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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report.

OVERVIEW

Our business consists principally of marketing, manufacturing and selling floorcovering products to high-end customers through our various sales forces and brands. We focus primarily on the upper end of the floorcovering market where we believe we have strong brands and competitive advantages with our style and design capabilities and customer relationships. Our Fabrica, Masland, DH Floors and TRUCOR brands have a significant presence in the high-end residential floorcovering markets. Dixie International sells all of our brands outside of the North American market.

Our sales volumes continue to be impacted by softness in U.S. housing turnover and sluggish new home construction. Weak consumer confidence continues to hinder consumer discretionary spending, which has caused consumers to postpone large purchases of durable goods such as flooring. Macroeconomic factors continue to impact new home construction and residential renovation and remodeling activity. Residential remodeling is a primary sales driver of flooring products, and most flooring is replaced before a home is listed for sale or just after a home purchase is completed. The current housing market conditions have suppressed remodeling activity as home sales remain soft. Housing turnover rates remain near historically low levels, driven by affordability challenges and broader economic uncertainty. We have, to some extent, offset the impact of a soft housing market and decreased renovation activity through cost containment, price increases, improved productivity and lower input costs. Due to low housing availability, aging stock and greater household formation, we believe demand in our markets will accelerate when consumer confidence improves and home mortgage interest rates decline. However, the ongoing impact of soft consumer demand, inflationary pressures and high interest rates to our business, financial condition, and results of operations cannot be determined at this time.

We continue to actively monitor trade policy and tariff announcements, including various executive orders issued by the current U.S. presidential administration. We have taken steps to mitigate the implemented tariffs through managing inventory of sourced products and adjusting prices as the tariff trade policy evolves. We continue to monitor changing tariff levels and adjust its strategies to mitigate their impact as trade policy evolves. These tariff actions, retaliatory measures, or other trade restrictions could materially and adversely impact our business, financial condition and results of operations.

Nasdaq Marketplace Rule 5550(a)(2) requires that, for continued listing on the exchange, we must maintain a minimum bid price of $1 per share. We received notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted, an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025.

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RESULTS OF OPERATIONS

Fiscal Year Ended December 27, 2025 Compared with Fiscal Year Ended December 28, 2024

Fiscal Year Ended (amounts in thousands)

Other (income) expense, net 11 — % (7) — % 18 (257.1) %

Income tax provision (benefit) 73 — % (29) — % 102 (351.7) %

Net Sales. Net sales for the year ended December 27, 2025 were $257.4 million compared with $265.0 in the prior period, a decrease of 2.9% for the year-over-year comparison. The lower net sales were attributed to continued lower demand within the floorcovering industry and related markets driven by continued high interest rates and inflation.

Gross Profit. Gross profit, as a percentage of net sales, increased 2.3 percentage points in 2025 compared with 2024. The increase in gross profit percentage in 2025 was primarily driven by lower raw material costs and cost reductions in our operations.

Selling and Administrative Expenses. Selling and administrative expenses were $67.7 million in 2025 compared with $69.9 million in 2024. Selling and administrative expenses as a percent of the net sales for 2025 and 2024 were 26.3% and 26.4% respectively. The decrease in selling and administrative expenses was primarily due to a reduction in sample and marketing expenses offset by an increase in legal expenses.

Other Operating Expense, Net. Net other operating expense was an expense of $1.2 million in 2025 compared with an expense of $200 thousand in 2024. Other operating expense, net includes estimated losses related to certain pending litigation.

Facility Consolidation and Severance Expenses, Net. Facility consolidation expenses were $549 thousand in 2025 compared with $1.3 million in 2024. The facility consolidation expenses incurred during 2025 and 2024 were primarily related to our plan for the consolidation of our east coast manufacturing to better align our production capacity with our sales volume and concentrate production into our lower cost facility.

Operating Income (Loss). The operating income in 2025 was $118 thousand compared to an operating loss of $5.9 million in 2024. The increase in operating income (loss) was primarily the result of cost reductions in our operations.

Interest Expense. Interest expense was $7.3 million in 2025 compared with $6.4 million in 2024. The increase is a result of higher interest rates through out 2025 compared to 2024.

Other (Income) Expense, Net. Net other (income) expense was an expense of $11 thousand in 2025 compared with income of $7 thousand in 2024. The 2025 expense included a loss of $66 thousand related to an extinguishment of a debt arrangement.

Income Tax Provision (Benefit). Our effective income tax rate was a provision of 1.01% in 2025. The provision relates to federal and state cash taxes paid offset by certain federal and state credits. In 2025, we increased our valuation allowance by $2.1 million related to our net deferred tax asset and specific federal and state net operating losses and federal and state tax credit carryforwards.

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Our effective income tax rate was a benefit of 0.24% in 2024. The provision relates to federal and state cash taxes paid offset by certain federal and state credits. In 2024, we decreased our valuation allowance by $3.8 million related to our net deferred tax asset and specific federal and state net operating losses and federal and state tax credit carryforwards.

Net Loss. Continuing operations reflected a loss of $7.3 million, or $0.50 per diluted share in 2025, compared with a loss from continuing operations of $12.2 million, or $0.83 per diluted share in 2024. Our discontinued operations reflected a loss of $340 thousand, or $0.02 per diluted share in 2025 compared with a loss of $790 thousand, or $0.05 per diluted share in 2024. Including discontinued operations, we had a net loss of $7.6 million, or $0.52 per diluted share, in 2025 compared with net loss of $13.0 million, or $0.88 per diluted share, in 2024.

LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN

During the year ended December 27, 2025, cash provided by continuing operations was $9.6 million. A reduction in inventories generated $482 thousand and an increase in accounts payable and accrued expenses generated $9.3 million.

Net cash used in investing activities was $473 thousand during the year ended December 27, 2025. This amount was primarily the result of purchases of property, plant and equipment of $598 thousand.

During the year ended December 27, 2025, cash used in financing activities was $1.6 million. We had net borrowings of $2.7 million on our revolving credit facilities. We had payments of $2.1 million on building and other term loans and payments on notes payable, net of borrowings was $280 thousand and payments on finance leases of $152 thousand.

As described in Note 1 to the consolidated financial statements, we had $52.7 million of outstanding indebtedness under our senior credit facility that is classified as current as of December 27, 2025. As of the date of these financial statements, the Company’s existing cash and cash equivalents would not be sufficient to satisfy this debt in whole and meet the Company’s operating needs for at least one year after the issuance of these financial statements.

We have evaluated our liquidity position over the next twelve months. In our evaluation we considered recent operating losses, reduced availability under our credit facility, covenant violations and macroeconomic pressures. Management has developed plans that are intended to improve liquidity and address these conditions, including profit improvement initiatives and seeking additional debt financing. Our evaluation of these plans, and our assumptions regarding their execution and timing, requires significant judgment and is subject to inherent uncertainty. We believe, after having reviewed various financial scenarios, our operating cash flows, credit availability under our revolving credit facility and other sources of financing are adequate to finance our anticipated liquidity requirements under current operating conditions. However, our current forecast projects we may not be able to maintain compliance with certain of our financial covenants under our loan agreements. We have been able to obtain waivers in the past for such violations but it cannot be assured that such waivers will be obtained in the future. Refer to Note 1 in our consolidated financial statements for detail regarding our assessment as a going concern.

Availability under our MidCap Financial Senior Secured Revolving Credit Facility on December 27, 2025 was $8.2 million which is subject to a $6.0 million minimum excess availability requirement. Significant additional cash expenditures above our normal liquidity requirements, significant deterioration in economic conditions or continued operating losses could affect our business and require supplemental financing or other funding sources.

Debt Facilities

Revolving Credit Facility - MidCap Financial IV Trust. On February 25, 2025, we entered into a new $75.0 million revolving credit agreement with MidCap Financial IV Trust, as agent, and lenders from time-to-time party thereto (collectively, "MidCap"). The credit agreement is secured by a security interest on all accounts receivable, inventory, and other assets other than certain excluded assets, including a deed to secure debt lien on our Calhoun and Chatsworth, Georgia facilities. Our borrowing capacity is based on certain percentages of values/sub-limits of the accounts receivable, inventory, and other assets (including the real properties serving as collateral for the loan). The agreement matures on February 25, 2028.

