 |   |   | March 27, 2010 |   |
| Income (loss) from continuing operations (1)             | $ | 644 |   |   | $ | (2,459 | ) |
|                                                     |   |   |   |
| Weighted-average shares outstanding (2)                  | 12,553 |   |   | 12,496 |   |
| Participating securities - unvested restricted stock (3) | 303 |   |   | — |   |
| Shares for basic earnings (loss) per share (2)           | 12,856 |   |   | 12,496 |   |
|                                                     |   |   |   |
| Effect of dilutive securities:                           |   |   |   |
| Stock options (3)                                        | 1 |   |   | — |   |
| Directors' stock performance units (3)                   | 45 |   |   | — |   |
| Shares for diluted earnings (loss) per share (2)(3)      | 12,902 |   |   | 12,496 |   |
|                                                     |   |   |   |
| Income (loss) per share:                                 |   |   |   |
| Basic                                                    | $ | 0.05 |   |   | $ | (0.20 | ) |
| Diluted                                                  | 0.05 |   |   | (0.20 | ) |

|     |                                                                  |
|-----|------------------------------------------------------------------|
| (1) | No adjustments needed to the numerator for diluted calculations. |

|     |                                                                                        |
|-----|----------------------------------------------------------------------------------------|
| (2) | Includes Common and Class B Common shares, less shares held in treasury, in thousands. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | 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 at the end of the relevant period, unvested restricted stock deemed to be participating securities, directors' stock performance units, and shares issuable on conversion of subordinated debentures into shares of Common Stock have been excluded.  Aggregate shares excluded were 1,158 and 1,716, respectively during the three months of 2011 and 2010. |

|                                                                        |
|------------------------------------------------------------------------|
|                                                                        |  |  |  |  |  |  |  |
|                                                                   | Three Months Ended |
|                                                                   | April 2, 2011 |   |   | March 27, 2010 |   |
| Net income (loss)                                                      | $ | 623 |   |   | $ | (2,529 | ) |
| Other comprehensive income (loss):                                     |   |   |   |
| Unrealized gain (loss) from interest rate swaps:                       |   |   |   |
| Before income taxes                                                    | 44 |   |   | (97 | ) |
| Income taxes                                                           | 17 |   |   | (37 | ) |
| Net of taxes                                                           | 27 |   |   | (60 | ) |
| Reclassification into earnings from interest rate swaps:               |   |   |   |
| Before income taxes                                                    | 140 |   |   | 410 |   |
| Income taxes                                                           | 53 |   |   | 156 |   |
| Net of taxes                                                           | 87 |   |   | 254 |   |
| Recognition of net actuarial gain on postretirement benefit plans:     |   |   |   |
| Before income taxes                                                    | (8 | ) |   | (13 | ) |
| Income taxes                                                           | (3 | ) |   | (5 | ) |
| Net of taxes                                                           | (5 | ) |   | (8 | ) |
| Amortization of prior service credits on postretirement benefit plans: |   |   |   |
| Before income taxes                                                    | (23 | ) |   | (22 | ) |
| Income taxes                                                           | (9 | ) |   | (8 | ) |
| Net of taxes                                                           | (14 | ) |   | (14 | ) |
| Comprehensive income (loss)                                            | $ | 718 |   |   | $ | (2,357 | ) |

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|                                                                                         |
|-----------------------------------------------------------------------------------------|
|                                                                                         |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                    | Interest Rate Swaps |   | Post-Retirement Liabilities |   | Total |
| Balance at December 25, 2010                                                            | $ | (514 | ) |   | $ | 483 |   |   | $ | (31 | ) |
| Unrealized gain from interest rate swaps, net of tax of $17                             | 27 |   |   | — |   |   | 27 |   |
| Reclassification into earnings from interest rate swaps, net of tax of $53              | 87 |   |   | — |   |   | 87 |   |
| Recognition of net actuarial gain on postretirement benefit plans, net of tax of $3     | — |   |   | (5 | ) |   | (5 | ) |
| Amortization of prior service credits on postretirement benefit plans, net of tax of $9 | — |   |   | (14 | ) |   | (14 | ) |
| Balance at April 2, 2011                                                                | $ | (400 | ) |   | $ | 464 |   |   | $ | 64 |   |

|                          |
|--------------------------|
|                          |  |  |  |  |  |  |  |
|                     | Three Months Ended |
|                     | April 2, 2011 |   |   | March 27, 2010 |   |
| Other operating income:  |   |   |   |
| Insurance proceeds (1)   | $ | (492 | ) |   | $ | — |   |
| Miscellaneous income     | (82 | ) |   | (59 | ) |
| Other operating income   | $ | (574 | ) |   | $ | (59 | ) |
|                     |   |   |   |
| Other operating expense: |   |   |   |
| Retirement expenses      | $ | 72 |   |   | $ | 111 |   |
| Miscellaneous expense    | 11 |   |   | 18 |   |
| Other operating expense  | $ | 83 |   |   | $ | 129 |   |
|                     |   |   |   |
| Other income:            |   |   |   |
| Miscellaneous income     | $ | (24 | ) |   | $ | (11 | ) |
| Other income             | $ | (24 | ) |   | $ | (11 | ) |
|                     |   |   |   |
| Other expense:           |   |   |   |
| Miscellaneous expense    | $ | 7 |   |   | $ | 9 |   |
| Other expense            | $ | 7 |   |   | $ | 9 |   |

