Mohawk Industries, Inc. Announces First Quarter Earnings
By Mohawk Industries Inc., PRNEWednesday, April 28, 2010
CALHOUN, Georgia, April 29, 2010 - Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 first quarter
net earnings of US$21 million and diluted earnings per share (EPS) of US$0.30
which included a restructuring charge of approximately US$4 million primarily
related to manufacturing infrastructure. Excluding the restructuring charge,
net earnings and EPS would have been US$24 million and US$0.35 per share,
respectively. In the first quarter of 2009, the net loss was US$106 million
and loss per share was US$1.55. Excluding the 2009 charges, net earnings and
earnings per share would have been US$10 million and US$0.14 per share,
respectively. Net sales for the first quarter of 2010 were US$1,347 million
which was a 2% increase from 2009 adjusted net sales or a 1% increase with a
constant exchange rate. In the quarter we had four more shipping days or
about a 6% impact. Our cash position and liquidity remain strong with over
US$450 million in cash and a capital structure that supports our business.
In commenting on the first quarter results, Jeffrey S. Lorberbaum,
Chairman and CEO stated, "Our earnings were higher than expected as the
economic cycle has bottomed and we had more favorable cost reductions and
foreign exchange. Our first quarter sales were flat compared to the fourth
quarter due to an improving residential business. During the first quarter,
we have introduced innovative new products, enhanced manufacturing and
distribution processes, reduced the cost structure and improved quality and
productivity throughout the business. We purchased US$200 million of our
bonds in April that will save cash and improve earnings this year. Both
rating agencies upgraded their outlook of Mohawk to stable, in recognition of
our strong cash flow and the improving economy."
Our Mohawk segment net sales were up 2% compared to adjusted sales last
year. The industry is lagging the overall economy as compressed housing
prices reduced consumer remodeling. Consumer tests show our SmartStrand
Sorona carpets are the softest products available in the market place and are
favored by our consumers. Mohawk's Etchware, part of our bio-based
SmartStrand carpet collection, was recently voted the number one carpet
choice by retailers in 2010. Restructurings initiated in 2009 in both carpet
and backing plants are substantially complete and are generating cost savings
in the business. The 4-6% carpet price increase announced in December will be
fully implemented in the second quarter. All our raw materials have increased
further than we anticipated in the first quarter with commodity and
transportation costs continuing to rise. Consistent with past changes in
costs, we have recently announced an additional carpet price increase of 5-7%
to recover the change in material costs.
Our Dal-Tile sales were down 5% in the quarter due to the impact of new
home construction and the commercial market in the ceramic business. Our
market share remains strong and is about five times larger than our nearest
competitor. Our Reveal Imaging technology creates random patterns only seen
in nature. Using this technology, our new San Michele product offers the
industry's most realistic natural stone visuals and was voted the Best
Ceramic Tile by retailers this year. We have updated our stone tile offering
with additional products at lower price points to satisfy today's value
conscious customer. In the first quarter, the Mexican ceramic industry turned
positive growing 3% and we continued to outpace the industry improving our
market share. Process improvements in tile manufacturing have resulted in
increased productivity and quality. New investments have increased capacity
and reduced costs in color mixing, glaze and trim production.
Unilin sales improved 14% as reported or 9% on a constant exchange rate.
Our operating margin for the quarter was 9% and the EBITDA margin was
approximately 21%. Our European business in the period performed better than
the fourth quarter even with more severe weather affecting business and
difficulty in some local economies. We saw improvements in some Western
European markets as well as Russia. In the U.S., business conditions appear
to have bottomed and our customers are more optimistic about the future. In
Europe, sales of our two meter laminate planks are continuing to grow as a
premium alternative. New products using our GenuEdge technology have the most
natural wood looks ever introduced in the laminate flooring category. We are
testing new printing technology for high end laminate products that do not
use a printed paper layer like most products today. Demand for our board
products continues to improve and is increasing capacity utilization of our
plants. We have implemented price increases on boards during the first
quarter but raw materials have escalated faster than our prices. We are
continuing to raise board prices further in the second quarter which should
improve margins in the future.
The residential category is expected to improve as we proceed through the
year while the commercial business is expected to remain difficult. This year
we have already increased prices of carpet, wood flooring, boards and vinyl.
