Good morning. My name is Heather, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Fourth Quarter and Year End 2007 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers, remarks there will be a question-and-answer period. [Operator Instructions]. As a reminder ladies and gentlemen, this conference is being recorded today, Thursday, February 14, 2008. Thank you, I would now like to introduce Jeff Lorberbaum, Chairman and CEO of Mohawk Industries. Mr. Lorberbaum, you may begin your conference.

Welcome to the Mohawk fourth quarter and year-end 2007 conference call. With me, I have Frank Boykin, our CFO. Would you please read the Safe Harbor statement?

I would be glad to. I would like to remind everyone that our press release and statements we make on this call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which are subject to various risk and uncertainties including, but not limited to those set forth in our press release and our periodic filings with the Securities and Exchange Commission.

Thank you. Mohawk Industries fourth quarter earnings were $379 million and earnings per share was $5.53 including a one-time tax benefit. Excluding the one-time tax benefit, net earnings were $108 million and earnings per share was $1.57. Net sales for the quarter were $1.8 billion, a decrease of 5% from the prior year. The one-time tax benefit was required by U.S. GAAP and a result of international restructuring, which will reduce our taxes long-term. Frank, will give more details in his review. Sales were impacted favorably by Columbia wood flooring acquisition, exchange rate gains, and growth in the Dal-Tile segment, which partially offset other sales decline. Cash flow from operations continued strong at $273 million, an additional $189 million of debt was paid down during the quarter. During 2007, we entered a difficult U.S. housing market and rising costs in the United States. For the year, our earnings were $707 million, and earnings per share was $10.32 including the one-time tax benefit of $272 million, a pre tax benefit from customs refund of $9 million, and a one time pre tax closing cost of $14 million. Net sales for the year were about $7.6 billion, a decrease of 4% from 2006. Sales were favorably impacted by the growth in Unilin segment, exchange rate gains and the acquisition of Columbia wood flooring, which partially offset other sales decline. We closed several plants in all divisions to position us for the future. We implemented an international tax restructuring during the year, which has reduced our tax rates on an annual basis from 32.6% in 2006 to 28% in 2007. Based on the international earnings, our tax rate should fall to about 26% in 2008. We are managing our working capital investment through this cycle and for the year had cash flows from operations of $875 million. We also reduced our debt by $534 million. Our debt-to-capital ratio has continued to improve the 33% providing us significant flexibility for future opportunity. Our management team handled in the U.S. many challenges as a flooring market continued its decline. The industry softened with falling consumer confidence, employment deteriorating, credit availability tightening and home sales decline. The European economy was good, but has begun to slow. Energy and raw materials have continued to increase and pricing actions have been executed across our businesses. We made adjustments in our business strategy during the year and continued to adapt to the changing environment. Frank, would you please give our financial report?

Yes. Net sales for the quarter were $1.8 billion down 5% from the prior year. Our commercial business and our European laminate businesses both grew while the U.S. residential market impacted sales decline and then also our other boards and roofing business showed a decline in Europe. Gross profit for the year... for the quarter was down 190 basis points at 27.3% impacted primarily by lower volume and residential products and higher cost across most of our businesses. SG&A came in at $309 million or 17.4% of sales. SG&A dollars were actually down about $16 million from last year due to initiatives that we put in place, and also impacted by lower marketing costs. Operating income, $181 million at 10% of net sales; interest expense and other expense came in at $36 million for the quarter. Our interest expense was down due to lower levels of debt during the quarter, and then other expense was down during the quarter due to gains in foreign exchange in 2007. Our income taxes, before the tax benefit were about $37 million. This represented a tax rate of about 25.5% compared to 31.5% last year impacted by a lower tax rate due to the European tax planning structure that we put in place last quarter. As Jeff had mentioned, we expect a 26% tax rate going forward. Our earnings per share before the tax benefit were $1.57, down 17% from last year. Our earnings per share after the tax benefit of 5.53 were benefited by the tax restructuring, that benefit was about $3.96 a share during the quarter. During the fourth quarter we implemented a change and restructured our organization in Unilin. Our tax records did not originally reflect the market value of our assets when we purchased Unilin. We made certain structural changes…

