Lastly, we have entered into an agreement in principle for the sale of our commercial business. This sale would represent a major change of focus for our Company. We are currently negotiating terms and conditions of the proposed sale. Upon successful completion of the sale, our entire focus would be solely on the residential floorcovering market where our well known and respected brands continue to gain market share.

While many of our planned second quarter product launches were delayed by the ransomware attack, we were still able to launch some key products into the residential market. On the soft surface side, we launched four new TECHnique patterns in our Masland and Fabrica divisions. These are high-end patterns tufted on the latest tufting innovation in the market, and produced with EnVision66™ fiber. We also launched several other EnVision66™ products across all divisions, bringing our total EnVision66™ offering to 31 styles, with additional styles coming during the third quarter. In April, we unveiled our new EnVisionSD Pet Solutions™ program with five new special edition styles expected to begin hitting retail stores this summer. EnVisionSD Pet Solutions™ styles are produced with a solution dyed nylon 6,6 fiber which has built in stain resistance and stands up to the toughest stains and wear and tear from today's active families and their pets.

One key event for the industry during the second quarter was the sale of the STAINMASTER® brand by Invista to Lowe's. Over the last couple of years, our Company had begun developing alternative fiber offerings in order to diversify our sources of raw materials and help prepare for such an eventuality. We had also introduced Envision66™ products as our new brand to the industry. In response to this event, we quickly developed a multifaceted strategy to help our specialty retail customers transition their showrooms from the STAINMASTER® brand to our EnVision66™ and EnVisionSD Pet Solutions™ brands. A key component of this effort was the development of the Premier Flooring Center™ (PFC). The PFC was developed as a non-disruptive, turnkey solution for existing STAINMASTER® Flooring Center retailers. The PFC offers a retail friendly selling system for upselling to better goods and focuses on the benefits of nylon 6,6. It also provides new signage, labels, and in store merchandising materials to create a fresh new look and feel in these showrooms. We will be installing the PFC in about 200 stores during this summer.

On the hard surface side, we introduced two new key programs in our luxury vinyl category. TRUCOR™ 3DP, a new collection of 12 wood and tile visuals in our TRUCOR™ family, is built on a SPC core, and features an enhanced digital print technology. These beautiful products deliver high definition visuals, an AC5 scratch resistance rating for exceptional durability, and virtually eliminate the pattern repeat found in most LVF products currently on the market. We also introduced TRUCOR™ Applause, a SPC offering with eight SKUs made in the USA. This is our first domestically sourced luxury vinyl program, and we are seeing great reception to the competitive price points and simplified supply chain for this offering.

Our commercial business and the commercial market continues to be adversely impacted by COVID-19. Our sales of commercial floorcovering products during the quarter were down approximately 8% from the previous year. We are beginning to see improvement, but we believe the recovery will be longer coming and not as dynamic as the residential market recovery. On June 30, 2021 we announced that we had entered into an agreement in principle for the sale of our commercial business. We are continuing to discuss the terms and conditions of the agreement," Frierson concluded.

Our gross profit as a percentage of net sales was 24.6% for the second quarter of 2021, compared to our 20.1% gross profit margin in the second quarter of 2020. We have implemented price increases in 2021 to mitigate the impact of higher raw material and personnel costs. Our selling and administrative expenses for the quarter were 20.1% of net sales, an improvement of seven percentage points from our level of 27.2% in the second quarter of 2020 as we continue to retain many of the cost saving initiatives implemented as part of our response to the COVID-19 pandemic. Our receivables increased $10.9 million as compared to the first quarter in 2021, primarily due to higher sales for the period. Net inventories increased $1.7 million during the quarter. This increase was due to higher sales volume and demand. Our accounts payable and accrued expenses increased by $12.7 million year over year and $5.6 million on the quarter. Our capital expenditures for the second quarter of 2021 were $1.8 million and are planned for 2021 level of approximately $5.0 million. Interest expense was $1.2 million for the second quarter of 2021. The change in working capital during the quarter, particularly the increase in receivables, contributed to a $1.9 million increase in debt during the quarter. Our availability at the end of the quarter was $40.2 million under our line of credit with our senior credit facility.

Our residential floorcovering sales and orders for the first 5 weeks of the quarter have continued at a very strong pace, well ahead of the same period a year ago. Both residential sales and orders are approximately 30% ahead of sales and orders last year and 2019 as well. Due to increased cost pressure on many fronts, industry wide price increases were announced during the later half of the second quarter. Additional price increases have been announced for August. Raw material, labor and transportation costs have continued to escalate.

A listen-only Internet simulcast and replay of Dixie's conference call may be accessed with appropriate software at the Company's website at https://investor.dixiegroup.com. The simulcast will begin at approximately 10:00 a.m. Eastern Time on August 5, 2021. A replay will be available approximately two hours later and will continue for approximately 30 days. If Internet access is unavailable, a listen-only telephonic conference will be available by dialing (877) 407-0989 and entering 13721095 at least 10 minutes before the appointed time. The Dixie Group, Inc. is a leading marketer and manufacturer of carpet and rugs to higher-end residential and commercial customers through the Fabrica International, Masland Carpets, Dixie Home, AtlasMasland and Dixie International brands.

This press release contains forward-looking statements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management and the Company at the time of such statements and are not guarantees of performance. Forward-looking statements are subject to risk factors and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Such factors include the levels of demand for the products produced by the Company. Other factors that could affect the Company's results include, but are not limited to, availability of raw material and transportation costs related to petroleum prices, the cost and availability of capital, integration of acquisitions, ability to attract, develop and retain qualified personnel and general economic and competitive conditions related to the Company's business. Issues related to the availability and price of energy may adversely affect the Company's operations. Additional information regarding these and other risk factors and uncertainties may be found in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

CONTACT:  
Allen Danzey
Chief Financial Officer
706-876-5865
allen.danzey@dixiegroup.com

THE DIXIE GROUP, INC. 
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(unaudited; in thousands, except earnings (loss) per share) 

THE DIXIE GROUP, INC. 
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