Mohawk Industries, Inc. Announces Fourth Quarter Earnings

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CALHOUN, Ga., Feb. 22, 2011 /CNW/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 fourth quarter net earnings of $46 million and diluted earnings per share (EPS) of $0.66. For the fourth quarter of 2009, the net earnings were $20 million and EPS was $0.29. Excluding unusual items, 2009 fourth quarter net earnings and EPS were $39 million and $0.56 per share. Net sales for the fourth quarter of 2010 were $1.3 billion which was a decrease of approximately 6% versus 2009. Net sales for the quarter increased 2% over the prior year on a constant days and exchange rate basis. For the full year of 2010, our net earnings were $185 million and EPS was $2.65. For the full year of 2009, our net loss was $5 million and loss per share was $0.08. Net sales for the full year of 2010 were $5.3 billion representing a slight decrease from 2009. On a constant exchange rate and excluding 2009 sales adjustments, net sales decreased 2%. Our cash position and liquidity remain strong with over $500 million available immediately after retiring $300 million of bonds in January 2011.

Commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings exceeded our expectations as results were positively impacted by enhanced manufacturing efficiencies, benefits from restructuring actions, reducing SG&A costs and improved process consistency. Our operating margin of 6.8% continues to show improvement compared to last year despite rising raw material costs. During 2010, our emphasis on innovation, new products, manufacturing improvements and cost reduction have benefited our margins and increased earnings. Investments in the Russian, Chinese and Mexican flooring markets are expanding our international presence and will provide platforms for future revenue and profit growth. The consensus among economists is that these markets will outperform the more mature U.S. and Western European flooring markets. The U.S. industry decline experienced over the past few years appears to have bottomed with some markets showing signs of improvement."

After adjusting for the lower number of days in the quarter, our Mohawk segment net sales decreased 3% but achieved the highest operating margin in two years despite increasing raw material costs. Manufacturing costs, material yields and process controls have improved from last year. Our market position, after adjusting for the number of days in the period, stabilized in the fourth quarter as we accelerated key introductions in new residential polyester carpets and commercial carpet tile products. We implemented a 7-10% carpet price increase in February to offset our raw material inflation. Sales of our commercial carpet tile continue to grow supported by a broader product offering and an expanded sales force. Improved planning and inventory processes have enhanced our service levels, reducing delivery time and costs.

Our Dal-Tile segment net sales declined 4% as reported but increased 4% after adjusting for the lower number of days this period and a constant exchange rate. In the fourth quarter, we began implementing a price increase of 1-2% to cover rising transportation costs. We have added sales personnel focusing on large commercial accounts and housing contractors to maximize participation in these improving markets. Dal-Tile is leading the industry with advances in decorating technologies created by our Reveal Imaging. We are introducing products that have greater distinction between individual tiles, stronger natural visuals and new textures. We are increasing our Mexican sales and customer base by expanding our product selection and sales force. Our joint venture in China is broadening its product offering, implementing new production technology and supplying tile to existing Mohawk markets. The investment in China will position us long term to take advantage of this growing market.

Our Unilin revenues were flat in the period as reported, but increased 14% after adjusting for the number of days in the period and the exchange rate. Our margins remain compressed as our material costs have continued to escalate. We implemented price increases in our board products in the fourth quarter and are executing additional price increases in boards, laminate and roofing in the first quarter to recover continued inflation and improve margins. Our laminate flooring business is increasing with Northern Europe, Russia and Asia out-performing. We are expanding our home center participation by leveraging our technology and styling leadership. The introduction of new furniture finishes and high definition technology continues to affirm our leadership in laminate technology. We are proceeding with construction of our Russian laminate plant and expanding our Malaysian wood manufacturing.

The economic recovery and stronger consumer spending will positively impact our industry in 2011. The seasonally slow first quarter is being affected by harsh weather and increasing raw material costs offsetting savings from our cost initiatives. The Chinese joint venture's extended holiday shutdown will unfavorably impact our first quarter. The residential remodeling market should improve with increased consumer spending and higher home sales. Commercial remodeling is growing as businesses invest to maximize their operating results. For the balance of 2011, we anticipate an improvement in our results as price increases are implemented, volume expands and the recovery continues. With these factors, our first quarter guidance for earnings is $0.36 to $0.44 per share, excluding restructuring charges.

We remain committed to enhancing our organization to drive innovation in product, processes and costs. Advances in our marketing, product introductions, manufacturing efficiencies, and service should yield higher profitability. This year, a higher level of capital investments will improve productivity, support new product development and expand our global reach.

