MHK Mohawk Industries Inc

CALHOUN, Ga., Feb. 22, 2011 /CNW/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 fourth quarter net earnings of $46 million and diluted earnings per share (EPS) of $0.66. For the fourth quarter of 2009, the net earnings were $20 million and EPS was $0.29. Excluding unusual items, 2009 fourth quarter net earnings and EPS were $39 million and $0.56 per share. Net sales for the fourth quarter of 2010 were $1.3 billion which was a decrease of approximately 6% versus 2009. Net sales for the quarter increased 2% over the prior year on a constant days and exchange rate basis. For the full year of 2010, our net earnings were $185 million and EPS was $2.65. For the full year of 2009, our net loss was $5 million and loss per share was $0.08. Net sales for the full year of 2010 were $5.3 billion representing a slight decrease from 2009. On a constant exchange rate and excluding 2009 sales adjustments, net sales decreased 2%. Our cash position and liquidity remain strong with over $500 million available immediately after retiring $300 million of bonds in January 2011. Commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings exceeded our expectations as results were positively impacted by enhanced manufacturing efficiencies, benefits from restructuring actions, reducing SG&A costs and improved process consistency. Our operating margin of 6.8% continues to show improvement compared to last year despite rising raw material costs. During 2010, our emphasis on innovation, new products, manufacturing improvements and cost reduction have benefited our margins and increased earnings. Investments in the Russian, Chinese and Mexican flooring markets are expanding our international presence and will provide platforms for future revenue and profit growth. The consensus among economists is that these markets will outperform the more mature U.S. and Western European flooring markets. The U.S. industry decline experienced over the past few years appears to have bottomed with some markets showing signs of improvement." After adjusting for the lower number of days in the quarter, our Mohawk segment net sales decreased 3% but achieved the highest operating margin in two years despite increasing raw material costs. Manufacturing costs, material yields and process controls have improved from last year. Our market position, after adjusting for the number of days in the period, stabilized in the fourth quarter as we accelerated key introductions in new residential polyester carpets and commercial carpet tile products. We implemented a 7-10% carpet price increase in February to offset our raw material inflation. Sales of our commercial carpet tile continue to grow supported by a broader product offering and an expanded sales force. Improved planning and inventory processes have enhanced our service levels, reducing delivery time and costs. Our Dal-Tile segment net sales declined 4% as reported but increased 4% after adjusting for the lower number of days this period and a constant exchange rate. In the fourth quarter, we began implementing a price increase of 1-2% to cover rising transportation costs. We have added sales personnel focusing on large commercial accounts and housing contractors to maximize participation in these improving markets. Dal-Tile is leading the industry with advances in decorating technologies created by our Reveal Imaging. We are introducing products that have greater distinction between individual tiles, stronger natural visuals and new textures. We are increasing our Mexican sales and customer base by expanding our product selection and sales force. Our joint venture in China is broadening its product offering, implementing new production technology and supplying tile to existing Mohawk markets. The investment in China will position us long term to take advantage of this growing market. Our Unilin revenues were flat in the period as reported, but increased 14% after adjusting for the number of days in the period and the exchange rate. Our margins remain compressed as our material costs have continued to escalate. We implemented price increases in our board products in the fourth quarter and are executing additional price increases in boards, laminate and roofing in the first quarter to recover continued inflation and improve margins. Our laminate flooring business is increasing with Northern Europe, Russia and Asia out-performing. We are expanding our home center participation by leveraging our technology and styling leadership. The introduction of new furniture finishes and high definition technology continues to affirm our leadership in laminate technology. We are proceeding with construction of our Russian laminate plant and expanding our Malaysian wood manufacturing. The economic recovery and stronger consumer spending will positively impact our industry in 2011. The seasonally slow first quarter is being affected by harsh weather and increasing raw material costs offsetting savings from our cost initiatives. The Chinese joint venture's extended holiday shutdown will unfavorably impact our first quarter. The residential remodeling market should improve with increased consumer spending and higher home sales. Commercial remodeling is growing as businesses invest to maximize their operating results. For the balance of 2011, we anticipate an improvement in our results as price increases are implemented, volume expands and the recovery continues. With these factors, our first quarter guidance for earnings is $0.36 to $0.44 per share, excluding restructuring charges. We remain committed to enhancing our organization to drive innovation in product, processes and costs. Advances in our marketing, product introductions, manufacturing efficiencies, and service should yield higher profitability. This year, a higher level of capital investments will improve productivity, support new product development and expand our global reach. 