Thank you, Frank. The U.S. economy is slowing with the housing and flooring industries being among those most affected. Credit market lending standards and declining housing prices have all contributed to the present cyclical downturn in the flooring industry. The concern about the overall economy caused the Federal Reserve to cut rate significantly and increased liquidity, which has reduced mortgage rights. Congress has a stimulus package, which should increase consumer and business spending and could help the housing market in the future. We can not predict the cycle bottom, but pent up demand from consumers postponing purchases will cause a rebound in the residential and remodeling market when the economy improves. The European economy has been running at above average growth rates. Currently Europe is being impacted by tightening credit, a stronger euro and higher energy, which is causing the construction and remodeling industry to slow. Eastern European and Russian economies are expected to grow at above of average rate this year. Our three segments are managing this environment with many initiatives for reducing costs and improving revenues and margins. The Mohawk segment has been impacted to the greatest than the other segments with sales down 13% and operating margins of 7.2%. Sales declined as industry conditions have weakened. The commercial channel outperformed the residential channel, and the trend is expected to continue for the foreseeable future. We aggressively drop more products than normal last year as industry volume sell. In commercial, we have a higher share of broadloom carpet, which is being impacted by the growth in the carpet tiles. To improve our sales, we introduced more high volume products in the fourth quarter and are delivering our 2008 introductions earlier than normal. We have introduced the new WundaWeve collection, which is being accepted and will improve our high…

[Operator Instructions]. Your first question comes from the line of Dan Oppenheim with Banc of America Securities.

This is actually Mike Vaughn for Dan. I was just wondering could you provide a little more color on the order trends you've seen since you announced the price increases just given last summer we saw a pull forward and demand pulled forward only to see it drop off afterwards.

I think, we are projecting any industry... we are still anticipating the industry to decline. We are in a moment in time, where it's very difficult to read the order entry rates, because January sales levels are always all significantly and with markets and timing of markets as well as the price increase, it's difficult to interpret those today. So I mean we don't have a clear indication at the moment.

And I guess it seems that, the comment about fully implemented in four to six months. That seems a little more drawn out than we've seen previously; is that an attempt to kind of just ease into the price increase and minimize that effect?

No, it's the same thing we have been saying since I have been here. So it's typical of what we have always done.

Okay, great. And just one quick follow-up, could you quantify the reductions in SG&A that you are targeting there and what we did expect for modeling purposes?

We are still in the process of putting together all of those right now, and we don't really have a good number that we can share with you at this point, I will talk you about this point. It's an ongoing process.

Okay, great. Thanks.

Your next question comes from Keith Hughes with SunTrust Robinson Humphrey.

Hello?

Mr. Hughes, your line is open.

He must have changed his mind.

Your next question comes from the line of David MacGregor with Longbow Research.

Hello, this is actually Shawn Ross for David MacGregor. How are you guys doing?

Excellent, good morning.

Good morning. I had a quick question; could you walk us through on your assumptions for second quarter and how you plan to get back to in line with 2Q 07. I mean going from first quarter guidance of $0.81 and $0.90 and going back up about $1.60 to $1.70?

I mean to start out with the... our assumptions are that the industry is still declining that we have lower production rate in the first quarter as both Mohawk and the consumers are being more conservative than they are. There is the lag in the pricing of our products, which the costs are being affected much more in the first quarter, but the pricings not. As we look for the rest of the year, we see that Unilin improvement is not going to be quite as much as historical, but we think someone help as quite as much is in prior years. The actions that we are taking are... we are cutting the infrastructure costs, we are improving productivity, the price increases we have already mention, they have accelerated product introduction and then the normal things that happen as we have a higher seasonal sales as we move through the year. What we said was that we expect the second quarter to improve from the first quarter, but we still expected it be below last year. We said we expect it to be more in line, we didn't say we expected it to be the same.