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Advances under the revolving credit facility bear interest at annual rates equal to SOFR (plus a 0.11448% SOFR adjustment) for a 1 month period, as defined with a floor of 1.00% or published SOFR, plus an applicable margin ranging between 3.75% and 4.25%. The applicable margin is determined based on the revolving loan availability percentage under the revolving credit facility with margins increasing as availability decreases. We are subject to a minimum excess availability covenant that is based upon a fixed charge coverage ratio which must be above a 1.10 to 1.00 ratio. We are subject to a monthly rolling minimum EBITDA requirement if availability is under 20% of the principal amount of the loan. The credit agreement is subject to customary terms and conditions and annual administrative and unused line fees with pricing varying based on excess availability. As of December 27, 2025, the unused borrowing availability under the MidCap revolving credit agreement was $8.2 million which is subject to a $6.0 million minimum excess availability requirement. (See Note 22 Subsequent Events for information on our amended revolving credit agreement with MidCap Financial IV Trust.)

The revolving credit facility requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. GAAP) in the revolving credit facility, requires the balance on the revolving credit facility to be classified as a current liability. The “subjective acceleration clause” allows the lender to declare an event of default if there is a material adverse change in the Company's business or financial condition. Upon the occurrence of an event of default, the lender may, among other things, declare all obligations payable in full. The loan requires certain compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers or amendments for all such financial covenants.

Term Loans. Effective October 28, 2020, we entered into a $10.0 million principal amount USDA Guaranteed term loan with AmeriState Bank as lender. The term of the loan is 25 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset every 5 years at 3.5% above 5-year treasury. The interest rate reset at 7.11% on October 26, 2025 and will reset every 5 years thereafter. The loan is secured by a first mortgage on our Atmore, Alabama and Roanoke, Alabama facilities. The loan requires certain compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers for all such financial covenants.

Effective October 29, 2020, we entered into a $15.0 million principal amount USDA Guaranteed term loan with the Greater Nevada Credit Union as lender. The term of the loan is 10 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset after 5 years at 3.5% above 5-year treasury. The interest rate reset at 7.11% on October 29, 2025. Payments on the loan are interest only over the first three years and principal and interest over the remaining seven years. The loan is secured by a first lien on a substantial portion of our machinery and equipment, a certificate of deposit and a second lien on our Atmore and Roanoke facilities. The loan requires certain compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers for all such financial covenants.

Notes Payable - Other. On January 14, 2019, we entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Saraland Industrial, LLC, an Alabama limited liability company (the “Purchaser”). Pursuant to the terms of the Purchase and Sale Agreement, we sold our Saraland facility, and approximately 17.12 acres of surrounding property located in Saraland, Alabama (the “Property”) to the Purchaser for a purchase price of $11.5 million. Concurrent with the sale of the Property, we and the Purchaser entered into a twenty-year lease agreement (the “Lease Agreement”), whereby we leased back the Property at an annual rental rate of $977 thousand, subject to annual rent increases of 1.25%. Under the Lease Agreement, we have two (2) consecutive options to extend the term of the Lease by ten years for each such option. This transaction was recorded as a failed sale and leaseback. We recorded a liability for the amounts received, continued to depreciate the asset, and imputed an interest rate so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

Our other financing notes have terms up to 1 year, bear interest ranging from 6.45% to 6.75% and are due in monthly installments through their maturity dates. Our other notes do not contain any financial covenants.

Finance Lease Obligations. Our finance lease obligations are due in monthly installments through their maturity dates. Our finance lease obligations are secured by the specific equipment leased. (See Note 9 to our Consolidated Financial Statements).

Stock-Based Awards

We recognize compensation expense related to share-based stock awards based on the fair value of the equity instrument over the period of vesting for the individual stock awards that were granted. At December 27, 2025, the total unrecognized compensation expense related to unvested restricted stock awards was $598 thousand with a weighted-average vesting period of 6.3 years.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements at December 27, 2025 or December 28, 2024.

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Income Tax Considerations

For the year ended December 27, 2025, we increased our valuation allowances by $2.1 million related to our net deferred tax asset and specific federal and state net operating losses and federal and state credit carryforwards.

During 2026 and 2027, we do not anticipate cash outlays for income taxes to exceed $200 thousand. This is due to our tax loss carryforwards and tax credit carryforwards that will be used to partially offset taxable income. At December 27, 2025, we were in a net deferred tax liability position of $91 thousand, which was included in other long-term liabilities in our Consolidated Balance Sheets.

Discontinued Operations - Environmental Contingencies

We have reserves for environmental obligations established at four previously owned sites that were associated with our discontinued textile businesses. We have a reserve of $2.1 million for environmental liabilities at these sites as of December 27, 2025. The liability established represents our best estimate of loss and is the reasonable amount to which there is any meaningful degree of certainty given the periods of estimated remediation and the dollars applicable to such remediation for those periods. The actual timeline to remediate, and thus, the ultimate cost to complete such remediation through these remediation efforts, may differ significantly from our estimates. Pre-tax cost for environmental remediation obligations classified as discontinued operations were primarily a result of specific events requiring action and additional expense in each period.

Fair Value of Financial Instruments

At December 27, 2025, we had no assets or liabilities measured at fair value that fall under a level 3 classification in the hierarchy (those subject to significant management judgment or estimation).

Recent Accounting Pronouncements

See Note 2 to our Consolidated Financial Statements of this Form 10-K for a discussion of new accounting pronouncements which is incorporated herein by reference.

Critical Accounting Policies

Certain estimates and assumptions are made when preparing our consolidated financial statements. Estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict. As a result, actual amounts could differ from estimates made when our financial statements are prepared.

The Securities and Exchange Commission requires management to identify its most critical accounting policies, defined as those that are both most important to the portrayal of our financial condition and operating results and the application of which requires our most difficult, subjective, and complex judgments. Although our estimates have not differed materially from our experience, such estimates pertain to inherently uncertain matters that could result in material differences in subsequent periods.

We believe application of the following accounting policies require significant judgments and estimates and represent our critical accounting policies. Other significant accounting policies are discussed in Note 1 to our Consolidated Financial Statements.

•Going concern and liquidity. Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. Under U.S. GAAP, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. If substantial doubt is raised, management must also assess whether its plans to mitigate those conditions or events will alleviate that substantial doubt.

In performing this assessment, we make significant judgments about our expected liquidity, including projected cash flows from operations, capital expenditure requirements, availability and terms of external financing, compliance with financial covenants in our debt agreements, and other factors that could affect our ability to meet obligations as they become due. These estimates involve assumptions regarding, among other things, future sales volumes and pricing, gross margin performance, timing of collections from customers, payment terms with suppliers, cost‐reduction initiatives, and access to capital markets or other funding sources.

As of December 27, 2025, we had $52.7 million of outstanding indebtedness under our senior credit facility that is classified as a current liability, unrestricted cash and cash equivalents of $3.2 million and unused availability under our senior credit facility of $8.2 million, subject to a $6.0 million minimum excess availability requirement and continued compliance with applicable financial covenants. We are required to maintain certain financial ratios and other covenants, which, if not met, could result in an event of default and an acceleration of our outstanding indebtedness. Our going concern and liquidity assessment therefore requires significant judgment about our ability to meet these covenants over the next 12 months, including the effectiveness and timing of management’s plans.

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At the time of issuance of these financial statements, conditions and events, including recent operating losses, reduced availability under our credit facility, covenant violations and macroeconomic pressures, raised substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. Management has developed plans that are intended to improve liquidity and address these conditions, including profit improvement initiatives and seeking additional debt financing. Our evaluation of these plans, and our assumptions regarding their execution and timing, requires significant judgment and is subject to inherent uncertainty.

If our actual operating results, cash flows, or access to capital differ materially from our estimates, or if we are unable to execute our plans as currently contemplated, we may be unable to meet our obligations as they become due or maintain compliance with our debt covenants. In that event, we could be required to seek additional financing on less favorable terms, further reduce or delay capital expenditures and other spending, dispose of assets, or pursue other strategic alternatives. Changes in our judgments or assumptions regarding going concern and liquidity could have a material effect on our consolidated financial statements and related disclosures.

