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Thursday 17 April, 2008

Mohawk Industries, Inc.

Mohawk Industries, Inc. Announces First Quarter...

CALHOUN, Georgia, April 17 /PRNewswire/ --

    Mohawk Industries, Inc. (NYSE: MHK) today announced 2008 first quarter
net earnings of US$65 million and diluted earnings per share (EPS) of US$0.95
(both 28% below last year). Last year a US$9 million pre-tax refund (US$6
million after tax) from U.S. Customs was received and we are still
anticipating additional refunds. Net sales for the quarter were US$1,738
million, a decrease of 6.7% from 2007. Our balance sheet remained strong
during the quarter with debt to capitalization at 32% and debt to EBITDA at

    The U.S. economy continues to slow and is being impacted by tightening
credit, contracting residential home sales, declining consumer confidence,
and increasing costs. The flooring industry is in a cyclical downturn and the
residential remodeling category is one of the first to fall but leads the
rebound when the economy improves. Spending on commercial has remained
positive though it is expected to slow in the future. The U.S. credit
problems have affected Europe with growth expected to be flat to modest
overall and good in Eastern Europe and Russia.

    In commenting on the first quarter results, Jeffrey S. Lorberbaum,
Chairman and CEO, stated: "Our performance for the first quarter exceeded our
guidance for the period in a very difficult environment. All of our business
segments have managed through cyclical downturns in the past and are focused
on improving productivity and quality, reducing infrastructure costs, passing
along increased costs, controlling working capital, and investing in products
and assets to enhance our future.

    "Our Mohawk segment has continued to slow with weak industry conditions
resulting in sales declining 13.6%. Residential sales remain slow with new
and existing home sales low and consumers postponing purchases. Our carpet
price increases are being implemented during the quarter and should be
substantially complete by the end of the second quarter. To better align with
present volumes, additional reductions in infrastructure costs and production
levels were made during the period. New residential introductions are being
shipped earlier than prior years and are concentrated on fashion and value
engineered products. Commercial product sales are stronger than residential.
Carpet tiles continue to grow and our new Encycle tile with leading edge
technology has benefits that make it more durable, environmentally friendly
and economically advantageous. Raw material and energy costs are rising and
may require future pricing action. Many initiatives to reduce energy and
water consumption are being implemented in our operations. A new Mohawk
consumer campaign is being launched that co-ordinates TV, print and digital
marketing appealing to the design enthusiast with fashionable styling and
superior selection.

    "The Dal-Tile segment sales in the first quarter declined 3.8% which we
believe outperformed the industry again. Strong growth in the commercial
market is off-setting some of the weakness in the residential market. Our
sales in Mexico and Canada have continued to expand as we increase our
penetration in those markets. Our distribution system has been expanded with
the opening of a new service center in Michigan and we have planned three to
four more this year. Our sales force and new introductions are focusing on
the better performing commercial, multi-family and higher end remodeling
categories. Our ceramic price increase initiated in the fourth quarter is
substantially implemented. In April, we are executing additional price
increases on selected products and raising the energy surcharge to pass along
increased costs. Cost reduction initiatives remain a priority concentrated on
SG&A, manufacturing productivity, inventory management, freight and raw
materials. Dal-Tile's new product 'Metro Leather' won the Dealer's Choice
Award for the best new ceramic tile.

    "The Unilin segment sales were up 14.7% in the first quarter as reported
and up 4.7% using a constant exchange rate. Unilin sales were down 6.2%
excluding our wood acquisition on a local basis. Both the European and U.S.
markets slowed in the period with growth continuing in Eastern Europe and
Russia. Sales grew in U.S. laminate and European roofing systems with the
other products slowing compared to the prior year. Our costs increased due to
plant start up expenses, rising energy and materials, higher costs for U.S.
imports and lower overhead absorption. Price increases are being executed in
some markets to offset rising costs and currency changes. Reductions in
staffing and production levels are being made to further align with industry
conditions. Our U.S. flooring expansion should begin production by the end of
the second quarter and will reduce imports of higher cost products from
Europe. Our wood flooring team continues to improve operational costs and
quality as planned. Our wood production is operating at a loss and
experiencing lower volumes with the industry. We are launching new distressed
and antique looks as well as a patented installation system to enhance our

    Although seasonal improvements will benefit the second quarter, we expect
to have many of the same challenges we faced during the first quarter. Weak
demand and higher costs in the U.S. and Europe will weigh on our future
results. We will adjust our business as changes in customer demand and costs
require. Lower debt levels, reduced tax rates and beneficial exchange rates
will positively affect our results. Based on these factors, our guidance for
the second quarter of 2008 is US$1.36 to US$1.45. In spite of a difficult
flooring market, Mohawk continues to modernize manufacturing facilities,
create innovative products, and launch exciting advertising and promotional
campaigns. We are positioned with a more dynamic and cost effective
enterprise for the turn around that always occurs.