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.

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.

There will be a conference call Wednesday, February 23, 2011 at 11:00 AM Eastern Time.

The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 38370453. A conference call replay will also be available until March 9, 2011 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 38370453.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

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    Consolidated Statement of
     Operations                                   Three Months Ended
                                                  ------------------
    (Amounts in thousands, except per       December 31,       December 31,
     share data)                                 2010               2009
                                            -------------      -------------
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    Net sales                                  $1,262,198          1,347,108
    Cost of sales                                 920,532          1,005,414
    ---------------------------------             -------          ---------
        Gross profit                              341,666            341,694
    Selling, general and administrative
     expenses                                     256,026            294,829
    -----------------------------------           -------            -------
    Operating income                               85,640             46,865
    Interest expense                               30,166             34,527
    Other (income) expense, net                    (1,324)             1,509
    ---------------------------                    ------              -----
        Earnings (loss) before income taxes        56,798             10,829
    Income tax expense (benefit)                   11,040             (8,950)
        Net earnings (loss)                       $45,758             19,779
        -------------------                       -------             ------
    Basic earnings (loss) per share (1)             $0.67               0.29
    -----------------------------------             -----               ----
    Weighted-average common shares
     outstanding - basic                           68,612             68,472
    ------------------------------                 ------             ------
    Diluted earnings (loss) per share
     (1)                                            $0.66               0.29
    ---------------------------------               -----               ----
    Weighted-average common shares
     outstanding - diluted                         68,843             68,682
    ------------------------------                 ------             ------
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        (1) Basic and diluted earnings per
         share for the twelve months ended
         December 31, 2010, includes a
         decrease of approximately $0.04
         and $0.05, respectively, for an
         adjustment to the fair value of a
         redeemable noncontrolling interest
         in a consolidated subsidiary of
         the Company.
    >>

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    Other Financial Information
    (Amounts in thousands)
    Net cash provided by operating
     activities                                  $109,318            259,611
    ------------------------------               --------            -------
    Depreciation and amortization                 $74,522             81,827
    -----------------------------                 -------             ------
    Capital expenditures                          $69,940             37,644
    --------------------                          -------             ------



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    Consolidated Statement of
     Operations                                    Twelve Months Ended
                                                   -------------------
    (Amounts in thousands, except per       December 31,        December 31,
     share data)                                 2010                2009
                                            -------------      -------------
    >>

    <<
    Net sales                                   5,319,072           5,344,024
    Cost of sales                               3,916,472           4,111,794
    ---------------------------------           ---------           ---------
        Gross profit                            1,402,600           1,232,230
    Selling, general and administrative
     expenses                                   1,088,431           1,188,500
    -----------------------------------         ---------           ---------
    Operating income                              314,169              43,730
    Interest expense                              133,151             127,031
    Other (income) expense, net                    (7,166)             (1,108)
    ---------------------------                    ------              ------
        Earnings (loss) before income taxes       188,184             (82,193)
    Income tax expense (benefit)                    2,713             (76,694)
        Net earnings (loss)                       185,471              (5,499)
        -------------------                       -------              ------
    Basic earnings (loss) per share (1)              2.66               (0.08)
    -----------------------------------              ----               -----
    Weighted-average common shares
     outstanding - basic                           68,578              68,452
    ------------------------------                 ------              ------
    Diluted earnings (loss) per share
     (1)                                             2.65               (0.08)
    ---------------------------------                ----               -----
    Weighted-average common shares
     outstanding - diluted                         68,784              68,452
    ------------------------------                 ------              ------
    >>

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        (1) Basic and diluted earnings per
         share for the twelve months ended
         December 31, 2010, includes a
         decrease of approximately $0.04
         and $0.05, respectively, for an
         adjustment to the fair value of a
         redeemable noncontrolling interest
         in a consolidated subsidiary of
         the Company.
    >>

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    Other Financial Information
    (Amounts in thousands)
    Net cash provided by operating
     activities                                   319,712             672,205
    ------------------------------                -------             -------
    Depreciation and amortization                 296,773             303,004
    -----------------------------                 -------             -------
    Capital expenditures                          156,180             108,925
    --------------------                          -------             -------