Okay. Can you give anymore insight into their number by business segment unit? Can you break it down by Unilin versus Mohawk versus Dal-Tile?

I don't think I am prepared to do that at this point.

Okay.

I mean, we just give one quarter worth of direction and we just give the operating margin for the business, the earnings per share.

Okay. And then final quick question is can you talk about the revenues, profitabilities of products that you manufacture versus product that you are just distributing?

I'm hesitating, because I mean we have a lot of different products and categories and they are all different from each other. I don't really know how to answer that question. I mean we have a lot of products in each of the divisions that we purchased and that we sell and they are all over the place.

Okay. How about consolidated, the trending upward down in percentages of distribution in the past quarters?

We don't have that information in front of us.

Okay. Thank very much.

Your next question comes from the line of Sam Darkatsh with Raymond James.

Yes, this is Jeffrey calling in for Sam. Good morning guys.

Would you speak a little louder, please?

Is this better, Frank?

Yes.

Okay. And my first question related to collectibility and if you have seen any change there versus what you are describing in Q3 and Q4, both from the builder channel and then from some of the smaller independent retailers and stores and that kind of thing?

We had not seen any change in terms of the quality of our receivables. As Jeff had mentioned, remember, we've got thousands of customers and as you know, one customer that comprises more than 5% of our sales. And we don't actually sell directly to the builders. We sell to contractors and dealers that doing itself and even stall to the builder. So I think overall our account receivable agent is still in pretty good shape right now.

Okay. Next question you mentioned that you expect favorable foreign exchange in Q2, what did you mean by that?

Well, if you look at the exchange rate now, I mean it's moving around, but it's 146, 147 today between euro and the dollar. A year ago, which is what we would be comparing to in Q2 is in the mid 130s. And so, when we take our European operations and we translate those into dollars, year-over-year we should have the benefits.

But on a year-over-year basis, you should have benefiting for the last...

Exactly, but we expect to continue to have a benefit into the second quarter we had in the past.

Okay, understood. My final question relates back to the tax benefits. Can you help me understand what you are talking about there? It sounds like you are basically just taking your cost basis up on some of the Unilin assets, so if you... is it... if you decided to sell those assets, you would pay lower taxes on them, is that what you are saying?

Yes, that's what we are saying. We increased the tax basis of our assets and that increased basis is going to allow us to take a larger or tax purposes amortization deduction.

But it will affect it on an ongoing basis, not as we sell it.

Understood, relates to the amortization. Thank you.

Your next question comes from the line of Laura Champine with Morgan Keegan. John D. Kernan - Morgan Keegan & Company: Hi, guys. This is actually John Kernan calling in for Laura. Can you hear me?

We can. John D. Kernan - Morgan Keegan & Company: Okay. Can you comment on your inventory build in Q4 that came on sales decline and then maybe comment about some of the progress you see with inventory in Q1 given that you are probably looking at some year-over-year sales declines also in that quarter?

Let me address the first part of the question, and then maybe Jeff will address the second part. On the first part, if you look at inventories at the end of Q4, and as I mentioned, it's about $60 million of reported for Columbia. John D. Kernan - Morgan Keegan & Company: For Columbia.

We have got to back that out, and we do that our turns are pretty much flat year-over-year.

So, we don't... if you extract the wood business, the inventories didn't increase. John D. Kernan - Morgan Keegan & Company: Okay. And you expect what's your outlook for Q1 would be...

We are trying to not let them increase as much as they have in the past. John D. Kernan - Morgan Keegan & Company: Okay.

We are trying to maintain control of the inventory. John D. Kernan - Morgan Keegan & Company: Can you also comment on the commercial side? I mean we get monthly data on the residential housing market, but are you seeing any weakness in commercial construction markets, because it seems like recently there has been some concern over that market?

