Mohawk Industries, Inc. Announces Fourth Quarter Earnings

CALHOUN, Georgia, February 14 /PRNewswire/ --

- 2007 Fourth Quarter EPS US$5.53 with one-time tax benefit

- 2007 Fourth Quarter EPS US$1.57 excluding one-time tax benefit

- US$189 million of debt paid down in quarter

- US$875 million cash flow from operations for year

- 27% improvement in Unilin annual operating profit

Mohawk Industries, Inc. (NYSE: MHK) today announced 2007 fourth quarter net earnings of US$379.1 million and diluted earnings per share (EPS) of US$5.53, including a one-time tax benefit. Net earnings and EPS for the quarter, excluding the tax benefit, were US$107.5 million and US$1.57, respectively. In the fourth quarter of 2006, net earnings and EPS were US$129.5 million and US$1.90 per share, respectively, and included a pre-tax benefit of US$4.4 million (US$.04 per share) related to a refund from U.S. Customs. As required under generally accepted accounting principles, a US$271.6 million (US$3.96 per share) tax benefit to earnings was recorded during the quarter which resulted from an international restructuring. Net sales for the quarter were US$1,807.3 million, a decrease of 5% from 2006. Sales were impacted favorably by the Columbia wood flooring acquisition, exchange rates and growth in the Dal-Tile segment which partially offset other sales declines. Cash flow from operations continued strong at US$273 million and an additional US$189 million of debt was paid during the quarter.

For the year 2007, earnings were US$706.8 million and EPS were US$10.32, including the US$271.6 million one-time tax benefit, a pre-tax benefit of US$9.2 million (US$.09 per share) related to a refund from U.S. customs and pre-tax charge of US$14.2 million (US$.13 per share) for plant closing costs. In 2006, net earnings and EPS were US$455.8 million and US$6.70 per share, respectively, and included a pre-tax benefit of US$19.4 million (US$.18 per share) related to a refund from U.S. Customs. Net sales for the year were US$7,586.0 million, a decrease of 4% from 2006. Sales were favorably impacted by growth in the Unilin segment, exchange rate gains and the acquisition of the Columbia wood flooring business which partially offset other sales declines. For the year Unilin's results improved substantially with operating profit increasing 27%. For the year we had cash flow from operations of US$875 million and reduced our debt by US$534 million.

In commenting on the fourth quarter and year results, Jeffrey S. Lorberbaum, Chairman and CEO, stated: "During 2007 we endured a difficult U.S. housing market and rising costs, while continuing the growth of our Unilin segment. Our management team in the U.S. handled the many challenges as the flooring market continued its decline. Our three segments are managing this cycle with many initiatives to improve revenues, reduce costs, increase prices, improve productivity, manage working capital and update our product portfolio.

The Mohawk segment has been impacted greater than our other segments with sales down 13% in the quarter and a 7.2% operating margin. The commercial channel outperformed the residential channel and this is expected to continue for the foreseeable future. Raw material costs have escalated and we announced a carpet price increase in December with further adjustments in January based on the changing environment. The announced increase should take four to six months to fully implement. We continue to right size the business by reducing costs. We are implementing many initiatives to improve efficiency and yields which we expect will have a favorable long term impact. Sales focus has been increased in the commercial, multi-family and higher-end residential channels which are expected to outperform other channels. We have discontinued production in our flat woven plant which will reduce sales about US$40 million this year.

Our Dal-Tile sales were up 2% in the quarter compared to 2006 with operating margins of 13.2%. Dal-Tile is performing well with growth in the commercial and higher-end residential channels. We are implementing price increases to pass through rising energy, logistics and other costs. Earlier investments in our sales infrastructure have enabled us to outperform the market but are impacting our margins. The Mexican market continues to expand and Dal-Tile is growing our business by focusing on premium ceramic products. During the year we closed a high cost ceramic facility in the U.S. and reduced outside purchases of ceramic to increase utilization of our plants and control inventory levels. We have completed the introduction of a new exterior collection of porcelain and stone tiles. These products extend the interior living areas to the outdoors in both residential and commercial applications.

