EX-99.1 2 g23149exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
NEWS RELEASE
  (MOHAWK LOGO)
 
   
     
For Release:
  Immediately
 
   
Contact:
  Frank H. Boykin, Chief Financial Officer (706) 624-2695
MOHAWK INDUSTRIES, INC. ANNOUNCES
FIRST QUARTER EARNINGS
Calhoun, Georgia, April 29, 2010 — Mohawk Industries, Inc. (NYSE:MHK) today announced 2010 first quarter net earnings of $21 million and diluted earnings per share (EPS) of $0.30 which included a restructuring charge of approximately $4 million primarily related to manufacturing infrastructure. Excluding the restructuring charge, net earnings and EPS would have been $24 million and $0.35 per share, respectively. In the first quarter of 2009, the net loss was $106 million and loss per share was $1.55. Excluding the 2009 charges, net earnings and earnings per share would have been $10 million and $0.14 per share, respectively. Net sales for the first quarter of 2010 were $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 $450 million in cash and a capital structure that supports our business.

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     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 $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

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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

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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 $0.60-$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

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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 800-642-1687 for US/local calls and 706-645-9291 for
International/Local calls and entering Conference ID # 68016043.

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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
                 
Consolidated Statement of Operations   Three Months Ended
(Amounts in thousands, except per share data)   April 3, 2010   March 28, 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, 2010   March 28, 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
(Amounts in thousands)   April 3, 2010   March 28, 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
    Three Months Ended   Months Ended
Adjusted EBITDA reconciliation   June 27, 2009   September 29, 2009   December 31, 2009   April 3, 2010   April 3, 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.