MHK Mohawk Industries Inc

CALHOUN, Ga., Feb. 15 /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE:MHK) today announced 2006 fourth quarter net earnings of $129.5 million (30% above last year) and diluted earnings per share (EPS) of $1.90 (29% above last year). The 2006 fourth quarter net earnings include $3.3 million in closing costs for a ceramic plant, $1.8 million for stock options charges not required in the prior year and income of $2.8 million for a partially paid customs refund, all net of taxes. Net sales for the quarter were $1,898.6 million, an increase of 5% from 2005. The sales growth resulted from the Unilin acquisition (completed October 31, 2005), hard surfaces sales growth and price increases. Cash flow from operations and EBITDA during the quarter remained strong at $235.8 million and $303.9 million, respectively. After paying down debt of $602.7 million during the year and $190.9 million during the fourth quarter, debt to EBITDA ratio improved to 2.5 and our debt to capitalization ratio improved to 43%. Working capital also showed improvement over last year. For the year 2006, net earnings were $455.8 million (18% above last year) and EPS were $6.70 (17% above last year). The 2006 net earnings include $3.3 million in closing costs for a ceramic plant, $7.5 million for stock options charges not required in the prior year and income of $12.3 million for a partially paid customs refund, all net of taxes. Net sales for the year were $7,905.8 million, an increase of 19% from 2005. This increase is attributable to the Unilin acquisition, hard surface sales growth, and price increases. In commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated: "Even though the industry remains soft, our business results were good for the quarter. We benefited from strong growth in the Unilin business and business initiatives to reduce costs. Our overall strategy of offering a total flooring solution combined with an expanded geographical presence has positively influenced results. The U.S. flooring industry continued slowing. The residential new construction market and the retail remodeling channel have continued their decline. The commercial channel continues to out perform the residential channel. The Mohawk segment sales were down 6% as industry sales continued to contract. The cost reduction programs put in place last quarter partially offset lower margins which were impacted by higher costs and reduced volume. There continues to be an increased level of promotional activity to stimulate customer activity. Our new and replacement residential carpet sales continued to fall. The commercial channel continued to grow during the quarter with some softening in the high end category as customers have traded down. Our material costs have remained high but could improve if commodity prices soften. There are many initiatives on cost reduction, efficiency and sales growth in process. We continue to review the industry and adjust to the changing environment. Our Dal-Tile segment sales grew 4% during the quarter despite a deteriorating residential market. Dal-Tile is following industry trends with residential sales slowing and commercial sales growing. We are reducing expenses, increasing productivity, and focusing on the commercial and redecorating channels. Our plant expansions were completed and will enhance our position. Margins were impacted by the closing of a high cost ceramic facility and higher transportation costs. Our ceramic business is well positioned for the long-term. The Unilin segment performed above our expectations. Both the European and U.S. markets were strong with a proforma sales increase of 24% using a constant exchange rate. The Mohawk brand laminate continues to increase sales of Unilin products. Operating margins at 20% were higher than anticipated due to volume increases, improved product mix, and later raw material cost increases than anticipated. The Unilin management team continues to produce strong results and has proven to be a positive addition to our business. We received a favorable international trade commission ruling which precluded many importers from bringing laminate products into the U.S. that infringe on patents." The Company is anticipating continued slow U.S. industry sales in the first quarter of 2007 that will impact margins and earnings. It has reduced manufacturing, administration, and marketing expenses based on current industry conditions and will continue to adjust as required. Based on these factors, earnings guidance for the first quarter of 2007 is from $1.01 to $1.10 EPS. This guidance includes refunds of approximately $5 million received from U.S. customs in January 2007. 