MHK Mohawk Industries Inc

CALHOUN, Ga., Feb. 23 /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE:MHK) today announced an increase in quarterly net earnings of 5% above the fourth quarter of 2004 before a one-time non-cash charge. In accordance with Generally Accepted Accounting Principles, net earnings were $85,712,000 and diluted earnings per share (EPS) was $1.26 for the fourth quarter of 2005. Before the Unilin one-time non-cash charge of $34,305,000 ($22,329,000 after tax) for purchase accounting of inventory, adjusted earnings were $108,041,000 (5% above last year) and EPS of $1.59 (5% above last year). Before the adjustment, Unilin positively impacted our results due to strong margins and lower operating costs. Earning were also positively affected by sales growth and better leveraging of selling, general and administrative costs, offset by higher raw material and energy costs and the impact of LIFO. The company had estimated fourth quarter earnings of $1.49 to $1.58 EPS excluding the adjustment. Net earnings and EPS for the fourth quarter of 2004 were $102,470,000 and $1.52, respectively. Net sales for the quarter increased 22% to $1,804,551,000 from $1,475,099,000 in 2004. This increase was primarily the result of unit growth, price increases and the Unilin acquisition. The Mohawk segment net sales of $1,192,182,000 in the fourth quarter of 2005 were up 8% from $1,103,474,000 due primarily to price increases. The Dal-Tile segment net sales of $443,710,000 in the fourth quarter of 2005 grew 19% from $371,625,000 due to volume growth, price increases and a small stone products acquisition. The Unilin segment, acquired on October 31, 2005, had net sales of $168,814,000. Before the one-time non-cash charge of $34,305,000 ($22,329,000 after tax) for purchase accounting of Unilin inventory, adjusted earnings for the year 2005 were $380,524,000 (3% above last year) and EPS of $5.63 (3% above last year). Net earnings in accordance with GAAP were $358,195,000 and $5.30 in EPS compared to $368,622,000 in net earnings, and $5.46 in EPS, for 2004. This increase in adjusted EPS and earnings is attributable to sales growth, better leverage of selling, general and administrative costs and the Unilin acquisition, offset by higher raw material and energy costs and the impact of LIFO inventory charges in the Mohawk segment. Net sales for the year 2005 increased 13% to $6,620,099,000 from $5,880,372,000. This sales increase resulted primarily from the acquisition of Unilin, internal growth and price increases. In commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The last few months have been eventful as we completed in October the acquisition of Unilin, a fully integrated European and U.S. laminate manufacturer, and a bond offering in January to finance the purchase. We are pleased with the acquisition and continue to make progress in developing and implementing a strategy to enhance our U.S. laminate business. In the U.S. we are focused on expanding our laminate business and maximizing our new plant's efficiencies. Unilin results in the period exceeded expectations with improved sales in the other wood panel business and better leverage of operating costs. The U.S. laminate business continues to grow with some softening in the European business. "Our carpet and rug business experienced significant disruption and higher costs in the raw material supply chain as the oil refineries in the Gulf Coast region struggled to recover lost capacity after the hurricanes in the quarter. We were able to work through the disruption with minimal impact to our service. Raw material and energy costs increased substantially and necessitated increasing selling prices twice during the fourth quarter. As in the past, our margins were impacted by the difference in timing between cost increases and implementation of price changes. We expect to pass these increases through to the customer. Our product sales of nylon filament and polyester carpets, commercial carpet tiles and hard surface flooring are increasing while our nylon staple and polypropylene carpets and home products sales were soft. Overall, sales trends continued with the growth in the commercial and new residential construction businesses outpacing residential replacement business. "The Dal-Tile segment continues to grow in both the residential and commercial businesses. All major product categories improved in unit sales and were positively affected by price increases during the quarter. The ceramic business was also negatively affected by rising energy and transportation costs partially offset by price increases. The capacity addition for our Mexican ceramic operation has been completed and expansion of our Muskogee plant is scheduled to be operational in the second half of this year. After construction, it will take about nine to twelve months to achieve the additional 20% increase in capacity. "Our balance sheet has strengthened with the debt to capitalization ratio improving to 52.2% at December 31, 2005. We have repaid approximately $232 million of debt since the end of the third quarter. Additionally, working capital as a percent of sales improved from 20% at the end of 2004 to 18% at the end of 2005." The economy appears to be strengthening with employment increasing and short-term interest rates possibly leveling out. Oil prices, natural gas, and commodity chemicals are unpredictable and may impact our costs. Our fourth quarter price increases will be fully implemented during the second quarter. We anticipate the flooring industry improving over 2005 led by commercial spending and residential redecorating. Stock options were not expensed in prior periods and we estimate an additional charge of $.04 per share in the first quarter. After considering these factors, the earnings forecast for the first quarter of 2006 is from $1.17 to $1.26. 