2. SAFE HARBOR STATEMENT
Certain of the statements in this presentation, particularly anticipating
future performance, business prospects, growth and operating strategies,
proposed acquisitions, and similar matters, and those that include the
words “believes,” “anticipates,” “forecast,” “estimates,” or similar
expressions constitute “forward-looking statements” within the meaning
of Securities Act of 1933 and the Securities Exchange Act of 1934.
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 industry conditions; competition; raw
material prices; timing and level of capital expenditures; integration of
acquisitions; introduction of new products; rationalization of operations;
and other risks identified in Mohawk’s SEC reports and public
announcements.
4. INTRODUCTION
Mohawk Management Team
Jeff Lorberbaum Chris Wellborn
Chairman and CEO Chief Operating Officer
Frank Boykin Frans De Cock
Chief Financial Officer President Unilin
Paul De Cock Guenter Heyen
President Unilin N.A. President Unilin U.S. MDF
Robert Leahy, Sr. V.P. Sales Roger Farabee, V.P. Marketing
Mohawk Hard Surfaces Unilin Flooring N.A.
Roy Foster, V.P. Sales Randy Smith, Plant Mgr.
Unilin Flooring N.A. Unilin Flooring U.S.
5. AGENDA
Thursday, May 3rd – Marriott Charlotte Center in Charlotte, North Carolina
7:00 a.m. to 8:15 a.m. – Management presentations: Jeff Lorberbaum, Chairman
and CEO; Frank Boykin, CFO; Paul De Cock, President
Unilin North America
8:15 a.m. to 3:15 p.m. – Tour of the Unilin manufacturing facilities in Mt. Gilead, N.C.
and Thomasville, N.C. Buses will be provided to both
facilities. Box lunch will be provided.
3:15 p.m. Following tour, bus transportation will be provided to
Charlotte Douglas International (CLT) and Piedmont Triad
International (GSO – Greensboro) Airports
7. MOHAWK HIGHLIGHTS
Total Flooring Product Offering
Leading Market Positions In All Major
Flooring Categories
Strong Brand Identity
Pervasive Sales Coverage
Flexible, Efficient and Vertically
Integrated Manufacturing
Superior Distribution Infrastructure
Consistent Financial Performance
and Disciplined Management
Mohawk Carpet
8. FINANCIAL DISCIPLINE
Consistent Financial Performance
11%
Net Sales 17% – AGR
10% $6.70
Earnings Per Share 20% - AGR
$8,000 $7.00
19%
$7,000 $6.00
$6.06 $7,906
$5.49
5%
$6,000 24% $6,620
$5.00
$4.62
$5,000 $5,880
$4.39
18%
$4.00
$4,999
15%
$4,000 $3.55
40%
43%
$3.00
$4,517
$3.00
$3,000 37% $2.61
$3,441
$2.00
$1.86 $3,401
$2,000
$1.30 $3,185
$1.00
$1,000 $2,407
$0 $0.00
$1,992
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
(2) (1,2)
Sales EPS
(1) Adjusted $22 million after-tax for one time non-cash charge for purchase accounting inventory in 2005
Not restated for pooling.
(2) 2005 and 2004 restated to reflect favorable impact of change from LIFO to FIFO ($0.43 and $0.03, respectively)
10. FLOORCOVERING GROWTH
Consumer Advertising
Total Industry 5%
Broadloom Carpet 2 – 3%
Area Rugs 8%
Hardwood 8%
Ceramic Tile 8%
Laminate 10%
Vinyl 0
(Source: Management Estimates for future growth)
11. FLOORCOVERING RETAILERS
Consumer Advertising
Diversified Customer Base
Over 30,000 Customers
2005
2%
Other
Home Centers 17%
Specialty 57%
Stores
Contractors 24%
(Source: July 17-31, 2006 Floor Covering Weekly)
12. BEST IN CLASS DISTRIBUTION NETWORK
Over 2,300 sales representatives
in North America
300 distribution points
State-of-the-art logistics system
1,000 trucks
13. MOHAWK GROWTH STRATEGY
1992 to 2000 Focus on Soft
Surface Acquisitions
2000 Added Hard Surface Sales
Force
Began Sourcing All Hard Surface
Categories
2002 Acquired Dal-Tile – Leading
Ceramic Position
2005 Acquired Unilin – Leading
Laminate Position
Karastan
14. BUSINESS CLIMATE
Business Environment Cycle Management
• Slowing GDP growth • Right size infrastructure
U.S.
