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Press release from PR Newswire

Mohawk Industries, Inc. Announces Fourth Quarter Earnings

Tuesday, February 22, 2011

Mohawk Industries, Inc. Announces Fourth Quarter Earnings16:01 EST Tuesday, February 22, 2011CALHOUN, Ga., Feb. 22, 2011 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 fourth quarter net earnings of $46 million and diluted earnings per share (EPS) of $0.66. For the fourth quarter of 2009, the net earnings were $20 million and EPS was $0.29. Excluding unusual items, 2009 fourth quarter net earnings and EPS were $39 million and $0.56 per share. Net sales for the fourth quarter of 2010 were $1.3 billion which was a decrease of approximately 6% versus 2009. Net sales for the quarter increased 2% over the prior year on a constant days and exchange rate basis. For the full year of 2010, our net earnings were $185 million and EPS was $2.65. For the full year of 2009, our net loss was $5 million and loss per share was $0.08. Net sales for the full year of 2010 were $5.3 billion representing a slight decrease from 2009. On a constant exchange rate and excluding 2009 sales adjustments, net sales decreased 2%. Our cash position and liquidity remain strong with over $500 million available immediately after retiring $300 million of bonds in January 2011.Commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings exceeded our expectations as results were positively impacted by enhanced manufacturing efficiencies, benefits from restructuring actions, reducing SG&A costs and improved process consistency. Our operating margin of 6.8% continues to show improvement compared to last year despite rising raw material costs. During 2010, our emphasis on innovation, new products, manufacturing improvements and cost reduction have benefited our margins and increased earnings. Investments in the Russian, Chinese and Mexican flooring markets are expanding our international presence and will provide platforms for future revenue and profit growth. The consensus among economists is that these markets will outperform the more mature U.S. and Western European flooring markets. The U.S. industry decline experienced over the past few years appears to have bottomed with some markets showing signs of improvement."After adjusting for the lower number of days in the quarter, our Mohawk segment net sales decreased 3% but achieved the highest operating margin in two years despite increasing raw material costs. Manufacturing costs, material yields and process controls have improved from last year. Our market position, after adjusting for the number of days in the period, stabilized in the fourth quarter as we accelerated key introductions in new residential polyester carpets and commercial carpet tile products. We implemented a 7-10% carpet price increase in February to offset our raw material inflation. Sales of our commercial carpet tile continue to grow supported by a broader product offering and an expanded sales force. Improved planning and inventory processes have enhanced our service levels, reducing delivery time and costs. Our Dal-Tile segment net sales declined 4% as reported but increased 4% after adjusting for the lower number of days this period and a constant exchange rate. In the fourth quarter, we began implementing a price increase of 1-2% to cover rising transportation costs. We have added sales personnel focusing on large commercial accounts and housing contractors to maximize participation in these improving markets. Dal-Tile is leading the industry with advances in decorating technologies created by our Reveal Imaging. We are introducing products that have greater distinction between individual tiles, stronger natural visuals and new textures.  We are increasing our Mexican sales and customer base by expanding our product selection and sales force.  Our joint venture in China is broadening its product offering, implementing new production technology and supplying tile to existing Mohawk markets. The investment in China will position us long term to take advantage of this growing market.Our Unilin revenues were flat in the period as reported, but increased 14% after adjusting for the number of days in the period and the exchange rate. Our margins remain compressed as our material costs have continued to escalate. We implemented price increases in our board products in the fourth quarter and are executing additional price increases in boards, laminate and roofing in the first quarter to recover continued inflation and improve margins. Our laminate flooring business is increasing with Northern Europe, Russia and Asia out-performing. We are expanding our home center participation by leveraging our technology and styling leadership. The introduction of new furniture finishes and high definition technology continues to affirm our leadership in laminate technology. We are proceeding with construction of our Russian laminate plant and expanding our Malaysian wood manufacturing.The economic recovery and stronger consumer spending will positively impact our industry in 2011. The seasonally slow first quarter is being affected by harsh weather and increasing raw material costs offsetting savings from our cost initiatives. The Chinese joint venture's extended holiday shutdown will unfavorably impact our first quarter. The residential remodeling market should improve with increased consumer spending and higher home sales. Commercial remodeling is growing as businesses invest to maximize their operating results. For the balance of 2011, we anticipate an improvement in our results as price increases are implemented,  volume expands and the recovery continues. With these factors, our first quarter guidance for earnings is $0.36 to $0.44 per share, excluding restructuring charges.We remain committed to enhancing our organization to drive innovation in product, processes and costs. Advances in our marketing, product introductions, manufacturing efficiencies, and service should yield higher profitability. This year, a higher level of capital investments will improve productivity, support new product development and expand our global reach. 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 Wednesday, February 23, 2011 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 # 38370453.  