CALHOUN, Ga., April 23 /PRNewswire-FirstCall/ -- Mohawk Industries,
Inc. (NYSE:MHK) today announced 2009 first quarter sales of $1,208
million, a decrease of 30% from 2008, which includes two fewer days
or 3% less than last year. We had an operating loss of $146 million
in the quarter. A charge of $122 million was recorded for a
discontinued carpet tile backing which included a $110 million
sales allowance and a $12 million inventory reserve. Sales declined
20% excluding the sales allowance on a constant exchange rate with
comparable days. Operating income was $42 million excluding the
carpet tile charge, a $62 million FIFO inventory flow through and a
$4 million restructuring cost. Our loss in the first quarter was
$1.55 per share or $106 million. Based on the current business
environment, all segments anticipate positive operating income in
the second quarter. In commenting on the first quarter results,
Jeffrey S. Lorberbaum, chairman and CEO stated, "In the quarter, we
generated $38 million of operating cash flow which is a $118
million improvement over first quarter 2008. Working capital
improved with inventories declining $183 million during the
quarter. The balance sheet remains strong with a cash balance of
$137 million and credit availability of more than $800 million. The
economic conditions in both U.S. and Europe remain weak in all
channels. Commercial construction and remodeling projects are being
postponed due to the uncertainty in the economy. The government
stimulus, low interest rates, and easing credit should improve the
residential business. All segments continue to focus on cash
generation by reducing infrastructure, operating costs, capital
expenditures and working capital. During the quarter we reduced
production units below sales levels to lower inventories,
negatively impacting overhead absorption. We cut employment levels
by almost 2,000, shut down four operations and reduced warehousing
space about one million square feet." The Mohawk segment sales
declined by 34%. Sales declined 20%, excluding the carpet tile
sales allowance, using comparable days. We have discontinued
Encycle, a carpet tile backing technology, which accounted for less
than 15% of our commercial volume last year. The majority of our
carpet tile products will continue to use our proven vinyl
technology which has exceeded market expectations for over 15
years. At the end of the first quarter, we recognized a higher
trend of incidents occurring on the discontinued backing and
recorded an allowance to cover the estimated costs of remediating
where needed. We have developed a new thermoplastic technology that
is performing well with select customers across the country and we
will increase production over time. We are satisfying our customers
and maintaining our strong relationships. Raw material costs in the
Mohawk segment have remained relatively stable since the end of the
year. Our margins have shown improvement through the quarter
excluding the impact of the charges. Industry pricing has remained
reasonably stable with downward pressure occurring in some specific
areas. Seasonal sales improvements will increase capacity
utilization and second quarter results should be positive. We
reduced headcount by over 1,000 and closed two plants during the
period to adjust to the lower demand levels. We have made
reductions in selling, administrative, marketing and distribution
expenses to align the business structure with demand. New product
introductions are being delivered to our customers and should
positively impact our sales and margins. The FTC just approved the
first new carpet fiber since nylon was approved fifty years ago
which we use in our SmartStrand and Sorona products confirming the
premium attributes of better durability, stain resistance and
softness. The Dal-Tile segment sales were down 20% during the
quarter, or 16% on a constant exchange rate with comparable days.
Our commercial sales continue to decline as business investment
deteriorated in the period. We believe our overall market position
has improved as our product distribution provided value to our
customers. Higher unabsorbed overhead costs compressed margins as
we reduced production and inventory. In addition, our distribution
and selling costs were deleveraged due to the lower volume. We
continue to reduce our sales, marketing, administrative and
distribution infrastructure. We are consolidating several low
volume service centers, reducing staffing and renegotiating rents
in many locations. We have improved our manufacturing productivity,
product yields and distribution costs. We are introducing an
engineered stone program for indoor and outdoor uses and a new wood
program that our architectural representatives will specify. We are
expanding our distribution and product line in the Mexican market
which is performing better than the U.S. market. Unilin sales
declined 34% as reported or 24% on a constant exchange rate with
comparable days. The rate of decline was more challenging in the
first quarter than earlier periods with the economic slowdown
becoming more difficult and customers reducing their inventories.
