Mohawk Industries, Inc. Announces Fourth Quarter Earnings
By Mohawk Industries Inc., PRNEWednesday, February 24, 2010
CALHOUN, Georgia, February 25, 2010 - Mohawk Industries, Inc. (NYSE: MHK) today announced 2009 fourth quarter
net earnings of US$20 million and diluted earnings per share (EPS) of US$0.29
which included a restructuring charge of approximately US$30 million
primarily related to our distribution and manufacturing infrastructure.
Excluding the restructuring charge, net earnings and EPS would have been
US$39 million and US$0.56 per share, respectively. In the fourth quarter of
2008, the net loss was US$128 million and loss per share was US$1.87.
Excluding the 2008 fourth quarter goodwill, intangible and restructuring
charges, net loss and loss per share would have been US$5.1 million and
US$0.08 per share, respectively. Net sales for the 2009 fourth quarter were
US$1,347 million, a decrease of 9% (11% with a constant exchange rate) from
2008. Strong working capital management, reductions in capital spending and
active cost control enabled generation of free cash flow of US$222 million
for the quarter.
For the full year of 2009, our net loss was US$5 million or a net loss
per share of US$0.08. For the full year of 2008, net loss and loss per share
were US$1,458 million and US$21.32 per share, respectively. Net sales for
2009 were US$5,344 million representing a 22% decrease from 2008. The sales
decrease for both the quarter and the year in the U.S. and Europe is
primarily attributable to continuing weak consumer discretionary spending,
low home sales and soft business investment.
In commenting on the fourth quarter results, Jeffrey S. Lorberbaum,
Chairman and CEO stated, "Our fourth quarter earnings exceeded expectations
due to the implementation of cost savings efforts, personnel reductions and
plant consolidations. Our balance sheet is strong with over US$500 million of
cash and a net debt to total capital ratio of 26%. All our segments have
reduced infrastructure and capacity and improved productivity. New products
have been developed in all segments that will enhance our sales and market
position. In spite of the very difficult environment, we are strategically
positioning our company for growth. Our geographic product expansion
continues with enhanced distribution of ceramic tile in Mexico, laminate in
Russia and wood flooring in Western Europe. Environmental sustainability is a
priority and Newsweek recognized Mohawk as one of the top 15 companies in the
consumer product category for our efforts."
Mohawk segment sales were down 8% for the fourth quarter, better than the
industry. We are focused on streamlining the business and reducing costs in
this segment. We have reorganized our commercial carpet manufacturing
operations, consolidated our backing facilities, combined carpet and ceramic
distribution warehousing and further reduced staffing levels. In the first
quarter of 2010, we are implementing a price increase to recover raw material
cost inflation. Our proprietary Smart Strand brand has achieved broad
customer acceptance in the market place as a high value alternative to nylon
and polyester due to its superior softness, enhanced performance and easy
maintenance.
Dal-Tile sales for the fourth quarter were down 20% as reported or 21%
with a constant exchange rate. Dal-Tile continues to outperform the market
with our broad product offering and market saturation. The commercial
industry decline is impacting our ceramic business more significantly than
other segments. Dal-Tile's leading design, superior quality and extensive
distribution infrastructure distinguish us from the market. We have
introduced "Out Stand," a new technology for the commercial market, with a
60% recycled content, more durable surface, better stain resistance and
anti-microbial protection. We have expanded our position in the Home Centers
and the Mexican market with product innovation and superior service. We have
increased our operational efficiency and lowered our costs through process
innovation and consolidation initiatives, including the closing of our Dallas
ceramic tile manufacturing operation.
Unilin sales increased 2% for the quarter as reported and decreased 7% on
a constant exchange rate. Our operating margin for the quarter was 9% and the
EBITDA margin was approximately 22%. Although business conditions are
difficult for Europe and the U.S., we believe the category has reached the
bottom of the cycle. It is our view that the European market could improve
more rapidly than the U.S. since European consumers generally rely less on
credit and housing has not contracted as severely. We are pursuing multiple
strategies to maximize our laminate sales including, new product
introductions at lower prices, additional technological innovation,
geographic expansion and growth in the DIY channel. We plan to develop
business through the local distribution we acquired in the U.K. in 2009,
continued growth of our European wood flooring business with an expanded
product offering and increased presence in Russia with local manufacturing.
Unilin has implemented many cost reductions to lower SG&A, reduce
manufacturing costs and manage inventory levels while further investing in
product innovation.