• Housing contraction • Increase management effectiveness
Economy
• Credit tightening • Maximize inventory turns
• Positive business investment • Enhance distribution efficiency
• Improve productivity & technology
• Cyclical downturn • Reduce sales & marketing expenses
• Commercial growth • Improve service & fill rates
• Postponed remodeling investments • Build organizational excellence
Flooring
• New housing construction decline
• Escalating material costs
• Trading down (change in price & mix)
18. UNILIN
Historical Sales and EBIT Margin Evolution
$ 1,237
%
11.6
437.0
:
R
CAG
S
ALE
S
EBIT Margin (%)
$ 1,102
302.0
($ in millions)
$193.0
993
16.3%
17.3%
16.4%
$ 348
$ 332
$ 294 EBITDA
EBITDA
EBITDA
FY2004 FY2005 FY2006
Remarks ; FY 2004 and FY 2005 Pro Forma for acquisition related statements
19. A BRIEF HISTORY OF UNILIN
1960’s Foundation of the Unilin Group as a flax board manufacturer located in Ooigem
Launch of wood chipboard production
1970’s Diversification into the production of roofing systems
1980’s Start of production of melamine-faced chipboards
Start of production of laminate flooring in Wielsbeke
1990’s Launch of Quick·Step
Invention of the Uniclic glue-less system
Start of production of MDF boards in Bazeilles
2000’s Development in the U.S.:
- Acquisition of a laminate flooring production plant and of a MDF/HDF plant in North
Carolina
- Second green field laminate flooring plant built In Thomasville, NC
- Acquisition by Mohawk in 2005
21. LAMINATE FLOORING HISTORY
Laminate manufacturing has historically been linked to the production of wood panels
History of Laminate Flooring
1950s 1980s 1989 Early 90s Mid-90’s 2000s
High Pressure Laminate Pergo becomes European wood- Very fast Large flooring
laminates flooring first significant panel laminate flooring manufacturers-
(HPL) are developed in dedicated manufacturers growth in Shaw, Mohawk,
developed for Sweden as a laminate enter the laminate Europe and Mannington
furniture new flooring business, in launch product
Laminate
applications application company particular Kaindl/ line in this
flooring
of melamine Kronotex, Egger booming segment
Unilin also introduced in
HPL
becomes a Witex also enters North America
major the market and
competitor plays a part in
following promoting the
introduction of product
DPL
technology
22. GLOBAL PRODUCTION OF
LAMINATE FLOORING
• Europe is the largest manufacturer of laminate products - 551 M m² in 2006 ; + 4 % compared
to 2005.
• North American production is growing at a healthy rate (+16 % in 2006, + 21 % over the 2002-
2006 period)
• China manufactures the largest proportion of Asia originating products
• The share of North American manufactured goods is increasing steadily and represents 8 % of
global production in 2006.
1000
878
815
900
800 730
700 620
600 533
500 395
365
400
300 243
551
186 528
479
425
200 390
82 136
305
298
100 192
157
120
77
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Europe N+S America Asia/Australia
Source: Munksjo Paper
23. CONSUMPTION (M²) OF LAMINATE FLOORING
IN THE TOP 10 COUNTRIES
• China is the largest consumer of laminate products, followed by the U.S. and
Germany
• These countries have also shown the largest growth over the 2004-2006 period
200
180
160
140
120
100
80
60
40
20
0
USA
Turkey
Germany
China
Britain
France
Canada
Poland
Iberia
Netherlands
Romania
Russia
2004 2005 2006
Source: Munksjo Paper
24. UNILIN FLOORING
5 Key Competitive Advantages
Key competitive Advantages Strategic Positioning
1. Superior positioning: Unilin benefits
from strong brand recognition with a
very good positioning, recognized by
the floor covering dealer community
2. Product innovation: Unilin is
recognized as the innovation and
product leader with a strong patent
Unilin is the world’s most
portfolio
respected laminate flooring
3. Vertically integrated producer both designer, manufacturer and
in Europe and in the U.S., allowing
marketer
best-in-class industrialization
4. State-of-the-art manufacturing
footprint, allowing best-in-class cost
positioning
5. Wide coverage of distribution
channels: Unilin enjoys a very strong
presence in all distribution channels,
both in Europe and in the U.S.
