MEDIA RELEASE PR42058
Mohawk Industries, Inc. Announces Third Quarter Earnings
CALHOUN, Ga., Nov. 5, 2010 /PRNewswire-AsiaNet/ --
Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 third quarter net earnings of $51 million and
diluted earnings per share (EPS) of $0.74 which included unusual items that were offsetting. For the third
quarter of 2009, the net earnings were $34 million and EPS was $0.50. Excluding the 2009 unusual items, net
earnings and EPS would have been $44 million and $0.64 per share. Net sales for the third quarter of 2010
were $1.3 billion which was a decrease of 5.3% versus 2009 net sales or 3.8% decrease with a constant
exchange rate. We have a strong financial position with free cash flow of $87 million in the quarter and an
improving net debt to EBITDA ratio of 2.0.
For the first nine months of 2010, our net earnings were $140 million and EPS was $2.03. Excluding
unusual items, net earnings would have been $128 million and EPS would have been $1.86. In the first nine
months of 2009, our net loss was $25 million and loss per share was $0.37. Excluding the 2009 unusual items,
net earnings and EPS would have been $108 million and $1.57. Net sales for the first nine months of 2010
were $4.1 billion representing a 1.5% increase from 2009. On a constant exchange rate, constant days and
excluding 2009 sales adjustments, net sales decreased 2.9%.
In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our
earnings were in line with our expectations though the industry slowdown continued into the third quarter. All
of our businesses were impacted by soft industry conditions during the quarter. In response, we reduced our
operating costs, implemented product promotions to drive sales, introduced new products to satisfy market
changes and continued our international expansion strategies in Mexico, China and Russia. Our cost
containment and restructuring initiatives resulted in the lowest SG&A expense in over twelve quarters.
Liquidity remains strong with over $850 million available of which approximately $300 million will be used to
retire our 2011 bonds."
Our Mohawk segment made progress improving operating margins excluding restructuring charges, by
34%, however, some of the progress came at the expense of lower sales which were down 6%. The margins
were benefited by price increases, product mix and productivity improvements. To improve our position, we
have adjusted prices on specific products, initiated selected promotions and introduced additional polyester
products which are gaining share. We are seeing higher demand levels in our commercial business as the
remodeling markets improve. Commercial carpet tile is growing faster and we are expanding our tile
assortment with new styling and broader price points. We are reducing our manufacturing and administrative
costs, increasing service levels, improving quality and introducing innovative products.
Our Dal-Tile segment net sales were down 5% due to continued softness in the ceramic markets and the
impact of lost production at our Monterrey, Mexico facility. We have announced a price increase for selective
products to cover increased transportation costs beginning in November. We introduced more new products
primarily focused on the residential remodeling with enhanced merchandising to maximize sales and minimize
disruptions from our lost production. Commercial ceramic sales appear to have reached a cyclical bottom and
the health care, education and institutional channels are outperforming. Our manufacturing team continues to
implement cost savings by increasing production speeds, improving productivity and utilizing more local
materials. A hurricane in July caused a flash flood which completely shut down our Monterrey, Mexico ceramic
facility and it is currently operating at normal levels. The insurance claim for the damage and disruption was
resolved during the quarter with proceeds compensating for damage, repair, lost sales and margin impact.
During the period our ceramic investment in China was completed and we have begun developing new
products for both the Chinese and American markets. A new site near Mexico City has been selected for a tile
plant which will begin production of low to medium priced tile in 2012.
Our Unilin segment net sales decreased 2% as reported, but increased 6% using a constant exchange rate.
Business in Europe improved while conditions remained difficult in the U.S. markets. Margins declined in the
quarter as prices lagged material costs, U.S. sales slowed and maintenance expense increased. Our
European sales improved in most markets and products except for roofing systems. Conditions in the U.S.
remain weak and we are stimulating demand with promotions. We are broadening our distribution with Home
Centers and National accounts by providing fashionable products. In Russia we are expanding our laminate
customer base to support the new flooring plant which should be operational in mid 2011. Sales of our
insulation boards are rising and we are increasing production to satisfy demand. The plants are improving
productivity and reducing indirect expenses.
