S&P Raises Mohawk’s Ratings

New York, NY, May 24--Standard & Poor's Ratings Services said today that it raised its corporate credit and unsecured debt ratings on floorcoverings giant Mohawk Industries Inc. to 'BBB+' from 'BBB'. The outlook for the Calhoun, GA-based Mohawk is stable. Total debt outstanding at April 3, 2004, was about $1 billion. The rating action follows Standard & Poor's review of the company and incorporates Mohawk's improving operating performance and financial measures, despite a period of economic weakness. Although Mohawk has grown aggressively through acquisitions, the company has consistently posted improved revenues, margins, and credit protection measures. Mohawk has demonstrated its ability to maintain consistent financial results while integrating significant acquisitions. The company has also benefited from favorable demographic trends, as the majority of Mohawk's revenues are from the residential sector, which is a more stable, replacement business. "The ratings on Mohawk Industries Inc. reflect its strong position in the carpet and floorcoverings market, supported by a portfolio of well-recognized brands covering multiple price points and distribution channels," said Standard & Poor's credit analyst Susan Ding. "The ratings also reflect Mohawk's vertically integrated operations and its position as a low-cost producer, as well as its comprehensive product portfolio and diverse customer base." These positive rating factors are somewhat offset by Mohawk's participation in a mature, fragmented, and cyclical industry, as well as its vulnerability to reduced discretionary spending in an economic downturn, as the purchase of carpets and other floor coverings is deferrable. Mohawk's goal is to become a total floor coverings company providing "one-stop" shopping to its customers. To this end it acquired Dal-Tile Inc. in March 2002. This purchase provided Mohawk with access to the fast-growing ceramic tile sector, while the Lees Carpet acquisition in November 2003 added commercial carpet tiles to its product portfolio. Although Mohawk has acquired 16 firms since its IPO in 1992, the company has demonstrated a disciplined approach, financing the transactions with a combination of cash, stock, and debt. As a result of the acquisitions, Mohawk, with $5 billion in annual revenues, is now the largest player in the $20 billion floor covering industry, surpassing privately-held Shaw Industries (unrated).

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