Mohawk 2Q Earnings Off 4%, Beats Estimates

Calhoun, GA, July 19, 2007--Mohawk Industries in the second quarter reported net earnings that fell 4% to $115.3 million, or $1.68 per share, from $119.5 million, or $1.76 per share during the same period last year.

Net sales fell 4% to $1.98 billion from $2.06 billion a year earlier.

Analysts were expecting earnings per share of $1.58 during the quarter on sales of $1.99 billion. The company had expected earnings between $1.51 and $1.60 per share.

For the first half of 2007, net earnings were up 3% to $206 million, EPS was up 3% to $3.01. Net sales for the first half were off 4% to $3.841 billion.

The company said that sales decreases for both the quarter and the year to date are attributable to slowing U.S. industry demand in the residential new construction and redecorating business.

Jeffrey S. Lorberbaum, Chairman and CEO, said, "Second quarter earnings were ahead of our guidance for the quarter. The European business maintained its strong growth and performance partially offsetting the cyclical downturn in the U.S. Our U.S. commercial business continued performing better than our residential business. U.S. residential flooring is in a cyclical downturn with soft sales in the new home and consumer redecorating categories. During the quarter, Mohawk took another important step in its strategy to become a complete provider of floor covering with the announced acquisition of four wood manufacturing plants.

"The Mohawk segment sales for the quarter were off 10% from last year as the industry suffered from slow residential sales. Our comps will become easier in the third quarter because industry sales began declining in this period last year. Commercial sales were stronger than residential as modular carpet continued to gain market share. Raw material costs increased during the quarter and we announced a carpet price increase in May of 4% to 6% which we began implementing in June. Promotions continue at a greater pace to stimulate sales and balance asset utilization in the industry.

"The Dal-Tile segment sales for the quarter were slightly below last year. We believe we are performing better than market due to the earlier investments made in sales, products and marketing. Commercial sales are offsetting some of the weakness in residential. Selected price increases were implemented in the quarter and surcharges are being applied to cover increased transportation and energy costs. We are reducing our controllable costs but margins are lower due to infrastructure investments in distribution and sales personnel to maximize sales and unabsorbed overhead from lower production schedules. Our Dal-Tile team is implementing multiple initiatives to reduce costs, improve efficiency and manage working capital. We are increasing production as we continue to shift products to our own facilities which were previously sourced externally.

"Our Unilin segment turned in a strong performance for the quarter with sales up 16% over last year. The European economy is strong while the U.S. residential market remains weak. The strong Euro positively impacted sales by 5% and operating income by $5 million. Our patents continue to gain strength and we entered new license agreements growing revenues. Our Unilin segment results were the highest ever but we anticipate results in the second half to be more in line with past performance.

"Our agreement with Columbia Forest Products to acquire two solid wood plants and one engineered plant in the U.S. and one engineered plant in Malaysia is expected to close in the third quarter. The plants are currently experiencing losses, but the business is expected to be accretive after the first year. After the acquisition, Mohawk will be the second largest producer in the pre-finished wood category, which is expected to grow between 6% to 8% over time. The transaction is subject to customary government approvals and closing conditions.

"We are focused on environmental stewardship and will be presenting our many initiatives under a program identified as Greenworks. This program includes recycling both post consumer and industrial waste, utilizing bio- based raw materials and energy, and reducing water usage, energy consumption and emissions. Greenworks is beneficial for our customers, our communities and the environment.

"During the period, no payments were received from U.S. Customs for duty refunds. In the future, we expect additional payments though the timing and amount are not known at this point."

The company expects the U.S. residential environment to continue to be difficult during the third quarter. The management team is committed to maintaining the proper balance between cost cutting and being prepared for a future turnaround. Based on these factors, the guidance for the third quarter of 2007 is $1.61 to $1.70 EPS.