The commercial markets appeared to still be doing reasonably well. They tend to track differently, because the large projects are done well in advance and once you start them they continue through completion. And so if you look in cycle, the commercial business when the economy goes down, it won't trail off for at least six to nine months and sometimes longer after it. So at this point, it's continuing reasonable, and most people believe it will do okay this year, so we tend to soften as we move through the year. John D. Kernan - Morgan Keegan & Company: Okay. Thanks guys.

You're welcome.

Your next question comes from the line of Ivy Zelman with Zelman & Associates. Ivy Zelman - Zelman & Associates: A 2Q and think about the expectations you are forecasting for new residential, do you see sequential improvement and kind of quantify what your expectations are for repair and remodel for the industry that assuming we could be at a better framework if you are looking for things to get better or you're thinking that housing activity is still going to be down year-over-year 20% as most are expecting for housing starts to kind of quantify some of the expectations in the end markets?

Let me just make sure we are starting from the same point; we don't expect the business to be much better. What we said was we expected the seasonality, which normally occurs from first quarter to second quarter, they still occur. So, the improvement we refer to is not in the industry versus the historical, it's improvement in sequential that first quarter is always low. And second quarter is always better. So... Ivy Zelman - Zelman & Associates: Okay. So year-over-year, you are still assuming new construction will be down, and I guess quantify... can you quantify that what you think it would be and what repairing model might be for your year-over-year declines?

We don't have any better information then the marketplaces. I mean the marketplace is assuming that new houses will be down to 900 to 1 billion units. And I mean we don't have any other reference points than you have in the general markets. We are using the same ones. Ivy Zelman - Zelman & Associates: Okay. The second question relates to CapEx; did we hear you say that you spent 160 in 07 and you think you will spend 300 in 08? And if so, can you give us an explanation of what the increase would come from as is the new plant for wood products in the U.S.?

We start out every year with a plan that we put in the budget. And the budget anticipates what's going to happen on a certain set of circumstances. As we go through the year, we keep adapting it as it changes. In our plans is when we made the plan at this point is it takes a long period of time to put a new capacity in many of our pieces. And in the plan was investments and new capacities in ceramic, as well as new capacities in laminate, replacing extrusion... higher cost extrusion capacity, and investing in other cost improvements within the business. Now because of the length of time it takes to put these in, which in many cases is two years or greater, you have to anticipate what's going on. So in the plan are those investments we haven't turned any of the large ones through, which is the something that happened this year. This year we started out with about $300 million plan, and what we did is we didn't try and loose these large new plants for future, because we've read the economy and said that we thought it would be longer before we would need them. So we are starting the year with the same expectations, but we are not going to turn those new capital investments those if we don't see us needing them. But you have to put them in place before you need them.

Your next question comes from the line of Michael Rehaut with JP Morgan.

Hi guys, this is actually Ray [ph] calling in for Mike.

Good morning.

Good morning. I want to talk about your uses of cash; it looks like you guys have pretty good flexibility right now. We think historically when your net debt to cap cut down to about 25%, you guys did a Dal-Tile and Unilin acquisition. You've got 32% right now or so, what kind of your multiples or opportunities are you guys seeing out in the marketplace right now. And when do you think it would make more sense to just to repurchase your own shares that's your EBITDA is only about seven times right now versus about eight times historically?

We think we are in excellent place given the environment, we think that having cash available is a right thing to be at today, and it gives us a lot of flexibility. It's just got through the capital expenditures. It gives us the availability to invest heavily in capital expenditures in futures. If we determine as the right time, and you are right the two big pieces are with the capital either to look at acquisitions or to buyback stock. And we like having the flexibility that whichever one of them appears to have the most value to the business. We have the cash that enables us to do that. We don't have a specific acquisition or a specific price point that we will invest in, we take the opportunities as they arise and all the basic information we have at that point and determine, which one makes the most sense and if the continuing changing analysis, the acquisitions, I think some of the multiples, we perceive are coming down as the costs of high risks debt has gone up, some of the valuations are coming down, and so we believe there will be quickly some opportunities over the near term that we might want to take advantage of. So we are leaving -- so we believe we are in an excellent position to go whichever route makes the most sense.

