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<TYPE>10-Q
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<FILING-DATE>20010418
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>DAL TILE INTERNATIONAL INC
<CIK>0000906611
<ASSIGNED-SIC>3250
<IRS-NUMBER>133548809
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0101
</COMPANY-DATA>
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<FILE-NUMBER>033-64140
<FILM-NUMBER>1605255
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>7834 HAWN FREEWAY
<STREET2>STE 1704
<CITY>DALLAS
<STATE>TX
<ZIP>75217
<PHONE>2143981411
</BUSINESS-ADDRESS>
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<TEXT>

<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-Q

<TABLE>
<C>        <S>
   /X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                 FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2001

                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                        COMMISSION FILE NUMBER 33-64140

                            ------------------------

                          DAL-TILE INTERNATIONAL INC.

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
               DELAWARE                                     13-3548809
    (State or other jurisdiction of            (I.R.S. Employer identification no.)
    incorporation or organization)

   7834 HAWN FREEWAY, DALLAS, TEXAS                           75217
(Address of principal executive office)                     (Zip Code)
</TABLE>

                                 (214) 398-1411
              (Registrant's telephone number, including area code)

                            ------------------------

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

    As of April 17, 2001, the registrant had 55,736,347 outstanding shares of
voting common stock, par value $0.01 per share.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                          DAL-TILE INTERNATIONAL INC.
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
PART I--FINANCIAL INFORMATION

  Item 1--Financial Statements (Unaudited)..................      3

         Notes to Consolidated Condensed Financial
    Statements (Unaudited)..................................      8

  Item 2-- Management's Discussion and Analysis of Financial
          Condition and Results of Operations...............     10

PART II--OTHER INFORMATION

  Item 5--Other Information.................................     14

  Item 6--Exhibits and Reports on Form 8-K..................     14
</TABLE>

                                       2
<PAGE>
                          DAL-TILE INTERNATIONAL INC.

                     CONSOLIDATED CONDENSED BALANCE SHEETS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              (UNAUDITED)
                                                               MARCH 30,    DECEMBER 29,
                                                                 2001           2000
                                                              -----------   ------------
<S>                                                           <C>           <C>
ASSETS
Current Assets:

  Cash......................................................   $     927      $   1,477

  Trade accounts receivable, net of allowance of $3,165 at
    March 30, 2001 and $3,271 at December 29, 2000..........     117,904        104,352

  Inventories...............................................     152,458        140,246

  Prepaid expenses..........................................       5,668          5,702

  Other current assets......................................      19,932         25,222
                                                               ---------      ---------

Total current assets........................................     296,889        276,999

Property, plant, and equipment, at cost.....................     341,353        344,032

Less accumulated depreciation...............................    (119,769)      (119,343)
                                                               ---------      ---------

                                                                 221,584        224,689

Goodwill, net of accumulated amortization of $77,398 at
  March 30, 2001 and $76,202 at December 29, 2000...........     137,064        138,260

Tradename and other assets, net of accumulated amortization
  of $9,921 at March 30, 2001 and $9,373 at December 29,
  2000......................................................      28,766         30,572
                                                               ---------      ---------

Total assets................................................   $ 684,303      $ 670,520
                                                               =========      =========
</TABLE>

   The accompanying notes are an integral part of the consolidated condensed
                             financial statements.

                                       3
<PAGE>
                          DAL-TILE INTERNATIONAL INC.

               CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              (UNAUDITED)
                                                               MARCH 30,    DECEMBER 29,
                                                                 2001           2000
                                                              -----------   ------------
<S>                                                           <C>           <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:

  Trade accounts payable....................................   $  38,195      $  32,766

  Accrued expenses..........................................      61,935         66,848

  Current portion of long-term debt.........................      59,511         55,761

  Income taxes payable......................................         904            542

  Deferred income taxes.....................................       1,734          4,779
                                                               ---------      ---------

Total current liabilities...................................     162,279        160,696

Long-term debt..............................................     259,467        276,017

Other long-term liabilities.................................      19,057         17,968

Deferred income taxes.......................................      13,634          3,531

Stockholders' Equity:

  Preferred stock, $.01 par value:

    Authorized shares--11,100,000; no issued or outstanding
      shares at March 30, 2001 and December 29, 2000........          --             --

  Common stock, $.01 par value:

    Authorized shares--200,000,000; issued and outstanding
      shares--55,736,347 at March 30, 2001 and 55,252,695 at
      December 29, 2000.....................................         558            553

  Additional paid-in capital................................     457,357        453,144

  Accumulated deficit.......................................    (155,870)      (172,338)

  Accumulated other comprehensive loss......................     (72,179)       (69,051)
                                                               ---------      ---------

Total stockholders' equity..................................     229,866        212,308
                                                               ---------      ---------

Total liabilities and stockholders' equity..................   $ 684,303      $ 670,520
                                                               =========      =========
</TABLE>

   The accompanying notes are an integral part of the consolidated condensed
                             financial statements.

                                       4
<PAGE>
                          DAL-TILE INTERNATIONAL INC.

                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                      (IN THOUSANDS EXCEPT PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                              ---------------------
                                                              MARCH 30,   MARCH 31,
                                                                2001        2000
                                                              ---------   ---------
<S>                                                           <C>         <C>
Net sales...................................................  $245,590    $230,113

Cost of goods sold..........................................   128,596     119,429
                                                              --------    --------

Gross profit................................................   116,994     110,684

Expenses:

  Transportation............................................    16,495      15,705

  Selling, general and administrative.......................    65,371      63,070

  Amortization of intangibles...............................     1,378       1,378
                                                              --------    --------

Total expenses..............................................    83,244      80,153
                                                              --------    --------

Operating income............................................    33,750      30,531

Interest expense, net.......................................     6,409       7,881

Other income (expense)......................................      (563)        177
                                                              --------    --------

Income before income taxes..................................    26,778      22,827

Income tax provision........................................    10,310       1,502
                                                              --------    --------

Net Income..................................................  $ 16,468    $ 21,325
                                                              ========    ========

BASIC EARNINGS PER SHARE

Net income per common share.................................  $   0.30    $   0.39
                                                              ========    ========

Average shares..............................................    55,576      54,809
                                                              ========    ========

DILUTED EARNINGS PER SHARE

Net income per common share.................................  $   0.29    $   0.39
                                                              ========    ========

Average shares..............................................    57,664      54,815
                                                              ========    ========
</TABLE>

   The accompanying notes are an integral part of the consolidated condensed
                             financial statements.

                                       5
<PAGE>
                          DAL-TILE INTERNATIONAL INC.

            CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY

                                 MARCH 30, 2001
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                ACCUMULATED
                                                    ADDITIONAL                     OTHER
                                          COMMON     PAID-IN     ACCUMULATED   COMPREHENSIVE
                                          STOCK      CAPITAL       DEFICIT         LOSS         TOTAL
                                         --------   ----------   -----------   -------------   --------
<S>                                      <C>        <C>          <C>           <C>             <C>
Balance at December 29, 2000...........    $553      $453,144     $(172,338)      $(69,051)    $212,308

Exercise of stock options and other....       5         4,213            --             --        4,218

Comprehensive Income:

  Net income...........................      --            --        16,468             --       16,468

  Unrealized gain (loss) on hedge
    instruments, net of tax............      --            --            --         (3,092)      (3,092)

  Foreign currency translation
    adjustments........................      --            --            --            (36)         (36)
                                                                                               --------

Total Comprehensive Income.............                                                          13,340
                                           ----      --------     ---------       --------     --------

Balance at March 30, 2001..............    $558      $457,357     $(155,870)      $(72,179)    $229,866
                                           ====      ========     =========       ========     ========
</TABLE>

   The accompanying notes are an integral part of the consolidated condensed
                             financial statements.