A conference call replay will also be available until March 9, 2011 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 38370453.MOHAWK INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statement of OperationsThree Months EndedTwelve Months Ended(Amounts in thousands, except per share data)December 31, 2010December 31, 2009December 31, 2010December 31, 2009Net sales$     1,262,1981,347,1085,319,0725,344,024Cost of sales920,5321,005,4143,916,4724,111,794    Gross profit341,666341,6941,402,6001,232,230Selling, general and administrative expenses256,026294,8291,088,4311,188,500Operating income85,64046,865314,16943,730Interest expense30,16634,527133,151127,031Other (income) expense, net(1,324)1,509(7,166)(1,108)    Earnings (loss) before income taxes56,79810,829188,184(82,193)Income tax expense (benefit)  11,040(8,950)2,713(76,694)    Net earnings (loss)$          45,75819,779185,471(5,499)Basic earnings (loss) per share (1)$              0.670.292.66(0.08)Weighted-average common shares outstanding - basic68,61268,47268,57868,452Diluted earnings (loss) per share (1)$              0.660.292.65(0.08)Weighted-average common shares outstanding - diluted68,84368,68268,78468,452(1) Basic and diluted earnings per share for the twelve months ended December 31, 2010, includes a decrease of approximately $0.04 and $0.05, respectively, for an adjustment to the fair value of a redeemable noncontrolling interest in a consolidated subsidiary of the Company.  Other Financial Information(Amounts in thousands)Net cash provided by operating activities$        109,318259,611319,712672,205Depreciation and amortization$          74,52281,827296,773303,004Capital expenditures$          69,94037,644156,180108,925Consolidated Balance Sheet Data(Amounts in thousands)December 31, 2010December 31, 2009ASSETSCurrent assets:    Cash and cash equivalents$        354,217531,458Restricted cash27,954-    Receivables, net614,473673,931    Inventories1,007,503892,981    Prepaid expenses91,731108,947    Deferred income taxes and other current assets152,735151,683        Total current assets2,248,6132,359,000Property, plant and equipment, net1,687,1241,791,412Goodwill1,369,3941,411,128Intangible assets, net677,127785,342Deferred income taxes and other non-current assets116,66844,564$     6,098,9266,391,446LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt$        350,58852,907Accounts payable and accrued expenses698,326831,115        Total current liabilities1,048,914884,022Long-term debt, less current portion1,302,9941,801,572Deferred income taxes and other long-term liabilities440,021471,570        Total liabilities2,791,9293,157,164Noncontrolling interest35,44133,459Total stockholders' equity3,271,5563,200,823$     6,098,9266,391,446Segment InformationAs of or for the Three Months EndedAs of or for the Twelve Months Ended(Amounts in thousands)December 31, 2010December 31, 2009December 31, 2010December 31, 2009Net sales:    Mohawk$        667,230738,7162,844,8762,856,741    Dal-Tile317,354329,9851,367,4421,426,757    Unilin297,415298,3311,188,2741,128,315    Intersegment sales(19,801)(19,924)(81,520)(67,789)        Consolidated net sales$     1,262,1981,347,1085,319,0725,344,024Operating income (loss):    Mohawk$          48,80416,269122,904(125,965)    Dal-Tile19,90211,52897,33484,154    Unilin20,86425,331114,298105,953    Corporate and eliminations(3,930)(6,263)(20,367)(20,412)        Consolidated operating income$          85,64046,865314,16943,730Assets:    Mohawk$     1,637,3191,582,652    Dal-Tile1,644,4481,546,393    Unilin2,475,0492,598,182    Corporate and eliminations342,110664,219        Consolidated assets$     6,098,9266,391,446Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted Diluted Earnings Per Share(Amounts in thousands, except per share data)Three Months EndedDecember 31, 2009Net earnings$                 19,779Unusual items:Business restructurings29,787Income taxes(10,872)Adjusted net earnings $                 38,694Adjusted diluted earnings per share$                     0.56Weighted-average common shares outstanding - diluted68,682Reconciliation of Net Sales to Adjusted Net Sales(Amounts in thousands)Three Months EndedTwelve Months EndedDecember 31, 2010December 31, 2009December 31, 2010December 31, 2009Net sales$             1,262,1981,347,1085,319,0725,344,024Adjustments to net salesCommercial carpet tile reserve---121,224Impact of shipping days95,145---Exchange rate18,557-36,588-Adjusted net sales$             1,375,9001,347,1085,355,6605,465,248Reconciliation of Segment Net Sales to Adjusted Segment Net Sales(Amounts in thousands)Three Months EndedMohawk segmentDecember 31, 2010December 31, 2009Net sales$                667,230738,716Adjustments to net salesImpact of shipping days46,100-Adjusted net sales$                713,330738,716Dal-Tile segmentNet sales$                317,354329,985Adjustments to net salesImpact of shipping days26,445-Exchange rate(1,592)-Adjusted net sales$                342,207329,985Unilin segmentNet sales$                297,415298,331Adjustments to net salesImpact of shipping days22,600-Exchange rate20,149-Adjusted net sales$                340,164298,331Reconciliation of Gross Profit to Adjusted Gross Profit(Amounts in thousands)Three Months EndedDecember 31, 2010December 31, 2009Gross profit$                341,666341,694Adjustments to gross profitBusiness restructurings-22,295Adjusted gross profit$                341,666363,989   Adjusted gross margin as a percent of net sales27.1%27.0%Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses (Amounts in thousands)Three Months EndedDecember 31, 2010December 31, 2009Selling, general and administrative expenses $                256,026294,829Adjustments to selling, general and administrative expenses Business restructurings-7,492Adjusted selling, general and administrative expenses $                256,026302,321Adjusted selling, general and administrative expenses as a percent of net sales20.3%22.4%Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands)Three Months EndedDecember 31, 2010December 31, 2009Operating income$                  85,64046,865Adjustments to operating incomeBusiness restructurings-29,787Adjusted operating income$                  85,64076,652   Adjusted operating margin as a percent of net sales6.8%5.7%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands)Three Months EndedMohawk segmentDecember 31, 2010December 31, 2009Operating income$                  48,80416,269Adjustments to operating incomeBusiness restructurings-20,189Adjusted operating income$                  48,80436,458   Adjusted operating margin as a percent of net sales7.3%4.9%Dal-Tile segmentOperating income$                  19,90211,528Adjustments to operating income    Add: Business restructurings-9,598Adjusted operating income$                  19,90221,126   Adjusted operating margin as a percent of segment net sales6.3%6.4%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.For further information: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695