10 Report of Independent Auditors Board of Directors The Dixie Group, Inc. We have audited the accompanying consolidated balance sheets of The Dixie Group, Inc. as of December 29, 2001 and December 30, 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 29, 2001. These financial statements are the responsibility of the Company's management. Our responsi- bility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examin- ing on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Dixie Group, Inc. at December 29, 2001 and December 30, 2000 and the consolidated results of their operations and cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles gener- ally accepted in the United States.  As discussed in Note A to the consolidated financial statements, the Company changed its method of accounting for derivative instruments and hedging activities in 2001, and as further discussed in Note N to the consolidated financial statements, the Company changed its method of inventory valuation for certain inventories in 2000. Chattanooga, Tennessee February 12, 2002 THE DIXIE GROUP  / 2001 ANNUAL REPORT