25. 1. UNILIN REGARDED AS TOP MANUFACTURER
BY U.S. RETAIL COMMUNITY
Source: National Floor Trends 2006
26. 2. UNILIN IS A RECOGNISED INNOVATION
LEADER IN LAMINATE FLOORING
History of key laminate flooring innovations
1989 1996 2000-02 2002-04 2004-06
Embossed in- V-groove or joint
Direct Pressure Glue-less joints New surface
Bevelled edging in
register
Laminate technologies
Faster installation
wood look laminates Being
process (DPL) (up to 50% time Used for both
Creates indentation developed by
Straight forward saving) stone and
between tiles or most pure-
and more cost- ceramic look
Most laminate planks to give the play
tiles and for a
efficient floorings have are appearance of a real competitors
wide range of
now glue-less
Developed by joint
wood grains Quick·Step a
Unilin Patent application
Patented by Unilin
leader in new
Industrialized by (2000) and
as the « Uniclic »
surface
Unilin industrialization by
joint which has
technologies
Unilin
become the industry
standard
One-step process
Source: Unilin management
27. 3. UNIQUE INDUSTRIALIZATION
PROCESS (1)
1. Unilin is the only fully vertically integrated manufacturer in the U.S.
controlling all steps from R&D, HDF supply, chemical development,
paper saturation, pressing, cutting, milling to distribution.
2. As a consequence Unilin can innovate at every step of the
manufacturing process.
3. All these innovations are blended together into every product and
this makes it very difficult for competitors to imitate the product
advantages.
4. All innovations are patent protected. Patents and the protection
through intellectual property (IP) are an integral part of the
innovation process.
5. Patent lawyers and analysts are part of every innovation very early
in the product development process and check world-wide IP
conflicts and patent filing possibilities.
28. 3. UNIQUE INDUSTRIALIZATION
PROCESS (2)
6. All R&D and manufacturing skills come together in the transfer of
the innovation into an efficient, scalable and cost-effective
manufacturing process.
7. The capabilities of innovation, protecting the innovation and
industrializing the innovation give Unilin a distinct advantage in the
marketplace.
8. Summarizing :
• Unilin is the world’s most sophisticated laminate manufacturer
• Unilin handles very high degrees of development and
manufacturing complexity
• Unilin is very cost-competitive
29. 4. STATE-OF-THE-ART
PRODUCTION FACILITIES
1. Superior industrial footprint:
• 13 production facilities located in
Belgium, France, the Netherlands Wielsbeke
and the U.S. (Laminate Flooring & Melamine)
2. Competitive scale
• The second largest MDF/HDF plant
in the world (Bazeilles - 541,000 m3)
• 4 laminate flooring plants – each
with specific focus
• The only HDF plant in the U.S.
focused on thin MDF and HDF
Bazeilles (MDF & Chipboards)
manufacturing
3. Significant investments made in the
recent past
• High level of automation
• State-of-the-art equipment
4. Optimal location, close to raw material
sources and main customer base
30. 5. U.S. CHANNEL STRATEGY TO SUSTAIN
GROWTH AND GAIN MARKET SHARE
Overview of UNILIN Laminate Flooring Channel Coverage
Specialty stores through Specialty stores through Home Centers and
independent distribution Mohawk direct distribution Warehouse Clubs
Multiple branding
options – account
specific
• National Presence through • National presence through • Growing importance
a network of 12 regional Mohawk Sales Force
• Private Labeling
distributors in the U.S.
