2 Letter to Shareholders Fellow Shareholders and Associates: the California facility can be more effi- ciently produced in the Company's larger plants in the Southeast. In 2001, The Dixie Group was prof- itable, despite a difficult economy. We implemented an aggressive strategy to strengthen our balance sheet, consolidate operations and eliminate barriers to prof- itable growth. The strategy we began in mid-2000 is continuing and, by the end of the year 2001, included the following results:  Fabrica, which we acquired in mid-2000, continues to increase its sales in the high- end residential market with newly introduced products and handcrafted rugs. Masland, which serves the high-end  residential and commercial markets, is increasing its offerings of distinctively designed products to enhance its market position and growth. The home center market continues to be an important part of our business where we can give customers exclusivity with our differenti- ated products. We are also encouraged by the opportunities we see in the retail specialty market. The relationships we have developed with "selective" retailers, together with the introduction of innova- tive products and programs, should result in this becoming an important market  for us. The factory-built housing market is recovering after a long slump and we expect the recovery to have a positive impact on Carriage, the largest carpet During 2001, we focused on eliminating the problems we identified in the previ- ous year. We continued consolidating our North Georgia operations, merging three tufting operations into one, three dyeing operations into one, and multiple distri- bution centers into one. In addition, we combined three information systems. In early 2002, we closed a small carpet yarn plant in California and moved Candlewick's headquarters to Calhoun, locating it with our North Georgia  operations. The yarn manufactured in • Reduced our workforce by 25 percent; • Reduced inventories by 26 percent; and • Reduced debt by 27 percent. THE DIXIE GROUP  / 2001 ANNUAL REPORT