<SUBMISSION>
<ACCESSION-NUMBER>0001104659-01-501403
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20010629
<FILING-DATE>20010810
<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>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>033-64140
<FILM-NUMBER>1705196
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>7834 HAWN FREEWAY
<STREET2>STE 1704
<CITY>DALLAS
<STATE>TX
<ZIP>75217
<PHONE>2143981411
</BUSINESS-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>j1240_10q.htm
<DESCRIPTION>10-Q
<TEXT>
<html>

<head>
<title>Prepared by MerrillDirect</title>
</head>

<body link=blue vlink=purple>

<div>

<div align=right><b><font size=5>

<hr size=2 width="100%" noshade color=black align=right>

</font></b></div>


<div align=right><b><font size=5>

<hr size=1 width="100%" noshade color=black align=right>

</font></b></div>

<p align=center><b><font size=5>UNITED
STATES<br>
SECURITIES AND EXCHANGE COMMISSION</font></b><b><font size=2><br>
Washington, D.C.&nbsp; 20549</font></b></p>

<p align=center><b><font size=5>FORM 10-Q</font></b></p>

<p><b><font size=3 face=Wingdings>&#253;</font></b><b><font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

<p align=center><b><font size=2>For the quarterly period ended <u>June 29, 2001</u></font></b></p>

<p align=center><b><font size=2>OR</font></b></p>

<p><b><font size=3 face=Wingdings>o</font></b><b><font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

<p align=center><b><font size=2>For the transition period from_______to_______</font></b></p>

<p align=center><b><font size=2>Commission file number <u>&nbsp;&nbsp;33-64140</u></font></b></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="57%">
 <tr>
  <td  align=center width="100%" valign=top><b><font size=5>DAL-TILE INTERNATIONAL INC.</font></b></td>
 </tr>
 <tr>
  <td  align=center width="100%" valign=top><div align=center><b><font size=2><hr size=2 width="100%" noshade color=black align=center></font></b></div></td>
 </tr>
</table>

</div>

<p><b><font size=5>&nbsp;</font></b></p>

<p align=center><font size=2><br>
(Exact name of registrant as specified in its charter)</font></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="98%">
 <tr>
  <td  align=center width="50%" valign=top><b><font size=2>Delaware</font></b></td>
  <td  align=center width="50%" valign=top><b><font size=2>13-3548809</font></b></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top>
<hr size=1 width="14%" noshade color=black align=center></td>
  <td  align=center width="50%" valign=top>
<hr size=1 width="19%" noshade color=black align=center></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font size=2>(State or other
  jurisdiction of</font></td>
  <td  align=center width="50%" valign=top><font size=2>(I.R.S. Employer</font></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font size=2>incorporation or
  organization)</font></td>
  <td  align=center width="50%" valign=top><font size=2>identification no.)</font></td>
 </tr>
</table>

</div>

<p align=center><font size=3 face=Times>&nbsp;</font></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="27%">
 <tr>
  <td  align=center width="100%" valign=top><b><font size=2>7834
  Hawn Freeway, Dallas, Texas 75217</font></b></td>
 </tr>
 <tr>
  <td  align=center width="100%" valign=top><div align=right><b><font size=2><hr size=2 width="100%" noshade color=black align=right></font></b></div></td>
 </tr>
 <tr>
  <td  align=center width="100%" valign=top><font size=2>(Address of principal
  executive offices)</font></td>
 </tr>
 <tr>
  <td  align=center width="100%" valign=top><font size=2>(Zip Code)</font></td>
 </tr>
</table>

</div>

<p><font size=2>&nbsp;</font></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="31%">
 <tr>
  <td  align=center width="100%" valign=top><b><font size=2>(214)
  398-1411</font></b></td>
 </tr>
 <tr>
  <td  align=center width="100%" valign=top><div align=center><b><font size=2><hr size=2 width="43%" noshade color=black align=center></font></b></div></td>
 </tr>
 <tr>
  <td  align=center width="100%" valign=top><font size=2>(Registrant&#146;s
  telephone number, including area code)</font></td>
 </tr>
</table>

</div>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>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.</font></p>

<p><font size=2>YES&nbsp;&nbsp;
</font><font size=2 face=Wingdings>&#253;</font><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; NO&nbsp;&nbsp;
</font><font size=2 face=Wingdings>o</font></p>

<p><font size=2>As of August 6, 2001, the registrant had
55,883,001 outstanding shares of voting common stock, par value $0.01 per
share.</font></p>