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|                                            |
|--------------------------------------------|
|                                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                       |   |   |   |   |   |   |   |   | As of April 2, 2011 |
|                                       | Accrued Balance at Dec. 25, 2010 |   | 2011 Expenses To Date |   | 2011 Cash Payments |   | Accrued Balance at April 2, 2011 |   | Total Costs Incurred To Date |   | Total Expected Costs |
| Equipment and inventory relocation         | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | 3,193 |   |   | $ | 3,193 |   |
| Severance pay and employee relocation | — |   |   | — |   |   | — |   |   | — |   |   | 1,095 |   |   | 1,095 |   |
| Leased facilities - obligations            | 1,626 |   |   | 10 |   |   | (205 | ) |   | 1,431 |   |   | 2,225 |   |   | 2,275 |   |
| Totals                                     | $ | 1,626 |   |   | $ | 10 |   |   | $ | (205 | ) |   | $ | 1,431 |   |   | $ | 6,513 |   |   | $ | 6,563 |   |

|                                       |
|---------------------------------------|
|                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                  |   |   |   |   |   |   |   |   | As of April 2, 2011 |
|                                  | Accrued Balance at Dec. 25, 2010 |   | 2011 Expenses To Date |   | 2011 Cash Refunds (Payments) |   | Accrued Balance at April 2, 2011 |   | Total Costs Incurred To Date |   | Total Expected Costs |
| Severance pay and employee relocation | $ | 9 |   |   | $ | (10 | ) |   | $ | 1 |   |   | $ | — |   |   | $ | 971 |   |   | $ | 971 |   |
| Computer systems conversion cost      | — |   |   | — |   |   | — |   |   | — |   |   | 481 |   |   | 481 |   |
| Totals                                | $ | 9 |   |   | $ | (10 | ) |   | $ | 1 |   |   | $ | — |   |   | $ | 1,452 |   |   | $ | 1,452 |   |

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|                                               |
|-----------------------------------------------|
|                                               |  |  |  |  |  |  |  |
|                                          | Three Months Ended |
|                                          | April 2, 2011 |   |   | March 27, 2010 |   |
| Loss from discontinued operations:            |   |   |   |
| Before income taxes                           | $ | (32 | ) |   | $ | (103 | ) |
| Income tax benefit                            | (11 | ) |   | (33 | ) |
| Loss from discontinued operations, net of tax | $ | (21 | ) |   | $ | (70 | ) |

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|                                               |
|-----------------------------------------------|
|                                               |  |  |  |  |  |  |
|                                          |   |        Three Months Ended |
|                                          |   | April 2, 2011 |   |   | March 29, 2010 |   |
| Net sales                                     |   | 100.0 |  % |   | 100.0 |  % |
| Cost of sales                                 |   | 74.9 |  % |   | 75.5 |  % |
| Gross profit                                  |   | 25.1 |  % |   | 24.5 |  % |
| Selling and administrative expenses           |   | 23.3 |  % |   | 28.5 |  % |
| Other operating income                        |   | (0.8 | )% |   | (0.1 | )% |
| Other operating expense                       |   | 0.1 |  % |   | 0.2 |  % |
| Facility consolidation and severance expenses |   | — |  % |   | 0.4 |  % |
| Operating income (loss)                       |   | 2.5 |  % |   | (4.5 | )% |

|                                       |
|---------------------------------------|
|                                       |  |  |  |  |  |  |  |  |  |  |  |
|                                  |   |        Three Months Ended |
|                                  |   | April 2, 2011 |   | March 29, 2010 |   | Percent Increase/(Decrease) |
| Consolidated net sales                |   | $ | 65,954 |   |   | $ | 50,454 |   |   | 30.7 | % |
| Adjustment to consolidated net sales: |   |   |   |   |   |   |
| Impact of shipping weeks              |   | (4,711 | ) |   | — |   |   |   |
| Adjusted consolidated net sales       |   | $ | 61,243 |   |   | $ | 50,454 |   |   | 21.4 | % |

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|         |                              |
|---------|------------------------------|
| • | Discharges 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. |

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|                                  |
|----------------------------------|
|                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| 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 |
| January 29, 2011                 |   | — |   |   | $ | — |   |   | — |   |   |
| February 26, 2011                |   | — |   |   | — |   |   | — |   |   |
| April 2, 2011                    |   | 27,771 |   |   | 4.56 |   |   | 27,771 |   |   |
| Three Months Ended April 2, 2011 |   | 27,771 |   |   | $ | 4.56 |   |   | $ | 27,771 |   | $ | 4,678,468 |   |

|      |          |
|------|----------|
| (a.) | Exhibits |

|      |                                    |
|------|------------------------------------|
| (i.) | Exhibits Incorporated by Reference |

|       |                                 |
|-------|---------------------------------|
| (ii.) | Exhibits Filed with this Report |

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|                      |
|----------------------|
|                      |  |  |
|                 |   | THE DIXIE GROUP, INC. |
|                 |         | (Registrant) |
|                 |   |   |
| Date:   May 12, 2011 |        | By: /s/ JON A. FAULKNER |
|                 |   | Jon A. FaulknerVice President and Chief Financial Officer |
|                 |   |   |
| Date:  May 12, 2011  |   | By: /s/ D. EUGENE LASATER |
|                 |   | D. Eugene LasaterController |

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