We are presently implementing a second price increase in both carpet and
board products to offset material inflation but the lag will negatively
impact the second quarter. The future periods should improve as we come out
of our seasonally slower first quarter. Our second quarter guidance for
earnings is US$0.60-US$0.68 per share which excludes the cost of purchasing
our bonds.
The infrastructure improvements, cost reductions and product innovations
we have implemented will benefit us as we move through the year. We are well
positioned to take advantage of the economic recovery which is just
beginning. Our balance sheet remains strong and our capital structure has
ample liquidity to allow financial flexibility. We are committed to deliver
sustainable growth and increase the value of our company over the long term.
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.
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, 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, April 30, 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 # 68016043. A
conference call replay will also be available until May 14, 2010 by dialing
+1-800-642-1687 for US/local calls and +1-706-645-9291 for
International/Local calls and entering Conference ID # 68016043.
(All amounts in U.S. dollars unless otherwise noted)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations Three Months Ended
------------------
(Amounts in thousands, except per share April 3, March 28,
data) 2010 2009
--------- ----------
Net sales $1,347,236 1,208,339
Cost of sales 1,005,990 1,054,650
--------------------------------------- --------- ---------
Gross profit 341,246 153,689
Selling, general and administrative
expenses 287,625 299,573
----------------------------------- ------- -------
Operating income (loss) 53,621 (145,884)
Interest expense 33,908 30,184
Other (income) expense, net (3,799) 2,615
--------------------------- ------ -----
Earnings (loss) before income taxes 23,512 (178,683)
Income tax expense (benefit) 2,974 (72,796)
--------------------------- ------- --------
Net earnings (loss) $20,538 (105,887)
------------------- ------- --------
Basic earnings (loss) per share $0.30 (1.55)
------------------------------- ----- -----
Weighted-average common shares
outstanding - basic 68,523 68,433
------------------------------ ------ ------
Diluted earnings (loss) per share $0.30 (1.55)
--------------------------------- ----- -----
Weighted-average common shares
outstanding - diluted 68,730 68,433
------------------------------ ------ ------
Other Financial Information
(Amounts in thousands)
Net cash (used in) provided by
operating activities $(46,192) 37,919
------------------------------ -------- ------
Depreciation and amortization $76,798 67,680
----------------------------- ------- ------
Capital expenditures $23,309 27,093
-------------------- ------- ------
Consolidated Balance Sheet Data
(Amounts in thousands)
April 3, March 28,
2010 2009
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $452,335 136,552
Receivables, net 788,124 784,677
Inventories 932,785 985,463
Prepaid expenses 109,968 128,413
Deferred income taxes and other current
assets 160,246 191,516
--------------------------------------- ------- -------
Total current assets 2,443,458 2,226,621
Property, plant and equipment, net 1,719,051 1,867,072
Goodwill 1,377,518 1,368,552
Intangible assets, net 736,353 799,927
Deferred income taxes and other non-
current assets 42,520 25,464
------------------------------------ ------ ------
$6,318,900 6,287,636
---------- ---------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $551,426 137,501
Accounts payable and accrued expenses 859,690 828,397
------------------------------------- ------- -------
Total current liabilities 1,411,116 965,898
Long-term debt, less current portion 1,303,437 1,843,612
Deferred income taxes and other long-
term liabilities 452,858 486,704
------------------------------------- ------- -------
Total liabilities 3,167,411 3,296,214
----------------- --------- ---------
Total equity 3,151,489 2,991,422
------------ --------- ---------
$6,318,900 6,287,636
---------- ---------
Segment Information As of or for the Three Months Ended
-----------------------------------
April 3, March 28,
(Amounts in thousands) 2010 2009
--------- ----------
Net sales:
Mohawk $716,583 594,331
Dal-Tile 341,396 358,478
