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Thursday 19 July, 2007

Mohawk Industries, Inc.

Mohawk Industries, Inc. Announces Second Quarte...





CALHOUN, Georgia, July 19 /PRNewswire/ --

    Mohawk Industries, Inc. (NYSE: MHK) today announced 2007 second quarter 
net earnings of US$115 million and diluted earnings per share (EPS) of 
US$1.68 (both 4% below last year). Net sales for the quarter were US$1,977 
million, a decrease of 4% from 2006. During the quarter the Company had 
strong cash flow from operations of US$226 million and EBITDA of US$276 
million. In addition, debt of US$208 million was paid down during the quarter 
reducing the Company debt to capital ratio to 38%. For the first half of 
2007, net earnings were US$206 million and EPS was US$3.01 (both 3% above 
last year). Net sales for the first half of 2007 were US$3,841 million 
representing a 4% decrease from 2006. The sales decreases for both the 
quarter and the year to date are attributable to slowing U.S. industry demand 
in the residential new construction and redecorating business.



    In commenting on the second quarter results, Jeffrey S. Lorberbaum,
Chairman and CEO, stated: "Second quarter earnings were ahead of our guidance
for the quarter. The European business maintained its strong growth and
performance partially offsetting the cyclical down turn in the U.S. Our U.S.
commercial business continued performing better than our residential
business. U.S. residential flooring is in a cyclical downturn with soft sales
in the new home and consumer redecorating categories. During the quarter,
Mohawk took another important step in its strategy to become a complete
provider of floor covering with the announced acquisition of four wood
manufacturing plants.



    "The Mohawk segment sales for the quarter were off 10% from last year as
the industry suffered from slow residential sales. Our comps will become
easier in the third quarter because industry sales began declining in this
period last year. Commercial sales were stronger than residential as modular
carpet continued to gain market share. Raw material costs increased during
the quarter and we announced a carpet price increase in May of 4% to 6% which
we began implementing in June. Promotions continue at a greater pace to
stimulate sales and balance asset utilization in the industry.



    "The Dal-Tile segment sales for the quarter were slightly below last
year. We believe we are performing better than market due to the earlier
investments made in sales, products and marketing. Commercial sales are
offsetting some of the weakness in residential. Selected price increases were
implemented in the quarter and surcharges are being applied to cover
increased transportation and energy costs. We are reducing our controllable
costs but margins are lower due to infrastructure investments in distribution
and sales personnel to maximize sales and unabsorbed overhead from lower
production schedules. Our Dal-Tile team is implementing multiple initiatives
to reduce costs, improve efficiency and manage working capital. We are
increasing production as we continue to shift products to our own facilities
which were previously sourced externally.



    "Our Unilin segment turned in a strong performance for the quarter with
sales up 16% over last year. The European economy is strong while the U.S.
residential market remains weak. The strong Euro positively impacted sales by
5% and operating income by US$5 million. Our patents continue to gain
strength and we entered new license agreements growing revenues. Our Unilin
segment results were the highest ever but we anticipate results in the second
half to be more in line with past performance.



    "Our agreement with Columbia Forest Products to acquire two solid wood
plants and one engineered plant in the U.S. and one engineered plant in
Malaysia is expected to close in the third quarter. The plants are currently
experiencing losses, but the business is expected to be accretive after the
first year. After the acquisition, Mohawk will be the second largest producer
in the pre-finished wood category, which is expected to grow between 6% to 8%
over time. The transaction is subject to customary government approvals and
closing conditions.



    "We are focused on environmental stewardship and will be presenting our
many initiatives under a program identified as Greenworks. This program
includes recycling both post consumer and industrial waste, utilizing
bio-based raw materials and energy, and reducing water usage, energy
consumption and emissions. Greenworks is beneficial for our customers, our
communities and the environment.



    "During the period, no payments were received from U.S. Customs for duty
refunds. In the future, we expect additional payments though the timing and
amount are not known at this point."



    The company expects the U.S. residential environment to continue to be
difficult during the third quarter. The management team is committed to
maintaining the proper balance between cost cutting and being prepared for a
future turnaround. Based on these factors, the guidance for the third quarter
of 2007 is US$1.61 to US$1.70 EPS.



    Certain of the statements in the immediately preceding paragraphs,
particularly anticipating future performance and business prospects
constitute "forward-looking statements" under 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, including our ability to
successfully implement our plans, 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, rugs and other home products.
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, July 20, 2007 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 July 27, 2007 by
dialing +1-800-642-1687 for US/local calls and +1-706-645-9291 for
International/Local calls and entering Conference ID # 4827114.