<hr size=1 width="100%" noshade color=black align=right>






<hr size=2 width="100%" noshade color=black align=right>


<page>


<p>&nbsp;</p>

<p align=center><b><font size=2>DAL-TILE
INTERNATIONAL INC.</font></b></p>

<p align=center><b><font size=2>Table of Contents</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="91%" colspan=3 valign=bottom><font size=2><a
  href="#ConsolidatedCondensedBalanceSheets"   title="Click to goto CONSOLIDATED CONDENSED BALANCE SHEETS">PART I &#150;
  FINANCIAL INFORMATION</a></font></td>
  <td  align=center width="8%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="76%" valign=bottom>&nbsp;</td>
  <td  align=center width="8%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="11%" valign=top><font size=2><a href="#ConsolidatedCondensedBalanceSheets"   title="Click to goto CONSOLIDATED CONDENSED BALANCE SHEETS">Item 1 &#150;</a></font></td>
  <td width="76%" valign=top><font size=2><a
  href="#ConsolidatedCondensedBalanceSheets"   title="Click to goto CONSOLIDATED CONDENSED BALANCE SHEETS">Financial
  Statements (Unaudited)</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top><font size=2><a
  href="#NotesToConsolidatedCondensedFinancialSta"   title="Click to goto NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS&#13;">Notes
  to Consolidated Condensed Financial Statements (Unaudited)</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top>&nbsp;</td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="11%" valign=top><font size=2><a
  href="#Item2managementsDiscussionAndAnalysisOfF"   title="Click to goto ITEM 2&#151;MANAGEMENT'S DISCUSSION AND ANALYSIS OF&#11;FINANCIAL CONDITION AND RESULTS OF OPERATIONS">Item
  2 &#150;</a></font></td>
  <td width="76%" valign=top><font size=2><a
  href="#Item2managementsDiscussionAndAnalysisOfF"   title="Click to goto ITEM 2&#151;MANAGEMENT'S DISCUSSION AND ANALYSIS OF&#11;FINANCIAL CONDITION AND RESULTS OF OPERATIONS">Management&#146;s
  Discussion and Analysis of Financial
  Condition and Results of Operations</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top>&nbsp;</td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top>&nbsp;</td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="91%" colspan=3 valign=top><font size=2><a
  href="#PartIi_OtherInformation"   title="Click to goto PART II.  OTHER INFORMATION">PART II &#150; OTHER INFORMATION</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top>&nbsp;</td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="11%" valign=top><font size=2><a   href="#Item4_" title="Click to goto Item 4. ">Item
  4 &#150;</a></font></td>
  <td width="76%" valign=top><font size=2><a   href="#Item4_" title="Click to goto Item 4. ">Submission of Matters to a Vote
  of Security Holders</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top>&nbsp;</td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="11%" valign=top><font size=2><a
  href="#Item5_OtherInformation"   title="Click to goto Item 5.&#9;Other Information&#13;">Item 5 &#150;</a></font></td>
  <td width="76%" valign=top><font size=2><a
  href="#Item5_OtherInformation"   title="Click to goto Item 5.&#9;Other Information&#13;">Other Information</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="15%" colspan=2 valign=top>&nbsp;</td>
  <td width="76%" valign=top>&nbsp;</td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="11%" valign=top><font size=2><a
  href="#Item6_ExhibitsAndReportsOnForm8k"   title="Click to goto Item 6.&#9;&#9;Exhibits and Reports on Form 8-K&#13;">Item
  6 &#150;</a></font></td>
  <td width="76%" valign=top><font size=2><a
  href="#Item6_ExhibitsAndReportsOnForm8k"   title="Click to goto Item 6.&#9;&#9;Exhibits and Reports on Form 8-K&#13;">Exhibits
  and Reports on Form 8-K</a></font></td>
  <td  align=right width="8%" valign=top>&nbsp;</td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<page>


<p align=center>&nbsp;</p>

<p align=center><b><font size=2>DAL-TILE INTERNATIONAL INC.<br>
<a name=ConsolidatedCondensedBalanceSheets>CONSOLIDATED CONDENSED BALANCE
SHEETS</a><br>
(In Thousands)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="12%" colspan=3 rowspan=3 valign=bottom><b><font size=2>(Unaudited)<br>
  June 29, <br>
  2001</font></b></td>
  <td  align=center width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=4 rowspan=3 valign=bottom><b><font size=2>December 29,<br>
  2000</font></b></td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Assets</font></b></td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom><font size=2>Current
  Assets:</font></td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="67%" valign=bottom bgcolor="#cceeff"><font size=2>Cash
  </font></td>
  <td width="1%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="11%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>983</font></td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="2%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="11%" valign=bottom bgcolor="#cceeff"><font   size=2>1,477</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="67%" valign=bottom><font size=2>Trade
  accounts receivable, net of allowance of $3,329 at</font></td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="67%" valign=bottom><font size=2>June
  29, 2001 and $3,271 at December 29, 2000 </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom><font   size=2>125,150</font></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom><font   size=2>104,352</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="67%" valign=bottom bgcolor="#cceeff"><font size=2>Inventories
  </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff"><font   size=2>161,499</font></td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff"><font   size=2>140,246</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="67%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="67%" valign=bottom bgcolor="#cceeff"><font size=2>Prepaid
  expenses </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff"><font   size=2>3,507</font></td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff"><font   size=2>5,702</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="67%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="67%" valign=bottom bgcolor="#cceeff"><font size=2>Other
  current assets </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff"><font   size=2>18,135</font></td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff"><font   size=2>25,222</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total
  current assets </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff"><font   size=2>309,274</font></td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff"><font   size=2>276,999</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Property,
  plant, and equipment, at cost </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff"><font   size=2>349,534</font></td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff"><font   size=2>344,032</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom><font size=2>Less
  accumulated depreciation </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom><font   size=2>(124,852</font></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>)</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom><font   size=2>(119,343</font></td>
  <td width="2%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" colspan=5 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=4 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom><font   size=2>224,682</font></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom><font   size=2>224,689</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom><font size=2>Goodwill,
  net of accumulated amortization of $78,593 at</font></td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom><font size=2>June
  29, 2001 and $76,202 at December 29, 2000 </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom><font   size=2>135,869</font></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom><font   size=2>138,260</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom><font size=2>Tradename
  and other assets, net of accumulated amortization of $10,470</font></td>
  <td  align=right width="12%" colspan=3 valign=bottom>&nbsp;</td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom><font size=2>at
  June 29, 2001 and $9,373 at December 29, 2000 </font></td>
  <td  align=right width="12%" colspan=3 valign=bottom><font   size=2>28,604</font></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom><font   size=2>30,572</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" colspan=5 valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=4 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total
  assets </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" colspan=4 valign=bottom bgcolor="#cceeff"><font   size=2>698,429</font></td>
  <td width="1%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>670,520</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="69%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="12%" colspan=3 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=6 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>

<!-- DO NOT remove the following table row. It is needed for  .               the proper rendering of tables containing misaligned cells.-->
 <tr height=0>
  <td width=13></td>
  <td width=490></td>
  <td width=2></td>
  <td width=6></td>
  <td width=80></td>
  <td width=0></td>
  <td width=1></td>
  <td width=7></td>
  <td width=5></td>
  <td width=2></td>
  <td width=0></td>
  <td width=4></td>
  <td width=11></td>
  <td width=80></td>
  <td width=19></td>
 </tr>
</table>

<p align=center><font size=2>The
accompanying notes are an integral part of the consolidated condensed financial
statements.</font></p>