•Revenue recognition. We derive our revenues primarily from the sale of floorcovering products and processing services. Revenues are recognized when control of these products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products and services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. When we transfer control of our products to the customer prior to the related shipping and handling activities, we have adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. Incidental items that are immaterial in the context of the contract are recognized as expense. While we pay sales commissions to certain personnel, we have not capitalized these costs as costs to obtain a contract as we have elected to expense costs as incurred when the expected amortization period is one year or less. We do not have any significant financing components as payment is received at or shortly after the point of sale. We determine revenue recognition through the following steps:

▪Identification of the contract with a customer

▪Identification of the performance obligations in the contract

▪Determination of the transaction price

▪Allocation of the transaction price to the performance obligations in the contract

▪Recognition of revenue when, or as, the performance obligation is satisfied

•Variable consideration. The nature of our business gives rise to variable consideration, including rebates, allowances, and returns that generally decrease the transaction price, which reduces revenue. These variable amounts are generally credited to the customer, based on achieving certain levels of sales activity, product returns, or price concessions.

Variable consideration is estimated at the most likely amount using a portfolio approach that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are estimated based upon historical experience and known trends.

•Customer claims and product warranties. We generally provide product warranties related to manufacturing defects and specific performance standards for our products for a period of up to two years. We accrue for estimated future assurance warranty costs in the period in which the sale is recorded. The costs are included in Cost of Sales in the Consolidated Statements of Operations and the product warranty reserve is included in accrued expenses in the Consolidated Balance Sheets. We calculate our accrual using the portfolio approach based upon historical experience and known trends. We do not provide an additional service-type warranty.

•Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out method (LIFO), which generally matches current costs of inventory sold with current revenues, for substantially all inventories. Reserves are also established to adjust inventories that are off-quality, aged or obsolete to their lower of cost or market. Additionally, rates of recoverability per unit of off-quality, aged or obsolete inventory are estimated based on historical rates of recoverability and other known conditions or circumstances that may affect future recoverability. Actual results could differ from assumptions used to value our inventory.

•Self-insured accruals. We estimate costs required to settle claims related to our self-insured medical, dental and workers' compensation plans. These estimates include costs to settle known claims, as well as incurred and unreported claims. The estimated costs of known and unreported claims are based on historical experience. Actual results could differ from assumptions used to estimate these accruals.

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•Income taxes. Our effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in a future period. We evaluate the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates, including business forecasts and other projections of financial results over an extended period of time. In the event that we are not able to realize all or a portion of our deferred tax assets in the future, a valuation allowance is provided. We recognize such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. We had valuation allowances of $26.8 million at December 27, 2025 and $24.7 million at December 28, 2024. At December 27, 2025, we were in a net deferred tax liability position of $91 thousand. For further information regarding our valuation allowances, see Note 13 to the Consolidated Financial Statements.

•Loss contingencies. We routinely assess our exposure related to legal matters, environmental matters, product liabilities or any other claims against our assets that may arise in the normal course of business. If we determine that it is probable a loss has been incurred, the amount of the loss, or an amount within the range of loss, that can be reasonably estimated will be recorded.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in thousands)

Our earnings, cash flows and financial position are exposed to market risks relating to interest rates, among other factors. It is our policy to minimize our exposure to adverse changes in interest rates and manage interest rate risks inherent in funding our Company with debt. We address this financial exposure through a risk management program that includes maintaining a mix of fixed and floating rate debt and the occasional use of interest rate swap agreements.

At December 27, 2025, $72,528, or approximately 87% of our total debt, was subject to floating interest rates. A one-hundred basis point fluctuation in the variable interest rates applicable to this floating rate debt would have an annual pre-tax impact of approximately $725. Included in the $72,528, is the amount outstanding for term loans of $19,822. Both loans bear interest of 5% for the first five years. The interest rates reset at 7.11% for both term loans in 2025. For the 25-year term loan, the rate will continue to reset to reflect the then current 5-year treasury rate plus a margin. The 10-year term loan will not reset again. A one-hundred basis point fluctuation in the interest rates applicable to the term loans debt would have an annual pre-tax impact of approximately $198. See Note 9 for further discussion of these loans.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The supplementary financial information required by ITEM 302 of Regulation S-K is included in PART II, ITEM 5 of this report and the Financial Statements are included in a separate section of this report.

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rules 13(a)-15(e) and 15(d)-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 27, 2025, the date of the financial statements included in this Form 10-K (the “Evaluation Date”). Based on that evaluation, our CEO and CFO concluded that, as of the Evaluation Date, that due to the existence of a material weakness in our internal control over financial reporting described below, that our disclosure controls and procedures were not effective. However, giving full consideration to the deficiency, we have concluded that that the Consolidated Financial Statements included in this annual report present fairly, in all material respects our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted principles.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures, as well as diverse interpretation of U. S. generally accepted accounting principles by accounting professionals. It is also possible that internal control over financial reporting can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. These inherent limitations are known features of the financial reporting process; therefore, while it is possible to design into the process safeguards to reduce such risk, it is not possible to eliminate all risk.

Management, including our principal executive officer and principal financial officer, has used the criteria set forth in the report entitled “Internal Control - Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) to evaluate the effectiveness of its internal control over financial reporting. Management has concluded that, during the period covered by this Report, its internal control over financial reporting was not effective as of December 27, 2025, based on those criteria.

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Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected on a timely basis. During our assessment of internal control over financial reporting in our prior fiscal year and recurring in the current fiscal year, we identified the following material weaknesses:

•Inadequate presentation and disclosure requirements of debt - Our revolving credit facility required a reclassification to a current liability as the refinanced credit facility subsequent to year-end included a subjective acceleration clause and lockbox arrangement which required the financial statement presentation as current. We originally calculated a covenant in a method that differed from the contractual terms, which is included in the our going concern assessment. In preparing the fair value of debt disclosure, we did not formally re-evaluate our credit rating. With the refinance of the revolving credit facility, we had an observable transaction to provide supporting evidence. The current conditions and this transaction indicated a credit rating that was different than was originally used by us and resulted in a re-evaluation of our credit rating used and an adjustment to the disclosure.

•Inadequate evidence of a formal evaluation of lessor accounting - We did not retain a formal assessment of our lessor lease classification evaluation, and associated support, for the operating lease classification determinations under Topic 842 for a lease arrangement. We subsequently performed procedures that included a valuation for the net present value considerations. While the subsequent procedures did not change the lease classification determination, the change in presentation, if necessary, would have resulted in a materially different accounting result.

Remediation Efforts

We are committed to maintaining a strong internal control environment. In response to the material weaknesses described above, we will enhance our processes to evaluate and review debt transactions as they relate to the presentation and disclosure requirements of debt by designating an individual to be responsible for the review who has the expertise in these matters or will consult with outside professionals with the expertise. In addition, the designated individual will perform the necessary formal documentation as it relates to lessor accounting transactions. In order to fully document effective remediation, new transactions similar to the items above would need to occur. Such lessor transactions did not occur in the current year. We continue to evaluate and work to improve our disclosure controls and procedures and internal control over financial reporting. We plan to continue the implementation of these and other remediation efforts, such as the addition of more resources, to address the identified material weaknesses in the future.

Changes in Internal Control over Financial Reporting

Other than the remediation efforts described above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.OTHER INFORMATION

None.

Item 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

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PART III.

Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The section entitled "Information about Nominees for Director" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 is incorporated herein by reference. Information regarding the executive officers of the registrant is presented in PART I of this report.

We adopted a Code of Business Conduct and Ethics (the "Code of Ethics") which applies to our principal executive officer, principal financial officer and principal accounting officer or controller, and any persons performing similar functions. A copy of the Code of Ethics is incorporated by reference herein as Exhibit 14 to this report.

We adopted insider trading policies and procedures governing transactions in our securities that are designed to promote compliance with applicable insider trading laws, rules and regulations. A copy of the policy is incorporated by reference therein as Exhibit 19.1 to this report.

Audit Committee Financial Expert

The Board has determined that Michael L. Owens is an audit committee financial expert as defined by Item 407 (e)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended, and is independent within the meaning of the applicable Securities and Exchange Commission rules and NASDAQ standards. For a brief listing of Mr. Owens' relevant experience, please refer to the "Election of Directors" section of the Company's Proxy Statement.