Are there any opportunities like Eastern Europe or Russia that you are seeing right now or would that just be kind of organically groomed for you guys?

We have looked at some. If you get in those marketplaces, the businesses that are there are smaller, so they are not going to be large ones. And some of the cases there is other risks associated with them. So if we do anything on those markets, there will be more limited and not have a dramatic impact on our business.

Your next question comes from the line of Eric Bosshard with Cleveland Research.

Good morning this is Mark stepping in for Eric. First question; can you guys give a little bit more color on your organic growth within Unilin in both the U.S. and Europe. You mentioned Europe contract or Europe grew and the U.S. contracted; can you kind of compare the numbers this quarter to what we saw in previous quarters?

I am not prepared to break down product-by-product for you in the market. You have to understand first again that the year ago fourth quarter, we had a 34% gain in the quarter, which is highly unusual and unsustainable is that. So when you compare the fourth quarter this year to that, I think we had a good quarter, but the last year's was so off the charts and unusual that our results were good for where we are. On a local basis, we said that we had a decline of the volume after you take out everything whether up about 3%. Then within that one, you have the piece that grew with the European laminate business and we said that the other businesses, which is the U.S. laminate business and the other European roofing and board businesses declined slightly verses the comparison of prior year.

In terms of Europe, does the eliminate business in Europe, can you talk about the slowing sequentially from 3Q to 4Q give us the sense of the magnitude?

I guess a few percent.

Thank you. And then secondly, have you seen anything different talk about price increases across the business you've seen anything different from your peers, which suggests you maybe your ability to realize prices less with volumes continuing to contract more than expected?

I think that we are attempting to put pricing increases through and all product categories and all marketplaces and everyone of them has its unique set of circumstances. There are different competitors in this various product categories. There is different circumstances by geographic region. We believe that all of the industry is under great pressure to put through price increases in most categories. As you would suspect, the more commoditized and individual product is, the more pressure on it; and the less commoditized, the less pressure it is. The customers don't like it in any market and any place. It's difficult to push them through. I think we have the highest cost rises in the carpet side. The carpet side of the business has all its raw materials or oil base. We use a lot of energy to process it, you have distribution cost to do it. And the carpet industry over the last three or four years has continued to push through prices on the declining marketplace. This year there was a 6% to 8% increase announced in the carpet industry, which was led my competitor in December. The industry has all followed with increases and we are trying to execute those as we speak.

Your next question comes from the line of John Baugh with Stifel Nicolaus and Company.

Yes, this is Joe Herrick with Gutamer Research. You guys talked a lot about plant production being down, used less demand, inventory build up. Obviously right now this year is going to be very challenging. You are coming along with [ph] others in this economy. What are you guys doing in terms of operational improvement initiative to revolving around lean and Six Sigma to improve throughput throughout your plans, and what benefits do you expect to see?

We have a tremendous amount of effort in every facility and every business around improving productivity. Those productivity... lean is a concept of how to get the total business from the floor up through the management all on looking at the total processes and making them more efficient. We have changes in the processes; we have changes in the information that's flowing through them. We have moved equipment between facilities in order to make the cost less. We have taken out and are using the highest cost equipment at least and have more to follow it. We are reducing shifts; we shut down plants. We have gone back on and looked at the infrastructure cost we have in all the SG&A prices and continued SG&A costs, and try to reduce those as we go through. We also have high material usage. So you look at the material usage and try to improve the material yield. You try to find alternative products and substitute lower cost product to give you... to improve your cost structures. All the way down to things such as energy usage, water usage as well. So there are a numerable projects going on under those umbrellas and everyone of the business that we have.

What metrics are you guys using in your manufacturing process to measure your success obviously right now it's going to be very challenging. How are you going to measure success for 2008 and regarding your plans, which in... what parts of the world are you... do you have more concern with throughput than others or they just overall throughout the all business as a whole?

