Mohawk Industries, Inc. Announces Fourth Quarter Earnings


    


    
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<p>CALHOUN, Ga., <span class="xn-chron">Feb. 25</span> /CNW/ -- Mohawk Industries, Inc. (NYSE:   MHK) today announced 2009 fourth quarter net earnings of <span class="xn-money">$20 million</span> and diluted earnings per share (EPS) of <span class="xn-money">$0.29</span> which included a restructuring charge of approximately <span class="xn-money">$30 million</span> primarily related to our distribution and manufacturing infrastructure. Excluding the restructuring charge, net earnings and EPS would have been <span class="xn-money">$39 million</span> and <span class="xn-money">$0.56</span> per share, respectively.  In the fourth quarter of 2008, the net loss was <span class="xn-money">$128 million</span> and loss per share was <span class="xn-money">$1.87</span>. Excluding the 2008 fourth quarter goodwill, intangible and restructuring charges, net loss and loss per share would have been <span class="xn-money">$5.1 million</span> and <span class="xn-money">$0.08</span> per share, respectively. Net sales for the 2009 fourth quarter were <span class="xn-money">$1,347 million</span>, a decrease of 9% (11% with a constant exchange rate) from 2008.  Strong working capital management, reductions in capital spending and active cost control enabled generation of free cash flow of <span class="xn-money">$222 million</span> for the quarter.</p>
<p/>
<p>For the full year of 2009, our net loss was <span class="xn-money">$5 million</span> or a net loss per share of <span class="xn-money">$0.08</span>. For the full year of 2008, net loss and loss per share were <span class="xn-money">$1,458 million</span> and <span class="xn-money">$21.32</span> per share, respectively. Net sales for 2009 were <span class="xn-money">$5,344 million</span> representing a 22% decrease from 2008. The sales decrease for both the quarter and the year in the U.S. and <span class="xn-location">Europe</span> is primarily attributable to continuing weak consumer discretionary spending, low home sales and soft business investment.</p>
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<p>In commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our fourth quarter earnings exceeded expectations due to the implementation of cost savings efforts, personnel reductions and plant consolidations. Our balance sheet is strong with over <span class="xn-money">$500 million</span> of cash and a net debt to total capital ratio of 26%. All our segments have reduced infrastructure and capacity and improved productivity. New products have been developed in all segments that will enhance our sales and market position.  In spite of the very difficult environment, we are strategically positioning our company for growth. Our geographic product expansion continues with enhanced distribution of ceramic tile in <span class="xn-location">Mexico</span>, laminate in <span class="xn-location">Russia</span> and wood flooring in Western <span class="xn-location">Europe</span>. Environmental sustainability is a priority and Newsweek recognized Mohawk as one of the top 15 companies in the consumer product category for our efforts."</p>
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<p>Mohawk segment sales were down 8% for the fourth quarter, better than the industry.  We are focused on streamlining the business and reducing costs in this segment. We have reorganized our commercial carpet manufacturing operations, consolidated our backing facilities, combined carpet and ceramic distribution warehousing and further reduced staffing levels. In the first quarter of 2010, we are implementing a price increase to recover raw material cost inflation. Our proprietary Smart Strand brand has achieved broad customer acceptance in the market place as a high value alternative to nylon and polyester due to its superior softness, enhanced performance and easy maintenance.</p>
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<p>Dal-Tile sales for the fourth quarter were down 20% as reported or 21% with a constant exchange rate. Dal-Tile continues to outperform the market with our broad product offering and market saturation. The commercial industry decline is impacting our ceramic business more significantly than other segments. Dal-Tile's leading design, superior quality and extensive distribution infrastructure distinguish us from the market.  We have introduced "Out Stand," a new technology for the commercial market, with a 60% recycled content, more durable surface, better stain resistance and anti-microbial protection. We have expanded our position in the Home Centers and the Mexican market with product innovation and superior service.  We have increased our operational efficiency and lowered our costs through process innovation and consolidation initiatives, including the closing of our <span class="xn-location">Dallas</span> ceramic tile manufacturing operation.</p>
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<p>Unilin sales increased 2% for the quarter as reported and decreased 7% on a constant exchange rate.  Our operating margin for the quarter was 9% and the EBITDA margin was approximately 22%.  Although business conditions are difficult for <span class="xn-location">Europe</span> and the U.S., we believe the category has reached the bottom of the cycle. It is our view that the European market could improve more rapidly than the U.S. since European consumers generally rely less on credit and housing has not contracted as severely. We are pursuing multiple strategies to maximize our laminate sales including, new product introductions at lower prices, additional technological innovation, geographic expansion and growth in the DIY channel. We plan to develop business through the local distribution we acquired in the U.K. in 2009, continued growth of our European wood flooring business with an expanded product offering and increased presence in <span class="xn-location">Russia</span> with local manufacturing. Unilin has implemented many cost reductions to lower SG&A, reduce manufacturing costs and manage inventory levels while further investing in product innovation.</p>
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<p>The first quarter is seasonally the slowest quarter of the year. The residential category should improve during the year while the commercial category still faces significant headwinds. We are implementing a price increase on carpet and wood products to offset rising material costs but the lag in implementation will negatively impact the first quarter. Interest costs this year will be higher primarily due to rates increasing from our new agreement. Our first quarter guidance for earnings is <span class="xn-money">$0.10-$0.20</span> per share excluding restructuring charges.</p>
<p/>
<p>The economy improved in the fourth quarter and continued growth is expected throughout 2010. After our seasonally slower first quarter, future periods should improve as we move through the year. The improvements we have implemented throughout our business and the realization of price increases will benefit us in future quarters. Our business is financially strong, committed to ongoing process improvement and maximizing our long term results.</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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<p>There will be a conference call <span class="xn-chron">Friday, February 26, 2010</span> at <span class="xn-chron">11:00 AM Eastern Time</span>.</p>
<p>The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 49764409.  A conference call replay will also be available until <span class="xn-chron">March 12,  2010</span> by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 49764409.</p>
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<p>MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES</p>
<p> </p>
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    Consolidated Statement of Operations          
    (Amounts in thousands, except per share data)
    