<page>


<p align=center><b><font size=2>DAL-TILE INTERNATIONAL INC.<br>
CONSOLIDATED CONDENSED BALANCE SHEETS (continued)<br>
(In Thousands)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>(Unaudited)</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>June 29,</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>December 29,</font></b></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>2000</font></b></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Liabilities and
  Stockholders&#146; Equity</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Current
  Liabilities:</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Trade
  accounts payable </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>40,616</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>32,766</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Accrued
  expenses </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>70,103</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>66,848</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Current
  portion of long-term debt </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>62,697</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>55,761</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Income
  taxes payable </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,003</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>542</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Deferred
  income taxes </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>340</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>4,779</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total
  current liabilities </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>175,759</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>160,696</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Long-term
  debt </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>233,500</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>276,017</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Other
  long-term liabilities </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>19,999</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>17,968</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Deferred
  income taxes </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>21,286</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>3,531</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom><font size=2>Stockholders&#146;
  Equity:</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Preferred
  stock, $0.01 par value:</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" valign=bottom>&nbsp;</td>
  <td width="64%" valign=bottom><font size=2>Authorized
  shares &#150; 11,100,000; no issued or outstanding shares at June 29, 2001 and
  December 29, 2000</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="64%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom><font size=2>Common
  stock, $0.01 par value:</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="64%" valign=bottom bgcolor="#cceeff"><font size=2>Authorized
  shares &#150; 200,000,000 issued and outstanding shares &#150; 55,813,698 at June 29,
  2001 and 55,252,695 at December 29, 2000</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>558</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>553</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Additional
  paid-in capital </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>458,077</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>453,144</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Accumulated
  deficit </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(135,794</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(172,338</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Accumulated
  other comprehensive loss </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(74,956</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(69,051</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total
  stockholders&#146; equity </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>247,885</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>212,308</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total
  liabilities and stockholders&#146; equity </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>698,429</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>670,520</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
</table>

<p align=center><font size=2>The
accompanying notes are an integral part of the consolidated condensed financial
statements.<br>
<page></font></p>

<p align=center><b><font size=2>DAL-TILE INTERNATIONAL INC.<br>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS<br>
(In Thousands Except Per Share Amounts)<br>
(Unaudited)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="27%" colspan=5 valign=bottom><b><font size=2>Three
  Months Ended</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="28%" colspan=5 valign=bottom><b><font size=2>Six
  Months Ended</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="27%" colspan=5 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="28%" colspan=5 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>June
  29,</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>June
  30,</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>June
  29,</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>June
  30,</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>2000</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>2000</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net Sales </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>263,380</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>244,981</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>508,970</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>475,094</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Cost of Goods Sold </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>138,731</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>127,459</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>267,327</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>246,888</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Gross Profit </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>124,649</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>117,522</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>241,643</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>228,206</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Expenses:</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="39%" valign=bottom bgcolor="#cceeff"><font size=2>Transportation </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>17,662</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>15,724</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>34,157</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>31,429</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="39%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="39%" valign=bottom bgcolor="#cceeff"><font size=2>Selling, general and
  administrative </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>68,058</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>64,621</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>133,429</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>127,691</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="39%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="39%" valign=bottom bgcolor="#cceeff"><font size=2>Amortization of
  intangibles </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,378</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,378</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,756</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,756</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Total expenses </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>87,098</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>81,723</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>170,342</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>161,876</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Operating income </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>37,551</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>35,799</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>71,301</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>66,330</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Interest expense, net </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>5,562</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>7,723</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>11,971</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>15,604</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Other income (expense)
  </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>654</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>(745</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>91</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>(568</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Income before income
  taxes </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>32,643</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>27,331</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>59,421</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>50,158</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Income tax provision </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>12,567</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>1,792</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>22,877</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>3,294</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net income </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>20,076</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>25,539</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>36,544</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>46,864</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><b><font size=2>Basic Earnings Per Share</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net income per common
  share </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>0.36</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>0.47</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>0.66</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>0.85</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Average shares </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>55,776</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>54,826</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>55,676</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>54,817</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>Diluted Earnings Per Share</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom><font size=2>Net income per common
  share </font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>0.35</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>0.46</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>0.63</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>0.85</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Average shares </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>58,009</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>54,999</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>57,837</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>54,907</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
</table>

<p align=center><font size=2>The
accompanying notes are an integral part of the consolidated condensed financial
statements.</font></p>

<page>


<p align=center><b><font size=2>DAL-TILE INTERNATIONAL INC.<br>
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS&#146; EQUITY<br>
June 29, 2001<br>
(In Thousands)<br>
(Unaudited)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>Accumulated</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="11%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Additional</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>Other</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="11%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Common</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Paid-In</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Accumulated</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>Comprehensive</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="11%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Stock</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Capital</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><b><font size=2>Deficit</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>Loss</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="11%" colspan=2 valign=bottom><b><font size=2>Total</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="11%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Balance at December
  29, 2000</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>553</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>453,144</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>(172,338</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom bgcolor="#cceeff"><font   size=2>(69,051</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="10%" valign=bottom bgcolor="#cceeff"><font   size=2>212,308</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom><font size=2>Exercise of stock
  options and other</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>5</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>4,933</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="11%" colspan=2 valign=bottom><font   size=2>4,938</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="11%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom><font size=2>Comprehensive Income:</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="11%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="24%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Net income </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>-</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>-</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>36,544</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>-</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="11%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>36,544</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="24%" colspan=2 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="11%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="24%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Unrealized loss on hedge </font><font size=2>instruments,
  net of&nbsp; tax </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>-</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>-</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff"><b><font size=2>-</font></b></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><b><font size=2>&nbsp;</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(5,880</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="11%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(5880</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="24%" colspan=2 valign=bottom><font size=2>Foreign
  currency translation adjustments</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom><font   size=2>-</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(25</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="11%" colspan=2 valign=bottom><font   size=2>(25</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="23%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="11%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=left></td>
  <td  align=right width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Total comprehensive
  income </font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="13%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="11%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>30,639</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="11%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom><font size=2>Balance at June 29,
  2001 </font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>558</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>458,077</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>(135,794</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>(74,956</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="10%" valign=bottom><font   size=2>247,885</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="26%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="13%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="11%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>

<!-- DO NOT remove the following table row. It is needed for  .               the proper rendering of tables containing misaligned cells.-->
 <tr height=0>
  <td width=13></td>
  <td width=12></td>
  <td width=166></td>
  <td width=7></td>
  <td width=87></td>
  <td width=12></td>
  <td width=7></td>
  <td width=87></td>
  <td width=12></td>
  <td width=7></td>
  <td width=87></td>
  <td width=12></td>
  <td width=7></td>
  <td width=101></td>
  <td width=8></td>
  <td width=7></td>
  <td width=78></td>
  <td width=12></td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<p align=center><font size=2>The
accompanying notes are an integral part of the consolidated condensed financial
statements.</font></p>