                                       6
<PAGE>
                          DAL-TILE INTERNATIONAL INC.

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                              ---------------------
                                                              MARCH 30,   MARCH 31,
                                                                2001        2000
                                                              ---------   ---------
<S>                                                           <C>         <C>
OPERATING ACTIVITIES

Net income..................................................   $16,468     $21,325

Adjustments to reconcile net income to net cash provided by
  operating activities:

  Depreciation and amortization.............................     7,166       6,393

  Deferred income tax provision.............................     7,008         308

  Other, net................................................       148        (376)

  Changes in operating assets and liabilities:

    Trade accounts receivable...............................   (13,689)    (15,411)

    Inventories.............................................   (12,095)     (1,099)

    Other assets............................................     6,876         562

    Trade accounts payable and accrued expenses.............     1,208       1,307

    Accrued interest payable................................      (985)      1,035

    Other liabilities.......................................    (1,804)     (2,603)
                                                               -------     -------

Net cash provided by operating activities...................    10,301      11,441

INVESTING ACTIVITIES

Expenditures for property, plant and equipment, net.........    (2,325)     (7,891)

FINANCING ACTIVITIES

Repayments of long-term debt................................   (66,550)    (69,500)

Borrowings under long-term debt.............................    53,750      62,900

Proceeds from issuance of common stock......................     4,218       2,141
                                                               -------     -------

Net cash used in financing activities.......................    (8,582)     (4,459)

Effect of exchange rate changes on cash.....................        56          80
                                                               -------     -------

Net decrease in cash........................................      (550)       (829)

Cash at beginning of period.................................     1,477       1,193
                                                               -------     -------

Cash at end of period.......................................   $   927     $   364
                                                               =======     =======
</TABLE>

   The accompanying notes are an integral part of the consolidated condensed
                             financial statements.

                                       7
<PAGE>
                          DAL-TILE INTERNATIONAL INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

1.  BASIS OF PRESENTATION

    The operating results of Dal-Tile International Inc. for the three months
ended March 30, 2001 reflect the results of operations of Dal-Tile
International Inc. and its consolidated subsidiaries (the "Company") on the
basis of a 52/53 week accounting cycle.

    The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of the financial position, results of
operations and cash flow have been included. The results of operations for the
three months ended March 30, 2001 are not necessarily indicative of the results
that may be expected for the year ending December 28, 2001. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the December 29, 2000 annual report on Form 10-K of the
Company.

    Certain prior year amounts have been reclassified to conform to the 2001
presentation.

2.  EARNINGS PER SHARE

    Basic earnings per share are based on the average number of shares
outstanding during each period presented. Diluted earnings per share are based
on the average number of shares outstanding including any dilutive effects of
options, warrants and convertible securities.

3.  COMPREHENSIVE INCOME

    Total comprehensive income includes net income, changes in the fair value of
outstanding hedges, net of tax, and foreign currency translation adjustments.
For the first quarter of 2001 and 2000, total comprehensive income was $13,340
and $21,330, respectively.

4.  INVENTORIES

    Inventories are as follows:

<TABLE>
<CAPTION>
                                                        MARCH 30,   DECEMBER 29,
                                                          2001          2000
                                                        ---------   ------------
<S>                                                     <C>         <C>
Raw Materials.........................................  $  9,968      $  9,599
Work-in-process.......................................     5,350         5,204
Finished goods........................................   137,140       125,443
                                                        --------      --------
                                                        $152,458      $140,246
                                                        ========      ========
</TABLE>

                                       8
<PAGE>
5.  LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                        MARCH 30,   DECEMBER 29,
                                                          2001          2000
                                                        ---------   ------------
<S>                                                     <C>         <C>
Term A Loan...........................................  $102,500      $115,000
Term B Loan...........................................   121,750       122,000
Revolving Credit Loan.................................    87,050        86,700
Other.................................................     7,678         8,078
                                                        --------      --------
                                                         318,978       331,778
Less current portion..................................    59,511        55,761
                                                        --------      --------
                                                        $259,467      $276,017
                                                        ========      ========
</TABLE>

6.  INCOME TAXES

    The income tax provision for the first quarter of 2001 reflects an effective
tax rate of approximately 38.5 percent compared to 6.6 percent for the first
quarter of 2000. The increase in the effective rate for 2001 versus 2000 was
mainly due to the impact of the reversal of the valuation allowance recorded
against certain U.S. federal deferred tax assets.

