Mohawk Earnings - continued

-- continued More comments for Jeffrey Lorberbaum, Mohawk Industries, chairman and CEO, "The Unilin segment results were strong for the third quarter with good sales growth in the European laminate business. We also saw the U.S. laminate sales improve through the quarter as our U.S. distributors completed their inventory adjustments and purchased product more in line with their current sales. Our launch of the Mohawk laminate products continues on track and the first phase is complete. The third quarter margins were higher due to better laminate product mix, improvement in the U.S. distributor business, improved board pricing and productivity, and control of discretionary spending. We have been pleased with Unilin's performance since the acquisition was completed. We are managing our balance sheet with the debt to capitalization ratio improving to 46% after paying down $168 million of debt during the third quarter. We have many initiatives focused on improving efficiency, inventory turns, and working capital management. During the quarter, the lawsuit filed against us in 2004 that alleges Mohawk hired undocumented workers to suppress wages was reviewed by the 11th Circuit Court. After reconsidering the case, the Court refused to dismiss the RICO claims against Mohawk. Mohawk will appeal the decision and will continue to vigorously defend itself against this claim." The Company is anticipating continued slow sales in the fourth quarter that will result in unabsorbed overhead costs and impact our margin dollars. We are reducing our manufacturing, administration, and marketing expenses. Our carpet margins will also be affected by the lag between cost and selling price changes. Unilin margins will decrease to a more sustainable rate. Based on these factors, our earnings guidance for the fourth quarter of 2006 is from $1.51 to $1.60 EPS. This guidance does not include the expected closing of higher cost ceramic production at an estimated cost of $6,000,000 or the anticipated additional refunds from U.S. customs.