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 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 on Friday, February 24, 2006, at 11:00 AM Eastern Time. The telephone number to call is 1-800-603-9255, and the conference ID is 5610982. A conference call replay will be available until Tuesday, February 28, 2006 by dialing 1-800-642-1687 for US/local calls and (706) 645-9291 for international calls and entering Conference ID # 5610982. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Earnings Data Three Months Ended Twelve Months Ended (Amounts in thousands, Dec. 31 Dec. 31 Dec. 31 Dec. 31 except per share data) 2005 2004 2005 2004 Net sales $1,804,551 1,475,099 6,620,099 5,880,372 Cost of sales 1,349,496 1,059,176 4,896,965 4,259,531 Gross profit 455,055 415,923 1,723,134 1,620,841 Selling, general and administrative expenses 289,718 243,103 1,095,862 985,251 Operating income 165,337 172,820 627,272 635,590 Interest expense 31,625 12,308 66,791 53,392 Other (income) expense, net 934 (71) 3,460 4,809 Earnings before income taxes 132,778 160,583 557,021 577,389 Income taxes 47,066 58,113 198,826 208,767 Net earnings $85,712 102,470 358,195 368,622 Basic earnings per share $ 1.27 1.54 5.35 5.53 Weighted-average shares outstanding 67,248 66,689 66,932 66,682 Diluted earnings per share $ 1.26 1.52 5.30 5.46 Weighted-average common and dilutive potential common shares outstanding 67,860 67,595 67,644 67,557 Other Financial Information (Amounts in thousands) Net cash provided by operating activities $ 131,810 46,799 459,843 242,837 Depreciation & amortization $ 54,429 30,014 149,329 123,088 Capital expenditures $ 96,505 36,219 247,306 106,601 Consolidated Balance Sheet Data (Amounts in thousands) December 31, December 31, 2005 2004 ASSETS Current assets: Cash & cash equivalents $ 134,585 - Receivables 848,666 660,650 Inventories 1,166,913 1,017,983 Prepaid expenses 140,789 49,381 Deferred income taxes 49,534 55,311 Total current assets 2,340,487 1,783,325 Property, plant and equipment, net 1,810,728 905,332 Goodwill 2,621,963 1,377,349 Intangible assets 1,174,097 322,646 Other assets 44,248 14,466 $ 7,991,523 4,403,118 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 113,809 191,341 Accounts payable and accrued expenses 998,105 623,061 Total current liabilities 1,111,914 814,402 Long-term debt, less current portion 3,194,561 700,000 Deferred income taxes and other long-term liabilities 657,928 222,379 Total liabilities 4,964,403 1,736,781 Total stockholders' equity 3,027,120 2,666,337 $ 7,991,523 4,403,118 Segment Information As of or for the As of or for the (Amounts in thousands) Three Months Ended Twelve Months Ended Dec. 31 Dec. 31 Dec. 31 Dec. 31 2005 2004 2005 2004 Net sales: Mohawk $1,192,182 1,103,474 4,716,659 4,368,831 Dal-Tile 443,710 371,625 1,734,781 1,511,541 Unilin 168,814 - 168,814 - Corporate and eliminations (155) - (155) - Consolidated net sales $1,804,551 1,475,099 6,620,099 5,880,372 Operating income: Mohawk $ 109,477 124,073 381,699 424,256 Dal-Tile 63,296 51,784 260,194 219,831 Unilin (5,162) - (5,162) - Corporate and eliminations (2,274) (3,037) (9,459) (8,497) Consolidated operating income $ 165,337 172,820 627,272 635,590 Assets: Mohawk $2,424,982 2,285,025 Dal-Tile 2,207,514 2,063,195 Unilin 3,263,248 - Corporate and eliminations 95,779 54,898 Consolidated assets $7,991,523 4,403,118 Included in the Consolidated Statement of Earnings data is a one-time non-cash charge for Unilin purchase accounting related to the step-up in basis for inventory. The following reconciliation of net earnings reflects the impact of this charge on earnings. The Company believes the exclusion of this charge provides a meaningful depiction of its ongoing operations. As of or for the As of or for the Adjusted net earnings Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Net earnings $85,712 102,470 358,195 368,622 Inventory basis: Step-up 34,305 - 34,305 - Less: Income tax effect 11,976 - 11,976 - Net adjustment 22,329 22,329 Adjusted net earnings $108,041 102,470 380,524 368,622 Adjusted diluted earnings per share $1.59 1.52 5.63 5.46 Weighted-average common and dilutive potential common shares outstanding 67,860 67,595 67,644 67,557 Pro forma working capital ratio As of December 31, 2005 Net sales reported $6,620,099 Unilin 10 month net sales 993,407 Pro forma net sales $7,613,506 Net working capital $1,342,382 Working capital ratio 18% First Call Analyst: FCMN Contact: christi_scarbro@mohawkind.com DATASOURCE: Mohawk Industries, Inc. CONTACT: Frank H. Boykin, Chief Financial Officer of Mohawk Industries, +1-706-624-2695 Web site: http://www.mohawkind.com/

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