The third quarter sales demand and raw material trends are expected to continue through the fourth quarter.
Next year, we anticipate increased sales growth, higher selling prices and margin improvement as we gain
leverage from the changes we have implemented in the business. Our fourth quarter guidance for earnings is
$0.53 to $0.63 per share. The fourth quarter of this year includes four fewer days in the period compared to
last year.
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 Friday, November 5, 2010 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 # 15970034. A conference call replay will also be available until November 19, 2010 by dialing
800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID #
15970034.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations Three Months Ended
------------------
(Amounts in thousands, except per October 2, September
share data) 2010 26, 2009
---------- ---------
Net sales $1,309,552 1,382,565
Cost of sales 964,620 1,013,106
--------------------------------- ------- ---------
Gross profit 344,932 369,459
Selling, general and
administrative expenses 259,750 301,388
------------------------ ------- -------
Operating income (loss) 85,182 68,071
Interest expense 30,046 32,318
Other income, net (3,471) (610)
----------------- ------ ----
Earnings (loss) before income
taxes 58,607 36,363
Income tax expense (benefit) 7,513 2,015
Net earnings (loss) $51,094 34,348
------------------- ------- ------
Basic earnings (loss) per share $0.74 0.50
------------------------------- ----- ----
Weighted-average common shares
outstanding - basic 68,593 68,456
------------------------------ ------ ------
Diluted earnings (loss) per share $0.74 0.50
--------------------------------- ----- ----
Weighted-average common shares
outstanding - diluted 68,773 68,653
------------------------------ ------ ------
Other Financial Information
(Amounts in thousands)
Net cash provided by operating
activities $121,417 143,048
------------------------------ -------- -------
Depreciation and amortization $72,956 76,435
----------------------------- ------- ------
Capital expenditures $39,101 18,358
-------------------- ------- ------
Consolidated Balance Sheet Data
(Amounts in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Receivables, net
Inventories
Prepaid expenses
Deferred income taxes and other
current assets
-------------------------------
Total current assets
Property, plant and equipment,
net
Goodwill
Intangible assets, net
Deferred income taxes and other
non-current assets
-------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term
debt
Accounts payable and accrued
expenses
----------------------------
Total current liabilities
Long-term debt, less current
portion
Deferred income taxes and other
long-term liabilities
-------------------------------
Total liabilities
-----------------
Total equity
------------
Consolidated Statement of Operations Nine Months Ended
-----------------
(Amounts in thousands, except per October 2, September
share data) 2010 26, 2009
--------- ---------
Net sales 4,056,874 3,996,916
Cost of sales 2,995,940 3,106,380
--------------------------------- --------- ---------
Gross profit 1,060,934 890,536
Selling, general and
administrative expenses 832,405 893,671
------------------------ ------- -------
Operating income (loss) 228,529 (3,135)
Interest expense 102,985 92,504
Other income, net (5,842) (2,617)
----------------- ------ ------
Earnings (loss) before income
taxes 131,386 (93,022)
Income tax expense (benefit) (8,327) (67,744)
Net earnings (loss) 139,713 (25,278)
------------------- ------- -------
Basic earnings (loss) per share 2.04 (0.37)
------------------------------- ---- -----
Weighted-average common shares
outstanding - basic 68,567 68,446
------------------------------ ------ ------
Diluted earnings (loss) per share 2.03 (0.37)
--------------------------------- ---- -----
