CALHOUN, Ga., Nov. 4, 2010 /PRNewswire-FirstCall/ -- Mohawk
Industries, Inc. (NYSE: MHK) today announced 2010 third quarter net
earnings of $51 million and diluted
earnings per share (EPS) of $0.74
which included unusual items that were offsetting. For the third
quarter of 2009, the net earnings were $34
million and EPS was $0.50.
Excluding the 2009 unusual items, net earnings and EPS would have
been $44 million and $0.64 per share. Net sales for the third quarter
of 2010 were $1.3 billion which was a
decrease of 5.3% versus 2009 net sales or 3.8% decrease with a
constant exchange rate. We have a strong financial position with
free cash flow of $87 million in the
quarter and an improving net debt to EBITDA ratio of 2.0.
For the first nine months of 2010, our net earnings were
$140 million and EPS was $2.03. Excluding unusual items, net earnings
would have been $128 million and EPS
would have been $1.86. In the first
nine months of 2009, our net loss was $25
million and loss per share was $0.37. Excluding the 2009 unusual items, net
earnings and EPS would have been $108
million and $1.57. Net sales
for the first nine months of 2010 were $4.1
billion representing a 1.5% increase from 2009. On a
constant exchange rate, constant days and excluding 2009 sales
adjustments, net sales decreased 2.9%.
In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated,
"Our earnings were in line with our expectations though the
industry slowdown continued into the third quarter. All of our
businesses were impacted by soft industry conditions during the
quarter. In response, we reduced our operating costs, implemented
product promotions to drive sales, introduced new products to
satisfy market changes and continued our international expansion
strategies in Mexico, China and Russia. Our cost containment and restructuring
initiatives resulted in the lowest SG&A expense in over twelve
quarters. Liquidity remains strong with over $850 million available of which approximately
$300 million will be used to retire
our 2011 bonds."
Our Mohawk segment made progress improving operating margins
excluding restructuring charges, by 34%, however, some of the
progress came at the expense of lower sales which were down 6%. The
margins were benefited by price increases, product mix and
productivity improvements. To improve our position, we have
adjusted prices on specific products, initiated selected promotions
and introduced additional polyester products which are gaining
share. We are seeing higher demand levels in our commercial
business as the remodeling markets improve. Commercial carpet tile
is growing faster and we are expanding our tile assortment with new
styling and broader price points. We are reducing our manufacturing
and administrative costs, increasing service levels, improving
quality and introducing innovative products.
Our Dal-Tile segment net sales were down 5% due to continued
softness in the ceramic markets and the impact of lost production
at our Monterrey, Mexico facility.
We have announced a price increase for selective products to cover
increased transportation costs beginning in November. We introduced
more new products primarily focused on the residential remodeling
with enhanced merchandising to maximize sales and minimize
disruptions from our lost production. Commercial ceramic sales
appear to have reached a cyclical bottom and the health care,
education and institutional channels are outperforming. Our
manufacturing team continues to implement cost savings by
increasing production speeds, improving productivity and utilizing
more local materials. A hurricane in July caused a flash flood
which completely shut down our Monterrey,
Mexico ceramic facility and it is currently operating at
normal levels. The insurance claim for the damage and disruption
was resolved during the quarter with proceeds compensating for
damage, repair, lost sales and margin impact. During the period our
ceramic investment in China was
completed and we have begun developing new products for both the
Chinese and American markets. A new site near Mexico City has been selected for a tile plant
which will begin production of low to medium priced tile in
2012.
Our Unilin segment net sales decreased 2% as reported, but
increased 6% using a constant exchange rate. Business in
Europe improved while conditions
remained difficult in the U.S. markets. Margins declined in the
quarter as prices lagged material costs, U.S. sales slowed and
maintenance expense increased. Our European sales improved in most
markets and products except for roofing systems. Conditions in the
U.S. remain weak and we are stimulating demand with promotions. We
are broadening our distribution with Home Centers and National
accounts by providing fashionable products. In Russia we are expanding our laminate customer
base to support the new flooring plant which should be operational
in mid 2011. Sales of our insulation boards are rising and we
are increasing production to satisfy demand. The plants are
improving productivity and reducing indirect expenses.
The third quarter sales demand and raw material trends are
expected to continue through the fourth quarter. Next year, we
anticipate increased sales growth, higher selling prices and margin
improvement as we gain leverage from the changes we have
implemented in the business. Our fourth quarter guidance for
earnings is $0.53 to $0.63 per share.
The fourth quarter of this year includes four fewer days in the
period compared to last year.