Audit Committee

We have a standing audit committee. At December 27, 2025, members of our audit committee are Michael L. Owens, Chairman, William F. Blue, Jr., Charles E. Brock, and Hilda S. Murray.

Item 11.EXECUTIVE COMPENSATION

The sections entitled "Compensation Discussion and Analysis", "Executive Compensation Information" and "Director Compensation" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 are incorporated herein by reference.

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The section entitled "Principal Shareholders", as well as the beneficial ownership table (and accompanying notes), in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 are incorporated herein by reference.

Equity Compensation Plan Information as of December 27, 2025

The following table sets forth information as to our equity compensation plans as of the end of the 2025 fiscal year:

(a) (b) (c)

(1)Includes the options to purchase 315,000 shares of Common Stock under our Omnibus Equity Incentive Plan and 92,819 Performance Units issued under the 2016 Incentive Compensation Plan, each unit being equivalent to one share of Common Stock. Does not include shares of Common Stock issued but not vested pursuant to outstanding restricted stock awards.

(2)Includes the aggregate weighted-average of (i) the exercise price per share for outstanding options to purchase 315,000 shares of Common Stock under our Omnibus Equity Incentive Plan and (ii) the price per share of the Common Stock on the grant date for each of 92,819 Performance Units issued under the 2016 Incentive Compensation Plan (each unit equivalent to one share of Common Stock).

(3)Includes 258,517 shares remaining to be issued under the 2016 Incentive Compensation Plan 490,238 shares remaining to be issued under the Omnibus Equity Incentive Plan.

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Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The sections entitled "Certain Transactions Between the Company and Directors and Officers" and "Independent Directors" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 6, 2026 are incorporated herein by reference.

Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

The section entitled "Audit Fees Discussion" in the Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held May 6, 2026 is incorporated herein by reference. The independent registered public accounting firm is Forvis Mazars, LLP (PCAOB Firm ID No. 686) located in Atlanta, Georgia.

PART IV.

Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements - The response to this portion of Item 15 is submitted as a separate section of this report.

(2) Financial Statement Schedules - The response to this portion of Item 15 is submitted as a separate section of this report.

(3) Exhibits - Please refer to the Exhibit Index which is attached hereto.

(b)Exhibits - The response to this portion of Item 15 is submitted as a separate section of this report. See Item 15(a)(3) above.

(c)Financial Statement Schedules - The response to this portion of Item 15 is submitted as a separate section of this report. See Item 15(a)(2).

Item 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 26, 2026 The Dixie Group, Inc.

/s/ DANIEL K. FRIERSON

By: Daniel K. Frierson

Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Capacity Date

Daniel K. Frierson

/s/ ALLEN L. DANZEY Vice President, Chief Financial Officer March 26, 2026

Allen L. Danzey

D. Kennedy Frierson, Jr.

/s/ WILLIAM F. BLUE, JR. Director March 26, 2026

William F. Blue, Jr.

/s/ CHARLES E. BROCK Director March 26, 2026

Charles E. Brock

/s/ HILDA S. MURRAY Director March 26, 2026

Hilda S. Murray

/s/ MICHAEL L. OWENS Director March 26, 2026

Michael L. Owens

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ANNUAL REPORT ON FORM 10-K

ITEM 8 AND ITEM 15(a)(1) AND ITEM 15(a)(2)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENTS

FINANCIAL STATEMENT SCHEDULES

YEAR ENDED DECEMBER 27, 2025

THE DIXIE GROUP, INC.

DALTON, GEORGIA

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FORM 10-K - ITEM 8 and ITEM 15(a)(1) and (2)

THE DIXIE GROUP, INC. AND SUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements and financial statement schedules of The Dixie Group, Inc. and subsidiaries are included in Item 8 and Item 15(a)(1) and 15(c):

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Report of independent registered public accounting firm 30

Consolidated balance sheets - December 27, 2025 and December 28, 2024 32

Notes to consolidated financial statements 36

Schedule II - Valuation and Qualifying Accounts 62

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, or the information is otherwise shown in the financial statements or notes thereto, and therefore such schedules have been omitted.

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Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee

The Dixie Group, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The Dixie Group, Inc. (the “Company”) as of December 27, 2025 and December 28, 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the two-year period ended December 27, 2025 and the related notes and schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 27, 2025 and December 28, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 27, 2025, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company has suffered recurring losses from operations, reduced availability under its credit facility, covenant violations, and macroeconomic pressures. The Company has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the conditions and events and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matter – LIFO Reserve

As disclosed in Notes 1 and 5 to the financial statements, the Company recognizes its inventory using the last-in, first-out (“LIFO”) method, which requires a reserve to adjust the historical cost carrying value of inventory to the lower of LIFO or market. As of December 27, 2025, the LIFO reserve was approximately $20,607,000. There is inherent complexity in the accounting for the LIFO reserve including complex calculations based on inventory pools, changes in those pools, and lower of cost or market adjustments.

We identified the LIFO reserve as a critical audit matter. The principal considerations for that determination included the complexity of the calculations, the judgment required for market adjustments, and the nature and extent of audit effort required to address the matter.

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Our audit procedures to test the appropriateness of the LIFO Reserve, among others:

•We tested the completeness of the LIFO reserve by evaluating whether all appropriate inventory items were included in the LIFO reserve calculation and in the appropriate category. This included reconciling the inventory used to calculate the LIFO reserve to the inventory subledger.

•We independently recalculated management’s LIFO pool calculation, including pool increases or inventory liquidations.

•We tested the aggregation of the pools used to arrive at the LIFO reserve, and considered whether methodologies were consistently applied, or that changes, if any, were in accordance with U.S. GAAP.

•We selected a sample of inventory items and tested whether the lower of cost or market adjustments made by management were in accordance with U.S. GAAP.

/s/ Forvis Mazars, LLP

We have served as the Company's auditor since 2013.

Atlanta, Georgia

March 26, 2026

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THE DIXIE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 3,204 $ 19

RESTRICTED CASH 3,865 —

LONG-TERM ASSETS OF DISCONTINUED OPERATIONS 1,053 1,064

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current portion of operating lease liabilities 4,553 3,804

Current liabilities of discontinued operations 1,073 1,156

LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS 3,321 3,398

COMMITMENTS AND CONTINGENCIES (See Note 17)

STOCKHOLDERS' EQUITY

Accumulated other comprehensive income 268 286

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 175,158 $ 175,872

See accompanying notes to the consolidated financial statements.

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THE DIXIE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

Year Ended

Other operating expense, net 1,209 200

Facility consolidation and severance expenses, net 549 1,327

Other (income) expense, net 11 (7)

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES (7,202) (12,239)

Income tax provision (benefit) 73 (29)

LOSS FROM CONTINUING OPERATIONS (7,275) (12,210)

Loss from discontinued operations, net of tax (340) (790)

BASIC LOSS PER SHARE:

Continuing operations $ (0.50) $ (0.83)

Discontinued operations (0.02) (0.05)

DILUTED LOSS PER SHARE:

Continuing operations $ (0.50) $ (0.83)

Discontinued operations (0.02) (0.05)

DIVIDENDS PER SHARE:

Common Stock $ — $ —

Class B Common Stock — —

See accompanying notes to the consolidated financial statements.

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THE DIXIE GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

Year Ended

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Unrecognized net actuarial gain on postretirement benefit plans 20 52

Income taxes — —

Unrecognized net actuarial gain on postretirement benefit plans, net 20 52

Income taxes — —

TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX (18) 18

(1) Amounts for postretirement plans reclassified from accumulated other comprehensive income to net loss were included in selling and administrative expenses in the Company's Consolidated Statements of Operations.

See accompanying notes to the consolidated financial statements.