7.  COMMITMENTS AND CONTINGENCIES

    The Company is subject to federal, state, local and foreign laws and
regulations relating to the environment and to work places. Laws that affect or
could affect the Company's United States operations include, among others, the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act
and the Occupational Safety and Health Act. The Company believes that it is
currently in substantial compliance with such laws and the regulations
promulgated thereunder.

    The Company is involved in various proceedings relating to environmental
matters. The Company, in the past, has disposed, or arranged for the disposal
of, substances which are now characterized as hazardous and currently is engaged
in the investigation and cleanup of hazardous substances at certain sites. It is
the Company's policy to accrue liabilities for remedial investigations and
cleanup activities when it is probable that such liabilities have been incurred
and when they can be reasonably estimated. The Company has provided reserves,
which management believes are adequate to cover probable and estimable
liabilities of the Company with respect to such remedial investigations and
cleanup activities, taking into account currently available information and the
Company's contractual rights of indemnification. However, estimates of future
response costs are necessarily imprecise due to, among other things, the
possible identification of presently unknown sites, the scope of contamination
of such sites, the allocation of costs among other potentially responsible
parties with respect to any such sites and the ability of such parties to
satisfy their share of liability. Accordingly, there can be no assurance that
the Company will not become involved in future litigation or other proceedings
or, if the Company were found to be responsible or liable in any litigation or
proceeding, that such costs would not be material to the Company.

    The Company is also a defendant in various lawsuits arising from normal
business activities. In the opinion of management, the ultimate liability likely
to result from the contingencies described above is not expected to have a
material adverse effect on the Company's consolidated financial condition,
results of operations or liquidity.

                                       9
<PAGE>
                ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The Company achieved record sales and profits during the first quarter of
2001. Growth was achieved across all distribution channels due primarily to
increased acceptance of new products within the residential market. Profit
margin before tax increased to approximately 10.9 percent versus 9.9 percent in
the first quarter of 2000 as a result of improved productivity, reduced
corporate spending and lower interest expense. In addition, management of
working capital improved through better inventory turns and reduced days sales
outstanding.

    In March, the Company announced plans for construction of a state-of-the-art
floor tile manufacturing facility in Muskogee, Oklahoma. The plant will produce
high quality floor tile and is expected to be one of the largest and most
cost-effective tile facilities in the United States. Initial production is
anticipated in the third quarter of 2002.

NET SALES

    Net sales in the first quarter of 2001 increased $15.5 million, or
6.7 percent, to $245.6 million from $230.1 million in the first quarter of 2000.
Sales increased across all distribution channels due primarily to gains within
the residential market. Compared to first quarter 2000, sales increased
8.0 percent through Company-operated sales centers, while sales to independent
distributors increased 3.9 percent and sales to home center retailers increased
7.2 percent.

GROSS PROFIT

    Gross profit in the first quarter of 2001 increased $6.3 million, or
5.7 percent, to $117.0 million from $110.7 million in the first quarter of 2000.
Gross margin was 47.6 percent in the first quarter of 2001 versus 48.1 percent
in the first quarter of 2000. Higher energy costs during the first quarter of
2001 were partially offset by improved productivity.