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,
and rugs. These products are marketed under the premier
brands in the industry, which include Mohawk, Karastan, 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 local
distribution.
Certain of the statements in the immediately preceding
paragraphs, particularly anticipating future performance, business
prospects, growth and operating strategies and similar matters and
those that include the words "could," "should," "believes,"
"anticipates," "expects," and "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 costs; timing and level of capital
expenditures; integration of acquisitions; rationalization of
operations; claims; litigation and other risks identified in
Mohawk's SEC reports and public announcements.
There will be a conference call Friday,
November 5, 2010 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. Conference ID # 15970034. A conference
call replay will also be available until November 19, 2010 by dialing 800-642-1687 for
US/local calls and 706-645-9291 for International/Local calls and
entering Conference ID # 15970034.
MOHAWK INDUSTRIES, INC. AND
SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of
Operations
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
(Amounts in thousands, except
per share data)
|
October 2,
2010
|
|
September
26, 2009
|
|
October 2,
2010
|
|
September
26, 2009
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
1,309,552
|
|
1,382,565
|
|
4,056,874
|
|
3,996,916
|
|
Cost of sales
|
964,620
|
|
1,013,106
|
|
2,995,940
|
|
3,106,380
|
|
Gross
profit
|
344,932
|
|
369,459
|
|
1,060,934
|
|
890,536
|
|
Selling, general and
administrative expenses
|
259,750
|
|
301,388
|
|
832,405
|
|
893,671
|
|
Operating income
(loss)
|
85,182
|
|
68,071
|
|
228,529
|
|
(3,135)
|
|
Interest expense
|
30,046
|
|
32,318
|
|
102,985
|
|
92,504
|
|
Other income, net
|
(3,471)
|
|
(610)
|
|
(5,842)
|
|
(2,617)
|
|
Earnings (loss)
before income taxes
|
58,607
|
|
36,363
|
|
131,386
|
|
(93,022)
|
|
Income tax expense (benefit)
|
7,513
|
|
2,015
|
|
(8,327)
|
|
(67,744)
|
|
Net earnings
(loss)
|
$
51,094
|
|
34,348
|
|
139,713
|
|
(25,278)
|
|
Basic earnings (loss) per
share
|
$
0.74
|
|
0.50
|
|
2.04
|
|
(0.37)
|
|
Weighted-average common shares
outstanding - basic
|
68,593
|
|
68,456
|
|
68,567
|
|
68,446
|
|
Diluted earnings (loss) per
share
|
$
0.74
|
|
0.50
|
|
2.03
|
|
(0.37)
|
|
Weighted-average common shares
outstanding - diluted
|
68,773
|
|
68,653
|
|
68,764
|
|
68,446
|
|
|
|
|
|
|
|
|
|
|
Other Financial
Information
|
|
|
|
|
|
|
|
|
(Amounts in
thousands)
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
$
121,417
|
|
143,048
|
|
210,394
|
|
412,720
|
|
Depreciation and
amortization
|
$
72,956
|
|
76,435
|
|
222,251
|
|
221,177
|
|
Capital expenditures
|
$
39,101
|
|
18,358
|
|
86,240
|
|
71,281
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
Data
|
|
|
|
|
|
|
|
|
(Amounts in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2010
|
|
September
26, 2009
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
$
365,835
|
|
306,145
|
|
Receivables,
net
|
|
|
|
|
697,491
|
|
832,105
|
|
Inventories
|
|
|
|
|
996,271
|
|
939,478
|
|
Prepaid
expenses
|
|
|
|
|
87,208
|
|
117,367
|
|
Deferred income
taxes and other current assets
|
|
|
|
|
147,397
|
|
164,016
|
|
Total
current assets
|
|
|
|
|
2,294,202
|
|
2,359,111
|
|
Property, plant and equipment,
net
|
|
|
|
|
1,680,541
|
|
1,841,779
|
|
Goodwill
|
|
|
|