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THE DIXIE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

Year Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Loss from continuing operations $ (7,275) $ (12,210)

Loss from discontinued operations (340) (790)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 5,620 6,542

Net gain loss on property, plant and equipment disposals (95) (24)

Impairment of assets — 238

Stock-based compensation expense 240 494

Expense for expected credit losses 274 194

Loss on extinguishment of debt 66 —

Changes in operating assets and liabilities:

Prepaid and other current assets 252 (20)

Accounts payable and accrued expenses 9,339 (618)

Other operating assets and liabilities 659 (496)

NET CASH PROVIDED BY OPERATING ACTIVITIES 9,629 3,626

NET CASH USED IN OPERATING ACTIVITIES - DISCONTINUED OPERATIONS (488) (394)

CASH FLOWS FROM INVESTING ACTIVITIES

Net proceeds from sales of property, plant and equipment 125 60

Purchase of property, plant and equipment (598) (2,094)

Joint venture capital distributions — 43

NET CASH USED IN INVESTING ACTIVITIES (473) (1,991)

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings (payments) on previous revolving credit facility (50,000) 2,381

Borrowings on current revolving credit facility 292,775 —

Payments on current revolving credit facility (240,069) —

Payments on notes payable - buildings and other term loans (2,138) (1,915)

Borrowings on notes payable - other 1,513 1,453

Payments on notes payable - other (1,793) (2,591)

Payments on finance leases (152) (70)

Change in outstanding checks in excess of cash (456) 26

Repurchases of Common Stock (27) (585)

Payments for debt issuance costs (1,271) —

NET CASH USED IN FINANCING ACTIVITIES (1,618) (1,301)

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 7,050 (60)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 19 79

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 7,069 $ 19

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents $ 3,204 $ 19

Restricted cash 3,865 —

Total cash, cash equivalents and restricted cash $ 7,069 $ 19

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid, net of (tax refunds) 14 94

Right-of-use assets obtained in exchange for new operating lease 2,996 411

Equipment purchased under finance leases — 395

Deposits utilized on purchased equipment, net — 6,530

See accompanying notes to the consolidated financial statements.

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THE DIXIE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(amounts in thousands, except share data)

Restricted stock grants forfeited - 31,812 shares (96) — 96 — — —

Class B converted into Common Stock- 5,980 shares 18 (18) — — — —

Stock-based compensation expense — — 494 — — 494

Other comprehensive income — — — — 18 18

Restricted stock grants issued - 32,000 shares 96 — (96) — — —

Restricted stock grants forfeited - 45,580 shares (137) — 137 — — —

Class B converted into Common Stock - 9,017 shares 27 (27) — — — —

Stock-based compensation expense — — 240 — — 240

Other comprehensive loss — — — — (18) (18)

See accompanying notes to the consolidated financial statements.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Company's businesses consist principally of marketing, manufacturing and selling finished carpet, rugs, luxury vinyl flooring and engineered wood flooring in the domestic floorcovering market. Additionally, the Company provides manufacturing support to its carpet businesses through its separate processing operations.

Basis of Presentation

The Consolidated Financial Statements include the accounts of The Dixie Group, Inc. and its wholly-owned subsidiaries (the "Company") and have been prepared in accordance with U.S. GAAP on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. All intercompany balances and transactions have been eliminated in consolidation.

Unless specifically noted otherwise, footnote disclosures reflect the results of continuing operations only. The results of discontinued operations are presented in Note 20.

Going Concern

The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. Under U.S. GAAP, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. If substantial doubt is raised, management must also assess whether its plans to mitigate those conditions or events will alleviate that substantial doubt.

In performing this assessment, the Company makes significant judgments about its expected liquidity, including projected cash flows from operations, capital expenditure requirements, availability and terms of external financing, compliance with financial covenants in its debt agreements, and other factors that could affect its ability to meet obligations as they become due. These estimates involve assumptions regarding, among other things, future sales volumes and pricing, gross margin performance, timing of collections from customers, payment terms with suppliers, cost‐reduction initiatives, and access to capital markets or other funding sources.

As of December 27, 2025, the Company has $52,706 of outstanding indebtedness under its senior credit facility that is classified as a current liability, unrestricted cash and cash equivalents of $3,204 and unused availability under its senior credit facility of $8,193, subject to a $6,000 minimum excess availability requirement and continued compliance with applicable financial covenants. The Company is required to maintain certain financial ratios and other covenants, which, if not met, could result in an event of default and an acceleration of its outstanding indebtedness. The Company's going concern and liquidity assessment therefore requires significant judgment about its ability to meet these covenants over the next twelve months, including the effectiveness and timing of management’s plans. The Company received waivers or amendments for certain financial covenant violations prior to, as of and subsequent to fiscal year-end. Compliance with future financial covenants will be dependent on operating performance.

At the time of issuance of these financial statements, conditions and events, including recent operating losses, reduced availability under its credit facility, covenant violations and macroeconomic pressures, raised substantial doubt about its ability to continue as a going concern within twelve months after the date the financial statements are issued. Management has developed plans that are intended to improve liquidity and address these conditions, including profit improvement initiatives and seeking additional debt financing. The Company's evaluation of these plans, and its assumptions regarding their execution and timing, requires significant judgment and is subject to inherent uncertainty, therefore management has concluded that these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include adjustments, if any, that may arise from the outcome of this uncertainty.

If the Company's actual operating results, cash flows, or access to capital differ materially from its estimates, or if the Company is unable to execute its plans as currently contemplated, the Company may be unable to meet its obligations as they become due or maintain compliance with its debt covenants. In that event, the Company could be required to seek additional financing on less favorable terms, further reduce or delay capital expenditures and other spending, dispose of assets, or pursue other strategic alternatives. Changes in the Company's judgments or assumptions regarding going concern and liquidity could have a material effect on its consolidated financial statements and related disclosures.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Variable Interest Entities

The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. At each reporting period, the Company assesses whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.

The Company entered into an arrangement to pool extrusion machinery whereby the Company and an independent entity, "the Entity", separately purchased machinery to concurrently produce fiber to reduce manufacturing costs. The entity purchases the raw materials, employs the staff and owns and manages the facility and the production of the fiber.The Company receives all fiber produced on its own machines and pays the entity an amount equal to the cost of raw materials and an agreed upon allocation of direct and indirect production and overhead costs of the fiber operations. The Company accounts for all amounts paid to the entity as the cost of raw material inventory.

The Company determined that the entity is a VIE and the Company's arrangement represents a variable interest in the entity. The Company has determined that the governance and operating structures of this VIE do not allow it to direct the activities that would significantly affect the Entity's economic performance. In addition, the Company does not have an obligation to absorb losses of the Entity. Therefore, the Company is not the primary beneficiary, and the results of operations and financial position of this VIE are not included in the Company's consolidated financial statements.The Company believes its maximum exposure of this unconsolidated VIE is the current carrying value of the equipment at the Entity's location.The carrying value and maximum exposure of this unconsolidated VIE was $6,630 as of December 27, 2025, and is included within property, plant and equipment, net on the Company’s consolidated balance sheets. Any additional potential losses cannot be determined.

Nasdaq Delisting Notification or Failure to Satisfy a Continued Listing Rule or Standard

Effective at the opening of business on October 3, 2024, the Company's Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, the Company was upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to remove the Company's securities from listing on Nasdaq. The delisting was effective February 21, 2025.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and these differences could be material.

Fiscal Year

The Company ends its fiscal year on the last Saturday of December. All references herein to "2025" and "2024" mean the fiscal years ended December 27, 2025 and December 28, 2024 respectively. Both fiscal year 2025 and fiscal 2024 contained 52 weeks.

Discontinued Operations

The consolidated financial statements separately report discontinued operations and the results of continuing operations (See Note 20).

Cash and Cash Equivalents

Highly liquid investments with original maturities of three months or less when purchased are reported as cash equivalents.

Restricted Cash

Restricted cash represents cash serving as collateral for letters of credit issued for the Company's self-insured workers' compensation program, a lease on one of its facilities and an utility deposit.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Market Risk

The Company sells carpet to floorcovering retailers, the interior design, architectural and specifier communities and supplies carpet yarn and carpet dyeing and finishing services to certain manufacturers. The Company's customers are located principally throughout the United States.

Receivables and Allowance for Expected Credit Losses

The Company grants credit to its customers with defined payment terms, performs ongoing evaluations of the credit worthiness of its customers and generally does not require collateral. Accounts receivable are carried at their outstanding principal amounts, less an anticipated amount for discounts and an allowance for expected credit losses, which management believes is sufficient to cover potential credit losses based on historical experience and periodic evaluation of the financial condition of the Company's customers. The Company's allowance for expected credit losses is computed using a number of factors including past credit loss experience and the aging of amounts due from our customers, in addition to other customer-specific factors. The Company also considers recent trends and developments related to the current macroeconomic environment such as unemployment rates, interest rates and inflation in determining its ending allowance for credit losses for accounts receivable. If the financial condition of the Company's customers were to deteriorate, resulting in a change in their ability to make payments, or if additional changes in macroeconomic factors occur, additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out ("LIFO") method, which generally matches current costs of inventory sold with current revenues, for substantially all inventories.