Our U.S. and European laminate business reflected a slight
improvement in the latter part of the quarter due to the positive
acceptance of our new introductions reaching the market. The
Russian flooring market continues to perform better than the rest
of Europe and we began to inventory our product locally to improve
our service and expand our customer base. We have signed additional
license agreements for our patents in the period but our volume
based revenues have contracted with the industry. We temporarily
closed one of our wood flooring plants in the U.S. to adjust
capacity to the demand and recorded a $4 million restructuring
charge. This will reduce production costs of our wood business
until the capacity is required. Seasonal improvements in volume
should increase utilization rates and positively impact all of our
business in the second quarter. All of the segments are expected to
have positive operating income in the second quarter from cost
reductions, lower infrastructure, and reduced material and energy
costs. Based on these factors, our EPS guidance for the second
quarter 2009 is $.43 to $.52 per share. Excluded from this guidance
is an estimated second quarter restructuring charge of
approximately $15 million related to closing facilities, which will
benefit our future operation. We do not see a catalyst for a
significant change in the overall flooring category in the near
term. We are maximizing sales opportunities while managing the cost
structure and working capital. We continue to reduce infrastructure
based on industry conditions and maximize our cash position. When
the recovery begins, we will benefit from the restructurings,
efficiency measures and cost reduction initiatives that have been
implemented. 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. Factors that
could cause future results to differ include changes in economic or
industry conditions; competition; raw material and energy costs and
supply; timing and level of capital expenditures; integration of
acquisitions; impairment charges; rationalization of operations;
claims and 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 24, 2009 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 # 93601795. A conference
call replay will also be available until Friday, May 1, 2009 by
dialing 1-800-642-1687 for US/local calls and 1-706-645-9291 for
International/Local calls and entering Conference ID # 93601795.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of
Operations Three Months Ended (Amounts in thousands, except per
share March 28, 2009 March 29, 2008 data) --------------
-------------- Net sales $1,208,339 1,738,097 Cost of sales
1,054,650 1,278,258 Gross profit 153,689 459,839 Selling, general
and administrative expenses 299,573 335,521 Operating (loss) income
(145,884) 124,318 Interest expense 30,184 33,767 Other (income)
expense, net 2,615 2,779 Earnings (loss) before income taxes
(178,683) 87,772 Income tax (benefit) expense (72,796) 22,382 Net
(loss) earnings $(105,887) 65,390 Basic (loss) earnings per share
$(1.55) 0.96 Weighted-average common shares outstanding - basic
68,433 68,375 Diluted (loss) earnings per share $(1.55) 0.95
Weighted-average common shares outstanding - diluted 68,433 68,579
Other Financial Information (Amounts in thousands) Net cash
provided by (used in) operating activities $37,919 (80,179)
Depreciation & amortization $67,680 73,256 Capital expenditures
$27,093 55,971 Consolidated Balance Sheet Data (Amounts in
thousands) March 28, 2009 March 29, 2008 --------------
-------------- ASSETS Current assets: Cash & cash equivalents
$136,552 73,289 Receivables 784,677 955,325 Inventories 985,463
1,296,424 Prepaid expenses 128,413 135,429 Deferred income taxes
and other assets 191,516 135,407 Total current assets 2,226,621
2,595,874 Property, plant and equipment, net 1,867,072 2,026,058
Goodwill 1,368,552 2,877,671 Intangible assets 799,927 1,211,512
Deferred income taxes and other assets 25,464 306,304 $6,287,636
9,017,419 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current portion of long-term debt $137,501 367,785 Accounts payable
and accrued expenses 828,397 932,856 Total current liabilities
965,898 1,300,641 Long-term debt, less current portion 1,843,612
2,003,013 Deferred income taxes and other long-term liabilities
486,704 731,960 Total liabilities 3,296,214 4,035,614 Total
stockholders' equity 2,991,422 4,981,805 $6,287,636 9,017,419 As of
or for the Segment Information Three Months Ended (Amounts in
thousands) March 28, 2009 March 29, 2008 --------------
-------------- Net sales: Mohawk $594,331 905,044 Dal-Tile 358,478
449,051 Unilin 268,466 403,755 Corporate and eliminations (12,936)
(19,753) Consolidated net sales $1,208,339 1,738,097 Operating
(loss) income: Mohawk $(179,055) 22,241 Dal-Tile 21,129 56,941
Unilin 14,552 49,956 Corporate and eliminations (2,510) (4,820)
Consolidated operating (loss) income $(145,884) 124,318 Assets:
Mohawk $1,773,447 2,410,031 Dal-Tile 1,662,595 2,257,190 Unilin
2,577,698 4,162,172 Corporate and eliminations 273,896 188,026
Consolidated assets $6,287,636 9,017,419 Reconciliation of Net
Sales to Adjusted Net Sales (Amounts in thousands) Three Months
Ended March 28, 2009 --------------------------------- Mohawk
Segment Information Consolidated Mohawk Dal-Tile Unilin
------------ ------- -------- ------ Net sales $1,208,339 594,331
358,478 268,466 Add: Commercial carpet sales allowance 110,224
110,224 - - Add: Exchange rate 35,664 - 6,026 29,638 Add: Change in
days in quarter 44,401 23,100 11,951 9,774 Adjusted net sales
$1,398,628 727,655 376,455 307,878 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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