Unilin 305,880 268,466
Intersegment sales (16,623) (12,936)
---------------------- ---------- ---------
Consolidated net sales $1,347,236 1,208,339
---------------------- ---------- ---------
Operating income (loss):
Mohawk $16,628 (179,055)
Dal-Tile 15,395 21,129
Unilin 26,458 14,552
Corporate and eliminations (4,860) (2,510)
------------------------------------ ------- --------
Consolidated operating income (loss) $53,621 (145,884)
------------------------------------ ------- --------
Assets:
Mohawk $1,673,264 1,773,447
Dal-Tile 1,568,605 1,662,595
Unilin 2,525,731 2,577,698
Corporate and eliminations 551,300 273,896
------------------- ---------- ---------
Consolidated assets $6,318,900 6,287,636
------------------- ---------- ---------
Reconciliation of Net Sales to Adjusted Net Sales
(Amounts in thousands)
Three Months Ended
------------------
April 3, 2010 March 28, 2009
------------- --------------
Net sales $1,347,236 1,208,339
Add: Commercial carpet tile reserve - 110,224
Less: Exchange rate 16,411 -
Less: Impact of four additional
shipping days 88,638 -
------------------ ---------- ---------
Adjusted net sales $1,242,187 1,318,563
------------------ ---------- ---------
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
(Amounts in thousands)
Three Months Ended
------------------
April 3, 2010 March 28, 2009
------------- --------------
Mohawk segment
Net sales $716,583 594,331
Add: Commercial carpet tile reserve - 110,224
------------------ -------- -------
Adjusted net sales $716,583 704,555
------------------ -------- -------
Unilin segment
Net sales $305,880 268,466
Less: Exchange rate 12,349 -
------------------ -------- -------
Adjusted net sales $293,531 268,466
------------------ -------- -------
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
------------------
April 3, 2010 March 28, 2009
------------- --------------
Net earnings (loss) $20,538 (105,887)
Unusual charges:
Add: Commercial carpet tile reserve - 122,492
Add: FIFO Inventory - 61,794
Add: Business restructurings 4,004 3,857
Add: Income taxes (469) (72,435)
--------------------- ------- -----
Adjusted net earnings $24,073 9,821
--------------------- ------- -----
Adjusted diluted earnings per share $0.35 0.14
Weighted-average common shares
outstanding - diluted 68,730 68,550
Reconciliation of Unilin Segment Operating Income to Unilin Segment
EBITDA
(Amounts in thousands)
Three Months
Ended
------------
EBITDA reconciliation April 3, 2010
--------------------- -------------
Operating income $26,458
Add: Other income 393
Add: Depreciation and amortization 37,748
----------------------------------- ------
EBITDA $64,599
------ -------
EBITDA margin 21%
Reconciliation of Total Debt to Net Debt
(Amounts in thousands)
Three Months
Ended
------------
April 3, 2010
-------------
Current portion of long-term debt $551,426
Long-term debt, less current portion 1,303,437
Less: Cash and cash equivalents 452,335
-------- ----------
Net Debt $1,402,528
-------- ----------
Reconciliation of Total Debt and Equity to Total Capitalization
(Amounts in thousands)
Three Months
Ended
------------
April 3, 2010
-------------
Current portion of long-term debt $551,426
Long-term debt, less current portion 1,303,437
Total equity 3,151,489
------------
Total Capitalization $5,006,352
-------------------- ----------
Net Debt to Capitalization 28%
Reconciliation of Operating Income to Adjusted EBITDA
(Amounts in thousands)
Trailing
Twelve
Months
Three Months Ended Ended
------------------------------------ ---------
Adjusted EBITDA June 27, Sept. 29, Dec. 31, April 3, April 3,
reconciliation 2009 2009 2009 2010 2010
---- ---- ---- ---- ----
Operating income $74,678 68,071 46,865 53,621 243,235
Add: Other income
(expense) 4,622 610 (1,509) 3,799 7,522
Add: Depreciation and
amortization 77,062 76,435 81,827 76,798 312,122
Add: Commercial carpet
Tile reserve - - 11,000 - 11,000
Add: Business
restructurings 12,060 16,019 29,787 4,004 61,870
--------------- -------- ------- ------- ------- -------
Adjusted EBITDA 168,422 161,135 167,970 138,222 635,749
--------------- -------- ------- ------- ------- -------
Net Debt to Adjusted
EBITDA 2.2
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.
Frank H. Boykin, Chief Financial Officer, +1-706-624-2695
Tags: April 29, Calhoun, georgia, Mohawk Industries Inc., Scandinavia, Western Europe