Property, Plant and Equipment

Property, plant and equipment are stated at the lower of cost or impaired value. Provisions for depreciation and amortization of property, plant and equipment have been computed for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets, ranging from 10 to 40 years for buildings and improvements, and 3 to 10 years for machinery and equipment. Costs to repair and maintain the Company's equipment and facilities are expensed as incurred. Such costs typically include expenditures to maintain equipment and facilities in good repair and proper working condition.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be fully recoverable. When the carrying value of the asset exceeds the value of its estimated undiscounted future cash flows, an impairment charge is recognized equal to the difference between the asset's carrying value and its fair value. Fair value is estimated using discounted cash flows, prices for similar assets or other valuation techniques.

Self-Insured Benefit Programs

The Company records liabilities to reflect an estimate of the ultimate cost of claims related to its self-insured medical and dental benefits and workers' compensation. The amounts of such liabilities are based on an analysis of the Company's historical experience for each type of claim.

Income Taxes

The Company recognizes deferred income tax assets and liabilities for the future tax consequences of the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company evaluates the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources. In the event that the Company is not able to realize all or a portion of the deferred tax assets in the future, a valuation allowance is provided. The Company recognizes such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense.

Treasury Stock

The Company classifies treasury stock as a reduction to Common Stock for the par value of such shares acquired and the difference between the par value and the price paid for each share recorded either entirely to retained earnings or to additional

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

paid-in-capital for periods in which the Company does not have retained earnings. This presentation reflects the repurchased shares as authorized but unissued as prescribed by state statute.

Revenue Recognition

The Company derives its revenues primarily from the sale of floorcovering products and processing services. Revenues are recognized when control of these products or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and services. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. When the Company transfers control of its products to the customer prior to the related shipping and handling activities, the Company has adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. Incidental items that are immaterial in the context of the contract are recognized as expense. While the Company pays sales commissions to certain personnel, the Company has not capitalized these costs as costs to obtain a contract as the Company has elected to expense costs as incurred when the expected amortization period is one year or less. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. The Company determined revenue recognition through the following steps:

•Identification of the contract with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, the performance obligation is satisfied

Performance Obligations

For performance obligations related to residential floorcovering products, control transfers at a point in time. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer and the customer must have the significant risks and rewards of ownership. The Company’s principal terms of sale are FOB Shipping Point and FOB Destination and the Company transfers control and records revenue for product sales either upon shipment or delivery to the customer, respectively. Revenue is allocated to each performance obligation based on its relative stand-alone selling prices. Stand-alone selling prices are based on observable prices at which the Company separately sells the products or services.

Variable Consideration

The nature of the Company’s business gives rise to variable consideration, including rebates, allowances, and returns that generally decrease the transaction price, which reduces revenue. These variable amounts are generally credited to the customer, based on achieving certain levels of sales activity, product returns, or price concessions.

Advertising Costs

The Company engages in promotional and advertising programs. Expenses relating to these programs are charged to results of operations during the period of the related benefits. These arrangements do not require significant estimates of costs. Costs related to cooperative advertising programs are normally recorded as selling and administrative expenses when the Company can reasonably identify the benefit associated with the program and can reasonably estimate that the fair value of the benefit is equal to or greater than its cost. The amount of advertising and promotion expenses included in selling and administrative expenses was not significant for the years 2025 and 2024.

Warranties

The Company generally provides product warranties related to manufacturing defects and specific performance standards for its products for a period of up to two years. The Company accrues for estimated future assurance warranty costs in the period in which the sale is recorded. The costs are included in cost of sales in the consolidated statements of operations and the product warranty reserve is included in accrued expenses in the consolidated balance sheets. The Company calculates its accrual using the portfolio approach based upon historical experience and known trends. The Company does not provide an additional service-type warranty (See Note 8).

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Cost of Sales

Cost of sales includes all costs related to manufacturing the Company's products, including purchasing and receiving costs, inspection costs, warehousing costs, freight costs, internal transfer costs or other costs of the Company's distribution network.

Selling and Administrative Expenses

Selling and administrative expenses include all costs, not included in cost of sales, related to the sale and marketing of the Company's products and general administration of the Company's business.

Operating Leases

The Company determines if an arrangement is an operating lease or a financing lease at inception. A lease exists if the Company obtains substantially all of the economic benefits of, and has the right to control the use of, an asset for a period of time. Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease agreement. Lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the term of the lease. Right-of-use assets may also be adjusted to reflect any prepayments made or any incentive payments received. Generally, the Company's leases do not provide a readily determinable implicit interest rate, therefore, the Company uses its incremental borrowing rate, which is based on information available at the lease commencement date, to determine the present value of lease payments.

The Company has operating leases primarily for real estate and equipment used in manufacturing. Operating lease expense is recognized in continuing operations on a straight-line basis over the lease term within cost of sales and selling and administrative expenses. Financing lease expense is comprised of both interest expense, which is recognized using the effective interest method, and amortization of the right-of-use assets. These expenses are presented consistently with the presentation of other interest expense and amortization or depreciation of similar assets. In determining lease asset values, the Company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company does not recognize a right-of-use asset and lease liability for leases with a term of twelve months or less.

Stock-Based Compensation

The Company recognizes compensation expense relating to stock-based payments based on the fair value of the equity or liability instrument issued. Restricted stock grants with pro-rata vesting are expensed using the straight-line method. (Terms of the Company's awards are specified in Note 15). The Company accounts for forfeitures when they actually occur.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

Adopted Accounting Standards

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods beginning after December 15, 2024. The Company adopted this ASU in 2025 and applied it on a prospective basis to annual financial statements. The Company did not adjust prior periods as permitted. The adoption of this ASU did not have a material impact on its financial statements and related disclosures (See Note 13).

Accounting Standards Yet to Be Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosures about certain categories of expenses (including purchases of inventory, employee compensation, depreciation and intangible asset amortization) that are included in the expense captions presented on the face of the income statement, as well as disclosures about selling expenses. This new guidance is intended to provide investors with more detailed expense information in order to better understand an entity's cost structure and forecast future cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027 on a prospective basis. Early adoption and retrospective application is permitted. The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

NOTE 3 - REVENUE

Disaggregation of Revenue from Contracts with Customers

The following table disaggregates the Company’s revenue by end-user markets:

Residential floorcovering products. Residential floorcovering products include broadloom carpet, rugs, luxury vinyl flooring and engineered hardwood. These products are sold into the designer, retailer, mass merchant and builder markets.

Other services. Other services include carpet yarn processing and carpet dyeing services.

Contract Balances

Other than receivables that represent an unconditional right to consideration, which are presented separately (See Note 4), the Company does not recognize any contract assets which give conditional rights to receive consideration, as the Company does not incur costs to obtain customer contracts that are recoverable. The Company may receive cash payments from customers in advance of the Company’s performance for limited production run orders resulting in contract liabilities. These contract liabilities are classified in accrued expenses in the consolidated balance sheets based on the timing of when the Company expects to recognize revenue, which is typically less than a year. The net decrease or increase in the contract liabilities is primarily driven by order activity for limited runs requiring deposits offset by the recognition of revenue and the application of deposit on the receivables ledger for such activity during the period. The activity in the advanced deposits for continuing operations are as follows:

Beginning contract liability $ 728 $ 966

Ending contract liability $ 863 $ 728

NOTE 4 - RECEIVABLES, NET

Receivables are summarized as follows:

Less: allowance for expected credit losses 640 454

The activity related to the allowance for expected credit losses is as follows:

Expense for expected credit losses 274 194

Less amounts written-off, net of recoveries (88) (180)

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

NOTE 5 - INVENTORIES, NET

Inventories are summarized as follows:

Supplies and other 88 94

Reduction of inventory quantities in 2025 and 2024 resulted in liquidations of LIFO inventories carried at prevailing costs established in prior years and decreased cost of sales by $144 and $494 in 2025 and 2024, respectively.