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                      Three Months Ended                 Year Ended
                 ----------------------------   ---------------------------- 
                  December 31,    December 31,    December 31,   December 31,
                      2009            2008            2009            2008   
                 ------------    ------------    ------------   ------------
    Net sales      $1,347,108       1,485,172       5,344,024      6,826,348
    Cost of sales   1,005,414       1,129,210       4,111,794      5,088,584
    ------------------------------------------------------------------------
     Gross profit     341,694         355,962       1,232,230      1,737,764
    Selling, general
     and
     administrative
     expenses         294,829         324,892       1,188,500      1,318,501
    Impairment of
     goodwill and
     other
     intangibles            -         124,485               -      1,543,397
    ------------------------------------------------------------------------
     Operating income
      (loss)           46,865        (93,415)          43,730    (1,124,134)
    Interest expense   34,527          30,001         127,031        127,050
    Other expense
     (income), net      1,509          18,352         (1,108)         26,982
    ------------------------------------------------------------------------
     Earnings (loss)
      before income
      taxes            10,829       (141,768)        (82,193)    (1,278,166)
    Income tax
     (benefit)
     expense          (8,950)        (14,153)        (76,694)        180,062
    ------------------------------------------------------------------------
     Net earnings
      (loss)          $19,779       (127,615)         (5,499)    (1,458,228)
     -----------------------------------------------------------------------
    Basic earnings
     (loss) per
     share              $0.29          (1.87)          (0.08)        (21.32)
    ------------------------------------------------------------------------
    Weighted-average
     common shares
     outstanding -
     basic             68,472          68,416          68,452         68,401
    ------------------------------------------------------------------------
    Diluted earnings
     (loss) per share   $0.29          (1.87)          (0.08)        (21.32)
    ------------------------------------------------------------------------
    Weighted-average
     common shares
     outstanding -
     diluted           68,682          68,416          68,452         68,401
    ------------------------------------------------------------------------
    
