|Mohawk Industries, Inc. Announces First Quarter Earnings|
CALHOUN, Ga., April 19, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2007 first quarter net earnings of $90 million and diluted earnings per share (EPS) of $1.32 (both 14% above last year). The 2007 first quarter net earnings include income of $5.8 million from a partially paid customs refund, net of taxes. Net sales for the quarter were $1,864 million, a decrease of 3% from 2006. We continued to generate strong cash flow during the quarter. Cash flow from operations was $89 million and EBITDA was $249 million during the quarter. In addition, debt of $84 million was paid down during the quarter.
In commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated: "The first quarter results were better than we had anticipated and exceeded our estimate. The U.S. flooring business remains slow, however comparisons to the prior year, when the industry slowed down, will be easier in the second half of 2007. The residential business remains challenging in all product categories reflecting softness in both the new and remodeling businesses. Commercial sales are outperforming the rest of the business and are expected to continue throughout this year. In the U.S., we are managing our costs and improving productivity while still maintaining investments in products, marketing and assets. All businesses are managing their inventory levels, expenses and production schedules to adapt to the current industry downturn. The European economy maintained its positive trend and appears to have good momentum. The improved economic conditions in Europe allowed us to pass through rising material and energy costs.
The Mohawk segment sales were off 9% as they continue to be impacted by the downward trends in the industry. Industry sales declined more in the first quarter than in the fourth quarter. The commercial channel is stronger with the modular carpet category increasing its market share. Raw material costs remained stable from the fourth quarter. With the recent spike in oil prices, we are seeing an escalation in our costs from our suppliers and we are evaluating a price increase on our products to compensate. We have adjusted our plant production levels and reduced expenses to offset some of the lower volumes. In addition, we have multiple initiatives to improve productivity, efficiency and other costs.
The Dal-Tile segment sales were down 2% in the quarter. Our earlier investments are minimizing some of the declining sales trends affecting the entire industry. Commercial is still growing and is expected to be strong throughout the year. We are reducing our outsourced ceramic tile purchases to offset slower sales. We have opened new galleries in New York City and Chicago and a stone center in Atlanta to strengthen our position in these markets. All were favorably received by our customers.
Our Unilin segment continues to perform well with sales up 16% over last year. The European business showed improvement while the U.S. business slowed due to weakness in the residential category. In Europe operating margins were positively impacted by price increases in both laminate and other board products offsetting rising energy and raw material costs. Strong demand resulted in positive overhead absorption. Recent rulings in both the U.S. and Europe have bolstered the strength of our patents in the market place. We have signed a cross license agreement on profile patents with Valinge that allows us to pursue more aggressively companies that infringe on our technology. This settles much of our outstanding patent litigation. We still have a limited number of companies with which we have ongoing disputes and may require additional legal action."
In an internal review, the Company discovered that it had exchanged employee compensation information with its competitors while gathering market data. The Company has discontinued this activity and voluntarily disclosed the practice to the Department of Justice. This has no effect at all on the marketing or selling of our products. The Company believes that this matter will not be material to its financial condition.
The company does not expect substantial improvement in the operating environment during the second quarter. The management team is committed to maintaining the proper balance between cost cutting and being prepared for a future turn around. Based on these factors, the guidance for the second quarter of 2007 is $1.51 to $1.60 EPS.
Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies, proposed acquisitions, and similar matters, and those that include the words "could," "should," "believes," "anticipates," "forecasts," "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 prices; timing and level of capital expenditures; integration of acquisitions; introduction of new products; rationalization of operations; 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, rugs and other home products. 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 20, 2007 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. A conference call replay will also be available until April 27, 2007 by dialing 1-800-642-1687 for US/local calls and 1-706-645-9291 for International/Local calls and entering Conference ID # 4403108.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Earnings Data Three Months Ended (Amounts in thousands, except per share data) March 31, 2007 April 1, 2006 Net sales $1,863,863 1,925,106 Cost of sales 1,340,423 1,408,762 Gross profit 523,440 516,344 Selling, general and administrative expenses 352,863 352,443 Operating income 170,577 163,901 Interest expense 41,579 40,335 Other (income) expense, net 4,227 2,727 U.S. Customs refund, net (9,122) - Earnings before income taxes 133,893 120,839 Income taxes 43,515 41,718 Net earnings $90,378 79,121 Basic earnings per share $1.33 1.17 Weighted-average shares outstanding 67,906 67,564 Diluted earnings per share $1.32 1.16 Weighted-average common and dilutive potential common shares outstanding 68,255 68,079 Other Financial Information (Amounts in thousands) Net cash provided by operating activities $88,767 104,526 Depreciation & amortization $73,846 64,853 Capital expenditures $24,956 45,632 Consolidated Balance Sheet Data (Amounts in thousands) March 31, 2007 April 1, 2006 ASSETS Current assets: Cash & cash equivalents $53,598 82,174 Receivables 948,767 948,229 Inventories 1,245,073 1,248,474 Prepaid expenses 119,815 140,194 Deferred income taxes 176,444 34,857 Total current assets 2,543,697 2,453,928 Property, plant and equipment, net 1,864,999 1,822,424 Goodwill 2,710,821 2,642,389 Intangible assets 1,166,626 1,173,136 Other assets 29,141 30,704 $8,315,284 8,122,581 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $514,772 100,156 Accounts payable and accrued expenses 982,536 1,033,726 Total current liabilities 1,497,308 1,133,882 Long-term debt, less current portion 2,189,862 3,148,000 Deferred income taxes and other long- term liabilities 775,517 650,750 Total liabilities 4,462,687 4,932,632 Total stockholders' equity 3,852,597 3,189,949 $8,315,284 8,122,581 Segment Information As of or for the Three Months Ended (Amounts in thousands) March 31, 2007 April 1, 2006 Net sales: Mohawk $1,047,661 1,150,546 Dal-Tile 466,961 473,910 Unilin 352,096 302,630 Corporate and eliminations (2,855) (1,980) Consolidated net sales $1,863,863 1,925,106 Operating income: Mohawk $48,445 65,613 Dal-Tile 64,395 69,602 Unilin 60,499 40,019 Corporate and eliminations (2,762) (11,333) Consolidated operating income $170,577 163,901 Assets: Mohawk $2,470,812 2,520,435 Dal-Tile 2,279,739 2,257,052 Unilin 3,332,481 3,255,582 Corporate and eliminations 232,252 89,512 Consolidated assets $8,315,284 8,122,581 Reconciliation of EBITDA Three Months Ended (Amounts in thousands) March 31, 2007 EBITDA reconciliation: Operating income $170,577 Other expense (4,227) U.S. Customs refund, net 9,122 Depreciation and amortization 73,846 EBITDA $249,318
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.
Frank H. Boykin, Chief Financial Officer of Mohawk Industries, Inc., +1-706-624-2695