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Press release from CNW Group

Mohawk Industries, Inc. Announces Third Quarter Earnings

Thursday, November 04, 2010

Mohawk Industries, Inc. Announces Third Quarter Earnings16:04 EDT Thursday, November 04, 2010 << >>CALHOUN, Ga., Nov. 4, 2010 /CNW/ -- 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 September share data) 2, 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 September 2, 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 September (Amounts in thousands) 2, 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. >>For further information: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695 Web Site: http://www.mohawkind.com