    
    MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
    (All currency expressed in US$)

    Consolidated Statement of   
    Earnings Data                 Three Months Ended      Six Months Ended
    (Amounts in thousands,        June 30,    July 1,   June 30,    July 1,  
    except per share data)          2007       2006       2007       2006
    
    Net sales                    $1,977,210  2,058,123  3,841,073  3,983,229
    Cost of sales                 1,420,512  1,465,745  2,760,935  2,874,507
        Gross profit                556,698    592,378  1,080,138  1,108,722
    Selling, general and        
     administrative expenses        358,450    369,333    711,313    721,776
        Operating income            198,248    223,045    368,825    386,946
    Interest expense                 39,138     46,123     80,717     86,458
    Other (income) expense, net      (2,783)     3,598      1,444      6,325
    U.S. Customs refund                   -     (6,232)    (9,122)    (6,232)
        Earnings before income  
         taxes                      161,893    179,556    295,786    300,395
    Income taxes                     46,625     60,043     90,140    101,761
        Net earnings               $115,268    119,513    205,646    198,634
    Basic earnings per share          $1.69       1.77       3.02       2.94
    Weighted-average shares     
     outstanding                     68,167     67,693     68,037     67,629
    Diluted earnings per share        $1.68       1.76       3.01       2.92
    Weighted-average common and 
     dilutive potential common 
     shares outstanding              68,533     68,067     68,394     68,073
    
    Other Financial Information
    (Amounts in thousands)
    
    Net cash provided by        
     operating activities          $225,685    238,181    314,452    342,707
    Depreciation & amortization     $75,382     69,781    149,228    134,634
    Capital expenditures            $35,428     37,027     60,384     82,659



    Consolidated Balance Sheet Data
    (Amounts in thousands)

                                             June 30, 2007       July 1, 2006
    ASSETS
    Current assets:
        Cash & cash equivalents                    $57,763             73,398
        Receivables                                968,103            987,626
        Inventories                              1,229,326          1,283,931
        Prepaid expenses                           121,625            134,087
        Deferred income taxes                      173,252             41,427
            Total current assets                 2,550,069          2,520,469
    Property, plant and equipment, net           1,858,282          1,904,803
    Goodwill                                     2,719,724          2,691,910
    Intangible assets                            1,153,761          1,196,310
    Other assets                                    27,972             34,319
                                                $8,309,808          8,347,811
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
        Current portion of long-term debt         $364,114            530,626
        Accounts payable and accrued       
         expenses                                1,031,237          1,146,904
            Total current liabilities            1,395,351          1,677,530
    Long-term debt, less current portion         2,137,349          2,596,412
    Deferred income taxes and other    
     long-term liabilities                         768,278            654,332
            Total liabilities                    4,300,978          4,928,274
    Total stockholders' equity                   4,008,830          3,419,537
                                                $8,309,808          8,347,811



                               As of or for the Three  As of or for the Six  
    Segment Information             Months Ended          Months Ended
                                June 30,      July 1,    June 30,    July 1,    
    (Amounts in thousands)      2007          2006       2007        2006
    
    Net sales:
        Mohawk                   $1,113,412  1,241,992  2,161,073  2,392,538
        Dal-Tile                    505,187    506,914    972,148    980,824
        Unilin                      363,531    313,765    715,627    616,395
        Corporate and           
         eliminations                (4,920)    (4,548)    (7,775)    (6,528)
          Consolidated net sales $1,977,210  2,058,123  3,841,073  3,983,229
    
    Operating income:
        Mohawk                      $59,730     98,993    108,175    164,606
        Dal-Tile                     69,353     74,042    133,748    143,644
        Unilin                       81,737     59,657    142,236     99,676
        Corporate and           
         eliminations               (12,572)    (9,647)   (15,334)   (20,980)
          Consolidated        
           operating income        $198,248    223,045    368,825    386,946
    
    Assets:
        Mohawk                                         $2,448,907  2,622,196
        Dal-Tile                                        2,297,745  2,270,910
        Unilin                                          3,333,319  3,353,389
        Corporate and           
         eliminations                                     229,837    101,316
          Consolidated assets                          $8,309,808  8,347,811



    Reconciliation of EBITDA and Debt to capital percentage
        
                                                         Three Months Ended
    (Amounts in thousands)                                  June 30, 2007
    
    EBITDA reconciliation:
       Operating income                                              $198,248
       Other (expense)/income                                           2,783
       Depreciation and amortization                                   75,382
         EBITDA                                                      $276,413
    
       Outstanding Debt (a)                                        $2,501,463
       Total stockholders' equity                                   4,008,830
         Total capital (b)                                         $6,510,293
    
              Debt to capital (a)/(b)                                     38%


    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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