CALHOUN, Ga., July 27 /PRNewswire-FirstCall/ -- Mohawk Industries,
Inc. (NYSE:MHK) today announced 2006 second quarter net earnings of
$119,513,000 (22% above last year) and diluted earnings per share
(EPS) of $1.76 (21% above last year), in accordance with U.S.
Generally Accepted Accounting Principles (GAAP). Adjusted net
earnings for the second quarter of 2006 were $117,714,000 and
adjusted EPS were $1.73 per share. The adjusted net earnings
exclude a stock option charge that was not required in 2005
increasing net earnings $2,104,000 and exclude income for a portion
of a one-time refund received from U.S. Customs decreasing net
earnings by $3,903,000. Net sales for the quarter were
$2,058,123,000, an increase of 27% from 2005. The growth resulted
from the Unilin acquisition, total hard surface sales growth,
internal growth, price increases and new patent licenses. Mohawk
changed its method of accounting for soft surface inventories from
LIFO to FIFO during the second quarter of 2006. If Mohawk had
continued on LIFO, then net earnings for the second quarter would
have been slightly higher. All prior period amounts have been
revised to reflect this change. For the first half of 2006, net
earnings were $198,634,000 (16% above last year) and EPS was $2.92
(15% above last year), in accordance with U.S. GAAP. Adjusted net
earnings for the first half of 2006 were $198,577,000 and adjusted
EPS was $2.92 per share. The adjusted net earnings exclude a stock
option charge that was not required in 2005 increasing net earnings
by $3,846,000 and exclude income for a portion of a one-time refund
received from U.S. Customs decreasing net earnings by $3,903,000.
The change of accounting from LIFO to FIFO improved first quarter
2006 net earnings by $8,001,000. Net sales for the first half of
2006 were $3,983,229,000, representing a 28% increase over 2005.
This increase is attributable to the Unilin acquisition, strong
hard surface sales growth, internal growth, price increases and new
patent licenses. In commenting on the quarter results, Jeffrey S.
Lorberbaum, Chairman and CEO, stated, "I am pleased with our second
quarter performance, especially in light of the economic and
industry factors we are facing. Hard surface growth and higher
selling prices positively affected our sales while replacement
demand for carpet remains slow. The change from LIFO to FIFO
inventory accounting removes some uncertainty in predicting future
results. Our Unilin integration is progressing as planned. We
expect to benefit from the many capital projects recently completed
and the introduction of Mohawk-branded laminate in the future. The
Mohawk segment grew sales by 5% with margins improving from the
first quarter. In the second quarter, carpet raw material costs
remained relatively flat, and our suppliers announced increases in
July. In August, Mohawk is implementing selling price increases to
recover these cost changes. Industry sales improved from the first
quarter but were still behind last year in units. Sales trends
continued with the commercial channel and residential construction
channel performing better than the residential replacement channel.
While the economy continues to grow with employment at relatively
high levels, the higher gasoline and energy costs appear to be
impacting consumer behavior. We incurred greater marketing expenses
as a result of a higher level of product introductions due to
carpet raw material changes and the new laminate introductions. Our
expansion of the South Carolina fiber and yarn manufacturing is
complete and running as planned. Overall, quality has improved in
carpet manufacturing and our Six Sigma program continues to expand
with many cost reduction projects across our business. Our Dal-Tile
segment second quarter sales were strong as revenues grew 15% over
2005 from both volume and price increases. We had higher than
normal product introductions, absorbed start-up costs in the
Oklahoma ceramic facility, and had higher energy and transportation
costs. The Mexican ceramic expansion was completed in the first
quarter of the year and is running as planned. The Oklahoma
expansion started production at the end of the second quarter.
These capacity expansions will support our expected future growth
and allow us to produce a greater portion of our sales
requirements. The Unilin segment greatly improved margins from the
previous quarter. This improvement was attributable to seasonally
higher sales in Europe, better product mix and new patent licenses.
