Mohawk Industries, Inc. Announces Fourth Quarter Earnings



    
    - 2007 Fourth Quarter EPS $5.53 with one-time tax benefit

    - 2007 Fourth Quarter EPS $1.57 excluding one-time tax benefit

    - $189 million of debt paid down in quarter

    - $875 million cash flow from operations for year

    - 27% improvement in Unilin annual operating profit
    

    CALHOUN, Ga., Feb. 13 /CNW/ -- Mohawk Industries, Inc. (NYSE:   MHK) today
announced 2007 fourth quarter net earnings of $379.1 million and diluted
earnings per share (EPS) of $5.53, including a one-time tax benefit. Net
earnings and EPS for the quarter, excluding the tax benefit, were $107.5
million and $1.57, respectively.  In the fourth quarter of 2006, net earnings
and EPS were $129.5 million and $1.90 per share, respectively, and included a
pre-tax benefit of $4.4 million ($.04 per share) related to a refund from U.S.
Customs. As required under generally accepted accounting principles, a $271.6
million ($3.96 per share) tax benefit to earnings was recorded during the
quarter which resulted from an international restructuring.  Net sales for the
quarter were $1,807.3 million, a decrease of 5% from 2006.  Sales were
impacted favorably by the Columbia wood flooring acquisition, exchange rates
and growth in the Dal-Tile segment which partially offset other sales
declines. Cash flow from operations continued strong at $273 million and an
additional $189 million of debt was paid during the quarter.
    For the year 2007, earnings were $706.8 million and EPS were $10.32,
including the $271.6 million one-time tax benefit, a pre-tax benefit of $9.2
million ($.09 per share) related to a refund from U.S. customs and pre-tax
charge of $14.2 million ($.13 per share) for plant closing costs.  In 2006,
net earnings and EPS were $455.8 million and $6.70 per share, respectively,
and included a pre-tax benefit of $19.4 million ($.18 per share) related to a
refund from U.S. Customs.  Net sales for the year were $7,586.0 million, a
decrease of 4% from 2006.  Sales were favorably impacted by growth in the
Unilin segment, exchange rate gains and the acquisition of the Columbia wood
flooring business which partially offset other sales declines.  For the year
Unilin's results improved substantially with operating profit increasing 27%.
For the year we had cash flow from operations of $875 million and reduced our
debt by $534 million.
    In commenting on the fourth quarter and year results, Jeffrey S.
Lorberbaum, Chairman and CEO, stated: "During 2007 we endured a difficult U.S.
housing market and rising costs, while continuing the growth of our Unilin
segment.  Our management team in the U.S. handled the many challenges as the
flooring market continued its decline.   Our three segments are managing this
cycle with many initiatives to improve revenues, reduce costs, increase
prices, improve productivity, manage working capital and update our product
portfolio.
    The Mohawk segment has been impacted greater than our other segments with
sales down 13% in the quarter and a 7.2% operating margin.  The commercial
channel outperformed the residential channel and this is expected to continue
for the foreseeable future.  Raw material costs have escalated and we
announced a carpet price increase in December with further adjustments in
January based on the changing environment.  The announced increase should take
four to six months to fully implement.  We continue to right size the business
by reducing costs.  We are implementing many initiatives to improve efficiency
and yields which we expect will have a favorable long term impact.  Sales
focus has been increased in the commercial, multi-family and higher-end
residential channels which are expected to outperform other channels.  We have
discontinued production in our flat woven plant which will reduce sales about
$40 million this year.
    Our Dal-Tile sales were up 2% in the quarter compared to 2006 with
operating margins of 13.2%.  Dal-Tile is performing well with growth in the
commercial and higher-end residential channels.  We are implementing price
increases to pass through rising energy, logistics and other costs.  Earlier
investments in our sales infrastructure have enabled us to outperform the
market but are impacting our margins.  The Mexican market continues to expand
and Dal-Tile is growing our business by focusing on premium ceramic products.
During the year we closed a high cost ceramic facility in the U.S. and reduced
outside purchases of ceramic to increase utilization of our plants and control
inventory levels.  We have completed the introduction of a new exterior
collection of porcelain and stone tiles.  These products extend the interior
living areas to the outdoors in both residential and commercial applications.
    In the quarter the Unilin segment sales grew by 20% over last year with
an operating margin at 15.0%. Without Columbia, Unilin's sales growth was 7%
and the operating margin was 18.3%. In the local currency Unilin had a sales
decline of 3% without Columbia.  The fourth quarter 2007 sales comparison was
extremely difficult due to a 34% sales gain in the prior 2006 period.  Our
European laminate sales grew with the U.S. laminate and other sales declining
on a constant exchange rate basis.  Unilin is being impacted by the
contracting U.S. residential industry along with slowing European building and
remodeling sectors.  Unilin has experienced cost increases and has implemented
price increases in many product categories.  Lower industry volumes are also
reducing patent revenues.  We are adding infrastructure to expand our
penetration in Eastern Europe and Russia which are growing faster.  The
Columbia integration is progressing but volumes are being impacted by the
slowing industry. The wood plants are improving productivity, quality and
cost.  New products are being introduced to replace outside purchased product,
to fill in product voids and offer higher styled options.  The U.S. management
team is in place to execute our strategy and we are finalizing the European
wood team to maximize the Malaysian sales.
    In the first quarter, the company is expecting the U.S. flooring industry
to continue its decline and the European building and remodeling sector to
soften.  Material costs are rising even though the industry volumes are
falling.  We have reduced production in the plants in the first quarter due to
lower consumer demand and both our customers and Mohawk not building
inventories as we have in prior years.  With the current industry conditions,
we are reducing our infrastructure costs further and increasing prices which
will lag the rising costs.  Based on these factors, earnings guidance for the
first quarter of 2008 is from $.81 to $.90 EPS.
    The second quarter earnings are expected to improve and be more in line
with last year.  We anticipate sales and earnings will benefit from higher
seasonal sales rates, increases in selling prices, reduced infrastructure
costs and favorable foreign exchange.  Postponed flooring purchases by our
customers during past cycles have resulted in an industry rebound when the
economy improves.  2008 will also benefit from lower intangible asset
amortization, interest expense and tax rate.  We are focused on managing our
business through this cycle.
    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; litigation and
other risks identified in Mohawk's SEC reports and public announcements.
    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, Ralph Lauren, 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.
    There will be a conference call Thursday, February 14, 2008 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.
    A conference call replay will also be available until February 21, 2008
by dialing 1-800-642-1687 for US/local calls and 1-706-645-9291 for
International/Local calls and entering Conference ID # 30399711.



    MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

    
    Consolidated Statement
     of Earnings Data          Three Months Ended      Twelve Months Ended
    (Amounts in thousands, December 31, December 31, December 31, December 31,
     except per share data)     2007        2006          2007        2006
    

    
    Net sales                $1,807,268   1,898,594    7,586,018    7,905,842
    Cost of sales             1,318,005   1,344,516    5,471,234    5,674,531
      Gross profit              489,263     554,078    2,114,784    2,231,311
    Selling, general and
     administrative expenses    308,796     324,704    1,364,678    1,392,251
      Operating income          180,467     229,374      750,106      839,060
    Interest expense             36,234      42,584      154,469      173,697
    Other (income) expense,
     net                             (3)      2,108          674        8,488
    U.S. Customs refund               -      (4,370)      (9,154)     (19,436)
      Earnings before income
       taxes                    144,236     189,052      604,117      676,311
    Income taxes               (234,878)     59,561     (102,697)     220,478
      Net earnings             $379,114     129,491      706,814      455,833
    Basic earnings per share      $5.55        1.91        10.37         6.74
    Weighted-average shares
     outstanding                 68,333      67,733       68,172       67,674
    Diluted earnings per share    $5.53        1.90        10.32         6.70
    Weighted-average common
     and dilutive potential
     common shares outstanding   68,584      68,058       68,492       68,056
    



    
    Other Financial Information
     (Amounts in thousands)
    

    
    Net cash provided by
     operating activities      $273,240     235,804      875,077      782,045
    Depreciation &
     amortization               $81,573      72,278      306,437      274,952
    Capital expenditures        $65,244      41,721      163,076      165,769
    



    
    Consolidated Balance Sheet Data
    (Amounts in thousands)
                                          December 31, 2007 December 31, 2006
    ASSETS
    Current assets:
        Cash & cash equivalents                     $89,604            63,492
        Receivables                                 821,113           910,021
        Inventories                               1,276,568         1,225,874
        Prepaid expenses                            123,395           114,088
        Deferred income taxes                       139,040            99,251
            Total current assets                  2,449,720         2,412,726
    Property, plant and equipment, net            1,975,721         1,888,088
    Goodwill                                      2,797,339         2,699,639
    Intangible assets                             1,171,869         1,180,094
    Other assets                                    285,401            31,662
                                                 $8,680,050         8,212,209
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
        Current portion of long-term debt          $260,439           576,134
        Accounts payable and accrued expenses       996,061         1,053,444
            Total current liabilities             1,256,500         1,629,578
    Long-term debt, less current portion          2,021,395         2,207,547
    Deferred income taxes and other long-
     term liabilities                               694,798           659,821
            Total liabilities                     3,972,693         4,496,946
    Total stockholders' equity                    4,707,357         3,715,263
                                                 $8,680,050         8,212,209
    