<page>


<p align=center><b><font size=2>DAL-TILE INTERNATIONAL INC.<br>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS<br>
(In Thousands)<br>
(Unaudited)</font></b></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="29%" colspan=5 valign=bottom><b><font size=2>Six
  Months Ended</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="29%" colspan=5 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>June
  29,</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>June
  30,</font></b></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom><b><font size=2>2000</font></b></td>
  <td width="1%" valign=bottom><b><font size=2>&nbsp;</font></b></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td  align=center width="1%" valign=bottom>&nbsp;</td>
  <td  align=center width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><b><font size=2>Operating Activities</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><font size=2>Net Income </font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>36,544</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>46,864</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Adjustments to
  reconcile net income to net cash provided by operating activities:</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="66%" colspan=2 valign=bottom><font size=2>Depreciation and
  amortization </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>14,356</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>12,958</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td width="66%" colspan=2 valign=bottom><font size=2>Deferred income tax
  provision </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>12,987</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>1,483</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="66%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Other, net </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(1,584</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>295</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="66%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Changes in operating
  assets and liabilities:</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="64%" valign=bottom><font size=2>Trade accounts
  receivable </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(19,718</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(21,587</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="64%" valign=bottom><font size=2>Inventories </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(21,671</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(4,692</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="64%" valign=bottom><font size=2>Other assets </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>9,793</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(813</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="64%" valign=bottom><font size=2>Trade accounts payable
  and accrued expenses </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>13,783</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>5,948</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="64%" valign=bottom bgcolor="#cceeff"><font size=2>Accrued interest
  payable </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(1,230</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>400</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="3%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="64%" valign=bottom bgcolor="#cceeff"><font size=2>Other liabilities </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(2,524</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(3,420</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><font size=2>Net cash provided by
  operating activities </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>40,736</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>37,436</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><b><font size=2>Investing Activities</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><font size=2>Expenditures for
  property, plant, and equipment, net </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(10,868</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(15,958</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><b><font size=2>Financing Activities</font></b></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Borrowings under
  long-term debt </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>120,200</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>151,600</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Repayments of
  long-term debt </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(155,781</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(175,655</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Proceeds from issue of
  common stock </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>4,938</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>2,267</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><font size=2>Net cash used in
  financing activities </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(30,643</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(21,788</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="1%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><font size=2>Effect of exchange
  rate changes on cash </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>281</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom><font   size=2>(30</font></td>
  <td width="1%" valign=bottom><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Net decrease in cash </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(494</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>(340</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>)</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom bgcolor="#cceeff"><font size=2>Cash at beginning of
  period </font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,477</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="14%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>1,193</font></td>
  <td width="1%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom><font size=2>Cash at end of period </font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>983</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="13%" valign=bottom><font   size=2>853</font></td>
  <td width="1%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="68%" colspan=3 valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
  <td  align=right width="14%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="1%" valign=bottom>&nbsp;</td>
 </tr>

<!-- DO NOT remove the following table row. It is needed for  .               the proper rendering of tables containing misaligned cells.-->
 <tr height=0>
  <td width=13></td>
  <td width=13></td>
  <td width=468></td>
  <td width=7></td>
  <td width=94></td>
  <td width=13></td>
  <td width=7></td>
  <td width=94></td>
  <td width=12></td>
 </tr>
</table>

<p align=center><font size=2>The
accompanying notes are an integral part of the consolidated condensed financial
statements.</font></p>

<page>


<p align=center><b><font size=2>DAL-TILE
INTERNATIONAL INC.<br>
<a name=NotesToConsolidatedCondensedFinancialSta>NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS</a><br>
(IN THOUSANDS)<br>
(UNAUDITED)</font></b></p>

<p><font size=2>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Basis of Presentation</b></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
operating results of Dal-Tile International Inc. for the six months ended June
29, 2001 reflect the results of operations of Dal-Tile International Inc. and
its consolidated subsidiaries (the &#147;Company&#148;) on the basis of a 52/53 week
accounting cycle.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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.&nbsp; Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.&nbsp; 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.&nbsp; The results of operations for the six months
ended June 29, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 28, 2001.&nbsp; 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.</font></p>

<dir>
<p><font size=2>Certain
prior year amounts have been reclassified to conform to the 2001 presentation.</font></p>
</dir>

<p><font size=2>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Earnings Per Share</b></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic earnings per share are based on the
average number of shares outstanding during each period presented.&nbsp; Diluted earnings per share are based on the
average number of shares outstanding including any dilutive effects of options,
warrants and convertible securities.</font></p>

<p><font size=2>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Comprehensive Income</b></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total
comprehensive income includes net income, changes in the fair value of
outstanding hedges, net of tax, and foreign currency translation
adjustments.&nbsp; For the six months ended
June 29, 2001 and June 30, 2000, total comprehensive income was $30,639 and
$46,792, respectively.</font></p>

<p><font size=2>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Inventories</b></font></p>

<dir>
<p><font size=2>Inventories
are as follows:</font></p>
</dir>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="41%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=top>&nbsp;</td>
  <td  align=center width="17%" colspan=2 valign=bottom><b><font size=2>June
  29,</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" colspan=2 valign=bottom><b><font size=2>December
  29,</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="41%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" valign=top>&nbsp;</td>
  <td  align=center width="17%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="17%" colspan=2 valign=bottom><b><font size=2>2000</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="59%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Raw Materials</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>9,806</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="17%" valign=bottom bgcolor="#cceeff"><font   size=2>9,599</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" valign=bottom><font size=2>Work-in-process </font></td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom><font   size=2>5,595</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" colspan=2 valign=bottom><font   size=2>5,204</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="59%" colspan=2 valign=bottom bgcolor="#cceeff"><font size=2>Finished&nbsp; goods</font></td>
  <td  align=right width="17%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>146,098</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="17%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>125,443</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="41%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>161,499</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom><font size=2>$</font></td>
  <td  align=right width="17%" valign=bottom><font   size=2>140,246</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="41%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" valign=top>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="17%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<page>


