Mohawk Industries, Inc. Announces First Quarter Earnings

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CALHOUN, Ga., May 5, 2011 /CNW/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 first quarter net earnings of $23 million and diluted earnings per share (EPS) of $0.34. Excluding restructuring charges, 2011 first quarter net earnings were $29 million and EPS of $0.42. For the first quarter of 2010, the net earnings were $21 million and EPS was $0.30. Excluding restructuring charges, 2010 first quarter net earnings and EPS were $24 million and $0.35 per share. Net sales for the first quarter of 2011 were $1.3 billion which was flat versus 2010. Our cash and net debt to adjusted EBITDA ratio stand at $256 million and 2.2 respectively, providing flexibility to pursue strategic opportunities.

Commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "We grew our operating margin to 4.7% excluding restructuring charges, an improvement of approximately 40 basis points over the first quarter last year by continuing to drive cost reductions, manufacturing improvements and efficiency gains throughout the enterprise. Sales reported during the period were flat with last year with the outlook strengthening for the balance of the year. In the U.S., both remodeling and home sales are expected to improve over last year, and non-residential investment is estimated to increase over 8% in 2011."

Our Mohawk segment net sales declined 3.5% with commercial seeing improvement and the residential category still lagging. The residential order trends turned positive at the end of the first quarter and continued into April. The commercial business continues its recovery with modular tile products growing significantly. The hospitality channel is rebounding after several years of reduced capital spending. We expect continued improvement in our business from our new product introductions, additional customer commitments, price increases to cover raw materials and operational improvements. We announced two carpet price increases to offset the dramatic raw material inflation with the first increase in February followed by the second increase in April. Operational enhancements to optimize productivity, material and service are being executed and will improve our cost position this year. We are completing the consolidation of a carpet facility in South Georgia and relocating the production to our other manufacturing plants. Our many Greenworks initiatives continue to increase the recycled content utilized in our products and processes furthering our sustainable manufacturing commitments while lowering our costs.

Our Dal-Tile segment net sales increased approximately 1% versus last year. The sales trends improved during the period with commercial outperforming residential. We continued the expansion of our Reveal Imaging technology receiving multiple product awards and increased our position in the home center channel. To recover the rising freight costs, we have increased prices on our products and transportation. Cost reductions continue from new investments in technology, lean manufacturing, material innovations and improvements in the supply chain. We are implementing our ceramic strategy in Mexico where the market is growing 5%. We are expanding our sales organization, product offering and customer base to support a new facility in Mexico which should be operational in mid-2012. Our Chinese joint venture is investing to gain market share, increase product mix, improve efficiencies and strengthen management systems. We are building a strong platform to be positioned as a leader in the market.

Our Unilin net sales increased approximately 7% both as reported and on a constant exchange rate. Sales of most of our European products were positive while U.S. markets remain difficult but are showing improvement. Our margins were under pressure from escalating raw material costs which are ahead of our price increases. Price increases were implemented in European flooring, roofing and boards to offset material inflation and additional increases for some products have been announced in the second quarter. We are continuing to expand sales in home centers across Europe with Quick Step products positioned as a premium offering. The U.S. flooring business improved as we proceeded through the first quarter and we strengthened our position in the home center and specialized hard surface channels. We improved our U.S. wood manufacturing costs and enhanced the sales mix with higher value products and additional performance features.

After the seasonally slow first quarter, we believe the industry recovery will continue the balance of the year. Commercial renovation is improving as companies begin to reinvest. We anticipate pent-up demand in the residential remodeling market and improving home sales will positively impact results this year. Price and volume increases, along with cost reductions will enhance profitability. With these factors, our second quarter guidance for earnings is $0.87 to $0.97 per share, excluding any restructuring charges.

We have improved our organization's ability to drive innovation in product, processes and costs. We have managed through a challenging period and significantly redesigned our businesses to maximize our long term results. Our investments in new assets, geographic expansion and systems will enhance our core businesses and create new growth opportunities.

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

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

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    There will be a conference call Friday, May 6, 2011 at 11:00 AM Eastern
Time.

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The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 57677152. A conference call replay will also be available until May 20, 2011 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 57677152.