Weighted-average common shares
outstanding - diluted 68,764 68,446
------------------------------ ------ ------
Other Financial Information
(Amounts in thousands)
Net cash provided by operating
activities 210,394 412,720
------------------------------ ------- -------
Depreciation and amortization 222,251 221,177
----------------------------- ------- -------
Capital expenditures 86,240 71,281
-------------------- ------ ------
Consolidated Balance Sheet Data
(Amounts in thousands)
October 2, September
2010 26, 2009
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $365,835 306,145
Receivables, net 697,491 832,105
Inventories 996,271 939,478
Prepaid expenses 87,208 117,367
Deferred income taxes and other
current assets 147,397 164,016
-------------------------------
Total current assets 2,294,202 2,359,111
Property, plant and equipment,
net 1,680,541 1,841,779
Goodwill 1,389,057 1,424,391
Intangible assets, net 710,934 817,586
Deferred income taxes and other
non-current assets 117,176 45,588
------------------------------- ------- ------
$6,191,910 6,488,455
---------- ---------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term
debt $351,486 53,163
Accounts payable and accrued
expenses 779,825 876,579
---------------------------- ------- -------
Total current liabilities 1,131,311 929,742
Long-term debt, less current
portion 1,303,151 1,802,138
Deferred income taxes and other
long-term liabilities 441,948 510,486
------------------------------- ------- -------
Total liabilities 2,876,410 3,242,366
-----------------
Total equity 3,315,500 3,246,089
------------ --------- ---------
$6,191,910 6,488,455
---------- ---------
As of or for the Three
Segment Information Months Ended
----------------------
October 2, September
(Amounts in thousands) 2010 26, 2009
---------- ---------
Net sales:
Mohawk $713,481 755,904
Dal-Tile 345,074 361,590
Unilin 276,594 281,803
Intersegment sales (25,597) (16,732)
Consolidated net sales $1,309,552 1,382,565
---------------------- ---------- ---------
Operating income (loss):
Mohawk $31,127 16,261
Dal-Tile 33,913 21,166
Unilin 24,640 34,929
Corporate and eliminations (4,498) (4,285)
Consolidated operating income
(loss) $85,182 68,071
----------------------------- ------- ------
Assets:
Mohawk
Dal-Tile
Unilin
Corporate and eliminations
Consolidated assets
-------------------
As of or for the Nine
Segment Information Months Ended
---------------------
October 2, September
(Amounts in thousands) 2010 26, 2009
---------- ---------
Net sales:
Mohawk 2,177,646 2,118,025
Dal-Tile 1,050,088 1,096,772
Unilin 890,859 829,984
Intersegment sales (61,719) (47,865)
Consolidated net sales 4,056,874 3,996,916
---------------------- --------- ---------
Operating income (loss):
Mohawk 74,100 (142,234)
Dal-Tile 77,432 72,626
Unilin 93,434 80,622
Corporate and eliminations (16,437) (14,149)
Consolidated operating income
(loss) 228,529 (3,135)
----------------------------- ------- ------
Assets:
Mohawk $1,652,737 1,697,334
Dal-Tile 1,677,957 1,622,502
Unilin 2,542,233 2,754,233
Corporate and eliminations 318,983 414,386
-------
Consolidated assets $6,191,910 6,488,455
------------------- ---------- ---------
Reconciliation of Net Earnings (Loss) to Adjusted Net Earnings and
Adjusted Diluted Earnings Per Share
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
------------------ -----------------
October 2, September October 2, September
2010 26, 2009 2010 26, 2009
---------- --------- ---------- ---------
Net earnings (loss) $51,094 34,348 139,713 (25,278)
Unusual items:
Commercial carpet tile
reserve - - - 122,492
FIFO Inventory - - - 61,794
Business restructurings 3,330 16,019 12,263 31,936
Debt extinguishment costs - - 7,514 -
Acquisition purchase
accounting 1,713 - 1,713 -
U.S. customs refund (5,765) - (5,765) -
Discrete tax items, net - - (24,407) -
Income taxes 760 (6,167) (2,999) (83,004)
Adjusted net earnings $51,132 44,200 128,032 107,940