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 Wednesday, February 23, 2011 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 # 38370453. A conference call replay will also be available until March 9, 2011 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 38370453. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Operations Three Months Ended ------------------ (Amounts in thousands, except per December 31, December 31, share data) 2010 2009 ------------- ------------- Net sales $1,262,198 1,347,108 Cost of sales 920,532 1,005,414 --------------------------------- ------- --------- Gross profit 341,666 341,694 Selling, general and administrative expenses 256,026 294,829 ----------------------------------- ------- ------- Operating income 85,640 46,865 Interest expense 30,166 34,527 Other (income) expense, net (1,324) 1,509 --------------------------- ------ ----- Earnings (loss) before income taxes 56,798 10,829 Income tax expense (benefit) 11,040 (8,950) Net earnings (loss) $45,758 19,779 ------------------- ------- ------ Basic earnings (loss) per share (1) $0.67 0.29 ----------------------------------- ----- ---- Weighted-average common shares outstanding - basic 68,612 68,472 ------------------------------ ------ ------ Diluted earnings (loss) per share (1) $0.66 0.29 --------------------------------- ----- ---- Weighted-average common shares outstanding - diluted 68,843 68,682 ------------------------------ ------ ------ (1) Basic and diluted earnings per share for the twelve months ended December 31, 2010, includes a decrease of approximately $0.04 and $0.05, respectively, for an adjustment to the fair value of a redeemable noncontrolling interest in a consolidated subsidiary of the Company. Other Financial Information (Amounts in thousands) Net cash provided by operating activities $109,318 259,611 ------------------------------ -------- ------- Depreciation and amortization $74,522 81,827 ----------------------------- ------- ------ Capital expenditures $69,940 37,644 -------------------- ------- ------ Consolidated Statement of Operations Twelve Months Ended ------------------- (Amounts in thousands, except per December 31, December 31, share data) 2010 2009 ------------- ------------- Net sales 5,319,072 5,344,024 Cost of sales 3,916,472 4,111,794 --------------------------------- --------- --------- Gross profit 1,402,600 1,232,230 Selling, general and administrative expenses 1,088,431 1,188,500 ----------------------------------- --------- --------- Operating income 314,169 43,730 Interest expense 133,151 127,031 Other (income) expense, net (7,166) (1,108) --------------------------- ------ ------ Earnings (loss) before income taxes 188,184 (82,193) Income tax expense (benefit) 2,713 (76,694) Net earnings (loss) 185,471 (5,499) ------------------- ------- ------ Basic earnings (loss) per share (1) 2.66 (0.08) ----------------------------------- ---- ----- Weighted-average common shares outstanding - basic 68,578 68,452 ------------------------------ ------ ------ Diluted earnings (loss) per share (1) 2.65 (0.08) --------------------------------- ---- ----- Weighted-average common shares outstanding - diluted 68,784 68,452 ------------------------------ ------ ------ (1) Basic and diluted earnings per share for the twelve months ended December 31, 2010, includes a decrease of approximately $0.04 and $0.05, respectively, for an adjustment to the fair value of a redeemable noncontrolling interest in a consolidated subsidiary of the Company. Other Financial Information (Amounts in thousands) Net cash provided by operating activities 319,712 672,205 ------------------------------ ------- ------- Depreciation and amortization 296,773 303,004 ----------------------------- ------- ------- Capital expenditures 156,180 108,925 -------------------- ------- ------- Consolidated Balance Sheet Data (Amounts in thousands) December 31, December 31, 2010 2009 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $354,217 531,458 Restricted cash 27,954 - Receivables, net 614,473 673,931 Inventories 1,007,503 892,981 Prepaid expenses 91,731 108,947 Deferred income taxes and other current assets 152,735 151,683 ------------------------------- Total current assets 2,248,613 2,359,000 Property, plant and equipment, net 1,687,124 1,791,412 Goodwill 1,369,394 1,411,128 Intangible assets, net 677,127 785,342 Deferred income taxes and other non-current assets 116,668 44,564 ------------------------------- ------- ------ $6,098,926 6,391,446 ---------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $350,588 52,907 Accounts payable and accrued expenses 698,326 831,115 ---------------------------- ------- ------- Total current liabilities 1,048,914 884,022 Long-term debt, less current portion 1,302,994 1,801,572 Deferred income taxes and other long-term liabilities 440,021 471,570 ------------------------------- ------- ------- Total liabilities 2,791,929 3,157,164 ----------------- --------- --------- Noncontrolling interest 35,441 33,459 ----------------------- ------ ------ Total stockholders' equity 3,271,556 3,200,823 -------------------------- --------- --------- $6,098,926 6,391,446 ---------- --------- As of or for the Three Segment Information Months Ended ---------------------- December 