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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

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    Consolidated Statement of
     Operations                                      Three Months Ended
                                                     ------------------
    (Amounts in thousands, except               April 2,          April 3,
     per share data)                               2011             2010
                                               ---------         ---------
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    Net sales                                  $1,343,595         1,347,236
    Cost of sales                               1,002,003         1,005,990
    -----------------------------               ---------         ---------
        Gross profit                              341,592           341,246
    Selling, general and
     administrative expenses                      285,508           287,625
    ------------------------                      -------           -------
    Operating income                               56,084            53,621
    Interest expense                               26,595            33,908
    Other expense (income), net                       (15)           (4,531)
    ---------------------------                       ---            ------
        Earnings before income taxes               29,504            24,244
    Income tax expense                              4,966             2,974
    ------------------                              -----             -----
    Net earnings                                   24,538            21,270
    Net earnings attributable to
     noncontrolling interest                       (1,096)             (732)
        Net earnings attributable to
         Mohawk Industries, Inc.                  $23,442            20,538
        ----------------------------              -------            ------
    Basic earnings per share
     attributable to Mohawk
     Industries, Inc.                               $0.34              0.30
    ------------------------                        -----              ----
    Weighted-average common
     shares outstanding - basic                    68,674            68,523
    ---------------------------                    ------            ------
    Diluted earnings per share
     attributable to Mohawk
     Industries Inc.                                $0.34              0.30
    --------------------------                      -----              ----
    Weighted-average common
     shares outstanding - diluted                  68,904            68,730
    -----------------------------                  ------            ------
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    Other Financial Information
    (Amounts in thousands)
    Net cash used in operating
     activities                                   $67,413            46,192
    --------------------------                    -------            ------
    Depreciation and amortization                 $74,253            76,798
    -----------------------------                 -------            ------
    Capital expenditures                          $52,811            23,309
    --------------------                          -------            ------
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    Consolidated Balance Sheet
     Data
    (Amounts in thousands)
                                                April 2,          April 3,
                                                   2011             2010
                                               ---------         ---------
    ASSETS
    Current assets:
        Cash and cash equivalents                $256,231           452,335
        Receivables, net                          754,826           788,124
        Inventories                             1,075,613           932,785
        Prepaid expenses                           97,846           109,968
        Deferred income taxes and
         other current assets                     155,159           160,246
        -------------------------                 -------           -------
            Total current assets                2,339,675         2,443,458
    Property, plant and equipment,
     net                                        1,715,895         1,719,051
    Goodwill                                    1,406,731         1,377,518
    Intangible assets, net                        689,703           736,353
    Deferred income taxes and
     other non-current assets                     114,229            42,520
    -------------------------                     -------            ------
                                               $6,266,233         6,318,900
                                               ----------         ---------
    LIABILITIES AND EQUITY
    Current liabilities:
      Current portion of long-term
       debt                                       $52,706           551,426
      Accounts payable and accrued
       expenses                                   739,768           859,690
      ----------------------------                -------           -------
            Total current liabilities             792,474         1,411,116
    Long-term debt, less current
     portion                                    1,577,188         1,303,437
    Deferred income taxes and
     other long-term liabilities                  449,984           452,858
    ----------------------------                  -------           -------
            Total liabilities                   2,819,646         3,167,411
            -----------------                   ---------         ---------
    Noncontrolling interest                        33,255            29,866
    -----------------------
    Total stockholders' equity                  3,413,332         3,121,623
    --------------------------                  ---------         ---------
                                               $6,266,233         6,318,900
                                               ----------         ---------
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                                                 As of or for the Three
    Segment Information                                Months Ended
                                                -----------------------
                                                April 2,          April 3,
    (Amounts in thousands)                         2011             2010
                                               ---------         ---------
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    Net sales:
        Mohawk                                   $691,165           716,583
        Dal-Tile                                  344,415           341,396
        Unilin                                    325,832           305,880
        Intersegment sales                        (17,817)          (16,623)
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            Consolidated net sales             $1,343,595         1,347,236
            ----------------------             ----------         ---------
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    Operating income:
        Mohawk                                    $17,040            16,628
        Dal-Tile                                   17,700            15,395
        Unilin                                     26,250            26,458
        Corporate and eliminations                 (4,906)           (4,860)
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            Consolidated operating income         $56,084            53,621
            -----------------------------         -------            ------
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    Assets:
        Mohawk                                 $1,749,625         1,673,264
        Dal-Tile                                1,674,408         1,568,605
        Unilin                                  2,654,268         2,525,731
        Corporate and eliminations                187,932           551,300
                                                                    -------
            Consolidated assets                $6,266,233         6,318,900
            -------------------                ----------         ---------





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    Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted
    Diluted Earnings Per Share
    (Amounts in thousands, except per share data)
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                                             Three Months Ended
                                             ------------------
                                    April 2, 2011        April 3, 2010
                                    -------------        -------------
    Net earnings
     attributable to
     Mohawk Industries,
     Inc.                                    $23,442               20,538
    Unusual items:
      Business
       restructurings                          6,813                4,004
      Income taxes                          (1,018)                (469)
      ------------                          ------                 ----
        Adjusted net earnings               $29,237               24,073
    ---------------------                  -------               ------
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    Adjusted diluted
     earnings per share                      $0.42                 0.35
    Weighted-average
     common shares
     outstanding -
     diluted                                68,904               68,730



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Reconciliation of Total Debt to Net Debt