The first quarter is seasonally the slowest quarter of the year. The
residential category should improve during the year while the commercial
category still faces significant headwinds. We are implementing a price
increase on carpet and wood products to offset rising material costs but the
lag in implementation will negatively impact the first quarter. Interest
costs this year will be higher primarily due to rates increasing from our new
agreement. Our first quarter guidance for earnings is US$0.10-US$0.20 per
share excluding restructuring charges.
The economy improved in the fourth quarter and continued growth is
expected throughout 2010. After our seasonally slower first quarter, future
periods should improve as we move through the year. The improvements we have
implemented throughout our business and the realization of price increases
will benefit us in future quarters. Our business is financially strong,
committed to ongoing process improvement and maximizing our long term
results.
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, February 26, 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 # 49764409. A
conference call replay will also be available until March 12, 2010 by dialing
800-642-1687 for US/local calls and +1-706-645-9291 for International/Local
calls and entering Conference ID # 49764409.
(All currency is in US Dollars unless noted otherwise)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
---------------------------- ----------------------------
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
------------ ------------ ------------ ------------
Net sales $1,347,108 1,485,172 5,344,024 6,826,348
Cost of sales 1,005,414 1,129,210 4,111,794 5,088,584
------------------------------------------------------------------------
Gross profit 341,694 355,962 1,232,230 1,737,764
Selling, general
and
administrative
expenses 294,829 324,892 1,188,500 1,318,501
Impairment of
goodwill and
other
intangibles - 124,485 - 1,543,397
------------------------------------------------------------------------
Operating income
(loss) 46,865 (93,415) 43,730 (1,124,134)
Interest expense 34,527 30,001 127,031 127,050
Other expense
(income), net 1,509 18,352 (1,108) 26,982
------------------------------------------------------------------------
Earnings (loss)
before income
taxes 10,829 (141,768) (82,193) (1,278,166)
Income tax
(benefit)
expense (8,950) (14,153) (76,694) 180,062
------------------------------------------------------------------------
Net earnings
(loss) $19,779 (127,615) (5,499) (1,458,228)
-----------------------------------------------------------------------
Basic earnings
(loss) per
share $0.29 (1.87) (0.08) (21.32)
------------------------------------------------------------------------
Weighted-average
common shares
outstanding -
basic 68,472 68,416 68,452 68,401
------------------------------------------------------------------------
Diluted earnings
(loss) per share $0.29 (1.87) (0.08) (21.32)
------------------------------------------------------------------------
Weighted-average
common shares
outstanding -
diluted 68,682 68,416 68,452 68,401
------------------------------------------------------------------------
Other Financial Information
(Amounts in thousands)
Net cash provided
by operating
activities $259,611 199,107 672,205 576,086
------------------------------------------------------------------------
Depreciation
and
amortization $81,827 69,034 303,004 295,054
------------------------------------------------------------------------
Capital
expenditures $37,644 62,502 108,925 217,824
------------------------------------------------------------------------
Consolidated Balance Sheet Data
(Amounts in thousands)
December 31, December 31,
2009 2008
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $531,458 93,519
Receivables, net 673,931 696,284
Inventories 892,981 1,168,272
Prepaid expenses 108,947 125,603
Deferred income taxes and other
current assets 151,683 162,571
------------------------------------------------------------------------
Total current assets 2,359,000 2,246,249
Property, plant and equipment,
net 1,791,412 1,925,742
Goodwill 1,411,128 1,399,434
Intangible assets, net 785,342 847,850
Deferred income taxes and other
non-current assets 44,564 26,900
------------------------------------------------------------------------
$6,391,446 6,446,175
------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term
debt $52,907 94,785
Accounts payable and accrued
expenses 831,115 782,131
------------------------------------------------------------------------
Total current liabilities 884,022 876,916
Long-term debt, less current
portion 1,801,572 1,860,001
Deferred income taxes and other
long-term liabilities 471,570 524,325
------------------------------------------------------------------------
Total liabilities 3,157,164 3,261,242
------------------------------------------------------------------------
Total equity 3,234,282 3,184,933
------------------------------------------------------------------------
$6,391,446 6,446,175
------------------------------------------------------------------------
Segment Information
(Amounts in thousands)
As of or for the As of or for the
Three Months Ended Year Ended
---------------------------- ---------------------------
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