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    Other Financial Information
    (Amounts in thousands)
    
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    Net cash provided
     by operating
     activities      $259,611         199,107         672,205        576,086
    ------------------------------------------------------------------------
    Depreciation
     and
     amortization     $81,827          69,034         303,004        295,054
    ------------------------------------------------------------------------
    Capital
     expenditures     $37,644          62,502         108,925        217,824
    ------------------------------------------------------------------------
    
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    Consolidated Balance Sheet Data
    (Amounts in thousands)
                                                 December 31,   December 31,
                                                     2009           2008
                                                -------------   ------------
    ASSETS
    Current assets:
        Cash and cash equivalents                    $531,458         93,519
        Receivables, net                              673,931        696,284
        Inventories                                   892,981      1,168,272
        Prepaid expenses                              108,947        125,603
        Deferred income taxes and other
         current assets                               151,683        162,571
    ------------------------------------------------------------------------
            Total current assets                    2,359,000      2,246,249
    Property, plant and equipment,
     net                                            1,791,412      1,925,742
    Goodwill                                        1,411,128      1,399,434
    Intangible assets, net                            785,342        847,850
    Deferred income taxes and other
     non-current assets                                44,564         26,900
    ------------------------------------------------------------------------
                                                   $6,391,446      6,446,175
    ------------------------------------------------------------------------
    LIABILITIES AND EQUITY
    Current liabilities:
      Current portion of long-term
       debt                                           $52,907         94,785
      Accounts payable and accrued
       expenses                                       831,115        782,131
    ------------------------------------------------------------------------
            Total current liabilities                 884,022        876,916
    Long-term debt, less current
     portion                                        1,801,572      1,860,001
    Deferred income taxes and other
     long-term liabilities                            471,570        524,325
    ------------------------------------------------------------------------
            Total liabilities                       3,157,164      3,261,242
    ------------------------------------------------------------------------
    Total equity                                    3,234,282      3,184,933
    ------------------------------------------------------------------------
                                                   $6,391,446      6,446,175
    ------------------------------------------------------------------------
    
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    Segment Information  
    (Amounts in thousands)
                      As of or for the               As of or for the 
                     Three  Months Ended                Year Ended
                 ----------------------------   ---------------------------
                 December 31,    December 31,    December 31,   December 31,
                    2009             2008            2009           2008
                 ------------    ------------    ------------   ------------
    Net sales:
      Mohawk         $738,716         800,886       2,856,741      3,628,183
      Dal-Tile        329,985         412,780       1,426,757      1,815,373
      Unilin          298,331         292,143       1,128,315      1,465,208
      Intersegment
       sales         (19,924)        (20,637)        (67,789)       (82,416)
    ------------------------------------------------------------------------
        Consolidated
        net sales  $1,347,108       1,485,172       5,344,024      6,826,348
    ------------------------------------------------------------------------
    
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    Operating income
     (loss):
      Mohawk          $16,269        (48,610)       (125,965)      (216,152)
      Dal-Tile         11,528          41,438          84,154      (323,370)
      Unilin           25,331        (82,439)         105,953      (564,911)
       Corporate and
        eliminations  (6,263)         (3,804)        (20,412)       (19,701)
    ------------------------------------------------------------------------
         Consolidated
          operating
          income
          (loss)      $46,865        (93,415)          43,730    (1,124,134)
    ------------------------------------------------------------------------
    Assets:
      Mohawk                                       $1,582,652      1,876,696
      Dal-Tile                                      1,546,393      1,693,765
      Unilin                                        2,598,182      2,663,599
      Corporate and eliminations                      664,219        212,115
    ------------------------------------------------------------------------
         Consolidated assets                       $6,391,446      6,446,175
    ------------------------------------------------------------------------



    
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    Reconciliation of Net Sales to Adjusted Net Sales
    (Amounts in thousands)
    