31, December 31, (Amounts in thousands) 2010 2009 ------------- ------------- Net sales: Mohawk $667,230 738,716 Dal-Tile 317,354 329,985 Unilin 297,415 298,331 Intersegment sales (19,801) (19,924) Consolidated net sales $1,262,198 1,347,108 ---------------------- ---------- --------- Operating income (loss): Mohawk $48,804 16,269 Dal-Tile 19,902 11,528 Unilin 20,864 25,331 Corporate and eliminations (3,930) (6,263) Consolidated operating income $85,640 46,865 ---------------------- ------- ------ Assets: Mohawk Dal-Tile Unilin Corporate and eliminations Consolidated assets ------------------- As of or for the Twelve Segment Information Months Ended ----------------------- December 31, December 31, (Amounts in thousands) 2010 2009 ------------- ------------- Net sales: Mohawk 2,844,876 2,856,741 Dal-Tile 1,367,442 1,426,757 Unilin 1,188,274 1,128,315 Intersegment sales (81,520) (67,789) Consolidated net sales 5,319,072 5,344,024 ---------------------- --------- --------- Operating income (loss): Mohawk 122,904 (125,965) Dal-Tile 97,334 84,154 Unilin 114,298 105,953 Corporate and eliminations (20,367) (20,412) Consolidated operating income 314,169 43,730 ---------------------- ------- ------ Assets: Mohawk $1,637,319 1,582,652 Dal-Tile 1,644,448 1,546,393 Unilin 2,475,049 2,598,182 Corporate and eliminations 342,110 664,219 ------- Consolidated assets $6,098,926 6,391,446 ------------------- ---------- --------- Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted Diluted Earnings Per Share (Amounts in thousands, except per share data) Three Months Ended ------------ December 31, 2009 ------------- Net earnings $19,779 Unusual items: Business restructurings 29,787 Income taxes (10,872) Adjusted net earnings $38,694 --------------------- ------- Adjusted diluted earnings per share $0.56 Weighted-average common shares outstanding - diluted 68,682 Reconciliation of Net Sales to Adjusted Net Sales (Amounts in thousands) Three Months Ended ------------------ December 31, December 31, 2010 2009 ------------- ------------- Net sales $1,262,198 1,347,108 Adjustments to net sales Commercial carpet tile reserve - - Impact of shipping days 95,145 - Exchange rate 18,557 - Adjusted net sales $1,375,900 1,347,108 ------------------ ---------- --------- Twelve Months Ended ------------------- December 31, December 31, 2010 2009 ------------- ------------- Net sales 5,319,072 5,344,024 Adjustments to net sales Commercial carpet tile reserve - 121,224 Impact of shipping days - - Exchange rate 36,588 - Adjusted net sales 5,355,660 5,465,248 ------------------ --------- --------- Reconciliation of Segment Net Sales to Adjusted Segment Net Sales (Amounts in thousands) Three Months Ended ------------------ December 31, December 31, Mohawk segment 2010 2009 ------------- ------------- Net sales $667,230 738,716 Adjustments to net sales Impact of shipping days 46,100 - Adjusted net sales $713,330 738,716 ------------------ -------- ------- Dal-Tile segment Net sales $317,354 329,985 Adjustments to net sales Impact of shipping days 26,445 - Exchange rate (1,592) - Adjusted net sales $342,207 329,985 ------------------ -------- ------- Unilin segment Net sales $297,415 298,331 Adjustments to net sales Impact of shipping days 22,600 - Exchange rate 20,149 - Adjusted net sales $340,164 298,331 ------------------ -------- ------- Reconciliation of Gross Profit to Adjusted Gross Profit (Amounts in thousands) Three Months Ended ------------------ December 31, December 31, 2010 2009 ------------- ------------- Gross profit $341,666 341,694 Adjustments to gross profit Business restructurings - 22,295 Adjusted gross profit $341,666 363,989 --------------------- -------- ------- Adjusted gross margin as a percent of net sales 27.1% 27.0% Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses (Amounts in thousands) Three Months Ended ------------------ December 31, December 31, 2010 2009 ------------- ------------- Selling, general and administrative expenses $256,026 294,829 Adjustments to selling, general and administrative expenses Business restructurings - 7,492 Adjusted selling, general and administrative expenses $256,026 302,321 ----------------------------- -------- ------- Adjusted selling, general and administrative expenses as a percent of net sales 20.3% 22.4% Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands) Three Months Ended ------------------ December 31, December 31, 2010 2009 ------------- ------------- Operating income $85,640 46,865 Adjustments to operating income Business restructurings - 29,787 Adjusted operating income $85,640 76,652 ------------------------- ------- ------ Adjusted operating margin as a percent of net sales 6.8% 5.7% Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands) Three Months Ended ------------------ December 31, December 31, Mohawk segment 2010 2009 -------------- ------------- ------------- Operating income $48,804 16,269 Adjustments to operating income Business restructurings - 20,189 Adjusted operating income $48,804 36,458 ------------------------- ------- ------ Adjusted operating margin as a percent of net sales 7.3% 4.9% Dal-Tile segment ---------------- Operating income $19,902 11,528 Adjustments to operating income Add: Business restructurings - 9,598 Adjusted operating income $19,902 21,126 ------------------------- ------- ------ Adjusted operating margin as a percent of segment net sales 6.3% 6.4% 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. Frank H. Boykin, Chief Financial Officer, +1-706-624-2695 Web Site: http://www.mohawkind.com

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