In the quarter the Unilin segment sales grew by 20% over last year with an operating margin at 15.0%. Without Columbia, Unilin's sales growth was 7% and the operating margin was 18.3%. In the local currency Unilin had a sales decline of 3% without Columbia. The fourth quarter 2007 sales comparison was extremely difficult due to a 34% sales gain in the prior 2006 period. Our European laminate sales grew with the U.S. laminate and other sales declining on a constant exchange rate basis. Unilin is being impacted by the contracting U.S. residential industry along with slowing European building and remodeling sectors. Unilin has experienced cost increases and has implemented price increases in many product categories. Lower industry volumes are also reducing patent revenues. We are adding infrastructure to expand our penetration in Eastern Europe and Russia which are growing faster. The Columbia integration is progressing but volumes are being impacted by the slowing industry. The wood plants are improving productivity, quality and cost. New products are being introduced to replace outside purchased product, to fill in product voids and offer higher styled options. The U.S. management team is in place to execute our strategy and we are finalizing the European wood team to maximize the Malaysian sales.

In the first quarter, the company is expecting the U.S. flooring industry to continue its decline and the European building and remodeling sector to soften. Material costs are rising even though the industry volumes are falling. We have reduced production in the plants in the first quarter due to lower consumer demand and both our customers and Mohawk not building inventories as we have in prior years. With the current industry conditions, we are reducing our infrastructure costs further and increasing prices which will lag the rising costs. Based on these factors, earnings guidance for the first quarter of 2008 is from US$.81 to US$.90 EPS.

The second quarter earnings are expected to improve and be more in line with last year. We anticipate sales and earnings will benefit from higher seasonal sales rates, increases in selling prices, reduced infrastructure costs and favorable foreign exchange. Postponed flooring purchases by our customers during past cycles have resulted in an industry rebound when the economy improves. 2008 will also benefit from lower intangible asset amortization, interest expense and tax rate. We are focused on managing our business through this cycle.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words "could," "should," "believes," "anticipates," "expects," and "estimates," or similar expressions constitute "forward-looking statements." For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; raw material and energy costs; timing and level of capital expenditures; integration of acquisitions; rationalization of operations; litigation and other risks identified in Mohawk's SEC reports and public announcements.

Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, and rugs. These products are marketed under the premier brands in the industry, which include Mohawk, Karastan, Ralph Lauren, Lees, Bigelow, Dal-Tile, American Olean, Unilin and Quick Step. Mohawk's unique merchandising and marketing assist our customers in creating the consumers' dream. Mohawk provides a premium level of service with its own trucking fleet and over 250 local distribution locations.

There will be a conference call Thursday, February 14, 2008 at 11:00 AM Eastern Time.

The telephone number to call is +1-800-603-9255 for US/Canada and +1-706-634-2294 for International/Local.

A conference call replay will also be available until February 21, 2008 by dialing +1-800-642-1687 for US/local calls and +1-706-645-9291 for International/Local calls and entering Conference ID # 30399711.

(All amounts in US Dollars unless otherwise specified) MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Earnings Data Three Months Ended Twelve Months Ended (Amounts in thousands, December 31, December 31, December 31, December 31, except per share data) 2007 2006 2007 2006 Net sales $1,807,268 1,898,594 7,586,018 7,905,842 Cost of sales 1,318,005 1,344,516 5,471,234 5,674,531 Gross profit 489,263 554,078 2,114,784 2,231,311 Selling, general and administrative expenses 308,796 324,704 1,364,678 1,392,251 Operating income 180,467 229,374 750,106 839,060 Interest expense 36,234 42,584 154,469 173,697 Other (income) expense, net (3) 2,108 674 8,488 U.S. Customs refund - (4,370) (9,154) (19,436) Earnings before income taxes 144,236 189,052 604,117 676,311 Income taxes (234,878) 59,561 (102,697) 220,478 Net earnings $379,114 129,491 706,814 455,833 Basic earnings per share $5.55 1.91 10.37 6.74 Weighted-average shares outstanding 68,333 67,733 68,172 67,674 Diluted earnings per share $5.53 1.90 10.32 6.70 Weighted-average common and dilutive potential common shares outstanding 68,584 68,058 68,492 68,056 Other Financial Information (Amounts in thousands) Net cash provided by operating activities $273,240 235,804 875,077 782,045 Depreciation & amortization $81,573 72,278 306,437 274,952 Capital expenditures $65,244 41,721 163,076 165,769 Consolidated Balance Sheet Data (Amounts in thousands) December 31, 2007 December 31, 2006 ASSETS Current assets: Cash & cash equivalents $89,604 63,492 Receivables 821,113 910,021 Inventories 1,276,568 1,225,874 Prepaid expenses 123,395 114,088 Deferred income taxes 139,040 99,251 Total current assets 2,449,720 2,412,726 Property, plant and equipment, net 1,975,721 1,888,088 Goodwill 2,797,339 2,699,639 Intangible assets 1,171,869 1,180,094 Other assets 285,401 31,662 $8,680,050 8,212,209 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $260,439 576,134 Accounts payable and accrued expenses 996,061 1,053,444 Total current liabilities 1,256,500 1,629,578 Long-term debt, less current portion 2,021,395 2,207,547 Deferred income taxes and other long- term liabilities 694,798 659,821 Total liabilities 3,972,693 4,496,946 Total stockholders' equity 4,707,357 3,715,263 $8,680,050 8,212,209 As of or for the As of or for the Three Months Ended Twelve Months Ended Segment Information December 31, December 31, December 31, December 31, (Amounts in thousands) 2007 2006 2007 2006 Net sales: Mohawk $967,922 1,115,689 4,205,740 4,742,060 Dal-Tile 468,165 459,754 1,937,733 1,941,819 Unilin 393,572 327,599 1,487,645 1,236,918 Corporate and eliminations (22,391) (4,448) (45,100) (14,955) Consolidated net sales $1,807,268 1,898,594 7,586,018 7,905,842 Operating income: Mohawk $69,747 112,275 254,924 387,386 Dal-Tile 61,849 57,615 258,706 270,901 Unilin 58,990 64,669 272,260 214,093 Corporate and eliminations (10,119) (5,185) (35,784) (33,320) Consolidated operating income $180,467 229,374 750,106 839,060 Assets: Mohawk $2,302,527 2,488,856 Dal-Tile 2,259,811 2,257,107 Unilin 3,916,739 3,309,574 Corporate and eliminations 200,973 156,672 Consolidated assets $8,680,050 8,212,209