--------------------- ------- ------ ------- -------
Adjusted diluted earnings
per share $0.74 0.64 1.86 1.57
Weighted-average common
shares outstanding -
diluted 68,773 68,653 68,764 68,606
Reconciliation of Net Sales to Adjusted Net Sales
(Amounts in thousands)
Three Months Ended Nine Months Ended
------------------ -----------------
October 2, September 26, October 2, September 26,
2010 2009 2010 2009
---------- ------------- ----------- -------------
Net sales $1,309,552 1,382,565 4,056,874 3,996,916
Adjustments
to net sales
Commercial
carpet tile
reserve - - - 110,224
Exchange rate 20,816 - 17,916 -
Additional
shipping
days - - (88,638) -
Adjusted net
sales $1,330,368 1,382,565 3,986,152 4,107,140
------------ ---------- --------- --------- ---------
Reconciliation of Unilin Segment Net Sales to Adjusted Unilin Segment
Net Sales
(Amounts in
thousands)
Three Months Ended
------------------
October 2, September 26,
2010 2009
---------- -------------
Net sales $276,594 281,803
Adjustments to
net sales
Exchange rate 21,960 -
Adjusted net
sales $298,554 281,803
------------ -------- -------
Reconciliation of Operating Cash Flow to Free Cash Flow
(Amounts in thousands)
Three Months
Ended
------------
October 2,
2010
-----------
Net cash provided by
operating activities $121,417
Additions to property,
plant and equipment (39,101)
Proceeds from insurance
claim 4,614
Free Cash Flow $86,930
-------------- -------
Reconciliation of Total Debt to Net Debt
(Amounts in thousands)
Three Months
Ended
------------
October 2,
2010
------------
Current portion of
long-term debt $351,486
Long-term debt, less
current portion 1,303,151
Less: Cash and cash
equivalents 365,835
Net Debt $1,288,802
-------- ----------
Reconciliation of Operating Income to Adjusted EBITDA
(Amounts
in
thousands)
Three Months Ended
------------------
December 31, April 3, July 3, October 2,
2009 2010 2010 2010
------------- --------- -------- -----------
Operating
income $46,865 53,621 89,726 85,182
Other
income
(expense) (1,509) 3,799 (1,428) 3,471
Depreciation
and
amortization 81,827 76,798 72,497 72,956
Commercial
carpet
tile
reserve 11,000 - - -
Business
restructurings 29,787 4,004 4,929 3,330
Adjusted
EBITDA $167,970 138,222 165,724 164,939
-------- -------- ------- ------- -------
Net Debt
to
Adjusted
EBITDA
---------
Trailing
(Amounts in thousands) Twelve
Months
Ended
-------
October 2,
2010
-----------
Operating income 275,394
Other income (expense) 4,333
Depreciation and
amortization 304,078
Commercial carpet tile
reserve 11,000
Business restructurings 42,050
Adjusted EBITDA 636,855
--------------- -------
Net Debt to Adjusted
EBITDA 2.0
-------------------- ---
Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands, except per share data)
Three Months Ended
------------------
October 2, September 26,
2010 2009
---------- -------------
Operating income $85,182 68,071
Adjustments to
operating income
Business
restructurings 3,330 16,019
Adjusted operating
income $88,512 84,090
------------------ ------- ------
Adjusted operating
margin 6.8% 6.1%
Mohawk segment
Operating income $31,127 16,261
Adjustments to
operating income
Business
restructurings 1,292 7,896
Adjusted operating
income $32,419 24,157
------------------ ------- ------
Adjusted operating
margin 4.5% 3.2%
Dal-Tile segment
Operating income $33,913 21,166
Adjustments to
operating income
Business
restructurings 1,223 8,123
Adjusted operating
income $35,136 29,289
------------------ ------- ------
Adjusted operating
margin 10.2% 8.1%
Unilin segment
Operating income $24,640 34,929
Adjustments to
operating income
Business
restructurings 815 -
Adjusted operating
income $25,455 34,929
------------------ ------- ------
Adjusted operating
margin 9.2% 12.4%
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.
SOURCE: Mohawk Industries, Inc.
CONTACT: Frank H. Boykin
Chief Financial Officer
+1-706-624-2695
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