OPERATING EXPENSES

    Operating expenses in the first quarter of 2001 increased $3.0 million, or
3.7 percent, to $83.2 million from $80.2 million in the first quarter of 2000.
This increase was due primarily to additional spending related to new product
introductions and higher costs associated with the growth in sales. Operating
expenses, as a percent of sales, in the first quarter of 2001 improved to
33.9 percent from 34.9 percent in the first quarter of 2000. The decrease was
due primarily to higher sales and lower corporate spending. Transportation
costs, as a percent of sales, declined from 6.8 percent of sales in the first
quarter of 2000 to 6.7 percent in the first quarter of 2001.

OPERATING INCOME

    Operating income in the first quarter of 2001 increased $3.3 million, or
10.8 percent, to $33.8 million from $30.5 million in the first quarter of 2000.
Operating margin improved to 13.7 percent in the first quarter of 2001 from
13.2 percent in the first quarter of 2000 due primarily to higher sales and
decreased corporate spending.

INTEREST EXPENSE (NET)

    Interest expense (net) in the first quarter of 2001 decreased $1.5 million,
or 19.0 percent, to $6.4 million from $7.9 million in the first quarter of 2000.
This decrease was due to reduced borrowing requirements on the Company's credit
facility and related reductions in interest rates and fees.

                                       10
<PAGE>
INCOME TAXES

    The income tax provision in the first quarter of 2001 reflects an effective
tax rate of approximately 38.5 percent compared to 6.6 percent for the first
quarter of 2000. The increase in the effective rate for 2001 versus 2000 was
mainly due to the impact of the reversal of the valuation allowance recorded
against certain U.S. federal deferred tax assets.

NET INCOME

    Net income in the first quarter of 2001 decreased $4.8 million, or
22.5 percent, to $16.5 million from $21.3 million in the first quarter of 2000.
On a pro-forma--fully taxed basis, net income increased $2.5 million, or
17.9 percent, from $14.0 million in the first quarter of 2000.

LIQUIDITY AND CAPITAL RESOURCES

    Cash flow from operations and funds available under the Company's bank
credit agreement (the "Fourth Amended Credit Facility") continue to provide the
Company with liquidity and capital resources for working capital requirements,
capital expenditures and debt service. For the first quarter of 2001, cash
provided by operating activities was $10.3 million compared to $11.4 million for
the same period in 2000. During the quarter, trade accounts receivable and
inventory levels increased in relation to the growth in sales; however,
improvements were made in working capital utilization through reduced days sales
outstanding and increased inventory turns.

    Net expenditures for property, plant and equipment were $2.3 million in the
first quarter of 2001 compared to $7.9 million in the first quarter of 2000. The
decrease was due to timing differences of capital projects. The Company plans to
initiate various capital projects during the remainder of fiscal year 2001 for
expansion and modernization of its manufacturing facilities, along with
expenditures for routine capital improvements and maintenance.

    Cash used in financing activities was $8.6 million for the first quarter of
2001. Cash outflows for term debt amortization of $12.8 million and other debt
of $0.4 million were offset by cash inflows of $0.4 million on the Company's
revolving credit facility, and $4.2 million related to employee stock purchases
and the exercise of options to purchase common stock. Total availability under
the Fourth Amended Credit Facility as of March 30, 2001 was $149.1 million.

    Although the Company believes cash flow from operating activities, together
with borrowings available under the Fourth Amended Credit Facility, will be
sufficient to fund working capital needs, capital expenditures and debt service
requirements, the Company is constantly pursuing opportunities to improve its
capital structure and may seek alternative financing arrangements.

    The Company is involved in various proceedings relating to environmental
matters and is currently engaged in environmental investigation and remediation
programs at certain sites. The Company has provided reserves for remedial
investigation and cleanup activities that are determined to be both probable and
reasonably estimable. The Company is entitled to indemnification with respect to
certain expenditures incurred in connection with such environmental matters and
does not expect that the ultimate liability with respect to such investigation
and remediation activities will have a material effect on the Company's
liquidity and financial condition.