As the result show, we have a greater decline in our Mohawk segment. So the Mohawk segment is having to adapt to them more aggressively than the others. So within it, it has many more pieces to adjust to not only increasing productivity, but then adapting to the lower volumes that we have. But we have the same thing in the downtown business in the fourth quarter. We closed a ceramic plant; we closed the yarn plant in the Mohawk division. We closed some assets in our European division and those were closure then underneath that a smaller pieces we are taking out the highest cost equipment to do those. So, there is hundreds of these things.

Your next question comes from the line Carl Reichardt with Wachovia Securities. Mr. Reichardt, your line is open. Your next question comes from the line of Daniel Donato with Mirror Global. [ph]

Hi guys, how is it going?

Great.

Question is regarded to the Unilin intellectual property income; I mean I heard figures all over the place, I mean which are pretty significant, I was just hoping you could tell us what percentage of Unilin operating income is due to IPO [ph] royalties.

Again, we don't break out individual product categories or pieces of any other pieces to only data we have ever given out is only to purchase the company that those incomes were about 5% of the net income. The revenues made up about 5% of the total at that point. So we haven't broken them out. We can tell you that the thing that we try to get through is that the revenue stream is based on the industries volume; and as the industry volumes come under pressure, it's also affected the revenues in the IP.

Right, but what's important is that the margin right assuming that it is like a royalty stream. It's pretty much as money in the bank, so...

Not exactly. People don't pay you IP income because you just show up. We have a high overhead structure in enforcing and legal fees. It's not unusual to spend $5 million to $10 million on a single case for IPs invested, and we have them all over the world.

Back when you first acquired, did you disclose what the actual operating income attributable to the royalties were or just the revenue?

It was just the revenue at that point.

Your next question comes from the line of Stephen East with Pali Capital.

Good morning guys.

Good morning.

Hey, Steve, how are you?

Good. Couple of questions on your assumptions, your guidance for first quarter; I realize you don't give a specific detail about how you get to it, but can you talk a little bit about the moving pieces between sort of revenue assumptions versus raw material costs being escalated year-over-year versus I guess the lack of overhead absorption by slowing down your facilities et cetera to control your inventories?

I am trying to figure out how to answer it, given we have multiple segments, multiple products and multiple pieces; I mean it's a very complex business today. The assumption I guess start with the high level are that the U.S. economies continuing in a difficult environment that the difficult environment is going to continue that the U.S. business... the flooring industry is in a cyclical recession and it will continue that the European business is starting to slow and that we think that the laminate business will... in Europe will continue to grow, but at a slower rate that the other businesses in Europe will decline at this point. The ceramic business and the U.S. is affected by the same pieces, I am very happy that we were able to grow the revenues to percent on the fourth quarter, it's going to continue to be difficult to have positive result from the U.S. given the environment line the ceramic business. A lot of the ceramic business goes into the new construction business and we have been able to grow the other categories to offset it. The carpet business is affected by the same recessionary environment and we are assuming that it's going to be in the decline and a continued decline over prior year results. We are finding that the customers that is in the first quarter, the industry has typically does promotions and we are finding that our customers are not being as aggressive in their purchasing of product, because they are also concerned about the future. So with that, they are more order rates in the first quarter. The raw material costs and all the businesses are going up. We are raising, the raw materials are going up before we execute the prices in the marketplace. So…

Your next question comes from the line of Alex Mitchell with Scopus Asset Management.

Good morning guys.

Good morning.

Let's see. So you've sometimes broken out just how much you would have to recapture to get even on cost in the Mohawk segment, are you able to do that?

I am not exactly sure what's you are asking. I remember what it is, but I am not sure what you want.

On the cost push in Mohawk, how much would you have... how much would price have to go up after to recruit that?

That is not I remember we have talked about in the past.

Rough percentage term, please.