    Certain of the statements in the immediately preceding paragraphs,
particularly anticipating future performance, business prospects, growth and
operating strategies, proposed acquisitions, and similar matters, and those
that include the words "could," "should," "believes," "anticipates,"
"forecasts," "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 prices; timing and level of
capital expenditures; integration of acquisitions; introduction of new
products; 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 Friday, April 18, 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.

    A conference call replay will also be available until April 25, 2008 by
dialing +1-800-642-1687 for US/local calls and +1-706-645-9291 for
International/Local calls and entering Conference ID # 39978826.

    (All amounts in US Dollars unless otherwise specified.)

    Consolidated Statement of Earnings Data
    (Amounts in thousands, except per             
     share data)                                    Three Months Ended 
                                            March 29, 2008     March 31, 2007
    Net sales                                   $1,738,097         1,863,863
    Cost of sales                                1,278,258         1,340,423
        Gross profit                               459,839           523,440
    Selling, general and administrative  
     expenses                                      335,521           352,863
        Operating income                           124,318           170,577
    Interest expense                                33,767            41,579
    Other (income) expense, net                      2,779             4,227
    U.S. Customs refund                                  -            (9,122)
        Earnings before income taxes                87,772           133,893
    Income taxes                                    22,382            43,515
        Net earnings                               $65,390            90,378
    Basic earnings per share                         $0.96              1.33
    Weighted-average shares outstanding             68,375            67,906
    Diluted earnings per share                       $0.95              1.32
    Weighted-average common and dilutive
     potential common shares outstanding            68,579            68,255
    Other Financial Information
    (Amounts in thousands)

    Net cash provided by (used in)       
     operating activities                         $(80,179)           88,767
    Depreciation & amortization                    $73,256            73,846
    Capital expenditures                           $55,971            24,956

    Consolidated Balance Sheet Data
    (Amounts in thousands)
                                           March 29, 2008     March 31, 2007
    Current assets:
        Cash & cash equivalents                     $73,289            53,598
        Receivables                                 955,325           978,789
        Inventories                               1,296,424         1,245,073
        Prepaid expenses                            135,429           119,815
        Deferred income taxes                       135,407           176,444
            Total current assets                  2,595,874         2,573,719
    Property, plant and equipment, net            2,026,058         1,864,999
    Goodwill                                      2,877,671         2,710,821
    Intangible assets                             1,211,512         1,166,626
    Deferred income taxes and other      
     assets                                         306,304            29,141
                                                 $9,017,419         8,345,306

    Current liabilities:
      Current portion of long-term debt            $367,785           514,772
      Accounts payable and accrued expenses         932,856         1,012,558
            Total current liabilities             1,300,641         1,527,330
    Long-term debt, less current portion          2,003,013         2,189,862
    Deferred income taxes and other long-
     term liabilities                               764,785           775,517
            Total liabilities                     4,068,439         4,492,709
    Total stockholders' equity                    4,948,980         3,852,597
                                                 $9,017,419         8,345,306
    Segment Information                   As of or for the Three Months Ended
    (Amounts in thousands)                   March 29, 2008    March 31, 2007
    Net sales:
        Mohawk                                    $905,044         1,047,661
        Dal-Tile                                   449,051           466,961
        Unilin                                     403,755           352,096
        Corporate and eliminations                 (19,753)           (2,855)
            Consolidated net sales              $1,738,097         1,863,863
    Operating income:
        Mohawk                                     $22,241            48,445
        Dal-Tile                                    56,941            64,395
        Unilin                                      49,956            60,499
        Corporate and eliminations                  (4,820)           (2,762)
            Consolidated operating income         $124,318           170,577
        Mohawk                                  $2,410,031         2,496,295
        Dal-Tile                                 2,257,190         2,279,739
        Unilin                                   4,162,172         3,337,020
        Corporate and eliminations                 188,026           232,252
            Consolidated assets                 $9,017,419         8,345,306

    Reconciliation of Debt to Capital, EBITDA and Debt to EBITDA
    Debt to Capital
                                                                    As of
                                                               March 29, 2008
    Outstanding Debt (a)                                         $2,370,798
    Total stockholders' equity                                    4,948,980
            Total capital (b)                                    $7,319,778
            Debt to capital percentage 
             (a)/(b)                                                     32%

                                                                Trailing Four
                                      Three Months Ended       Quarters Ended
    (Amounts in thousands) June 30, Sept. 29, Dec. 31, March 29,   March 29,
                             2007     2007      2007     2008        2008
    EBITDA reconciliation:
        income             $198,248  200,814  180,467  124,318        703,847
       Other (expense)/  
        income                2,783      799        3   (2,779)           806
       Depreciation and 
        amortization         75,382   75,636   81,573   73,256        305,847
         EBITDA            $276,413  277,249  262,043  194,795  (c) 1,010,500

    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)                        March 29, 2008
        Unilin segment net sales                      $403,755
          Less: Exchange rate gain                      35,200
        Adjusted Unilin segment net sales              368,555
          Less: Wood acquisition net sales              38,218
    Adjusted Unilin segment net sales  
     for exchange rate gain and wood     
     acquisition                                      $330,337
    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.

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