MHK Mohawk Industries Inc

CALHOUN, Ga., Oct. 19 /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE:MHK) today announced net sales for the third quarter of 2005 increased 11% to $1,697,634,000 from $1,529,651,000 for the third quarter of 2004. Diluted earnings per share (EPS) and net earnings for the third quarter of 2005 were $1.61 (4% below last year) and $108,652,000 (4% below last year), respectively. This compares to EPS and net earnings of $1.67 and $112,687,000, respectively, for the third quarter of 2004. The third quarter results were impacted by higher raw material costs, increasing energy costs and additional ceramic tile introductions that were shifted from the second to the third quarter partially offset by higher sales volume. The sales increase was due to higher sales volume in both the Mohawk and Dal-Tile segments as well as price increases. In the third quarter of 2005, the Mohawk segment net sales of $1,248,216,000 increased 11% from $1,129,422,000 and the Dal-Tile segment net sales of $449,418,000 grew 12% from $400,229,000. The growth in both segments resulted from unit growth and price increases. EPS for the first nine months of 2005 was $4.03 (2% above last year) and net earnings were $272,483,000 (2% above last year) compared to $3.94 EPS and $266,152,000 in net earnings for the first nine months of 2004. This increase in EPS and earnings is attributable to sales growth, partially offset by higher raw material and energy costs. Net sales for the first nine months of 2005 were $4,815,548,000, representing a 9% increase from 2004 sales of $4,405,273,000. The sales increase resulted from volume growth and price increases. In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The effect of both Hurricanes Katrina and Rita has reduced our results in the third quarter as we previously reported. As our raw material supply chain has begun to bring production capacity back on line, we are seeing cost increases and some supply disruptions. Additionally, natural gas, diesel fuel, and gasoline prices have substantially increased in the quarter. As disclosed earlier, Mohawk implemented carpet price increases of between 5% to 8% in early October and also increased hard surface prices. In addition, Mohawk announced another carpet price increase of similar size to be implemented in mid-November to offset the continuing cost increases. "The petrochemical industry on the Gulf Coast continues to struggle with the aftermath of the storms. We expect to see continued high costs and some supply limitations until these issues are resolved. Given the present conditions, we believe we will be able to maintain reasonable service levels as we manage the business with lower inventory. Although it is difficult for both Mohawk and our customers to adapt to these rapidly increasing costs, I believe we both will be successful in passing these to the end consumer. The industry will benefit as the Gulf Coast is being rebuilt over the next few years. "The Mohawk segment grew 11% in sales with new residential construction and commercial channels continuing to out pace the residential replacement business. During the latter part of the quarter, we saw carpet purchases and shipments increase ahead of our price increase. Price increases continue to lag the rapidly rising costs for energy and raw materials. Lower consumer confidence and the impact of the storms on gas and energy costs could influence spending in the future. The Dal-Tile segment continues to perform well with sales growing at 12% from the previous year. The segment was impacted by higher energy, transportation and product introductions in the third quarter. The expansion of our ceramic manufacturing operations in Mexico and Oklahoma is on track for completion. "The acquisition of Unilin is scheduled to close in the fourth quarter of this year. As previously reported, we have determined to permanently finance the transaction with debt. We are currently evaluating the appropriate combination of prepayable and term debt. The acquisition is not expected to have a significant impact on the fourth quarter before any one-time non-cash purchase accounting charges. Our outside advisors are reviewing these charges and the intangible asset amortization amounts as required under the purchase accounting rules. The Unilin acquisition will be another transformational event for our company making Mohawk a leader in the fast growing U.S. laminate market. "Our economy continues to show strength but the short term impact of the Gulf Coast storms on energy and the petrochemical industry has created uncertainty and higher costs. Additionally, consumer confidence and interest rates could impact the economy. Unforeseen changes in our supply chain may affect our results. Based on these factors, our fourth quarter earnings forecast is from $1.49 to $1.58." 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 "believes," "anticipates," "forecast," "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 broadloom 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 and American Olean. 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 Thursday October 20, 2005 at 11:00 AM Eastern Time. The telephone number to call is 1-800-603-9255 for US/local and 706-634-2294 for international calls. A conference call replay will also be available until Thursday, October 27, 2005 by dialing 1-800-642-1687 for US/local calls and (706) 645-9291 for international calls and entering Conference ID # 1485856. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Earnings Data Three Months Ended Nine Months Ended (Amounts in thousands, October 1, October 2, October 1, October 2, except per share data) 2005 2004 2005 2004 Net sales $1,697,634 1,529,651 4,815,548 4,405,273 Cost of sales 1,245,766 1,093,598 3,547,469 3,200,355 Gross profit 451,868 436,053 1,268,079 1,204,918 Selling, general and administrative expenses 274,052 242,995 806,144 742,148 Operating income 177,816 193,058 461,935 462,770 Interest expense 10,775 13,918 35,166 41,084 Other (income) expense, net (400) 2,467 2,526 4,880 Earnings before income taxes 167,441 176,673 424,243 416,806 Income taxes 58,789 63,986 151,760 150,654 Net earnings $108,652 112,687 272,483 266,152 Basic earnings per share $1.62 1.69 4.08 3.99 Weighted-average shares outstanding 66,865 66,669 66,827 66,680 Diluted earnings per share $1.61 1.67 4.03 3.94 Weighted-average common and dilutive potential common shares outstanding 67,519 67,468 67,572 67,544 Other Financial Information (Amounts in thousands) Net cash provided by operating activities $173,253 138,356 328,033 196,038 Depreciation & amortization $31,138 31,964 94,900 93,074 Capital expenditures $51,448 31,708 150,801 70,382 Consolidated Balance Sheet Data (Amounts in thousands) October 1, October 2, 2005 2004 ASSETS Current assets: Receivables $811,628 718,006 Inventories 1,089,970 1,000,802 Prepaid expenses 44,160 40,993 Deferred income taxes 55,311 84,260 Total current assets 2,001,069 1,844,061 Property, plant and equipment, net 995,204 898,824 Goodwill 1,378,849 1,377,881 Other assets 332,652 338,404 $4,707,774 4,459,170 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $68,679 207,315 Accounts payable and accrued expenses 776,199 779,080 Total current liabilities 844,878 986,395 Long-term debt, less current portion 700,000 700,009 Deferred income taxes and other long-term liabilities 221,134 213,668 Total liabilities 1,766,012 1,900,072 Total stockholders' equity 2,941,762 2,559,098 $4,707,774 4,459,170 Segment Information As of or for the Three As of or for the Nine Months Ended Months Ended (Amounts in thousands) October 1, October 2, October 1, October 2, 2005 2004 2005 2004 Net sales: Mohawk $1,248,216 1,129,422 3,524,477 3,265,357 Dal-Tile 449,418 400,229 1,291,071 1,139,916 Consolidated net sales $1,697,634 1,529,651 4,815,548 4,405,273 Operating income: Mohawk $110,854 131,361 272,222 300,183 Dal-Tile 69,137 62,750 196,898 168,047 Corporate and eliminations (2,175) (1,053) (7,185) (5,460) Consolidated operating income $177,816 193,058 461,935 462,770 Assets: Mohawk $2,482,741 2,304,347 Dal-Tile 2,174,055 2,072,761 Corporate and eliminations 50,978 82,062 Consolidated assets $4,707,774 4,459,170 DATASOURCE: Mohawk Industries, Inc. CONTACT: Frank H. Boykin, Chief Financial Officer of Mohawk Industries, Inc., +1-706-624-2695 Web site: http://www.mohawkind.com/

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