<p><font size=2>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Long-Term Debt</b></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-term debt consists of the
following:</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="5%" valign=top>&nbsp;</td>
  <td  align=center width="48%" valign=bottom>&nbsp;</td>
  <td  align=center width="20%" colspan=2 valign=bottom><b><font size=2>June
  29,</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="20%" colspan=2 valign=bottom><b><font size=2>December
  29,</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="5%" valign=top>&nbsp;</td>
  <td  align=center width="48%" valign=bottom>&nbsp;</td>
  <td  align=center width="20%" colspan=2 valign=bottom><b><font size=2>2001</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="20%" colspan=2 valign=bottom><b><font size=2>2000</font></b></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="5%" valign=top>&nbsp;</td>
  <td  align=center width="48%" valign=bottom>&nbsp;</td>
  <td  align=center width="20%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
  <td  align=center width="20%" colspan=2 valign=bottom><div align=right><b><font size=2><hr size=1 width="100%" noshade color=black align=right></font></b></div></td>
  <td  align=center width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="20%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="48%" valign=bottom bgcolor="#cceeff"><font size=2>Term A Loan </font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>90,000</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>115,000</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom><font size=2>Term B Loan </font></td>
  <td  align=right width="20%" colspan=2 valign=bottom><font   size=2>121,500</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="20%" colspan=2 valign=bottom><font   size=2>122,000</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="48%" valign=bottom bgcolor="#cceeff"><font size=2>Revolving Credit Loan </font></td>
  <td  align=right width="20%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>79,000</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="20%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>86,700</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom><font size=2>Other </font></td>
  <td  align=right width="20%" colspan=2 valign=bottom><font   size=2>5,697</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="20%" colspan=2 valign=bottom><font   size=2>8,078</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>&nbsp;</td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="5%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="48%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>296,197</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td  align=right width="20%" colspan=2 valign=bottom bgcolor="#cceeff"><font   size=2>331,778</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom><font size=2>Less current portion </font></td>
  <td  align=right width="20%" colspan=2 valign=bottom><font   size=2>62,697</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
  <td  align=right width="20%" colspan=2 valign=bottom><font   size=2>55,761</font></td>
  <td width="2%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="5%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="48%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>233,500</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
  <td width="0%" valign=bottom bgcolor="#cceeff"><font size=2>$</font></td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>276,017</font></td>
  <td width="2%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="48%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
  <td  align=right width="20%" colspan=2 valign=bottom>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="2%" valign=bottom>&nbsp;</td>
 </tr>
</table>

<p><font size=2><br>
6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Income Taxes</b></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
income tax provision for the second quarter of 2001 reflects an effective tax
rate of approximately 38.5 percent compared to 6.6 percent for the second
quarter of 2000.&nbsp; The increase in the
effective rate for 2001 versus 2000 was mainly due to the impact of the
reversal during 2000 of the valuation allowance recorded against certain U.S.
federal deferred tax assets.</font></p>

<p><font size=2>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Commitments and Contingencies</b></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company is subject to federal, state, local and foreign laws and regulations
relating to the environment and to work places.&nbsp; 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.&nbsp; The Company believes that it is
currently in substantial compliance with such laws and the regulations
promulgated thereunder.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company is involved in various proceedings relating to environmental
matters.&nbsp; 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
clean-up of hazardous substances at certain sites.&nbsp; It is the Company's policy to accrue liabilities for remedial
investigations and clean-up activities when it is probable that such
liabilities have been incurred and when they can be reasonably estimated.&nbsp; 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 clean-up
activities, taking into account currently available information and the
Company&#146;s contractual rights of indemnification.&nbsp; 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.&nbsp; 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.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company is also a defendant in various lawsuits arising from normal business
activities.&nbsp; 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.</font></p>

<p><b><font size=2>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Accounting
Pronouncements</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
June 2001, the Financial Accounting Standards Board issued Statement No. 141,
&#147;Business Combinations&#148; (&#147;SFAS 141&#148;) and Statement No. 142, &#147;Goodwill and Other
Intangible Assets&#148; (&#147;SFAS 142&#148;).&nbsp; Both
SFAS 141 and SFAS 142 will be effective for fiscal years beginning after
December 15, 2001.&nbsp; Under the new rules,
SFAS 141 eliminates the pooling of interest method of accounting for business
combinations.&nbsp; SFAS 142 requires that
goodwill and intangible assets deemed to have indefinite lives will no longer
be amortized but will be subject to annual impairment tests.&nbsp; The Company is currently reviewing the
impact of SFAS 141 and SFAS 142 and will adopt both statements on December 29,
2001 for the 2002 fiscal year.&nbsp; At the
present time, the Company has no foreseeable business combinations and
management believes that SFAS 141 will have no material impact on the
Company.&nbsp; The effect of adopting SFAS
142 will be to reduce amortization expense on an annual basis by approximately
$5.5 million and increase net income by approximately $5.2 million for 2002
compared to 2001.&nbsp; Management believes
that impairment of existing intangible assets, under the new statement, is
unlikely.</font></p>

<page>


<p align=center><a name=Item2managementsDiscussionAndAnalysisOfF><b><font size=2>ITEM 2<font color=black>&#151;</font>MANAGEMENT'S
DISCUSSION AND ANALYSIS OF<br>
</font></b></a><b><font size=2>FINANCIAL CONDITION AND RESULTS OF OPERATIONS</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company achieved record sales and profits during the second quarter of
2001.&nbsp; Sales increased primarily through
the Company-operated sales centers driven by continued growth in the
residential market.&nbsp; Profit margin
before tax increased to approximately 12.4&nbsp;percent versus
11.1&nbsp;percent in the second quarter of 2000 due to reduced corporate
spending and lower interest expense.&nbsp; In
addition, free cash flow improved through better management of working capital
and debt decreased $90.4 million from second quarter 2000.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; During
the quarter, the Company completed the public offering of 18.4 million shares
of Common Stock (16 million shares in the offering and 2.4 million in
over-allotment shares) by certain selling stockholders priced at $13.75.&nbsp; The Company did not receive any proceeds
from the sale of shares in the offering.</font></p>

<p><i><font size=2>Net
Sales</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
sales in the second quarter of 2001 increased $18.4&nbsp;million, or
7.5&nbsp;percent, to $263.4 million from $245.0 million in the second quarter
of 2000.&nbsp; For the six months ended June
29, 2001, net sales increased $33.9 million, or 7.1 percent, to $509.0 million
from $475.1 million for the same period in 2000.&nbsp; These increases for the three and six months ended June 29, 2001
were due primarily to gains in the residential market realized through the
Company-operated sales centers and home center retailers.&nbsp; Compared to second quarter 2000, quarter
sales increased 9.8&nbsp;percent through Company&#150;operated sales centers
and 8.9 percent for the six-month period.&nbsp;
Home center sales increased 3.6&nbsp;percent for the quarter and 5.5
percent for the six-month period.&nbsp; Sales
to independent distributors decreased 1.9 percent for the quarter but increased
1.0 percent for the six-month period.</font></p>

