Mohawk Industries, Inc. Announces Second Quarter Earnings



    CALHOUN, Ga., July 21 /CNW/ -- Mohawk Industries, Inc. (NYSE:   MHK) today
announced 2008 second quarter net earnings of $89 million and diluted earnings
per share (EPS) of $1.29 (both 23% below last year).  In the second quarter of
2007, net earnings and EPS were $115 million and $1.68 per share,
respectively.  Net sales for the quarter were $1,840 million, a decrease of 7%
from 2007.  The company generated cash flow from operations of $267 million. 
In addition, $183 million of debt was paid down improving the company's debt
to capital ratio to 30%.
    For the first six months of 2008, net earnings were $154 million and EPS
was $2.25 (both 25% below last year).  Net earnings and EPS were $206 million
and $3.01 per share, respectively, in the first six months of 2007.  Net sales
for the first six months of 2008 were $3,578 million representing a 7%
decrease from 2007.  The sales decreases for both the quarter and the year to
date are attributable to slowing U.S. residential housing and European demand.
    In commenting on the second quarter results, Jeffery S. Lorberbaum,
Chairman and CEO stated, "Our results for the second quarter were impacted by
the slowing economies in the U.S. and Europe and rapidly increasing commodity
costs.  Declining new U.S. home construction and residential remodeling,
slowing European demand and rising raw material and energy costs have
contributed to the flooring industry cyclical decline.  The rapidly increasing
costs are impacting our margins even as we raise selling prices to offset
these costs.
    Our management team remains focused on improving our market position,
increasing quality, introducing innovative products and providing excellent
customer service.  The team is relentlessly pursuing cost control, working
capital management, and process improvement to manage the cycle.  We believe
these efforts will better position our company for growth when the market
improves.
    The Mohawk segment performance is under pressure with sales declining 13%
below last year.  The commercial and rug products are performing better while
the hard surface and the cushion products are declining more than residential
carpet.  Higher energy, raw material and freight costs are causing dramatic
cost inflation.  We have announced three carpet price increases since December
to offset rising costs.  We are increasing our commercial carpet tile offering
with new value, performance and stylized options in our brands.  We have re-
engineered processes and improved manufacturing productivity, quality and
yields.
    Dal-Tile sales are down 5% during the quarter and are doing well in a
very difficult environment.  Commercial and Mexican sales growth continue to
buffer the impact of the declining U.S. residential industry.  In July, we
purchased a stone center in North Carolina to continue expanding our national
presence. The major factors affecting margins are rapidly rising energy and
freight costs along with customers trading down.  In the second quarter we
have increased product prices and energy surcharges to offset rising costs and
more may be required in the future.  Many cost initiatives are being executed
to improve labor productivity, control expenses and reduce energy consumption.
Freight costs are being reduced by utilizing lower cost transportation modes,
increasing weight per load and making more direct shipments.
    Unilin sales were up 13% over last year and down 7% on a constant
exchange rate basis excluding the Columbia acquisition.  Sales declines were
experienced in the U.S. and much of Western Europe, with Russia and Eastern
Europe growing.  Sales in the U.K. and Spain were most impacted by the slowing
European industry.  Oil based material and energy inflation continues to
increase the cost of most products.  A 5% - 6% price increase has been
announced for the U.S. laminate business during the third quarter.  The new
laminate production in the U.S. will be operating in the third quarter and
will reduce our costs on higher end products presently imported from Europe.
We have many cost initiatives to reduce energy consumption, modify processes
and lower material cost.
    The wood operations continue to operate at a loss.  New products are
being launched in the third quarter to reposition both the Columbia and Mohawk
brands in the market.  We have made significant improvements in manufacturing
processes, reducing labor, improving quality and material yields, but negative
overhead absorption is offsetting the progress.  We expect our new product
strategy will improve our wood sales and product mix."
    The third quarter outlook is challenging given the environment.  Slow
demand with higher material and energy costs will continue to compress our
margins.  As a result, we are raising product prices and transportation fees
on most products.  We will adapt our strategy to the changing environment.
Based on these factors our guidance for the third quarter of 2008 is $1.06 to
$1.15.  We have many focused initiatives under way to reduce cost, minimize
working capital, improve service and bring new products to market.  We remain
convinced Mohawk will be a stronger company as we come out of 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 Tuesday, July 22, 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.  Conference ID # 54459485.  A
conference call replay will also be available until Monday, July 28, 2008 by
dialing 1-800-642-1687 for US/local calls and 1-706-645-9291 for
International/Local calls and entering Conference ID # 54459485.