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    Consolidated Balance Sheet Data
    (Amounts in thousands)
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                                          December 31,       December 31,
                                               2010               2009
                                         -------------      -------------
    ASSETS
    Current assets:
        Cash and cash equivalents              $354,217            531,458
      Restricted cash                            27,954                  -
        Receivables, net                        614,473            673,931
        Inventories                           1,007,503            892,981
        Prepaid expenses                         91,731            108,947
        Deferred income taxes and other
         current assets                         152,735            151,683
        -------------------------------
            Total current assets              2,248,613          2,359,000
    Property, plant and equipment,
     net                                      1,687,124          1,791,412
    Goodwill                                  1,369,394          1,411,128
    Intangible assets, net                      677,127            785,342
    Deferred income taxes and other
     non-current assets                         116,668             44,564
    -------------------------------             -------             ------
                                             $6,098,926          6,391,446
                                             ----------          ---------
    LIABILITIES AND STOCKHOLDERS'
     EQUITY
    Current liabilities:
      Current portion of long-term
       debt                                    $350,588             52,907
      Accounts payable and accrued
       expenses                                 698,326            831,115
      ----------------------------              -------            -------
            Total current liabilities         1,048,914            884,022
    Long-term debt, less current
     portion                                  1,302,994          1,801,572
    Deferred income taxes and other
     long-term liabilities                      440,021            471,570
    -------------------------------             -------            -------
            Total liabilities                 2,791,929          3,157,164
            -----------------                 ---------          ---------
    Noncontrolling interest                      35,441             33,459
    -----------------------                      ------             ------
    Total stockholders' equity                3,271,556          3,200,823
    --------------------------                ---------          ---------
                                             $6,098,926          6,391,446
                                             ----------          ---------


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                                           As of or for the Three
    Segment Information                         Months Ended
                                            ----------------------
                                     December 31,       December 31,
    (Amounts in thousands)               2010               2009
                                    -------------      -------------
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    Net sales:
        Mohawk                           $667,230            738,716
        Dal-Tile                          317,354            329,985
        Unilin                            297,415            298,331
        Intersegment sales                (19,801)           (19,924)
    >>

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            Consolidated net sales     $1,262,198          1,347,108
            ----------------------     ----------          ---------
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    Operating income
     (loss):
        Mohawk                            $48,804             16,269
        Dal-Tile                           19,902             11,528
        Unilin                             20,864             25,331
        Corporate and
         eliminations                      (3,930)            (6,263)
    >>

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            Consolidated operating
             income                       $85,640             46,865
            ----------------------        -------             ------
    >>

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    Assets:
        Mohawk
        Dal-Tile
        Unilin
        Corporate and
         eliminations
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            Consolidated assets
            -------------------



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                                          As of or for the Twelve
    Segment Information                         Months Ended
                                           -----------------------
                                     December 31,       December 31,
    (Amounts in thousands)               2010               2009
                                    -------------      -------------
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    Net sales:
        Mohawk                          2,844,876          2,856,741
        Dal-Tile                        1,367,442          1,426,757
        Unilin                          1,188,274          1,128,315
        Intersegment sales                (81,520)           (67,789)
            Consolidated net sales      5,319,072          5,344,024
            ----------------------      ---------          ---------
    >>

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    Operating income
     (loss):
        Mohawk                            122,904           (125,965)
        Dal-Tile                           97,334             84,154
        Unilin                            114,298            105,953
        Corporate and
         eliminations                     (20,367)           (20,412)
    >>

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            Consolidated operating
             income                       314,169             43,730
            ----------------------        -------             ------
    >>

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    Assets:
        Mohawk                         $1,637,319          1,582,652
        Dal-Tile                        1,644,448          1,546,393
        Unilin                          2,475,049          2,598,182
        Corporate and
         eliminations                     342,110            664,219
                                                             -------
            Consolidated assets        $6,098,926          6,391,446
            -------------------        ----------          ---------


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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)
    >>

    <<
                                                  Three Months
                                                      Ended
                                                   ------------
                                                  December 31,
                                                       2009
                                                 -------------
    Net earnings                                        $19,779
    Unusual items:
      Business restructurings                            29,787
      Income taxes                                      (10,872)
        Adjusted net earnings                           $38,694
        ---------------------                           -------
    >>

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    Adjusted diluted earnings per share                   $0.56
    Weighted-average common shares
     outstanding - diluted                               68,682