<p><i><font size=2>Gross
Profit</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross
profit in the second quarter of 2001 increased $7.1&nbsp;million, or
6.0&nbsp;percent, to $124.6 million from $117.5 million in the second quarter
of 2000.&nbsp; Gross profit for the six
months ended June 29, 2001, increased $13.4 million, or 5.9 percent, to $241.6
million from $228.2 million for the same period in 2000.&nbsp; Gross margin was 47.3&nbsp;percent in the
second quarter of 2001 versus 48.0&nbsp;percent in 2000.&nbsp; For the six months ended June 29, 2001, gross
margin decreased to 47.5 percent from 48.0 percent in 2000.&nbsp; Higher energy costs and softer floor tile
prices were partially offset by improved productivity in manufacturing
operations.</font></p>

<p><i><font size=2>Operating
Expenses</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating
expenses in the second quarter of 2001 increased $5.4&nbsp;million, or
6.6&nbsp;percent, to $87.1&nbsp;million from $81.7&nbsp;million in the second
quarter of 2000.&nbsp; For the six months
ended June 29, 2001, operating expenses increased $8.4 million, or 5.2 percent,
to $170.3 million from $161.9 million for the same period in 2000.&nbsp; This increase was due primarily to
additional spending for new product introductions and higher costs associated
with the growth in sales.&nbsp; For the
quarter, operating expenses, as a percent of sales, decreased to
33.1&nbsp;percent from 33.3&nbsp;percent in the second quarter of 2000.&nbsp; Year to date, operating expenses, as a
percent of sales, decreased to 33.5 percent from 34.1 percent for the same
period in 2000.&nbsp; The decrease was due
primarily to higher sales and lower corporate spending.&nbsp; Transportation costs, as a percent of sales,
increased to 6.7 percent of sales for the quarter versus 6.4 percent in
2000.&nbsp; For the six months ended June 29,
2001, transportation costs as a percent of sales were 6.7 percent compared to
6.6 percent for the same period in 2000.&nbsp;
The increase was due primarily to higher fuel surcharges.</font></p>

<page>


<p><i><font size=2>Operating
Income</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating
income in the second quarter of 2001 increased $1.8&nbsp;million, or
5.0&nbsp;percent, to $37.6&nbsp;million from $35.8&nbsp;million in the second
quarter of 2000.&nbsp; For the six months
ended June 29, 2001, operating income increased $5.0 million, or 7.5 percent,
to $71.3 million from $66.3 million for the comparable period in 2000.&nbsp; Operating margin decreased to
14.3&nbsp;percent in the second quarter of 2001 from 14.6&nbsp;percent in the
second quarter of 2000.&nbsp; For the six
months ended June 29, 2001, operating margin remained flat at 14.0 percent.</font></p>

<p><i><font size=2>Interest
Expense (Net)</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest
expense (net) in the second quarter of 2001 decreased $2.1&nbsp;million, or
27.3&nbsp;percent, to $5.6&nbsp;million from $7.7&nbsp;million in the second
quarter of 2000.&nbsp; For the six months
ended June 29, 2001, interest expense (net) decreased $3.6 million, or 23.1
percent to $12.0 million from $15.6 million in the same period of 2000.&nbsp; This decrease was due to reduced borrowing
requirements on the Company's credit facility and related reductions in
interest rates and fees.</font></p>

<p><i><font size=2>Income
Taxes</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
income tax provision in the second quarter of 2001 reflects an effective tax
rate of approximately 38.5&nbsp;percent compared to 6.6&nbsp;percent for the
second quarter of 2000.&nbsp; The increase in
the effective rate for 2001 versus 2000 was mainly due to the impact of the
reversal during 2000 of the valuation allowance recorded against certain U.S.
federal deferred tax assets.</font></p>

<p><i><font size=2>Net
Income</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
income in the second quarter of 2001 decreased $5.4&nbsp;million, or
21.2&nbsp;percent, to $20.1&nbsp;million from $25.5&nbsp;million in the second
quarter of 2000.&nbsp; Year to date, net
income decreased to $36.5 million from $46.9 million for the same period in
2000.&nbsp; On a pro-forma<font color=black>&#151;</font>fully taxed basis, net income for the second
quarter of 2001 increased $3.3&nbsp;million, or 19.6&nbsp;percent, from
$16.8&nbsp;million in the second quarter of 2000.&nbsp; On a pro-forma<font color=black>&#151;fully
taxed basis, net income for the six months ended June 29, 2001 increased $5.7
million, or 18.5 percent, from $30.8 million in 2000.</font></font></p>

<p><i><font size=2>Liquidity
and Capital Resources</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash
flow from operations and funds available under the Company's bank credit
agreement (the &quot;Fourth Amended Credit Facility&quot;) continue to provide
the Company with liquidity and capital resources for working capital
requirements, capital expenditures and debt service.&nbsp; For the six months ended June 29, 2001, cash provided by
operating activities was $40.7&nbsp;million compared to $37.4&nbsp;million for
the same period in 2000.&nbsp; For the
six-month period, trade accounts receivable and inventories increased versus
prior year; however, inventory turns increased and days sales outstanding
decreased versus prior year.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
expenditures for property, plant and equipment were $10.9&nbsp;million for the
six months ended June 29, 2001, compared to $16.0&nbsp;million for the
comparable period of 2000.&nbsp; The decrease
was due primarily to timing differences of capital projects.&nbsp; The Company plans to initiate various
capital projects during the remainder of 2001 for the expansion and
modernization of manufacturing facilities, along with expenditures for routine
capital improvements and maintenance.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash
used in financing activities was $30.6&nbsp;million for the six months ended
June 29, 2001.&nbsp; Cash outflows for term
debt amortization of $25.5&nbsp;million, revolver debt of $7.7 million and
other debt of $2.3&nbsp;million were offset by cash inflows of
$4.9&nbsp;million related to employee stock purchases and the exercise of
options to purchase common stock.&nbsp; Total
availability under the Fourth Amended Credit Facility as of June 29, 2001 was
$157.0&nbsp;million.</font></p>