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                                             As of
    (Amounts in thousands)                 April 2, 2011
    ----------------------                 -------------
    Current portion of long-
     term debt                                    $52,706
    Long-term debt, less
     current portion                            1,577,188
    Less: Cash and cash
     equivalents                                  256,231
    -------------------                           -------
      Net Debt                               $1,373,663
      --------                               ----------



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    Reconciliation of Operating Income to Adjusted EBITDA
    (Amounts in thousands)
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                                         Three Months Ended
                                         ------------------
                                                      October 2,
                                July 3, 2010             2010
                                ------------         -----------
    Operating income                  $89,726              85,182
        Other income (expense)           (544)             (1,124)
        U.S. customs refund                 -               5,765
          Net earnings
           attributable to
           noncontrolling
           interest                            (884)             (1,170)
        Depreciation and
         amortization                     72,497              72,956
        ----------------              ------              ------
           EBITDA                     160,795             161,609
        Business restructurings         4,929               3,330
     Adjusted EBITDA                 $165,724             164,939
     ---------------                 --------             -------
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      Net Debt to Adjusted
       EBITDA
      --------------------



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                                        Three Months Ended
                                        ------------------
                                 December 31,          April 2,
                                      2010               2011
                                -------------         ---------
    Operating income                    85,640            56,084
        Other income (expense)           1,037               (15)
        U.S. customs refund              1,965                 -
          Net earnings
           attributable to
           noncontrolling
           interest                           (1,678)           (1,096)
        Depreciation and
         amortization                      74,522            74,253
        ----------------               ------            ------
           EBITDA                      161,486           129,226
        Business restructurings              -             6,813
                                           ---             -----
     Adjusted EBITDA                   161,486           136,039
     ---------------                   -------           -------
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      Net Debt to Adjusted
       EBITDA
      --------------------



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                                             Trailing
                                              Twelve
                                          Months Ended
                                         April 2, 2011
                                         -------------
    Operating income                            316,632
        Other income (expense)                     (646)
        U.S. customs refund                       7,730
          Net earnings
           attributable to
           noncontrolling
           interest                                    (4,828)
        Depreciation and
         amortization                              294,228
        ----------------                       -------
           EBITDA                               613,116
        Business restructurings                  15,072
                                                 ------
     Adjusted EBITDA                            628,188
     ---------------                            -------
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      Net Debt to Adjusted
       EBITDA                                          2.2
      --------------------                         ---


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    Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
    (Amounts in thousands)
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                                             Three Months Ended
                                             ------------------
    Unilin segment                  April 2, 2011       April 3, 2010
    --------------                  -------------       -------------
    Net sales                          $325,832              305,880
    Adjustments to net
     sales:
      Exchange rate                         2,319                    -
        Adjusted net sales               $328,151              305,880
        ------------------               --------              -------
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    Reconciliation of Gross Profit to
     Adjusted Gross Profit
    (Amounts in thousands)
                                         Three Months Ended
                                         ------------------
                                  April 2, 2011       April 3, 2010
                                  -------------       -------------
    Gross profit                       $341,592              341,246
    Adjustments to gross
     profit:
      Business
       restructurings                     6,347                3,857
      Adjusted gross profit            $347,939              345,103
      ---------------------            --------              -------
       Adjusted gross profit as
        a percent of net sales             25.9%                25.6%
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    Reconciliation of Operating Income to
     Adjusted Operating Income
    (Amounts in thousands)
                                         Three Months Ended
                                         ------------------
                                  April 2, 2011       April 3, 2010
                                  -------------       -------------
    Operating income                    $56,084               53,621
    Adjustments to operating
     income:
      Business
       restructurings                     6,813                4,004
      Adjusted operating
       income                           $62,897               57,625
      ------------------                -------               ------
       Adjusted operating income
        as a percent of net
        sales                               4.7%                 4.3%
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                                         Three Months Ended
                                         ------------------
    Mohawk segment                April 2, 2011       April 3, 2010
    --------------                -------------       -------------
    Operating income                    $17,040               16,628
    Adjustments to operating
     income:
      Business
       restructurings                     6,813                3,229
      Adjusted operating
       income                           $23,853               19,857
      ------------------                -------               ------
       Adjusted operating income
        as a percent of net
        sales                               3.5%                 2.8%
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                                         Three Months Ended
                                         ------------------
    Unilin segment                April 2, 2011       April 3, 2010
    --------------                -------------       -------------
    Operating income                    $26,250               26,458
    Adjustments to operating
     income:
      Business
       restructurings                         -                  775
      Adjusted operating
       income                           $26,250               27,233
      ------------------                -------               ------
       Adjusted operating income
        as a percent of net
        sales                               8.1%                 8.9%
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    The Company believes it is useful for itself and investors to review,
    as applicable, both GAAP and the
    above non-GAAP measures in order to assess the performance of the
    Company's business for
    planning and forecasting in subsequent periods.







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SOURCE Mohawk Industries, Inc.

For further information: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695 Web Site: http://www.mohawkind.com


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