    The U.S. is a party to the General Agreement on Tariffs and Trade ("GATT").
Under GATT, the U.S. currently imposes import duties on ceramic tile from
non-North American countries at no more than 13 percent, to be reduced ratably
to no less than 8.5 percent by 2004. Accordingly, GATT may stimulate competition
from non-North American manufacturers who now export, or who may seek to export,
ceramic tile to the U.S. The Company cannot predict with certainty the effect
that GATT may have on the Company's operations.

                                       11
<PAGE>
    NAFTA, which was entered into by Canada, Mexico and the United States and
became effective on January 1, 1994 has created the world's largest free-trade
zone. NAFTA has, among other things, removed and will continue to remove, over a
transition period, most normal customs duties imposed on goods traded among the
three countries. In addition, NAFTA will remove or limit many investment
restrictions, liberalize trade in services, provide a specialized means for
settlement of, and remedies for, trade disputes arising thereunder and will
result in new laws and regulations to further these goals. Although NAFTA lowers
the tariffs imposed on the Company's ceramic tile manufactured in Mexico and
sold in the U.S., it also may stimulate competition in the U.S. and Canada from
manufacturers located in Mexico. The U.S. currently imposes import duties on
glazed ceramic tile from Mexico of approximately 8.8 percent, although these
duties on imports from Mexico are being phased out ratably under NAFTA by 2008.
It is uncertain what ultimate effect NAFTA will have on the Company's results of
operations.

EFFECTS OF INFLATION

    The Company believes it has generally been able to enhance productivity to
offset increases in costs resulting from inflation in the U.S. and Mexico.
During the first quarter of 2001, the Company's results were negatively affected
by the increase of the inflation rate in Mexico that was not offset by
devaluation of the peso. Any future increases in the Mexican inflation rate,
which are not offset, or increases in the U.S. inflation rate, which affect
financing costs, may negatively affect the Company's results of operations.

    From time to time, the Company enters into transactions in other foreign
currencies, which may negatively affect the Company's results of operations.

DERIVATIVE FINANCIAL INSTRUMENTS

INTEREST RATE RISK MANAGEMENT

    To mitigate the impact of fluctuations in U.S. interest rates, the Company
currently maintains approximately 60 percent of its debt as fixed rate through
the use of interest rate swap agreements. Interest rate swap agreements are
designated with a portion of the principal balance and term of a specific debt
obligation. At March 30, 2001, the Company held four $50.0 million interest rate
swap agreements under which the Company pays a fixed percent of interest times
the notional principal amount and receives in return an amount equal to a
specified variable rate of interest times the same notional principal amount.
The fixed interest rates per agreement were 6.08 percent and 6.06 percent on
agreements that expire on December 31, 2001, and 5.25 percent on two agreements
that expire on December 31, 2002. The variable rate as of March 30, 2001 was
4.90 percent. These agreements were considered to be perfectly effective as of
March 30, 2001. During the quarter, the Company realized approximately
$0.1 million of interest income. The cumulative fair value of these agreements
as of March 30, 2001 was a liability of $2.2 million of which $1.4 million was
recorded in other current liabilities and $0.8 million was recorded in long-term
liabilities with the offset to other comprehensive income, net of applicable
income taxes.

FOREIGN CURRENCY EXCHANGE RISK MANAGEMENT

PESO FORWARD CONTRACTS

    The Company uses peso forward contracts to hedge against foreign currency
risk and accounts for these contracts as cash flow hedges. Such financial
instruments are marked-to-market with the offset to other comprehensive income
and deferred taxes, and then subsequently recognized as a component of cost of
goods sold in the same period during which the hedged transaction affects
earnings. In January of 2001, the Company entered into nine peso forward
contracts which expire on a monthly basis through December 2001. Two contracts
were settled as of March 30, 2001 for which the Company

                                       12
<PAGE>
recognized $0.1 million of net gain. The remaining seven contracts had a
cumulative fair value of $0.8 million which was recorded in other current assets
with the offset to other comprehensive income, net of applicable income taxes.
The hedge instruments were considered perfectly effective as of March 30, 2001.