You have two parts; one is the material cost and one is all the overhead pieces. The price increases, we typically try to get the raw material cost in this environment if you can get slightly more than the raw material cost, you have done an excellent job and that's what we are attempting to do and well no one is over. We put our price increases, the market price that backs to them. We have to stay competitive with the changes. It depends on the actions of our competitors in the marketplace. We hope they act in a rational manner and push through the material cost, but we have to stay competitive with the environment and we are attempting to do so.

Okay. And can you talk some of this... you spoke about seasons... seasonally the business would be up. First quarter, second quarter, does that also apply in Europe with Unilin, and some of the weakness that you have seen affect that all today... the weakness you have seen today.

Typically second quarter is always better than the first quarter. So, we would assume the same thing over there.

I think one of the things impacting the second quarter over there favorably is they are trying to gear up before the holiday season here. So they are shipping and making more of the second quarter than what you would normally expect.

Your next question comes from the line of Ben Joseph with Rice, Volker.

Hey guys, just back on the seasonality, you mentioned you expect 2Q to increase sequentially from 1Q 08, just wondering what kind of magnitude we are looking at. I mean in 2Q 07, we saw roughly 30% sequential increase relative to 1Q 07. I am wondering we can expect similar types or more 10% to 15% more reasonable, I mean kind of what's the expectation?

I think if you go back and look historically, our expectation is that possibly the second quarter will improve slightly more and our expectation is that the first quarter will be worse because of the lack of inventory investments by the customer and same thing our own volume. So, we are expecting it to have a slightly higher differential than the historical reference for those reasons.

Okay, all right. That's it, thank you guys.

Your next question is a follow up from the Michael Rehaut with JPMorgan.

Hey guys, just a quick follow-up on the 1Q guidance. It looks like I mean you are getting a benefit from the lower tax rate, lower interest expense and lower Unilin amortization. I am just trying to reconcile the $0.81 to $0.90. I am having a pretty hard time actually getting that number unless I am having sales and margins kind of fall off a cliff here. I am just wondering if you could like maybe if the deterioration coming from sales; is it from the margin side?

I mean the sales and volume we are expecting to be lower. We are expecting lower throughputs in the plants of those higher unabsorbed overheads in the plants. There is significant reduction due to the price lag in the pricing within it. Historically... the last couple of years, we are not anticipating the Unilin results improving like they have to offset some of those things form prior years.

Right. You are also getting the foreign exchange benefit, though out of Unilin still right in the first quarter?

Yes, correct.

Okay. All right, thanks.

Your next question is also a follow-up from the line of Stephen East with Pali Capital.

Just one question on the raw material costs; Frank, if you look at the raw material cost year-over-year, about how much are they up and probably how much of you all already been able to offset in ignoring that 4% to 6% price hike that you have got coming down the road?

I don't think we have those numbers in front of us. The one we are talking about now is the increase that we received take it from December through now.

Right.

Is that pricing... the compression is based on that piece, and we didn't blame the numbers in the prior years for the divisions.

Really what we try to do with our price increases is offset cost increases. If you go back overtime and look at price increases in the industry, which we track, that's assuming that accurately assuming that export of cost increases there. So we never get the announced amount as we all know. You start out with an announced amount; you get press somewhat as you do it. And you are expecting if you get something, you don't expect the cost increases to develop.

We have reached the end of the allotted time for questions for today. Mr. Lorberbaum, are there any closing remarks?

I think that we had an excellent 2007, given the environment that we are in. I think that our managers handle the various problems that we have. We are looking forward to 2008, remaining difficult at this point. We think that we are doing the right things in controlling costs; and still investing in our business. We believe we are well positioned with our liquidity to take advantage of any opportunities that we have. We believe that the industry will improve at some point. When it does, the residential remodeling business and replacement businesses are the first ones to come out of it, and they typically jump significantly when it happens. We are working our way through the short-term, and we are still position about the industry and our position in it over the long-term. And we appreciate you joining us; and have a nice day.

Thank you for your participation in today's Mohawk Industries fourth quarter and year-end 2007 conference call. You may now disconnect.