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                                                    Three Months Ended
                                        -------------------------------------
                                        December 31, 2009   December 31, 2008
                                        -----------------   -----------------
    Net sales                                  $1,347,108           1,485,172
    Add: Exchange rate                           (27,400)                   -
    -------------------------------------------------------------------------
      Adjusted net sales                       $1,319,708           1,485,172
    -------------------------------------------------------------------------
    
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    Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
    (Amounts in thousands)
                                                  Three Months Ended
                                           ----------------------------------
                                             December 31,        December 31,
                                                2009                 2008
                                           --------------        ------------
    Dal-Tile segment
    -------------------------------------------------------------------------
    Net sales                                    $329,985             412,780
    Add: Exchange rate                             (1,848)                  -
    -------------------------------------------------------------------------
      Adjusted net sales                         $328,137             412,780
    -------------------------------------------------------------------------
    
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    Unilin segment
    -------------------------------------------------------------------------
    Net sales                                    $298,331             292,143
    Add: Exchange rate                           (25,552)                   -
    -------------------------------------------------------------------------
      Adjusted net sales                         $272,779             292,143
    -------------------------------------------------------------------------
    
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    Reconciliation of Net Earnings (Loss) to Adjusted Net Earnings (Loss)
    (Amounts in thousands, except per share data)
    
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                                                    Three Months Ended
                                             --------------------------------
                                             December 31,        December 31,
                                                 2009                2008
                                             ------------        ------------
    
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    -------------------------------------------------------------------------
    Net earnings (loss)                           $19,779           (127,615)
    Add: Impairment of goodwill and
     other intangibles                                  -             124,485
    Add: Business restructurings                   29,787              29,670
    Add: Income tax expense (benefit)            (10,872)            (31,672)
    -------------------------------------------------------------------------
      Adjusted net earnings (Loss)                $38,694             (5,132)
    -------------------------------------------------------------------------
    
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    Adjusted diluted earnings per share             $0.56              (0.08)
    Weighted-average common shares
     outstanding - diluted                         68,682              68,416
    
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<p> </p>
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    Reconciliation of Free Cash Flow
    (Amounts in thousands)
    
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                                       Three Months Ended      Year Ended
                                       ------------------   -----------------
                                       December 31, 2009    December 31, 2009
                                       ------------------   -----------------
    Net cash provided by operations              $259,611             672,205
    Less: Net cash used in investing             (37,644)           (114,849)
    Less: Acquisition, net of cash
     acquired                                           -               5,924
    -----------------------------------------------------   -----------------
      Free cash flow                             $221,967             563,280
    -----------------------------------------------------   -----------------
    
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    Reconciliation of Unilin Segment Operating Income to Unilin Segment 
    EBITDA
    (Amounts in thousands)
    
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                                             Three Months Ended
                                            -------------------
                                              December 31, 2009
    EBITDA reconciliation                                    
    -----------------------------------------------------------
    Operating income                                    $25,331
     Less:  Other expense                               (1,293)
     Add:   Depreciation and amortization                41,400
    -----------------------------------------------------------
    EBITDA                                              $65,438
    -----------------------------------------------------------
    EBITDA margin                                           22%
    
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    Reconciliation of Total Debt to Net Debt
    (Amounts in thousands)                                        As of
                                                            -----------------
                                                            December 31, 2009
                                                            -----------------
    Current portion of long-term debt                                 $52,907
    Long-term debt, less current portion                            1,801,572
    Less: Cash and cash equivalents                                 (531,458)
    -------------------------------------------------------------------------
      Net Debt                                                     $1,323,021
    -------------------------------------------------------------------------
    
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<p> </p>
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    Reconciliation of Total Debt and Equity to Total Capitalization
    (Amounts in thousands)                                         As of
                                                            -----------------
                                                            December 31, 2009
                                                            -----------------
    Current portion of long-term debt                                 $52,907
    Long-term debt, less current portion                            1,801,572
    Total equity                                                    3,234,282
    -------------------------------------------------------------------------
      Total Capitalization                                         $5,088,761
    -------------------------------------------------------------------------
    
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<p>  Net Debt to Capitalization                                          26%</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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