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following:

Assets under construction 202 327

Property, plant and equipment, net $ 29,154 $ 33,747

Depreciation of property, plant and equipment, including amounts for finance leases, totaled $5,160 in 2025 and $6,366 in 2024.

NOTE 7 - ACCRUED EXPENSES

Accrued expenses are summarized as follows:

Provision for customer rebates, claims and allowances 5,884 6,921

Advanced customer deposits 863 728

Outstanding checks in excess of cash 15 470

(1)Includes a liability related to the Company's self-insured Workers' Compensation program. This program is collateralized by letters of credit in the aggregate amount of $3,008. The Company has other letters of credit outstanding totaling $852.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

NOTE 8 - PRODUCT WARRANTY RESERVES

The Company generally provides product warranties related to manufacturing defects and specific performance standards for its products. Product warranty reserves are included in accrued expenses in the Company's consolidated balance sheets. The following is a summary of the Company's product warranty activity for continuing operations:

Product warranty reserve at beginning of period $ 598 $ 735

Warranty liabilities accrued 663 624

Warranty liabilities settled (791) (761)

Product warranty reserve at end of period $ 470 $ 598

NOTE 9 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS

Long-term debt consists of the following:

Revolving credit facility - Fifth Third Bank $ — $ 50,000

Revolving credit facility - MidCap Financial IV Trust 52,706 —

Finance lease obligations 304 456

Deferred financing costs, net (1,977) (1,231)

Less: current portion of long-term debt 56,642 53,818

Revolving Credit Facility - Fifth Third Bank

On October 30, 2020, the Company entered into a $75,000 Senior Secured Revolving Credit Facility with Fifth Third Bank National Association as lender. The loan was secured by a first priority security interest on all accounts receivable, cash, and inventory, and provided for borrowing limited by certain percentages of values of the accounts receivable and inventory. The revolving credit facility was due to mature on October 30, 2025; however, on February 25, 2025, the Company refinanced its senior revolving credit facility with MidCap Financial IV Trust and the Company's existing revolving credit facility with Fifth Third was terminated in accordance with its terms. The Company recognized a $66 loss on the extinguishment of the Fifth Third debt which was included in other expense, net in the Company's consolidated statement of operations.

Under the Fifth Third revolving credit facility, at the Company's election, advances of the revolving credit facility bore interest at annual rates equal to either (a) SOFR (plus a 0.10% SOFR adjustment) for 1 or 3 month periods, as defined with a floor of 0.75% or published SOFR, plus an applicable margin ranging between 1.50% and 2.00%, or (b) the higher of the prime rate plus an applicable margin ranging between 0.50% and 1.00%. The applicable margin was determined based on availability under the revolving credit facility with margins increasing as availability decreased. The applicable margin could be increased by 0.50% if the fixed charge coverage ratio was below a 1.10 to 1.00 ratio. The Company paid an unused line fee on the average amount by which the aggregate commitments exceeded utilization of the revolving credit facility equal to 0.25% per annum. The weighted-average interest rate on borrowings outstanding under the revolving credit facility were 7.18% for December 28, 2024.

The agreement was subject to customary terms and conditions and annual administrative fees with pricing varying on excess availability and a fixed charge coverage ratio. The agreement was also subject to certain compliance, affirmative, and financial covenants. The Company was only subject to the financial covenants if borrowing availability was less than 12.5% of the lesser of the total loan availability of $75,000 or total collateral available, and remained until the availability was greater than 12.5% for thirty consecutive days.

Revolving Credit Facility - MidCap Financial IV Trust

On February 25, 2025, the Company entered into a new $75,000 revolving credit agreement with MidCap Financial IV Trust, as agent, and lenders from time-to-time party thereto (collectively, "MidCap"). The credit agreement is secured by a security interest on all accounts receivable, inventory, and other assets other than certain excluded assets, including a deed to secure debt lien on the Company's Calhoun and Chatsworth, Georgia facilities. The Company's borrowing capacity is based on certain

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

percentages of values/sub-limits of the accounts receivable, inventory, and other assets (including the real properties serving as collateral for the loan). The agreement matures on February 25, 2028.

Advances under the revolving credit facility bear interest at annual rates equal to SOFR (plus a 0.11448% SOFR adjustment) for a 1 month period, as defined with a floor of 1.00% or published SOFR, plus an applicable margin ranging between 3.75% and 4.25%. The applicable margin is determined based on the revolving loan availability percentage under the revolving credit facility with margins increasing as availability decreases. The Company is subject to a minimum excess availability covenant that is based upon a fixed charge coverage ratio which must be above a 1.10 to 1.00 ratio. The Company is subject to a monthly rolling minimum EBITDA requirement if availability is under 20% of the principal amount of the loan. The credit agreement is subject to customary terms and conditions and annual administrative and unused line fees with pricing varying based on excess availability. The weighted-average interest rate on borrowings outstanding under the revolving credit facility was 8.24% for December 27, 2025. As of December 27, 2025, the unused borrowing availability under the MidCap revolving credit agreement was $8,193 which is subject to a $6,000 minimum excess availability requirement. (See Note 22 for information on the Company's amended revolving credit agreement with MidCap.)

Term Loans

Effective October 28, 2020, the Company entered into a $10,000 principal amount USDA Guaranteed term loan with AmeriState Bank as lender. The term of the loan is 25 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year U.S. treasury, to be reset every 5 years at 3.5% above 5-year U.S. treasury. The interest rate reset at 7.11% on October 26, 2025 and will reset every 5 years thereafter. The loan is secured by a first mortgage on the Company’s Atmore, Alabama and Roanoke, Alabama facilities.

Effective October 29, 2020, the Company entered into a $15,000 principal amount USDA Guaranteed term loan with the Greater Nevada Credit Union as lender. The term of the loan is 10 years and bears interest at a minimum 5.00% rate or 4.00% above 5- year U.S. treasury, to be reset after 5 years at 3.5% above 5-year U.S. treasury. The interest rate rest at 7.11% on October 29, 2025. Payments on the loan are interest only over the first three years and principal and interest over the remaining seven years. The loan is secured by a first lien on a substantial portion of the Company’s machinery and equipment and a second lien on the Company’s Atmore and Roanoke facilities.

Debt Covenant Compliance

The Company's agreements for its Revolving Credit Facility and its term loans include certain compliance, affirmative, and financial covenants and, as of the reporting date, the Company is in compliance with or has received waivers or amendments for all such applicable financial covenants.

Notes Payable - Other

On January 14, 2019, the Company, entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Saraland Industrial, LLC, an Alabama limited liability company (the “Purchaser”). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its Saraland facility, and approximately 17.12 acres of surrounding property located in Saraland, Alabama (the “Property”) to the Purchaser for a purchase price of $11,500. Concurrent with the sale of the Property, the Company and the Purchaser entered into a twenty-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of $977, subject to annual rent increases of 1.25%. Under the Lease Agreement, the Company has two (2) consecutive options to extend the term of the Lease by ten years for each such option. This transaction was recorded as a failed sale and leaseback. The Company recorded a liability for the amounts received, will continue to depreciate the asset, and has imputed an interest rate of 7.07% so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the twenty-year lease term.

The Company's other financing notes have terms up to 1 year, bear interest ranging from 6.45% to 6.75% and are due in monthly installments through their maturity dates. The Company's other notes do not contain any financial covenants.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Finance Lease Obligations

The Company's financed lease obligations are due in monthly installments through their maturity dates. The Company's finance lease obligations are secured by the specific equipment leased.