<page>


<p>&nbsp;</p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company is involved in various proceedings relating to environmental matters
and is currently engaged in environmental investigation and remediation programs
at certain sites.&nbsp; The Company has
provided reserves for remedial investigation and clean-up activities that are
determined to be both probable and reasonably estimable.&nbsp; 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.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The United
States is a party to the General Agreement on Tariffs and Trade
(&quot;GATT&quot;).&nbsp; Under GATT, the
United States currently imposes import duties on ceramic tile from non-North
American countries at no more than 13&nbsp;percent, to be reduced ratably to no
less than 8.5&nbsp;percent by 2004.&nbsp;
Accordingly, GATT may stimulate competition from non-North American
manufacturers who now export, or who may seek to export, ceramic tile to the
United States.&nbsp; The Company cannot
predict with certainty the effect that GATT may have on the Company's
operations.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
North American Free Trade Agreement, which was entered into by Canada, Mexico
and the United States and became effective on January&nbsp;1, 1994, has created
the world's largest free&#150;trade zone.&nbsp;
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.&nbsp; 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.&nbsp; Although NAFTA
lowers the tariffs imposed on the Company's ceramic tile manufactured in Mexico
and sold in the United States, it also may stimulate competition in the United
States and Canada from manufacturers located in Mexico.&nbsp; The United States currently imposes import
duties on glazed ceramic tile from Mexico of approximately 8.8&nbsp;percent,
although these duties on imports from Mexico are being phased out ratably under
NAFTA by 2008.&nbsp; It is uncertain what
ultimate effect NAFTA will have on the Company's results of operations.</font></p>

<p><i><font size=2>New Accounting Pronouncements.</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font><font size=2>In
June 2001, the Financial Accounting Standards Board issued Statement No. 141,
&#147;Business Combinations&#148; (&#147;SFAS 141&#148;) and Statement No. 142, &#147;Goodwill and Other
Intangible Assets&#148; (&#147;SFAS 142&#148;). Both SFAS 141 and SFAS 142 will be effective
for fiscal years beginning after December 15, 2001. Under the new rules, SFAS
141 eliminates the pooling of interest method of accounting for business
combinations. SFAS 142 requires that goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests. The Company is currently reviewing the impact of SFAS 141 and
SFAS 142 and will adopt both statements on December 29, 2001 for the 2002
fiscal year. At the present time, the Company has no foreseeable business
combinations and management believes that SFAS 141 will have no material impact
on the Company. The effect of adopting SFAS 142 will be to reduce amortization
expense on an annual basis by approximately $5.5 million and increase net
income by approximately $5.2 million for 2002 compared to 2001. Management
believes that impairment of existing intangible assets, under the new
statement, is unlikely.</font></p>

<p><i><font size=2>Effects
of Inflation and Exchange Rates</font></i></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company believes it has generally been able to enhance productivity to offset
increases in costs resulting from inflation in the United States and
Mexico.&nbsp; During the second 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.&nbsp; Any future increases in the Mexican
inflation rate, which are not offset, or increases in the United States
inflation rate, which affect financing costs, may negatively affect the
Company's results of operations.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; From
time to time, the Company enters into transactions in other foreign currencies,
which may negatively affect the Company's results of operations.</font></p>

<page>


<p><font size=2>&nbsp;</font></p>

<p><a name="PartIi_OtherInformation"><b><font size=2>PART II.&nbsp; OTHER INFORMATION</font></b></a></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width=81 colspan=2 valign=top><b><font size=2>Item 4.</font></b></td>
  <td width=641 valign=top><b><font size=2>Submission
  of Matters to a Vote of Security Holders</font></b></td>
 </tr>
 <tr>
  <td width=81 colspan=2 valign=top>&nbsp;</td>
  <td width=641 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width=79 valign=top>&nbsp;</td>
  <td width=642 colspan=2 valign=top><font size=2>At the annual
  meeting of the Company held on April 26, 2001, the shareholders of the
  Company approved the following proposals:</font></td>
 </tr>
 <tr>
  <td width=79 valign=top>&nbsp;</td>
  <td width=642 colspan=2 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width=79 valign=top>&nbsp;</td>
  <td width=642 colspan=2 valign=top><font size=2>To elect five directors to serve the ensuing
  year and until respective successors shall have been duly elected and
  qualified:</font></td>
 </tr>

<!-- DO NOT remove the following table row. It is needed for  .               the proper rendering of tables containing misaligned cells.-->
 <tr height=0>
  <td width=79></td>
  <td width=2></td>
  <td width=641></td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<dir><dir>
<table border=0 cellspacing=0 cellpadding=0 width="82%">
 <tr>
  <td width="32%" valign=top><font size=2>Directors</font></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="28%" valign=top><font size=2>For</font></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="30%" valign=top><font size=2>Against</font></td>
 </tr>
 <tr>
  <td width="32%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="28%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="30%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="32%" valign=top bgcolor="#cceeff"><font size=2>Douglas
  D. Danforth</font></td>
  <td width="4%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="28%" valign=top bgcolor="#cceeff"><font size=2>50,561,771</font></td>
  <td width="4%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="30%" valign=top bgcolor="#cceeff"><font size=2>1,000,080</font></td>
 </tr>
 <tr>
  <td width="32%" valign=top><font size=2>John
  F. Fielder</font></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="28%" valign=top><font size=2>50,560,571</font></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="30%" valign=top><font size=2>1,001,280</font></td>
 </tr>
 <tr>
  <td width="32%" valign=top bgcolor="#cceeff"><font size=2>Vincent
  A. Mai</font></td>
  <td width="4%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="28%" valign=top bgcolor="#cceeff"><font size=2>50,224,136</font></td>
  <td width="4%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="30%" valign=top bgcolor="#cceeff"><font size=2>1,337,715</font></td>
 </tr>
 <tr>
  <td width="32%" valign=top><font size=2>Charles
  J. Pilliod, Jr.</font></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="28%" valign=top><font size=2>50,223,136</font></td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="30%" valign=top><font size=2>1,338,715</font></td>
 </tr>
 <tr>
  <td width="32%" valign=top bgcolor="#cceeff"><font size=2>Jacques
  R. Sardas</font></td>
  <td width="4%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="28%" valign=top bgcolor="#cceeff"><font size=2>47,113,302</font></td>
  <td width="4%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="30%" valign=top bgcolor="#cceeff"><font size=2>4,448,549</font></td>
 </tr>
</table>
</dir></dir>

<p><font size=2>&nbsp;</font></p>

<dir><dir>
<p><font size=2>To
approve the amendment of the stock option plan as set forth in the proxy dated
March 31, 2001.</font></p>
</dir></dir>