LIRA FORWARD CONTRACTS

    Currently, the Company uses lira forward contracts to hedge against foreign
currency risk and accounts for these contracts as fair value hedges. Such
financial instruments are marked-to-market with the offset against the change in
fair value of the firm commitment. At March 30, 2001, the Company had one lira
forward contract outstanding for the purchase of manufacturing equipment with a
notional amount of $1.9 million to be settled in May 2001. Due to the design of
the hedge, changes in the fair value of the forward contract perfectly offset
changes in the fair value of the firm commitment. As of March 30, 2001, the fair
value of the hedge was a liability of $0.1 million which was recorded in other
current liabilities with the offset to property, plant and equipment.

NATURAL GAS RISK MANAGEMENT

    The Company uses a combination of natural gas futures contracts and
long-term supply agreements to manage unanticipated fluctuations in natural gas
prices. The instruments generally cover a period of one to three years on
forecasted usage of natural gas measured in Million British Thermal Units
("MMBTU"). At March 30, 2001, the Company held natural gas contracts with an
aggregate notional amount of approximately 1.7 million MMBTU. During the first
quarter, the Company realized approximately $1.7 million in net gain. These
contracts had an aggregate fair value of approximately $2.0 million of which
$1.7 million was recorded in other current assets and $0.3 million was recorded
in long-term assets with the offset recorded in other comprehensive income, net
of applicable income taxes. The weighted average strike price per contract was
$3.72. In addition, the Company sold all its Mexican natural gas contracts,
which had an aggregate notional amount of 2.1 million MMBTU. The fair value of
these contracts, which remains in other comprehensive income, net of applicable
income taxes, will be recognized in cost of goods sold ratably based on original
forecasted transactions. If the Company determines that a forecasted transaction
will not occur, the fair value of the related contract will be recognized in
earnings immediately. These contracts were replaced with a long-term supply
agreement to purchase gas at a fixed price for the next three years.

                                       13
<PAGE>
PART II.  OTHER INFORMATION

ITEM 5. OTHER INFORMATION

       Cautionary Statement for purposes of "Safe Harbor Provisions" of the
       Private Securities Litigation Reform Act of 1995.

       Certain of the statements contained in this filing, particularly those
       anticipating future financial performance, business prospects, growth and
       operating strategies, new products and similar matters, constitute
       "forward-looking statements". For those statements, Dal-Tile claims the
       protection of the safe harbor for forward-looking statements contained in
       the Private Securities Litigation Reform Act of 1995. The statements are
       based on assumptions regarding the Company's ability to maintain its
       sales growth and gross margins and to control costs and on assumptions
       regarding the performance of the economy. These statements are based
       largely on the Company's expectations and are subject to a number of
       risks, uncertainties, and other factors that could cause actual results
       to differ materially from those expressed in the forward-looking
       statements. Such factors include, among other things, the impact of
       competitive pressures and changing economic conditions on the Company's
       business and its dependence on residential and commercial construction
       activity, the fact that the Company is highly leveraged, reliance on
       third party suppliers, increases in prices of raw materials and energy,
       currency fluctuations, other factors relating to the Company's foreign
       manufacturing operations, the impact of pending reductions in tariffs and
       customs duties, environmental laws and regulations, and the risk factors
       or uncertainties listed from time to time in Dal-Tile's filings with the
       Securities and Exchange Commission.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits

        None

    (b) Reports on Form 8-K

        No reports on Form 8-K were filed during the quarter ended March 30,
    2001.

                                       14
<PAGE>
                                   SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       DAL-TILE INTERNATIONAL INC.
                                                       (REGISTRANT)

                                                       By:         /s/ W. CHRISTOPHER WELLBORN
                                                            -----------------------------------------
                                                                     W. Christopher Wellborn
                                                                    EXECUTIVE VICE PRESIDENT,
                                                                     CHIEF FINANCIAL OFFICER
</TABLE>

Date: April 18, 2001

                                       15
</TEXT>
</DOCUMENT>
</SUBMISSION>