Reconciliation of Net Earnings to Adjusted Net Earnings (Amounts in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, 2007 December 31, 2007 Earnings before income taxes $144,236 604,117 Income tax benefit (271,608) (271,608) Income tax expense 36,730 168,911 Net earnings $379,114 706,814 Less: Income tax benefit (271,608) (271,608) Adjusted net earnings $107,506 435,206 Basic earnings per share $5.55 10.37 Income tax benefit per share - basic $3.97 3.98 Adjusted earnings per share - basic $1.58 6.39 Weighted-average common shares outstanding 68,333 68,172 Diluted earnings per share $5.53 10.32 Income tax benefit per share - diluted $3.96 3.97 Adjusted earnings per share - diluted $1.57 6.35 Weighted-average common and dilutive potential common shares outstanding 68,584 68,492 Reconciliation of U.S. Customs refunds and Plant Closing to EPS Three Months Twelve Months (Amounts in thousands, except Ended Ended per share data) December 31, December 31, December 31, 2006 2007 2006 U.S. Customs refund $(4,370) (9,154) (19,436) Income tax expense (1,602) (3,355) (7,123) U.S. Customs refund, net of tax $(2,768) (5,799) (12,313) Plant closings charge $- 14,200 - Income tax expense - 5,204 - Plant closing charge, net of tax $- 8,996 - U.S. Customs refund per share - basic $(0.04) (0.09) (0.18) Plant closing charge per share - basic $- 0.13 - Weighted-average common shares outstanding 67,733 68,172 67,674 U.S. Customs refund per share - diluted $(0.04) (0.09) (0.18) Plant closing charge per share - diluted $- 0.13 - Weighted-average common and dilutive potential common shares outstanding 68,058 68,492 68,056 Reconciliation of Unilin Segment Net Sales and Operating Income to Adjusted Unilin Three Months Ended Segment Net Sales and Operating Income December 31, December 31, (Amounts in thousands) 2007 2006 Unilin segment net sales $393,572 327,599 Less: Columbia net sales 44,270 - Adjusted Unilin segment net sales 349,302 327,599 Less: Exchange rate gain 32,200 - Adjusted Unilin segment net sales for Columbia and exchange rate gain $317,102 327,599 Unilin segment operating income $58,990 64,669 Less: Columbia operating loss (5,044) - Adjusted Unilin segment operating income for Columbia $64,034 64,669 Three Months Ended December 31, December 31, 2006 2005 Unilin proforma sales reconciliation: Net sales reported $327,599 168,814 Unilin net sales prior to acquisition - 76,275 Unilin proforma net sales $327,599 245,089 Proforma net sales percentage change 34%

The Company believes it is useful for itself and investors to review, as applicable, both GAAP and the above non-GAAP measures in order to assess the performance of the Company's business for planning and forecasting in subsequent periods.

Web site: http://www.mohawkind.com