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    Reconciliation of Net Sales to Adjusted Net Sales
    (Amounts in thousands)
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                                                Three Months Ended
                                                ------------------
                                        December 31,        December 31,
                                             2010                2009
                                       -------------       -------------
    Net sales                              $1,262,198           1,347,108
    Adjustments to net sales
      Commercial carpet tile reserve                -                   -
      Impact of shipping days                  95,145                   -
      Exchange rate                            18,557                   -
        Adjusted net sales                 $1,375,900           1,347,108
        ------------------                 ----------           ---------



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    <<
                                              Twelve Months Ended
                                              -------------------
                                        December 31,      December 31,
                                            2010              2009
                                       -------------     -------------
    Net sales                              5,319,072         5,344,024
    Adjustments to net sales
      Commercial carpet tile reserve               -           121,224
      Impact of shipping days                      -                 -
      Exchange rate                           36,588                 -
        Adjusted net sales                 5,355,660         5,465,248
        ------------------                 ---------         ---------


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    Reconciliation of Segment Net Sales to Adjusted
    Segment Net Sales
    (Amounts in thousands)
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    <<
                                               Three Months Ended
                                               ------------------
                                       December 31,        December 31,
    Mohawk segment                          2010                2009
                                      -------------       -------------
    Net sales                               $667,230             738,716
    Adjustments to net sales
      Impact of shipping days                 46,100                   -
        Adjusted net sales                  $713,330             738,716
        ------------------                  --------             -------
    >>

    <<
    Dal-Tile segment
    Net sales                               $317,354             329,985
    Adjustments to net sales
      Impact of shipping days                 26,445                   -
      Exchange rate                           (1,592)                  -
        Adjusted net sales                  $342,207             329,985
        ------------------                  --------             -------
    >>

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    Unilin segment
    Net sales                               $297,415             298,331
    Adjustments to net sales
      Impact of shipping days                 22,600                   -
      Exchange rate                           20,149                   -
        Adjusted net sales                  $340,164             298,331
        ------------------                  --------             -------
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    Reconciliation of Gross Profit
     to Adjusted Gross
     Profit
    (Amounts in thousands)
                                             Three Months Ended
                                             ------------------
                                       December 31,        December 31,
                                            2010                2009
                                      -------------       -------------
    Gross profit                            $341,666             341,694
    Adjustments to gross profit
      Business restructurings                      -              22,295
      Adjusted gross profit                 $341,666             363,989
      ---------------------                 --------             -------
       Adjusted gross margin as a
        percent of net sales                    27.1%               27.0%
    >>

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    Reconciliation of Selling,
     General and Administrative
     Expenses to Adjusted Selling,
      General and Administrative
      Expenses
    (Amounts in thousands)
                                             Three Months Ended
                                             ------------------
                                       December 31,        December 31,
                                            2010                2009
                                      -------------       -------------
    Selling, general and
     administrative expenses                $256,026             294,829
    Adjustments to selling,
     general and administrative
     expenses
      Business restructurings                      -               7,492
      Adjusted selling, general and
       administrative expenses              $256,026             302,321
      -----------------------------         --------             -------
      Adjusted selling, general and
       administrative expenses as a
       percent of net sales                     20.3%               22.4%
    >>

    <<
    Reconciliation of Operating
     Income to Adjusted
     Operating Income
    (Amounts in thousands)
                                             Three Months Ended
                                             ------------------
                                       December 31,        December 31,
                                            2010                2009
                                      -------------       -------------
    Operating income                         $85,640              46,865
    Adjustments to operating
     income
      Business restructurings                      -              29,787
      Adjusted operating income              $85,640              76,652
      -------------------------              -------              ------
       Adjusted operating margin as a
        percent of net sales                     6.8%                5.7%
    >>

    <<
     Reconciliation of Segment
      Operating Income to
     Adjusted Segment Operating
      Income
    (Amounts in thousands)
                                             Three Months Ended
                                             ------------------
                                       December 31,        December 31,
    Mohawk segment                          2010                2009
    --------------                    -------------       -------------
    Operating income                         $48,804              16,269
    Adjustments to operating
     income
      Business restructurings                      -              20,189
      Adjusted operating income              $48,804              36,458
      -------------------------              -------              ------
       Adjusted operating margin as a
        percent of net sales                     7.3%                4.9%
    >>

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    Dal-Tile segment
    ----------------
    Operating income                         $19,902              11,528
    Adjustments to operating
     income
        Add: Business restructurings               -               9,598
      Adjusted operating income              $19,902              21,126
      -------------------------              -------              ------
       Adjusted operating margin as a
        percent of segment net sales             6.3%                6.4%
    >>

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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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