    
                                As of or for the         As of or for the
                               Three Months Ended       Twelve Months Ended
    Segment Information    December 31, December 31, December 31, December 31,
    (Amounts in thousands)      2007        2006          2007        2006
    

    
    Net sales:
      Mohawk                  $967,922    1,115,689    4,205,740    4,742,060
      Dal-Tile                 468,165      459,754    1,937,733    1,941,819
      Unilin                   393,572      327,599    1,487,645    1,236,918
      Corporate and
       eliminations            (22,391)      (4,448)     (45,100)     (14,955)
        Consolidated net
         sales              $1,807,268    1,898,594    7,586,018    7,905,842
    

    
    Operating income:
      Mohawk                   $69,747      112,275      254,924      387,386
      Dal-Tile                  61,849       57,615      258,706      270,901
      Unilin                    58,990       64,669      272,260      214,093
      Corporate and
       eliminations            (10,119)      (5,185)     (35,784)     (33,320)
        Consolidated
         operating income     $180,467      229,374      750,106      839,060
    

    
    Assets:
      Mohawk                                          $2,302,527    2,488,856
      Dal-Tile                                         2,259,811    2,257,107
      Unilin                                           3,916,739    3,309,574
      Corporate and eliminations                         200,973      156,672
        Consolidated assets                           $8,680,050    8,212,209
    



    
    Reconciliation of Net Earnings to
     Adjusted Net Earnings
    (Amounts in thousands, except
     per share data)                  Three Months Ended  Twelve Months Ended
                                       December 31, 2007    December 31, 2007
    

    
    Earnings before income taxes                $144,236              604,117
         Income tax benefit                     (271,608)            (271,608)
         Income tax expense                       36,730              168,911
    Net earnings                                $379,114              706,814
    Less: Income tax benefit                    (271,608)            (271,608)
    Adjusted net earnings                       $107,506              435,206
    Basic earnings per share                       $5.55                10.37
    Income tax benefit per share - basic           $3.97                 3.98
    Adjusted earnings per share - basic            $1.58                 6.39
    Weighted-average common shares outstanding    68,333               68,172
    Diluted earnings per share                     $5.53                10.32
    Income tax benefit per share - diluted         $3.96                 3.97
    Adjusted earnings per share - diluted          $1.57                 6.35
    Weighted-average common and dilutive
     potential common shares outstanding          68,584               68,492
    



    
    Reconciliation of U.S. Customs
     refunds and Plant Closing to EPS  Three Months       Twelve Months
    (Amounts in thousands, except         Ended               Ended
     per share data)                   December 31,  December 31, December 31,
                                          2006           2007         2006
    

    
    U.S. Customs refund                 $(4,370)        (9,154)     (19,436)
         Income tax expense              (1,602)        (3,355)      (7,123)
    U.S. Customs refund, net of tax     $(2,768)        (5,799)     (12,313)
    

    
    Plant closings charge                    $-         14,200            -
         Income tax expense                   -          5,204            -
    Plant closing charge, net of tax         $-          8,996            -
    

    
    U.S. Customs refund per share -
     basic                               $(0.04)         (0.09)       (0.18)
    Plant closing charge per share -
     basic                                   $-           0.13            -
    Weighted-average common shares
     outstanding                         67,733         68,172       67,674
    

    
    U.S. Customs refund per share -
     diluted                             $(0.04)         (0.09)       (0.18)
    Plant closing charge per share -
     diluted                                 $-           0.13            -
    Weighted-average common and
     dilutive potential common shares
     outstanding                         68,058         68,492       68,056
    



    
    Reconciliation of Unilin Segment Net Sales
     and Operating Income to Adjusted Unilin            Three Months Ended
     Segment Net Sales and Operating Income         December 31,  December 31,
    (Amounts in thousands)                              2007          2006
    

    
      Unilin segment net sales                         $393,572       327,599
        Less: Columbia net sales                         44,270             -
    Adjusted Unilin segment net sales                   349,302       327,599
        Less: Exchange rate gain                         32,200             -
    Adjusted Unilin segment net sales for Columbia
     and exchange rate gain                            $317,102       327,599
      Unilin segment operating income                   $58,990        64,669
        Less: Columbia operating loss                   (5,044)             -
    Adjusted Unilin segment operating income for
     Columbia                                           $64,034        64,669
    


    
                                                       Three Months Ended
                                                    December 31,  December 31,
                                                        2006          2005
    

    
    Unilin proforma sales reconciliation:
      Net sales reported                               $327,599       168,814
      Unilin net sales prior to acquisition                   -        76,275
    Unilin proforma net sales                          $327,599       245,089
    

    
      Proforma net sales percentage change                   34%
    
    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,
Mohawk  Industries, Inc., +1-706-624-2695 Web Site: http://www.mohawkind.com


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