Mohawk Industries, Inc. Announces First Quarter Earnings


    




    
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<p>CALHOUN, Ga., <span class="xn-chron">April 29</span>  /CNW/ -- Mohawk Industries, Inc. (NYSE:   MHK) today announced 2010 first quarter net earnings of <span class="xn-money">$21 million</span> and diluted earnings per share (EPS) of <span class="xn-money">$0.30</span> which included a restructuring charge of approximately <span class="xn-money">$4 million</span> primarily related to manufacturing infrastructure. Excluding the restructuring charge, net earnings and EPS would have been <span class="xn-money">$24 million</span> and <span class="xn-money">$0.35</span> per share, respectively.  In the first quarter of 2009, the net loss was <span class="xn-money">$106 million</span> and loss per share was <span class="xn-money">$1.55</span>. Excluding the 2009 charges, net earnings and earnings per share would have been <span class="xn-money">$10 million</span> and <span class="xn-money">$0.14</span> per share, respectively. Net sales for the first quarter of 2010 were <span class="xn-money">$1,347 million</span> which was a 2% increase from 2009 adjusted net sales or a 1% increase with a constant exchange rate. In the quarter we had four more shipping days or about a 6% impact.  Our cash position and liquidity remain strong with over <span class="xn-money">$450 million</span> in cash and a capital structure that supports our business.</p>
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<p>In commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings were higher than expected as the economic cycle has bottomed and we had more favorable cost reductions and foreign exchange. Our first quarter sales were flat compared to the fourth quarter due to an improving residential business. During the first quarter, we have introduced innovative new products, enhanced manufacturing and distribution processes, reduced the cost structure and improved quality and productivity throughout the business. We purchased <span class="xn-money">$200 million</span> of our bonds in April that will save cash and improve earnings this year. Both rating agencies upgraded their outlook of Mohawk to stable, in recognition of our strong cash flow and the improving economy."</p>
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<p>Our Mohawk segment net sales were up 2% compared to adjusted sales last year.  The industry is lagging the overall economy as compressed housing prices reduced consumer remodeling. Consumer tests show our SmartStrand Sorona carpets are the softest products available in the market place and are favored by our consumers. Mohawk's Etchware, part of our bio-based SmartStrand carpet collection, was recently voted the number one carpet choice by retailers in 2010. Restructurings initiated in 2009 in both carpet and backing plants are substantially complete and are generating cost savings in the business. The 4-6% carpet price increase announced in December will be fully implemented in the second quarter. All our raw materials have increased further than we anticipated in the first quarter with commodity and transportation costs continuing to rise. Consistent with past changes in costs, we have recently announced an additional carpet price increase of 5-7% to recover the change in material costs.</p>
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<p>Our Dal-Tile sales were down 5% in the quarter due to the impact of new home construction and the commercial market in the ceramic business. Our market share remains strong and is about five times larger than our nearest competitor. Our Reveal Imaging technology creates random patterns only seen in nature. Using this technology, our new San Michele product offers the industry's most realistic natural stone visuals and was voted the Best Ceramic Tile by retailers this year. We have updated our stone tile offering with additional products at lower price points to satisfy today's value conscious customer. In the first quarter, the Mexican ceramic industry turned positive growing 3% and we continued to outpace the industry improving our market share. Process improvements in tile manufacturing have resulted in increased productivity and quality. New investments have increased capacity and reduced costs in color mixing, glaze and trim production.</p>
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<p>Unilin sales improved 14% as reported or 9% on a constant exchange rate.  Our operating margin for the quarter was 9% and the EBITDA margin was approximately 21%.   Our European business in the period performed better than the fourth quarter even with more severe weather affecting business and difficulty in some local economies. We saw improvements in some Western European markets as well as <span class="xn-location">Russia</span>. In the U.S., business conditions appear to have bottomed and our customers are more optimistic about the future. In <span class="xn-location">Europe</span>, sales of our two meter laminate planks are continuing to grow as a premium alternative. New products using our GenuEdge technology have the most natural wood looks ever introduced in the laminate flooring category. We are testing new printing technology for high end laminate products that do not use a printed paper layer like most products today. Demand for our board products continues to improve and is increasing capacity utilization of our plants. We have implemented price increases on boards during the first quarter but raw materials have escalated faster than our prices. We are continuing to raise board prices further in the second quarter which should improve margins in the future.</p>
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<p>The residential category is expected to improve as we proceed through the year while the commercial business is expected to remain difficult. This year we have already increased prices of carpet, wood flooring, boards and vinyl. We are presently implementing a second price increase in both carpet and board products to offset material inflation but the lag will negatively impact the second quarter. The future periods should improve as we come out of our seasonally slower first quarter. Our second quarter guidance for earnings is <span class="xn-money">$0.60-$0.68</span> per share which excludes the cost of purchasing our bonds.</p>
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<p>The infrastructure improvements, cost reductions and product innovations we have implemented will benefit us as we move through the year. We are well positioned to take advantage of the economic recovery which is just beginning. Our balance sheet remains strong and our capital structure has ample liquidity to allow financial flexibility. We are committed to deliver sustainable growth and increase the value of our company over the long term.</p>
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<p>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.</p>
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<p>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, <span class="xn-person">Ralph Lauren</span>, 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 over 250 local distribution locations.</p>
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    There will be a conference call Friday, April 30, 2010 at 11:00 AM Eastern
Time.

