omniture

Mohawk Industries, Inc. Announces Third Quarter Earnings

2010-11-05 04:52 1655

    CALHOUN, Ga., Nov. 5, 2010 /PRNewswire-Asia/ -- 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
                                             ------------------
    (Amounts in thousands, except per     October 2,       September
     share data)                             2010          26, 2009
                                          ----------       ---------

    Net sales                             $1,309,552       1,382,565
    Cost of sales                            964,620       1,013,106
    ---------------------------------        -------       ---------
        Gross profit                         344,932         369,459
    Selling, general and 
     administrative expenses                 259,750         301,388
    ------------------------                 -------         -------
    Operating income (loss)                   85,182          68,071
    Interest expense                          30,046          32,318
    Other income, net                         (3,471)           (610)
    -----------------                         ------            ----
        Earnings (loss) before income
         taxes                                58,607          36,363
    Income tax expense (benefit)               7,513           2,015
        Net earnings (loss)                  $51,094          34,348
        -------------------                  -------          ------
    Basic earnings (loss) per share            $0.74            0.50
    -------------------------------            -----            ----
    Weighted-average common shares 
     outstanding - basic                      68,593          68,456
    ------------------------------            ------          ------
    Diluted earnings (loss) per share          $0.74            0.50
    ---------------------------------          -----            ----
    Weighted-average common shares
     outstanding - diluted                    68,773          68,653
    ------------------------------            ------          ------

    Other Financial Information
    (Amounts in thousands)
    Net cash provided by operating
     activities                             $121,417         143,048
    ------------------------------          --------         -------
    Depreciation and amortization            $72,956          76,435
    -----------------------------            -------          ------
    Capital expenditures                     $39,101          18,358
    --------------------                     -------          ------

    Consolidated Balance Sheet Data
    (Amounts in thousands)
    
    ASSETS
    Current assets:
        Cash and cash equivalents
        Receivables, net
        Inventories
        Prepaid expenses
        Deferred income taxes and other
         current assets
        -------------------------------
            Total current assets
    Property, plant and equipment,
     net
    Goodwill
    Intangible assets, net
    Deferred income taxes and other
     non-current assets
    -------------------------------
    
    
    LIABILITIES AND EQUITY
    Current liabilities:
      Current portion of long-term
       debt
      Accounts payable and accrued
       expenses
      ----------------------------
            Total current liabilities
    Long-term debt, less current
     portion
    Deferred income taxes and other
     long-term liabilities
    -------------------------------
            Total liabilities
            -----------------
    Total equity
    ------------




    Consolidated Statement of Operations       Nine Months Ended
                                               -----------------
    (Amounts in thousands, except per      October 2,      September
     share data)                              2010         26, 2009
                                           ---------       ---------

    Net sales                              4,056,874       3,996,916
    Cost of sales                          2,995,940       3,106,380
    ---------------------------------      ---------       ---------
        Gross profit                       1,060,934         890,536
    Selling, general and
     administrative expenses                 832,405         893,671
    ------------------------                 -------         -------
    Operating income (loss)                  228,529          (3,135)
    Interest expense                         102,985          92,504
    Other income, net                         (5,842)         (2,617)
    -----------------                         ------          ------
        Earnings (loss) before income
         taxes                               131,386         (93,022)
    Income tax expense (benefit)              (8,327)        (67,744)
        Net earnings (loss)                  139,713         (25,278)
        -------------------                  -------         -------
    Basic earnings (loss) per share             2.04           (0.37)
    -------------------------------             ----           -----
    Weighted-average common shares
     outstanding - basic                      68,567          68,446
    ------------------------------            ------          ------
    Diluted earnings (loss) per share           2.03           (0.37)
    ---------------------------------           ----           -----
    Weighted-average common shares
     outstanding - diluted                    68,764          68,446
    ------------------------------            ------          ------

    Other Financial Information
    (Amounts in thousands)
    Net cash provided by operating
     activities                              210,394         412,720
    ------------------------------           -------         -------
    Depreciation and amortization            222,251         221,177
    -----------------------------            -------         -------
    Capital expenditures                      86,240          71,281
    --------------------                      ------          ------

    Consolidated Balance Sheet Data
    (Amounts in thousands)
                                           October 2,      September
                                              2010         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
                                          ----------       ---------




                                              As of or for the Three
    Segment Information                            Months Ended
                                              ----------------------
                                             October 2,      September
    (Amounts in thousands)                      2010         26, 2009
                                             ----------      ---------

    Net sales:
        Mohawk                                 $713,481        755,904
        Dal-Tile                                345,074        361,590
        Unilin                                  276,594        281,803
        Intersegment sales                      (25,597)       (16,732)
    
            Consolidated net sales           $1,309,552      1,382,565
            ----------------------           ----------      ---------
    
    Operating income (loss):
        Mohawk                                  $31,127         16,261
        Dal-Tile                                 33,913         21,166
        Unilin                                   24,640         34,929
        Corporate and eliminations               (4,498)        (4,285)
    
            Consolidated operating income
             (loss)                             $85,182         68,071
            -----------------------------       -------         ------

    Assets:
        Mohawk
        Dal-Tile
        Unilin
        Corporate and eliminations
    
            Consolidated assets
            -------------------




                                               As of or for the Nine
    Segment Information                            Months Ended
                                               ---------------------
                                             October 2,      September
    (Amounts in thousands)                      2010         26, 2009
                                             ----------      ---------

    Net sales:
        Mohawk                                2,177,646      2,118,025
        Dal-Tile                              1,050,088      1,096,772
        Unilin                                  890,859        829,984
        Intersegment sales                      (61,719)       (47,865)
            Consolidated net sales            4,056,874      3,996,916
            ----------------------            ---------      ---------

    Operating income (loss):
        Mohawk                                   74,100       (142,234)
        Dal-Tile                                 77,432         72,626
        Unilin                                   93,434         80,622
        Corporate and eliminations              (16,437)       (14,149)

            Consolidated operating income
             (loss)                             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,  September  October 2,  September
                                   2010     26, 2009      2010     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,  September 26,   October 2,   September 26,
                          2010         2009           2010          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,        September 26,
                             2010                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)
                                           Three Months Ended
                                           ------------------
                         December 31,   April 3,       July 3,    October 2,
                             2009         2010           2010        2010
                        -------------  ---------      --------   -----------
    Operating
     income                   $46,865      53,621        89,726       85,182
        Other
         income
         (expense)             (1,509)      3,799        (1,428)       3,471
         Depreciation
         and
         amortization          81,827      76,798        72,497       72,956
        Commercial
         carpet
         tile
         reserve               11,000           -             -            -
        Business
         restructurings        29,787       4,004         4,929        3,330
     Adjusted
      EBITDA                 $167,970     138,222       165,724      164,939
     --------                --------     -------       -------      -------

      Net Debt
       to
       Adjusted
       EBITDA
      ---------




                                   Trailing
    (Amounts in thousands)           Twelve
                                     Months
                                     Ended
                                    -------
                                  October 2,
                                      2010
                                  -----------
    Operating income                  275,394
        Other income (expense)          4,333
        Depreciation and
         amortization                 304,078
        Commercial carpet tile
         reserve                       11,000
        Business restructurings        42,050
     Adjusted EBITDA                  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,        September 26,
                                 2010                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.
collection