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, 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, February 16, 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 February 23, 2007 by dialing 1-800-642-1687 for US/local calls and 1-706-645-9291 for International/Local calls and entering Conference ID # 6034022. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Earnings Data Three Months Ended Twelve Months Ended (Amounts in thousands, December December December December except per share data) 31, 2006 31, 2005 31, 2006 31, 2005 Net sales $1,898,594 1,804,551 7,905,842 6,620,099 Cost of sales 1,344,516 1,327,793 5,674,531 4,851,853 Gross profit 554,078 476,758 2,231,311 1,768,246 Selling, general and administrative expenses 324,704 289,718 1,392,251 1,095,862 Operating income 229,374 187,040 839,060 672,384 Interest expense 42,584 31,625 173,697 66,791 Other (income) expense, net 2,108 934 8,488 3,460 U.S. Customs refund, net (4,370) - (19,436) - Earnings before income taxes 189,052 154,481 676,311 602,133 Income taxes 59,561 54,848 220,478 214,995 Net earnings $129,491 99,633 455,833 387,138 Basic earnings per share $1.91 1.48 6.74 5.78 Weighted-average shares outstanding 67,733 67,248 67,674 66,932 Diluted earnings per share $1.90 1.47 6.70 5.72 Weighted-average common and dilutive potential common shares outstanding 68,058 67,860 68,056 67,644 Other Financial Information (Amounts in thousands) Net cash provided by operating activities $235,804 233,511 782,045 561,544 Depreciation & amortization $72,278 55,757 274,952 150,657 Capital expenditures $41,721 96,505 165,769 247,306 Consolidated Balance Sheet Data (Amounts in thousands) December 31, 2006 December 31, 2005 ASSETS Current assets: Cash & cash equivalents $63,492 134,585 Receivables 851,428 848,666 Inventories 1,225,874 1,215,427 Prepaid expenses 138,866 140,789 Deferred income taxes 99,251 49,534 Total current assets 2,378,911 2,389,001 Property, plant and equipment, net 1,888,088 1,810,728 Goodwill 2,699,639 2,621,963 Intangible assets 1,180,094 1,174,097 Other assets 31,662 44,248 $8,178,394 8,040,037 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $576,134 113,809 Accounts payable and accrued expenses 1,019,629 998,105 Total current liabilities 1,595,763 1,111,914 Long-term debt, less current portion 2,207,547 3,194,561 Deferred income taxes and other long- term liabilities 659,821 675,324 Total liabilities 4,463,131 4,981,799 Total stockholders' equity 3,715,263 3,058,238 $8,178,394 8,040,037 As of or for the As of or for the Three Months Ended Twelve Months Ended Segment Information December December December December (Amounts in thousands) 31, 2006 31, 2005 31, 2006 31, 2005 Net sales: Mohawk $1,115,689 1,192,182 4,742,060 4,716,659 Dal-Tile 459,754 443,710 1,941,819 1,734,781 Unilin 327,599 168,814 1,236,918 168,814 Corporate and eliminations (4,448) (155) (14,955) (155) Consolidated net sales $1,898,594 1,804,551 7,905,842 6,620,099 Operating income: Mohawk $112,275 131,180 387,386 426,811 Dal-Tile 57,615 63,296 270,901 260,194 Unilin 64,669 (5,162) 214,093 (5,162) Corporate and eliminations (5,185) (2,274) (33,320) (9,459) Consolidated operating income $229,374 187,040 839,060 672,384 Assets: Mohawk $2,462,420 2,473,497 Dal-Tile 2,257,107 2,207,514 Unilin 3,302,195 3,263,248 Corporate and eliminations 156,672 95,778 Consolidated assets $8,178,394 8,040,037 Reconciliation of EBITDA, debt to EBITDA ratio, Debt to capital percentage and Unilin pro forma sales increase Three Months Ended Twelve Months Ended (Amounts in thousands) December 31, 2006 December 31, 2006 EBITDA reconciliation: Operating income $229,374 839,060 Other expense (2,108) (8,488) U.S. Customs refund, net 4,370 19,436 Depreciation and amortization 72,278 274,952 EBITDA (a) $303,914 1,124,960 Ratio of outstanding debt to EBITDA reconciliation: Outstanding Debt (b) $2,783,681 Ratio of outstanding debt to EBITDA (b)/(a) 2.5 Debt to capital reconciliation: Outstanding Debt (b) $2,783,681 Outstanding Debt $2,783,681 Total stockholders' equity 3,715,263 Total capital (c) $6,498,944 Debt to capital (b)/(c) 43% Three Months Ended Three Months Ended December 31, 2005 December 31, 2006 Unilin proforma sales reconciliation: Net sales reported $327,599 168,814 Unilin net sales prior to acquisition - 76,275 Impact of applying constant foreign exchange rate of $1.28 (1) - 18,266 $327,599 263,355 Proforma net sales percentage change 24% (1) Represents the incremental foreign exchange impact by applying the 2006 fourth quarter exchange rate to the 2005 fourth quarter results. 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. 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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