<dir><dir><dir><dir>
<table border=0 cellspacing=0 cellpadding=0 width="70%">
 <tr>
  <td width="31%" valign=top><font size=2>For</font></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>Against</font></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="30%" valign=top><font size=2>Abstain</font></td>
 </tr>
 <tr>
  <td width="31%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="32%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="30%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="31%" valign=top bgcolor="#cceeff"><font size=2>33,189,943</font></td>
  <td width="3%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="32%" valign=top bgcolor="#cceeff"><font size=2>14,394,177</font></td>
  <td width="3%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="30%" valign=top bgcolor="#cceeff"><font size=2>106,600</font></td>
 </tr>
</table>
</dir></dir></dir></dir>

<p><font size=2>&nbsp;</font></p>

<dir><dir>
<p><font size=2>To
ratify Ernst &amp; Young LLP as the Company&#146;s independent auditors for the
fiscal year ending December 28, 2001.</font></p>
</dir></dir>

<dir><dir><dir><dir>
<table border=0 cellspacing=0 cellpadding=0 width="70%">
 <tr>
  <td width="31%" valign=top><font size=2>For</font></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>Against</font></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="29%" valign=top><font size=2>Abstain</font></td>
 </tr>
 <tr>
  <td width="31%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="32%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
  <td width="3%" valign=top>&nbsp;</td>
  <td width="29%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="31%" valign=top bgcolor="#cceeff"><font size=2>51,516,587</font></td>
  <td width="3%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="32%" valign=top bgcolor="#cceeff"><font size=2>760,156</font></td>
  <td width="3%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td width="29%" valign=top bgcolor="#cceeff"><font size=2>2,608</font></td>
 </tr>
</table>
</dir></dir></dir></dir>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width=81 valign=top><a name="Item5_OtherInformation"><b><font size=2>Item
  5.</font></b></a></td>

  <td width=641 valign=top><b><font size=2>Other Information</font></b></td>

 </tr>
 <tr>
  <td width=81 valign=top>&nbsp;</td>

  <td width=641 valign=top>&nbsp;</td>

 </tr>
 <tr>
  <td width=81 valign=top>&nbsp;</td>

  <td width=641 valign=top><font   size=2>Cautionary
  Statement for purposes of &#147;Safe Harbor Provisions&#148; of the Private Securities
  Litigation Reform Act of 1995.</font></td>

 </tr>
 <tr>
  <td width=81 valign=top>&nbsp;</td>

  <td width=641 valign=top>&nbsp;</td>

 </tr>
 <tr>
  <td width=81 valign=top>&nbsp;</td>

  <td width=641 valign=top><font size=2>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 &#147;forward-looking
  statements&#148;.&nbsp; For those statements,
  the Company claims the protection of the safe harbor for forward-looking
  statements contained in the Private Securities Litigation Reform Act of
  1995.&nbsp; The statements are based on
  assumptions regarding the Company&#146;s ability to maintain its sales growth and
  gross margins and to control costs and on assumptions regarding the
  performance of the economy.&nbsp; These
  statements are based largely on the Company&#146;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.&nbsp; Such factors include,
  among other things, the impact of competitive pressures and changing economic
  conditions on the Company&#146;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&#146;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&#146;s filings
  with the Securities and Exchange Commission</font></td>

 </tr>
</table>

<p><b><font size=2>&nbsp;</font></b></p>



<dir><dir>
<p><a name="Item6_ExhibitsAndReportsOnForm8k"><font size=2>.</font></a></p>
</dir></dir>

<page>


<dir><dir>
<p><font size=2>&nbsp;</font></p>
</dir></dir>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="11%" valign=top><b><font size=2>Item 6.</font></b></td>

  <td width="88%" valign=top><b><font size=2>Exhibits and Reports on Form
  8-K</font></b></td>

 </tr>
</table>

<p><font size=2>&nbsp;</font></p>



<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Exhibits</u></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Reports on Form 8-K</u></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=87 valign=top>&nbsp;</td>
  <td width=32 valign=top><font size=2>(1)</font></td>
  <td width=615 valign=top><font size=2>The
  Company filed a report on Form 8-K dated April 9, 2001, reporting that the
  Company had announced that its investor conference call to address financial
  results for the first quarter of 2001 would be held on Wednesday, April 11,
  2001 at 10:00 Central Daylight Savings Time.</font></td>
 </tr>
 <tr>
  <td width=87 valign=top>&nbsp;</td>
  <td width=32 valign=top>&nbsp;</td>
  <td width=615 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width=87 valign=top>&nbsp;</td>
  <td width=32 valign=top><font size=2>(2)
  </font></td>
  <td width=615 valign=top><font size=2>The
  Company filed a report on Form 8-K dated April 11, 2001, which included the
  Company&#146;s first quarter press release stating its financial results, and a
  press release announcing its intention to file a registration statement with
  the Securities and Exchange Commission for an underwritten offering of shares
  of its common stock.</font></td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>&nbsp;</font></p>

<p><b><font size=2>SIGNATURE</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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.</font></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="44%" valign=top>&nbsp;</td>
  <td width="55%" colspan=2 valign=top><font size=2>DAL-TILE
  INTERNATIONAL&nbsp;INC.</font></td>
 </tr>
 <tr>
  <td width="44%" valign=top>&nbsp;</td>
  <td width="55%" colspan=2 valign=top><font size=2>(REGISTRANT)</font></td>
 </tr>
 <tr>
  <td width="44%" valign=top>&nbsp;</td>
  <td width="4%" valign=top><br clear=ALL><font size=2>By:</font></td>
  <td  align=center width="51%" valign=top><font size=2>/s/
  W. CHRISTOPHER WELLBORN</font></td>
 </tr>
 <tr>
  <td width="44%" valign=top>&nbsp;</td>
  <td width="4%" valign=top>&nbsp;</td>
  <td width="51%" valign=top>
<hr size=1 width="100%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="44%" valign=top>&nbsp;</td>
  <td width="4%" valign=top>&nbsp;</td>
  <td  align=center width="51%" valign=top><font size=2>W.
  Christopher Wellborn<br></font><font size=2>&nbsp;<i>Executive Vice President and</i><br><i>Chief Financial Officer</i></font></td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>Date: August 10, 2001</font></p>

<p><font size=2>&nbsp;</font></p>

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