• Captive audience with
• Interesting growth
• Participating in all major Mohawk Aligned dealers
opportunity for
specialty buying groups
• Increased focus on Unilin/Mohawk
• Focus on differentiated alternative segments:
products commercial, new home
construction
33. STRUCTURE OF NORTH AMERICAN MARKET (M²)
• The North American Market is still very import driven (58% mainly out of Europe and
China in 2006 compared to 63% in 2002).
• North American production is growing faster than imports in 2006. This will continue
as more capacity comes on stream domestically and existing capacity is fully utilized.
• This trend will mitigate some of the margin pressure going forward because import
duties and logistical costs are significant.
200
150 North American
import
100
North American
production
50
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: Munksjo Paper
34. PENETRATION IN THE U.S. MARKET IS STILL
LOWER THAN IN MOST EUROPEAN COUNTRIES
Laminate flooring market share of flooring market
(% of total volume)
25%
Netherlands
20
France
Belgium
15
UK
Germany
10
Spain
5
US
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Typical adoption S-curve indicating that Europe is approaching its
target penetration level, while penetration in the U.S. is still low and has
room to grow
Source: Catalina Research
35. LAMINATE PRICING EVOLUTION
Price decrease in Europe began when laminate penetration reached an inflexion point.
Strong price Prices remain
Prices remain stable or decrease slightly decrease stable
Laminate flooring
market share
25%
Netherlands
20
France
Belgium
15
UK
10
5
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Source: B2B 2003, expert and retailer interviews
36. U.S. LAMINATE TRENDS
Sales by Channel
$1,514 MM $2,438 MM
$330 MM
0.3%
100.0% 1.0% 4.0% 6.0%
2.6%
4.0%
75.0% 50.0%
50.4%
50.0%
50.0%
25.0% 46.0% 44.0% 40.0%
0.0%
1997 2006 2011
Specialty Retail Home Center Internet Builder Supply Dealer
Source: U.S. FLOOReport – 2006 & Internal Analysis
37. U.S. LAMINATE TRENDS
Sales by Segment
1.0%
100% 2.0% 6.5% 7.2%
90% 15.0% 13.2% 14.3%
80%
70%
31.5% Commercial
33.2%
60%
Res New
50%
Res Remodel DIY
82.0%
40% Res Remodel Pro
30%
48.8% 45.3%
20%
10%
0%
1997 2006E 2011E
($330MM) ($1514MM) ($2438MM)
Source: U.S. FLOOReport 2006
38. KEY STRATEGIC OBJECTIVES IN
NORTH AMERICA
The 5 main objectives for the North American laminate business are:
1. Grow the Mohawk business well above category growth rates using
direct distribution advantages and product technology leadership.
2. Establish Quick•Step as the brand and market leader in the
Specialty Retail distribution channel.
3. Penetrate new market segments by using Mohawk/Daltile
relationships and distribution advantages:
– New Residential
– Commercial
4. Obtain significant new business in the Home Center Channel, an
underdeveloped channel for Unilin.
5. Use product differentiation based on technology and smart product
management to generate higher ASP’s and better operating
margins than the competition.