    
    MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
    

    
    Consolidated Statement of
     Earnings Data                 Three Months Ended      Six Months Ended
    (Amounts in thousands,         June 28,   June 30,    June 28,   June 30,
     except per share data)          2008       2007        2008       2007
    

    
    Net sales                    $1,840,045  1,977,210   3,578,142  3,841,073
    Cost of sales                 1,357,153  1,420,512   2,635,411  2,760,935
        Gross profit                482,892    556,698     942,731  1,080,138
    Selling, general and
     administrative expenses        336,829    358,450     672,350    711,313
        Operating income            146,063    198,248     270,381    368,825
    Interest expense                 32,742     39,138      66,509     80,717
    Other (income) expense, net       1,650     (2,783)      4,429      1,476
    U.S. Customs refund                   -          -           -     (9,154)
        Earnings before income
         taxes                      111,671    161,893     199,443    295,786
    Income taxes                     22,893     46,625      45,275     90,140
        Net earnings                $88,778    115,268     154,168    205,646
    Basic earnings per share          $1.30       1.69        2.25       3.02
    Weighted-average shares
     outstanding                     68,403     68,167      68,389     68,037
    Diluted earnings per share        $1.29       1.68        2.25       3.01
    Weighted-average common and
     dilutive potential common
     shares outstanding              68,617     68,533      68,598     68,394
    

    
    Other Financial Information
    (Amounts in thousands)
    Net cash provided by
     operating activities          $266,871    225,685     186,692    314,452
    Depreciation & amortization     $75,052     75,382     148,308    149,228
    Capital expenditures            $49,839     35,428     105,810     60,384
    

    
    Consolidated Balance Sheet Data
    (Amounts in thousands)
                                                          June 28,   June 30,
                                                            2008       2007
    ASSETS
    Current assets:
        Cash & cash equivalents                            $64,038     57,763
        Receivables                                        982,378    998,023
        Inventories                                      1,250,300  1,229,326
        Prepaid expenses                                   131,218    121,625
        Deferred income taxes                              138,332    173,252
            Total current assets                         2,566,266  2,579,989
    Property, plant and equipment, net                   2,018,813  1,858,282
    Goodwill                                             2,876,724  2,719,724
    Intangible assets                                    1,190,157  1,153,761
    Deferred income taxes and other assets                 307,572     27,972
                                                        $8,959,532  8,339,728
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
        Current portion of long-term debt                 $290,392    364,114
        Accounts payable and accrued expenses              965,743  1,061,157
            Total current liabilities                    1,256,135  1,425,271
    Long-term debt, less current portion                 1,896,642  2,137,349
    Deferred income taxes and other long-term
     liabilities                                           763,858    768,278
            Total liabilities                            3,916,635  4,330,898
    Total stockholders' equity                           5,042,897  4,008,830
                                                        $8,959,532  8,339,728
    

    
    Segment Information          As of or for the Three  As of or for the Six
                                      Months Ended           Months Ended
    (Amounts in thousands)         June 28,   June 30,    June 28,   June 30,
                                     2008       2007        2008       2007
    

    
    Net sales:
        Mohawk                     $968,426  1,113,412   1,873,470  2,161,073
        Dal-Tile                    481,511    505,187     930,562    972,148
        Unilin                      411,525    363,531     815,280    715,627
        Corporate and eliminations  (21,417)    (4,920)    (41,170)    (7,775)
            Consolidated net
             sales               $1,840,045  1,977,210   3,578,142  3,841,073
    

    
    Operating income:
        Mohawk                      $34,593     59,730      56,834    108,175
        Dal-Tile                     58,169     69,353     115,110    133,748
        Unilin                       60,121     81,737     110,077    142,236
        Corporate and eliminations   (6,820)   (12,572)    (11,640)   (15,334)
            Consolidated
             operating income      $146,063    198,248     270,381    368,825
    

    
    Assets:
        Mohawk                                          $2,400,869  2,474,276
        Dal-Tile                                         2,259,255  2,297,745
        Unilin                                           4,109,314  3,337,870
        Corporate and eliminations                         190,094    229,837
            Consolidated assets                         $8,959,532  8,339,728
    



    
    Reconciliation of Debt to Capital
    

    
                                                                     As of
    (Amounts in thousands)                                       June 28, 2008
      Outstanding Debt (a)                                         $2,187,034
      Total stockholders' equity                                    5,042,897
            Total capital (b)                                      $7,229,931
    

    
            Debt to capital percentage (a)/(b)                             30%
    


    
    Reconciliation of
     Operating Income to
     EBITDA
                                                              Trailing Four
                                Three Months Ended            Quarters Ended
    (Amounts in         September December March 29, June 28,    June 28,
    thousands)          29, 2007  31, 2007   2008     2008         2008
    

    
    EBITDA reconciliation:
       Operating income  200,814   180,467  124,318  146,063      651,662
       Other (expense)/
        income               799         3   (2,779)  (1,650)      (3,627)
       Depreciation and
        amortization      75,636    81,573   73,256   75,052      305,517
          Reconciliation
          of debt to
          EBITDA         277,249   262,043  194,795  219,465 (c)  953,552
    


    
    Reconciliation of Debt to EBITDA
    

    
            Debt to EBITDA (a)/(c)                       2.3
    


    
    Reconciliation of Unilin Segment Net
     Sales to Adjusted Unilin Segment
     Net Sales
    

    
                                               Three Months Ended
    (Amounts in thousands)                       June 28, 2008
        Unilin segment net sales                    $411,525
          Less: Exchange rate gain                    41,000
        Adjusted Unilin segment net sales            370,525
          Less: Wood acquisition net sales            33,863
    Adjusted Unilin segment net sales               $336,662
    
    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 of
Mohawk Industries, Inc., +1-706-624-2695 Web Site: http://www.mohawkind.com


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