    
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<p>The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 68016043.  A conference call replay will also be available until <span class="xn-chron">May 14,  2010</span> by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 68016043.</p>
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<p>MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES</p>
<p> </p>
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    Consolidated Statement of Operations           Three Months Ended
                                                   ------------------
    (Amounts in thousands, except per share   April 3,         March 28,
     data)                                       2010             2009
                                             ---------        ----------
    
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<p> </p>
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    Net sales                                $1,347,236         1,208,339
    Cost of sales                             1,005,990         1,054,650
    ---------------------------------------   ---------         ---------
        Gross profit                            341,246           153,689
    Selling, general and administrative
     expenses                                   287,625           299,573
    -----------------------------------         -------           -------
    Operating income (loss)                      53,621          (145,884)
    Interest expense                             33,908            30,184
    Other (income) expense, net                  (3,799)            2,615
    ---------------------------                  ------             -----
        Earnings (loss) before income taxes      23,512          (178,683)
    Income tax expense (benefit)                  2,974           (72,796)
        Net earnings (loss)                     $20,538          (105,887)
        -------------------                     -------          --------
    Basic earnings (loss) per share               $0.30             (1.55)
    -------------------------------               -----             -----
    Weighted-average common shares
     outstanding - basic                         68,523            68,433
    ------------------------------               ------            ------
    Diluted earnings (loss) per share             $0.30             (1.55)
    ---------------------------------             -----             -----
    Weighted-average common shares
     outstanding - diluted                       68,730            68,433
    ------------------------------               ------            ------
    
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    Other Financial Information
    (Amounts in thousands)
    Net cash (used in) provided by
     operating activities                      $(46,192)           37,919
    ------------------------------             --------            ------
    Depreciation and amortization               $76,798            67,680
    -----------------------------               -------            ------
    Capital expenditures                        $23,309            27,093
    --------------------                        -------            ------





    
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<p> </p>
<p>Consolidated Balance Sheet Data</p>
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    (Amounts in thousands)
                                                  April 3,         March 28,
                                                     2010             2009
                                                 ---------        ----------
    ASSETS
    Current assets:
        Cash and cash equivalents                  $452,335           136,552
        Receivables, net                            788,124           784,677
        Inventories                                 932,785           985,463
        Prepaid expenses                            109,968           128,413
        Deferred income taxes and other current
         assets                                     160,246           191,516
        ---------------------------------------     -------           -------
            Total current assets                  2,443,458         2,226,621
    Property, plant and equipment, net            1,719,051         1,867,072
    Goodwill                                      1,377,518         1,368,552
    Intangible assets, net                          736,353           799,927
    Deferred income taxes and other non-
     current assets                                  42,520            25,464
    ------------------------------------             ------            ------
                                                 $6,318,900         6,287,636
                                                 ----------         ---------
    LIABILITIES AND EQUITY
    Current liabilities:
      Current portion of long-term debt            $551,426           137,501
      Accounts payable and accrued expenses         859,690           828,397
      -------------------------------------         -------           -------
            Total current liabilities             1,411,116           965,898
    Long-term debt, less current portion          1,303,437         1,843,612
    Deferred income taxes and other long-
     term liabilities                               452,858           486,704
    -------------------------------------           -------           -------
            Total liabilities                     3,167,411         3,296,214
            -----------------
    Total equity                                  3,151,489         2,991,422
    ------------                                  ---------         ---------
                                                 $6,318,900         6,287,636
                                                 ----------         ---------




    
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    Segment Information As of or for the Three Months Ended
                        -----------------------------------
    
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                                                  April 3,    March 28,
    (Amounts in thousands)                           2010        2009
                                                 ---------   ----------
    
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    Net sales:
        Mohawk                                     $716,583      594,331
        Dal-Tile                                    341,396      358,478
        Unilin                                      305,880      268,466
        Intersegment sales                          (16,623)     (12,936)
            Consolidated net sales               $1,347,236    1,208,339
            ----------------------               ----------    ---------
    
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    Operating income (loss):
        Mohawk                                      $16,628     (179,055)
        Dal-Tile                                     15,395       21,129
        Unilin                                       26,458       14,552
        Corporate and eliminations                   (4,860)      (2,510)
    
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            Consolidated operating income (loss)    $53,621     (145,884)
            ------------------------------------    -------     --------
    