Laminate sales in Europe were up and sales to our U.S. distributors
were down as we had anticipated. Our U.S. distributors were able to
substantially reduce their inventories because we now supply them
from our U.S. factory instead of Europe. Our U.S. distributors
reported that sales of our product to their customers were up
versus the prior year. Our U.S. laminate sales should return to a
more normalized level in the third quarter. The initial launch of
Unilin products through the Mohawk channel has received favorable
retailer reception. There will be additional laminate product
introductions through the year. We are managing our balance sheet
with the debt to capitalization ratio improving to 48% after paying
down $161 million of debt during the second quarter. The
organization has many initiatives focused on improving inventory
turns and working capital management. We received a favorable
ruling from the U.S. Supreme Court which vacated the lower court's
prior ruling on the pending class action suit that alleged the
Company suppressed wages by hiring illegal aliens. The Supreme
Court ruled on another case, which may have a positive bearing on
ours. We expect it to take six to twelve months for the lower court
to reconsider the case. We remain confident in our position and
believe the allegations are unfounded." We expect the Mohawk
segment to realize benefit from earlier price increases and capital
investments offset by continued weakness in the residential carpet
business and rising material costs. Dal-Tile investments in sales
and marketing should support future growth in market share. Unilin
results will be more normalized in the third quarter as they move
into the European vacation period when plant maintenance is
performed. After considering these factors, the third quarter
earnings forecast is from $1.76 to $1.85 EPS. This guidance does
not include any future refunds from U.S. Customs. There continues
to be uncertainty in consumer demand, oil prices, interest rates
and the flooring industry. Most economists are predicting slower
GDP growth. We will manage our business through this environment as
we have done in the past. Due to this uncertainty, we are
approaching the end of the year cautiously. 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,"
"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, 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 28, 2006 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 Tuesday, August 1, 2006 by
dialing 1-800-642-1687 for US/local calls and (706) 645-9291 for
international calls and entering Conference ID # 2073625. MOHAWK
INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of
Earnings Data Three Months Ended Six Months Ended (Amounts in
thousands, except July 1, July 2, July 1, July 2, per share data)
2006 2005 2006 2005 Net sales $2,058,123 1,624,692 3,983,229
3,117,914 Cost of sales 1,465,745 1,186,527 2,874,507 2,289,380
Gross profit 592,378 438,165 1,108,722 828,534 Selling, general and
administrative expenses 369,333 271,020 721,776 532,092 Operating
income 223,045 167,145 386,946 296,442 Interest expense 46,123
12,515 86,458 24,391 Other (income) expense, net 3,598 922 6,325
2,926 U.S. Customs refund, net (6,232) - (6,232) - Earnings before
income taxes 179,556 153,708 300,395 269,125 Income taxes 60,043
55,628 101,761 97,383 Net earnings $119,513 98,080 198,634 171,742
Basic earnings per share $1.77 1.47 2.94 2.57 Weighted-average
shares outstanding 67,693 66,811 67,629 66,807 Diluted earnings per
share $1.76 1.45 2.92 2.54 Weighted-average common and dilutive
potential common shares outstanding 68,067 67,504 68,073 67,598
Other Financial Information (Amounts in thousands) Net cash
provided by operating activities $238,181 104,079 342,707 154,780
Depreciation & amortization $69,781 31,497 134,634 63,762
Capital expenditures $37,027 64,832 82,659 99,353 Consolidated
Balance Sheet Data (Amounts in thousands) July 1, July 2, 2006 2005
ASSETS Current assets: Cash $73,398 - Receivables 987,626 775,992
Inventories 1,283,931 1,140,870 Prepaid expenses 134,087 49,125
Deferred income taxes 41,427 55,311 Total current assets 2,520,469
2,021,298 Property, plant and equipment, net 1,904,803 973,627
Goodwill 2,691,910 1,377,349 Intangibles 1,196,310 320,645 Other
assets 34,319 13,055 $8,347,811 4,705,974 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Current portion of
long-term debt $530,626 183,835 Accounts payable and accrued
expenses 1,146,904 757,813 Total current liabilities 1,677,530
941,648 Long-term debt, less current portion 2,596,412 700,000
Deferred income taxes and other long- term liabilities 654,332
226,883 Total liabilities 4,928,274 1,868,531 Total stockholders'
equity 3,419,537 2,837,443 $8,347,811 4,705,974 As of or for the As
of or for the Segment Information Three Months Ended Six Months
Ended (Amounts in thousands) July 1, July 2, July 1, July 2, 2006
2005 2006 2005 Net sales: Mohawk $1,241,992 1,184,914 2,392,538
2,276,260 Dal-Tile 506,914 439,778 980,824 841,654 Unilin 313,765 -
616,395 - Intersegment eliminations (4,548) - (6,528) -
Consolidated net sales $2,058,123 1,624,692 3,983,229 3,117,914
Operating income: Mohawk $98,993 102,399 164,606 173,691 Dal-Tile
74,042 69,291 143,644 127,761 Unilin 59,657 - 99,676 - Corporate
and intersegment eliminations (9,647) (4,545) (20,980) (5,010)
Consolidated operating income $223,045 167,145 386,946 296,442
Assets: Mohawk $2,622,196 2,508,066 Dal-Tile 2,270,910 2,147,812
Unilin 3,353,389 - Corporate and eliminations 101,316 50,096
Consolidated assets $8,347,811 4,705,974 Reconciliation of reported
net earnings to adjusted net earnings Three Months Six Months
(Amounts in thousands, except Ended Ended per share data) July 1,
2006 July 1, 2006 Net earnings reported $119,513 198,634
Adjustments: Stock option expense, net of taxes of $1,255 and
$2,263, respectively 2,104 3,846 U.S. Customs refund, net of taxes
of $2,329 (3,903) (3,903) $117,714 198,577 Adjusted net earnings
per common share (basic) $1.74 2.94 Adjusted net earnings per
common share (diluted) $1.73 2.92 The Company believes it is useful
for itself and investors to review, as applicable, both GAAP
information that includes the stock compensation impact of SFAS
123R and the U.S. Customs refund, and the non-GAAP measure that
excludes such information in order to assess the performance of the
Company's business for planning and forecasting in subsequent
periods. 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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