|
1,389,057
|
|
1,424,391
|
|
Intangible assets,
net
|
|
|
|
|
710,934
|
|
817,586
|
|
Deferred income taxes and other
non-current assets
|
|
|
|
|
117,176
|
|
45,588
|
|
|
|
|
|
|
$
6,191,910
|
|
6,488,455
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
|
|
|
$
351,486
|
|
53,163
|
|
Accounts payable and
accrued expenses
|
|
|
|
|
779,825
|
|
876,579
|
|
Total
current liabilities
|
|
|
|
|
1,131,311
|
|
929,742
|
|
Long-term debt, less current
portion
|
|
|
|
|
1,303,151
|
|
1,802,138
|
|
Deferred income taxes and other
long-term liabilities
|
|
|
|
|
441,948
|
|
510,486
|
|
Total
liabilities
|
|
|
|
|
2,876,410
|
|
3,242,366
|
|
Total equity
|
|
|
|
|
3,315,500
|
|
3,246,089
|
|
|
|
|
|
|
$
6,191,910
|
|
6,488,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Information
|
As of or for
the Three Months Ended
|
|
As of or for
the Nine Months Ended
|
|
(Amounts in
thousands)
|
October 2,
2010
|
|
September
26, 2009
|
|
October 2,
2010
|
|
September
26, 2009
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
Mohawk
|
$
713,481
|
|
755,904
|
|
2,177,646
|
|
2,118,025
|
|
Dal-Tile
|
345,074
|
|
361,590
|
|
1,050,088
|
|
1,096,772
|
|
Unilin
|
276,594
|
|
281,803
|
|
890,859
|
|
829,984
|
|
Intersegment
sales
|
(25,597)
|
|
(16,732)
|
|
(61,719)
|
|
(47,865)
|
|
Consolidated net sales
|
$
1,309,552
|
|
1,382,565
|
|
4,056,874
|
|
3,996,916
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss):
|
|
|
|
|
|
|
|
|
Mohawk
|
$
31,127
|
|
16,261
|
|
74,100
|
|
(142,234)
|
|
Dal-Tile
|
33,913
|
|
21,166
|
|
77,432
|
|
72,626
|
|
Unilin
|
24,640
|
|
34,929
|
|
93,434
|
|
80,622
|
|
Corporate and
eliminations
|
(4,498)
|
|
(4,285)
|
|
(16,437)
|
|
(14,149)
|
|
Consolidated operating income (loss)
|
$
85,182
|
|
68,071
|
|
228,529
|
|
(3,135)
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Mohawk
|
|
|
|
|
$
1,652,737
|
|
1,697,334
|
|
Dal-Tile
|
|
|
|
|
1,677,957
|
|
1,622,502
|
|
Unilin
|
|
|
|
|
2,542,233
|
|
2,754,233
|
|
Corporate and
eliminations
|
|
|
|
|
318,983
|
|
414,386
|
|
Consolidated assets
|
|
|
|
|
$
6,191,910
|
|
6,488,455
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Earnings
(Loss) to Adjusted Net Earnings and Adjusted Diluted Earnings Per
Share
|
|
(Amounts in thousands, except
per share data)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
October 2,
2010
|
|
September
26, 2009
|
|
October 2,
2010
|
|
September
26, 2009
|
|
Net earnings (loss)
|
$
51,094
|
|
34,348
|
|
139,713
|
|
(25,278)
|
|
Unusual items:
|
|
|
|
|
|
|
|
|
Commercial carpet tile
reserve
|
-
|
|
-
|
|
-
|
|
122,492
|
|
FIFO Inventory
|
-
|
|
-
|
|
-
|
|
61,794
|
|
Business
restructurings
|
3,330
|
|
16,019
|
|
12,263
|
|
31,936
|
|
Debt extinguishment
costs
|
-
|
|
-
|
|
7,514
|
|
-
|
|
Acquisition purchase
accounting
|
1,713
|
|
-
|
|
1,713
|
|
-
|
|
U.S. customs
refund
|
(5,765)
|
|
-
|
|
(5,765)
|
|
-
|
|
Discrete tax items,
net
|
-
|
|
-
|
|
(24,407)
|
|
-
|
|
Income taxes
|
760
|
|
(6,167)
|
|
(2,999)
|
|
(83,004)
|
|
Adjusted net
earnings
|
$
51,132
|
|
44,200
|
|
128,032
|
|
107,940
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per
share
|
$
0.74
|
|
0.64
|
|
1.86
|
|
1.57
|
|
Weighted-average common shares
outstanding - diluted
|
68,773
|
|
68,653
|
|
68,764
|
|
68,606
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Sales to
Adjusted Net Sales
|
|
(Amounts in
thousands)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
October 2,
2010
|
|
September
26, 2009
|
|
October 2,
2010
|
|