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    Assets:
        Mohawk                                   $1,673,264    1,773,447
        Dal-Tile                                  1,568,605    1,662,595
        Unilin                                    2,525,731    2,577,698
        Corporate and eliminations                  551,300      273,896
                                                                 -------
            Consolidated assets                  $6,318,900    6,287,636
            -------------------                  ----------    ---------



    
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    Reconciliation of Net Sales to Adjusted Net Sales
    (Amounts in thousands)
    
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                                                     Three Months Ended
                                                     ------------------
                                                                   March 28,
                                             April 3, 2010            2009
                                             -------------        ----------
    
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    Net sales                                    $1,347,236         1,208,339
    Add: Commercial carpet tile reserve                   -           110,224
    Less: Exchange rate                              16,411                 -
    Less:  Impact of four additional
     shipping days                                   88,638                 -
      Adjusted net sales                         $1,242,187         1,318,563
      ------------------                         ----------         ---------




    
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    Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
    (Amounts in thousands)
    
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                                                     Three Months Ended
                                                     ------------------
                                                                   March 28,
                                             April 3, 2010            2009
                                             -------------        ----------
    Mohawk segment
    
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    Net sales                                      $716,583           594,331
    Add: Commercial carpet tile reserve                   -           110,224
      Adjusted net sales                           $716,583           704,555
      ------------------                           --------           -------
    
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    Unilin segment
    Net sales                                      $305,880           268,466
    Less: Exchange rate                              12,349                 -
      Adjusted net sales                           $293,531           268,466
      ------------------                           --------           -------



    
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    Reconciliation of Net Earnings (Loss)to Adjusted Net Earnings and
    Adjusted Diluted Earnings Per Share
    (Amounts in thousands, except per share data)
    
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                                                      Three Months Ended
                                                      ------------------
                                                                   March 28,
                                              April 3, 2010           2009
                                              -------------       ----------
    
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    Net earnings (loss)                              $20,538         (105,887)
    Unusual charges:
    Add: Commercial carpet tile reserve                    -          122,492
    Add: FIFO Inventory                                    -           61,794
    Add: Business restructurings                       4,004            3,857
    Add: Income taxes                                   (469)         (72,435)
      Adjusted net earnings                          $24,073            9,821
      ---------------------                          -------            -----
    
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    Adjusted diluted earnings per share                $0.35             0.14
    Weighted-average common shares
     outstanding - diluted                            68,730           68,550


    
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<p> </p>
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    Reconciliation of Unilin Segment Operating Income to Unilin Segment
    EBITDA
    (Amounts in thousands)
    
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                                                Three Months
                                                    Ended
                                                 ------------
    EBITDA reconciliation                      April 3, 2010
    ---------------------                      -------------
    Operating income                                  $26,458
        Add:  Other income                                393
        Add:  Depreciation and amortization            37,748
        -----------------------------------            ------
     EBITDA                                           $64,599
     ------                                           -------
     EBITDA margin                                         21%




    
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    Reconciliation of Total Debt to Net Debt
    (Amounts in thousands)
    
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                                                Three Months
                                                    Ended
                                                 ------------
                                               April 3, 2010
                                               -------------
    Current portion of long-term debt                $551,426
    Long-term debt, less current portion            1,303,437
    Less: Cash and cash equivalents                   452,335
      Net Debt                                     $1,402,528
      --------                                     ----------


    
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    Reconciliation of Total Debt and Equity to Total Capitalization
    (Amounts in thousands)
    
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                                                Three Months
                                                    Ended
                                                 ------------
                                               April 3, 2010
                                               -------------
    Current portion of long-term debt                $551,426
    Long-term debt, less current portion            1,303,437
    Total equity                                    3,151,489
    ------------
      Total Capitalization                         $5,006,352
      --------------------                         ----------
    
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      Net Debt to Capitalization                           28%



    
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    Reconciliation of Operating Income to Adjusted EBITDA
    (Amounts in thousands)                                         Trailing
                                                                    Twelve
    Adjusted EBITDA                                                 Months
     reconciliation                     Three Months Ended           Ended  
                              ------------------------------------ ---------
                               June 27, Sept. 29, Dec. 31, April 3, April 3,
                                2009     2009      2009     2010    2010
                                ----     ----      ----     ----    ----
    Operating income          $74,678   68,071    46,865   53,621  243,235
       Add:  Other income 
        (expense)               4,622      610    (1,509)   3,799    7,522
       Add: Depreciation and
        amortization           77,062   76,435    81,827   76,798  312,122
       Add: Commercial carpet 
        Tile reserve                -        -    11,000        -   11,000
       Add: Business 
        restructurings         12,060   16,019    29,787    4,004   61,870
     Adjusted EBITDA          168,422  161,135   167,970  138,222  635,749
     ---------------         --------  -------   -------  -------   -------
      Net Debt to Adjusted
       EBITDA                     2.2
    
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<p> </p>
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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.








    

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


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