Debt Maturities

Maturities of long-term debt for periods following December 27, 2025 are as follows:

Long-TermDebt Finance Leases (See Note 10) Total

Deferred financing costs, net (1,977) — (1,977)

NOTE 10 - LEASES

Leases as Lessee

Balance sheet information related to right-of-use assets and liabilities is as follows:

Operating Leases:

Total operating lease liabilities $ 24,753 $ 26,099

Finance Leases:

Noncurrent portion of finance lease liabilities Long-term debt 154 314

Total financing lease liabilities $ 304 $ 456

Lease cost recognized in the consolidated financial statements is summarized as follows:

Finance lease cost:

Amortization of lease assets $ 98 $ 54

Interest on lease liabilities 21 14

Total finance lease costs $ 119 $ 68

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Other supplemental information related to leases is summarized as follows:

Weighted average remaining lease term (in years):

Weighted average discount rate:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 6,241 $ 5,789

Operating cash flows from finance leases 21 14

Financing cash flows from finance leases 152 70

The following table summarizes the Company's undiscounted future minimum lease payments under non-cancellable contractual obligations for operating and financing lease liabilities as of year end:

Fiscal Year Operating Leases Finance Leases

Total future minimum lease payments (undiscounted) 30,149 321

Less: Present value discount (5,396) (17)

Leases as Lessor

The Company leases or subleases to third parties certain excess space in its facilities, which are included as fixed assets. The leases are accounted for as operating leases and the lease or sublease income is included in other operating expense, net. The Company recognizes lease income on a straight-line basis as collectability is probable, including any escalation or lease incentives, as applicable, and the Company continues to recognize the underlying asset which is included in property, plant and equipment, net on the Company's consolidated balance sheets. The leases do not have any residual value guarantees. The Company has elected the practical expedient to combine all non-lease components as a combined component. The nature of the Company’s sublease agreements do not provide for variable lease payments or options to purchase.

Lease income and sublease income related to fixed lease payments is recognized in other operating expense, net in the in the consolidated statements of operations because they are not ordinary activities of the Company and is summarized as follows:

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

The following table summarizes the Company's undiscounted lease payments to be received under operating leases including amounts to be paid by the Company to the head lessor for the next five years and thereafter as of 2025:

Fiscal Year Gross Lease Payments Payments to Head Lessor Net Lease Payments

NOTE 11 - FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange value of an asset or a liability in an orderly transaction between market participants. The fair value guidance outlines a valuation framework and establishes a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and disclosures. The hierarchy consists of three levels as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities as of the reported date;

Level 2 - Other than quoted market prices in active markets for identical assets or liabilities, quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and other than quoted prices for assets or liabilities and prices that are derived principally from or corroborated by market data by correlation or other means; and

Level 3 - Measurements using management's best estimate of fair value, where the determination of fair value requires significant management judgment or estimation.

The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:

Carrying Fair Carrying Fair

Amount Value Amount Value

Financial assets:

Financial liabilities:

The fair values of the Company's long-term debt and finance leases were estimated using market rates the Company believes would be available for similar types of financial instruments and represent level 2 measurements. The fair values of cash and cash equivalents and restricted cash approximate their carrying amounts due to the short-term nature of the financial instruments.

NOTE 12 - EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsors a 401(k) defined contribution plan that covers a significant portion, or approximately 98% of the Company's associates. This plan includes a mandatory Company match on the first 1% of participants' contributions. The Company matches the next 2% of participants' contributions if the Company meets prescribed earnings levels. The plan also provides for additional Company contributions above the 3% level if the Company attains certain additional performance targets. Matching contribution expense for this 401(k) plan was $657 in 2025 and $335 in 2024.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Additionally, the Company sponsors a 401(k) defined contribution plan that covers those associates at one facility who are under a collective-bargaining agreement, or approximately 2% of the Company's associates. Under this plan, the Company generally matches participants' contributions, on a sliding scale, up to a maximum of 2.75% of the participant's earnings. Matching contribution expense for the collective-bargaining 401(k) plan was $5 in 2025 and $5 in 2024.

Non-Qualified Retirement Savings Plan

The Company sponsors a non-qualified retirement savings plan that allows eligible associates to defer a specified percentage of their compensation. The obligations for continuing operations owed to participants under this plan were $16,350 at December 27, 2025 and $16,411 at December 28, 2024 and are included in other long-term liabilities in the Company's Consolidated Balance Sheets. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The Company utilizes a Rabbi Trust to hold, invest and reinvest deferrals and contributions under the plan. Amounts are invested in Company-owned life insurance in the Rabbi Trust and the cash surrender value of the policies for continuing operations was $16,225 at December 27, 2025 and $16,537 at December 28, 2024 and is included in other assets in the Company's Consolidated Balance Sheets.

Multi-Employer Pension Plan

The Company contributes to a multi-employer pension plan under the terms of a collective-bargaining agreement that covers its union-represented employees. These union-represented employees represented approximately 2% of the Company's total employees. The risks of participating in multi-employer plans are different from single-employer plans. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company's participation in the multi-employer pension plan for 2025 is provided in the table below. The "EIN/Pension Plan Number" column provides the Employee Identification Number (EIN) and the three digit plan number. The most recent Pension Protection Act (PPA) zone status available in 2025 and 2024 is for the plan's year-end at 2024 and 2023, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The "FIP/RP Status Pending/Implemented" column indicates a plan for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date of the collective-bargaining agreement to which the plan is subject.

(1) The collective-bargaining agreement requires the Company to contribute to the plan at the rate of $0.47 per compensated hour for each covered employee. The Company will make additional contributions, as mandated by law, in accordance with the fund's 2010 Rehabilitation Plan which required a surcharge equal to $0.03 per hour (from $0.47 to $0.50) effective June 1, 2014 to May 31, 2015, a surcharge equal to $0.03 per hour (from $0.50 to $0.53) effective June 1, 2015 to May 31, 2016, a surcharge equal to $0.02 per hour (from $0.53 to $0.55) effective June 1, 2016 to May 31, 2017, a surcharge equal to $0.03 per hour (from $0.55 to $0.58) effective June 1, 2017 to May 31, 2018, a surcharge equal to $0.02 per hour (from $0.58 to $0.60) effective June 1, 2018 to May 31, 2019, a surcharge equal to $0.03 per hour (from $0.60 to $0.63) effective June 1, 2019 to May 31, 2020, a surcharge equal to $0.03 per hour (from $0.63 to $0.66) effective June 1, 2020 to May 31, 2021, a surcharge equal to $0.03 per hour (from $0.66 to $0.69) effective June 1, 2021 to May 31, 2022, a surcharge equal to $0.03 per hour (from $0.69 to $0.72) effective June 1, 2022 to May 31, 2023, a surcharge equal to $0.03 per hour (from $0.72 to $0.75) effective June 1, 2023 to May 31, 2024 a surcharge equal to $0.03 per hour (from $0.75 to $0.78) effective June 1, 2024 to May 31, 2025 and a surcharge equal to $0.04 per hour (from $0.78 to $0.82 effective June 1, 2025 to May 31, 2026. Based upon current employment and benefit levels, the Company's contributions to the multi-employer pension plan are expected to be approximately $27 for 2026.

(2) The Company's contributions to the plan do not represent more than 5% of the total contributions to the plan for the most recent plan year available.

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THE DIXIE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share data)

Postretirement Plans

The Company sponsors a postretirement benefit plan that provides life insurance to a limited number of associates upon retirement as part of a collective bargaining agreement.

Information about the benefit obligation and funded status of the Company's postretirement benefit plan is summarized as follows:

Change in benefit obligation:

Benefit obligation at beginning of year $ 285 $ 324

Service cost 1 1

Actuarial gain (20) (52)

Benefits paid (1) (1)

Benefit obligation at end of year 276 285

Change in plan assets:

Fair value of plan assets at beginning of year — —

Employer contributions 1 1

Benefits paid (1) (1)

Fair value of plan assets at end of year — —

Unfunded amount $ (276) $ (285)

The balance sheet classification of the Company's liability for the postretirement benefit plan is included in discontinued operations and is summarized as follows:

Current liabilities of discontinued operations $ 21 $ 22

Long-term liabilities of discontinued operations 255 263

Benefits expected to be paid on behalf of associates for the postretirement benefit plan during the period 2026 through 2035 are summarized as follows:

Years PostretirementPlan

Assumptions used to determine the benefit obligation of the Company's postretirement benefit plan are summarized as follows:

DXYN US Equity

DXYN · 10-K · period ended 2025-12-27

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in thousands)

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 9A. CONTROLS AND PROCEDURES

Item 9B.OTHER INFORMATION

Item 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11.EXECUTIVE COMPENSATION

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 16. FORM 10-K SUMMARY

DXYN US Equity☆

DXYN · 10-K · period ended 2025-12-27

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in thousands)

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 9A. CONTROLS AND PROCEDURES

Item 9B.OTHER INFORMATION

Item 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11.EXECUTIVE COMPENSATION

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 16. FORM 10-K SUMMARY

DXYN US Equity