September
26, 2009
|
|
Net sales
|
$
1,309,552
|
|
1,382,565
|
|
4,056,874
|
|
3,996,916
|
|
Adjustments to net
sales
|
|
|
|
|
|
|
|
|
Commercial carpet tile
reserve
|
-
|
|
-
|
|
-
|
|
110,224
|
|
Exchange rate
|
20,816
|
|
-
|
|
17,916
|
|
-
|
|
Additional shipping
days
|
-
|
|
-
|
|
(88,638)
|
|
-
|
|
Adjusted net
sales
|
$
1,330,368
|
|
1,382,565
|
|
3,986,152
|
|
4,107,140
|
|
|
|
|
|
|
|
|
|
Reconciliation of Unilin Segment
Net Sales to Adjusted Unilin Segment Net Sales
|
|
(Amounts in
thousands)
|
|
|
|
|
|
Three Months
Ended
|
|
|
October 2,
2010
|
|
September
26, 2009
|
|
Net sales
|
$
276,594
|
|
281,803
|
|
Adjustments to net
sales
|
|
|
|
|
Exchange rate
|
21,960
|
|
-
|
|
Adjusted net
sales
|
$
298,554
|
|
281,803
|
|
|
|
|
|
Reconciliation of Operating Cash
Flow to Free Cash Flow
|
|
(Amounts in
thousands)
|
|
|
Three Months
Ended
|
|
|
October 2,
2010
|
|
Net cash provided by operating
activities
|
$
121,417
|
|
Additions to property, plant and
equipment
|
(39,101)
|
|
Proceeds from insurance
claim
|
4,614
|
|
Free Cash Flow
|
$
86,930
|
|
|
|
Reconciliation of Total Debt to
Net Debt
|
|
(Amounts in
thousands)
|
|
|
Three Months
Ended
|
|
|
October 2,
2010
|
|
Current portion of long-term
debt
|
$
351,486
|
|
Long-term debt, less current
portion
|
1,303,151
|
|
Less: Cash and cash
equivalents
|
365,835
|
|
Net Debt
|
$
1,288,802
|
|
|
|
Reconciliation of Operating
Income to Adjusted EBITDA
|
|
(Amounts in
thousands)
|
|
|
|
|
|
|
|
|
Trailing
Twelve
|
|
|
Three Months
Ended
|
|
Months
Ended
|
|
|
December 31,
2009
|
|
April 3,
2010
|
|
July 3,
2010
|
|
October 2,
2010
|
|
October 2,
2010
|
|
Operating income
|
$
46,865
|
|
53,621
|
|
89,726
|
|
85,182
|
|
275,394
|
|
Other income
(expense)
|
(1,509)
|
|
3,799
|
|
(1,428)
|
|
3,471
|
|
4,333
|
|
Depreciation and
amortization
|
81,827
|
|
76,798
|
|
72,497
|
|
72,956
|
|
304,078
|
|
Commercial carpet tile
reserve
|
11,000
|
|
-
|
|
-
|
|
-
|
|
11,000
|
|
Business
restructurings
|
29,787
|
|
4,004
|
|
4,929
|
|
3,330
|
|
42,050
|
|
Adjusted EBITDA
|
$
167,970
|
|
138,222
|
|
165,724
|
|
164,939
|
|
636,855
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Debt to Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating
Income to Adjusted Operating Income
|
|
(Amounts in thousands, except
per share data)
|
|
|
Three Months
Ended
|
|
|
October 2,
2010
|
|
September
26, 2009
|
|
Operating income
|
$
85,182
|
|
68,071
|
|
Adjustments to operating
income
|
|
|
|
|
Business
restructurings
|
3,330
|
|
16,019
|
|
Adjusted operating
income
|
$
88,512
|
|
84,090
|
|
Adjusted operating
margin
|
6.8%
|
|
6.1%
|
|
|
|
|
|
|
Mohawk segment
|
|
|
|
|
Operating income
|
$
31,127
|
|
16,261
|
|
Adjustments to operating
income
|
|
|
|
|
Business
restructurings
|
1,292
|
|
7,896
|
|
Adjusted operating
income
|
$
32,419
|
|
24,157
|
|
Adjusted operating
margin
|
4.5%
|
|
3.2%
|
|
|
|
|
|
|
Dal-Tile segment
|
|
|
|
|
Operating income
|
$
33,913
|
|
21,166
|
|
Adjustments to operating
income
|
|
|
|
|
Business
restructurings
|
1,223
|
|
8,123
|
|
Adjusted operating
income
|
$
35,136
|
|
29,289
|
|
Adjusted operating
margin
|
10.2%
|
|
8.1%
|
|
|
|
|
|
|
Unilin segment
|
|
|
|
|
Operating income
|
$
24,640
|
|
34,929
|
|
Adjustments to operating
income
|
|
|
|
|
Business
restructurings
|
815
|
|
-
|
|
Adjusted operating
income
|
$
25,455
|
|
34,929
|
|
Adjusted operating
margin
|
9.2%
|
|
12.4%
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
SOURCE Mohawk Industries, Inc.