39. KEY ACCOMPLISHMENTS SINCE
ACQUISITION (1)
1. Established new U.S. Based Management team
2. Transferred Unilin North America Headquarters to Dallas to
leverage Daltile infrastructure:
• New marketing team led by VP Marketing Roger Farabee (formerly
Mohawk Ceramic) consisting of Daltile and Unilin marketing
professionals
• New VP Sales – Roy Foster (formerly American Olean) reorganized
and strengthened distributor sales force
• HQ Finance, IS and HR functions in Dallas
• Promoted Supply Chain Director internally to support multi-channel
growth strategy
• Use Daltile HQ support to set up specific projects and leverage existing
capabilities (credit, supply chain, etc …)
3. Developed brand new Mohawk product line which will be introduced
over the course of 2006/2007
40. KEY ACCOMPLISHMENTS SINCE
ACQUISITION (2)
4. Initiated business in the Home Center Category
• Launched first products to Home Depot
• Making presentations to other Home Centers
5. Realized significant cost savings (both for Unilin and Mohawk/Daltile)
in logistics and supply chain by combining Unilin and Mohawk buying
power
• Unilin domestic freight is managed by Mohawk national transport group
• Unilin trans-Atlantic freight is managed by Daltile international transport
group
6. Integrated UNILIN into the Mohawk financial reporting process
• Sox compliance
• Financial processes
42. THE DPL PROCESS
• The layers are assembled all at once, pressed together in a single step
• Core layer is made of HDF (High Density Fiberboard)
• Direct pressure products are manufactured using 20-35 bar of pressure
Overlay
(protective
layer)
Decorative
paper
Core layer
Stabilizing layer
Newer technology (~20% cheaper than HPL) introduced by Unilin in 1989
Now accounts for almost all of the laminate market
Product performance increasingly close to HPL at more attractive price points
43. DPL: GENERIC PRODUCT COMPOSITION
INTO FIVE LAYERS
Layers Composition Key characteristics
Melamine plastic
Protective layer Abrasion resistance
with aluminum
oxide particles
Decorative layer Paper, with a Color, pattern
printed image of
decorative motif
Hot-pressed
together in a
Core High-density Thickness (6-10 mm)
single step
fiberboard (HDF) Resistance to water
Mechanical properties
Grooves and edges for assembly, machined
into the core
Stabilizing Melamine sheet Dimensional stability
Water resistance
Soundproofing Felt or other soft Only on some products (tend to be high-end):
Optional
material reduce the sound level, and save laying
separate sound-proofing material
44. LAMINATE FLOORING QUALITY VARIES,
RESULTING IN LARGE PRICE DIFFERENCES
DPL
Product
HPL
charac-
Low-end product High-end product
teristics
Regular abrasion resistance Superior abrasion resistance, Thicker than DPL and more
Protective suitable for intensive passage area resistant due to higher pressure in
layer manufacturing process
Decorative Simple photograph of motif, no Complex finish aspect (matt + Less choice than high-end DPL
Fewer producers
surface effects glossy); depth of coloring
layer Less volume
Repetitive patterns Numerous surface effects: V-
groove, wood grain, etc.
(embossed registered)
Numerous motifs to avoid repetition
Core 6-7 mm thick, providing basic High thickness (>= 8mm), providing High thickness (>= 8mm), providing
mechanical resistance high resistance high resistance
Other Limited range of accessories Full range of accessories (skirting Essentially the same as high-end
No integrated sound layer boards, etc.) DPL
Sometimes integrated sound layer
Real plank look, feel and sound
Basic product High-end product Niche product
Retail price ~ USD 0.99-1.99 /ft2 Retail price USD 1.99-4.99 / ft2 Retail price > ~USD 4.00/ft2
45. VERTICAL INTEGRATION
Vertical integration guarantees Unilin
manufacturing excellence and undisputed
quality
• In-house R&D, design, innovation
• In-house chemical development
• In-house MDF/HDF production [Bazeilles (Fr) and Mount
Gilead (USA)]
• In-house impregnation
• In-house pressing
• In-house cutting, milling, packaging
• In-house distribution
49. CONCLUSIONS (1)
Unilin - definitely the best positioned player in the
U.S. Market with great profitable growth
opportunities:
1. Participates in the fastest growing flooring category in the U.S.
2. Is very highly regarded by distribution and retail community
3. The undisputed innovation leader
4. The only vertically integrated manufacturer in the U.S.
• With great cost position
• Excellent control over product innovation
• Unique industrialization process
50. CONCLUSIONS (2)
5. A clear strategy to grow the Mohawk laminate business at above
market growth rates
• Responding to market trends
• Leveraging unique product knowledge
• Using excellent access to distribution channels
6. The management team is in place to implement the strategy
7. Leveraging Daltile/Mohawk synergies will further optimize (cost,
channel access) Unilin’s position as we move forward