------------ ------------ ------------ ------------
Net sales:
Mohawk $738,716 800,886 2,856,741 3,628,183
Dal-Tile 329,985 412,780 1,426,757 1,815,373
Unilin 298,331 292,143 1,128,315 1,465,208
Intersegment
sales (19,924) (20,637) (67,789) (82,416)
------------------------------------------------------------------------
Consolidated
net sales $1,347,108 1,485,172 5,344,024 6,826,348
------------------------------------------------------------------------
Operating income
(loss):
Mohawk $16,269 (48,610) (125,965) (216,152)
Dal-Tile 11,528 41,438 84,154 (323,370)
Unilin 25,331 (82,439) 105,953 (564,911)
Corporate and
eliminations (6,263) (3,804) (20,412) (19,701)
------------------------------------------------------------------------
Consolidated
operating
income
(loss) $46,865 (93,415) 43,730 (1,124,134)
------------------------------------------------------------------------
Assets:
Mohawk $1,582,652 1,876,696
Dal-Tile 1,546,393 1,693,765
Unilin 2,598,182 2,663,599
Corporate and eliminations 664,219 212,115
------------------------------------------------------------------------
Consolidated assets $6,391,446 6,446,175
------------------------------------------------------------------------
Reconciliation of Net Sales to Adjusted Net Sales
(Amounts in thousands)
Three Months Ended
-------------------------------------
December 31, 2009 December 31, 2008
----------------- -----------------
Net sales $1,347,108 1,485,172
Add: Exchange rate (27,400) -
-------------------------------------------------------------------------
Adjusted net sales $1,319,708 1,485,172
-------------------------------------------------------------------------
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
(Amounts in thousands)
Three Months Ended
----------------------------------
December 31, December 31,
2009 2008
-------------- ------------
Dal-Tile segment
-------------------------------------------------------------------------
Net sales $329,985 412,780
Add: Exchange rate (1,848) -
-------------------------------------------------------------------------
Adjusted net sales $328,137 412,780
-------------------------------------------------------------------------
Unilin segment
-------------------------------------------------------------------------
Net sales $298,331 292,143
Add: Exchange rate (25,552) -
-------------------------------------------------------------------------
Adjusted net sales $272,779 292,143
-------------------------------------------------------------------------
Reconciliation of Net Earnings (Loss) to Adjusted Net Earnings (Loss)
(Amounts in thousands, except per share data)
Three Months Ended
--------------------------------
December 31, December 31,
2009 2008
------------ ------------
-------------------------------------------------------------------------
Net earnings (loss) $19,779 (127,615)
Add: Impairment of goodwill and
other intangibles - 124,485
Add: Business restructurings 29,787 29,670
Add: Income tax expense (benefit) (10,872) (31,672)
-------------------------------------------------------------------------
Adjusted net earnings (Loss) $38,694 (5,132)
-------------------------------------------------------------------------
Adjusted diluted earnings per share $0.56 (0.08)
Weighted-average common shares
outstanding - diluted 68,682 68,416
Reconciliation of Free Cash Flow
(Amounts in thousands)
Three Months Ended Year Ended
------------------ -----------------
December 31, 2009 December 31, 2009
------------------ -----------------
Net cash provided by operations $259,611 672,205
Less: Net cash used in investing (37,644) (114,849)
Less: Acquisition, net of cash
acquired - 5,924
----------------------------------------------------- -----------------
Free cash flow $221,967 563,280
----------------------------------------------------- -----------------
Reconciliation of Unilin Segment Operating Income to Unilin Segment
EBITDA
(Amounts in thousands)
Three Months Ended
-------------------
December 31, 2009
EBITDA reconciliation
-----------------------------------------------------------
Operating income $25,331
Less: Other expense (1,293)
Add: Depreciation and amortization 41,400
-----------------------------------------------------------
EBITDA $65,438
-----------------------------------------------------------
EBITDA margin 22%
Reconciliation of Total Debt to Net Debt
(Amounts in thousands) As of
-----------------
December 31, 2009
-----------------
Current portion of long-term debt $52,907
Long-term debt, less current portion 1,801,572
Less: Cash and cash equivalents (531,458)
-------------------------------------------------------------------------
Net Debt $1,323,021
-------------------------------------------------------------------------
Reconciliation of Total Debt and Equity to Total Capitalization
(Amounts in thousands) As of
-----------------
December 31, 2009
-----------------
Current portion of long-term debt $52,907
Long-term debt, less current portion 1,801,572
Total equity 3,234,282
-------------------------------------------------------------------------
Total Capitalization $5,088,761
-------------------------------------------------------------------------
Net Debt to Capitalization 26%
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: Calhoun, February 25, georgia, Mohawk Industries Inc., Scandinavia, Western Europe
