19/07/2007 23:42
PR Newswire
CALHOUN, Georgia, July 19 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2007 second quarter net earnings of US$115 million and diluted earnings per share (EPS) of US$1.68 (both 4% below last year). Net sales for the quarter were US$1,977 million, a decrease of 4% from 2006. During the quarter the Company had strong cash flow from operations of US$226 million and EBITDA of US$276 million. In addition, debt of US$208 million was paid down during the quarter reducing the Company debt to capital ratio to 38%. For the first half of 2007, net earnings were US$206 million and EPS was US$3.01 (both 3% above last year). Net sales for the first half of 2007 were US$3,841 million representing a 4% decrease from 2006. The sales decreases for both the quarter and the year to date are attributable to slowing U.S. industry demand in the residential new construction and redecorating business. In commenting on the second quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated: "Second quarter earnings were ahead of our guidance for the quarter. The European business maintained its strong growth and performance partially offsetting the cyclical down turn in the U.S. Our U.S. commercial business continued performing better than our residential business. U.S. residential flooring is in a cyclical downturn with soft sales in the new home and consumer redecorating categories. During the quarter, Mohawk took another important step in its strategy to become a complete provider of floor covering with the announced acquisition of four wood manufacturing plants. "The Mohawk segment sales for the quarter were off 10% from last year as the industry suffered from slow residential sales. Our comps will become easier in the third quarter because industry sales began declining in this period last year. Commercial sales were stronger than residential as modular carpet continued to gain market share. Raw material costs increased during the quarter and we announced a carpet price increase in May of 4% to 6% which we began implementing in June. Promotions continue at a greater pace to stimulate sales and balance asset utilization in the industry. "The Dal-Tile segment sales for the quarter were slightly below last year. We believe we are performing better than market due to the earlier investments made in sales, products and marketing. Commercial sales are offsetting some of the weakness in residential. Selected price increases were implemented in the quarter and surcharges are being applied to cover increased transportation and energy costs. We are reducing our controllable costs but margins are lower due to infrastructure investments in distribution and sales personnel to maximize sales and unabsorbed overhead from lower production schedules. Our Dal-Tile team is implementing multiple initiatives to reduce costs, improve efficiency and manage working capital. We are increasing production as we continue to shift products to our own facilities which were previously sourced externally. "Our Unilin segment turned in a strong performance for the quarter with sales up 16% over last year. The European economy is strong while the U.S. residential market remains weak. The strong Euro positively impacted sales by 5% and operating income by US$5 million. Our patents continue to gain strength and we entered new license agreements growing revenues. Our Unilin segment results were the highest ever but we anticipate results in the second half to be more in line with past performance. "Our agreement with Columbia Forest Products to acquire two solid wood plants and one engineered plant in the U.S. and one engineered plant in Malaysia is expected to close in the third quarter. The plants are currently experiencing losses, but the business is expected to be accretive after the first year. After the acquisition, Mohawk will be the second largest producer in the pre-finished wood category, which is expected to grow between 6% to 8% over time. The transaction is subject to customary government approvals and closing conditions. "We are focused on environmental stewardship and will be presenting our many initiatives under a program identified as Greenworks. This program includes recycling both post consumer and industrial waste, utilizing bio-based raw materials and energy, and reducing water usage, energy consumption and emissions. Greenworks is beneficial for our customers, our communities and the environment. "During the period, no payments were received from U.S. Customs for duty refunds. In the future, we expect additional payments though the timing and amount are not known at this point." The company expects the U.S. residential environment to continue to be difficult during the third quarter. The management team is committed to maintaining the proper balance between cost cutting and being prepared for a future turnaround. Based on these factors, the guidance for the third quarter of 2007 is US$1.61 to US$1.70 EPS. Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance and business prospects constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties, including our ability to successfully implement our plans, and other risks identified in Mohawk's SEC reports and public announcements. Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, rugs and other home products. These products are marketed under the premier brands in the industry, which include Mohawk, Karastan, Ralph Lauren, Lees, Bigelow, Dal-Tile, American Olean, Unilin and Quick Step. Mohawk's unique merchandising and marketing assist our customers in creating the consumers' dream. Mohawk provides a premium level of service with its own trucking fleet and over 250 local distribution locations. There will be a conference call Friday, July 20, 2007 at 11:00 AM Eastern Time. The telephone number to call is +1-800-603-9255 for US/Canada and +1-706-634-2294 for International/Local. A conference call replay will also be available until July 27, 2007 by dialing +1-800-642-1687 for US/local calls and +1-706-645-9291 for International/Local calls and entering Conference ID # 4827114. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES (All currency expressed in US$) Consolidated Statement of Earnings Data Three Months Ended Six Months Ended (Amounts in thousands, June 30, July 1, June 30, July 1, except per share data) 2007 2006 2007 2006 Net sales $1,977,210 2,058,123 3,841,073 3,983,229 Cost of sales 1,420,512 1,465,745 2,760,935 2,874,507 Gross profit 556,698 592,378 1,080,138 1,108,722 Selling, general and administrative expenses 358,450 369,333 711,313 721,776 Operating income 198,248 223,045 368,825 386,946 Interest expense 39,138 46,123 80,717 86,458 Other (income) expense, net (2,783) 3,598 1,444 6,325 U.S. Customs refund - (6,232) (9,122) (6,232) Earnings before income taxes 161,893 179,556 295,786 300,395 Income taxes 46,625 60,043 90,140 101,761 Net earnings $115,268 119,513 205,646 198,634 Basic earnings per share $1.69 1.77 3.02 2.94 Weighted-average shares outstanding 68,167 67,693 68,037 67,629 Diluted earnings per share $1.68 1.76 3.01 2.92 Weighted-average common and dilutive potential common shares outstanding 68,533 68,067 68,394 68,073 Other Financial Information (Amounts in thousands) Net cash provided by operating activities $225,685 238,181 314,452 342,707 Depreciation & amortization $75,382 69,781 149,228 134,634 Capital expenditures $35,428 37,027 60,384 82,659 Consolidated Balance Sheet Data (Amounts in thousands) June 30, 2007 July 1, 2006 ASSETS Current assets: Cash & cash equivalents $57,763 73,398 Receivables 968,103 987,626 Inventories 1,229,326 1,283,931 Prepaid expenses 121,625 134,087 Deferred income taxes 173,252 41,427 Total current assets 2,550,069 2,520,469 Property, plant and equipment, net 1,858,282 1,904,803 Goodwill 2,719,724 2,691,910 Intangible assets 1,153,761 1,196,310 Other assets 27,972 34,319 $8,309,808 8,347,811 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $364,114 530,626 Accounts payable and accrued expenses 1,031,237 1,146,904 Total current liabilities 1,395,351 1,677,530 Long-term debt, less current portion 2,137,349 2,596,412 Deferred income taxes and other long-term liabilities 768,278 654,332 Total liabilities 4,300,978 4,928,274 Total stockholders' equity 4,008,830 3,419,537 $8,309,808 8,347,811 As of or for the Three As of or for the Six Segment Information Months Ended Months Ended June 30, July 1, June 30, July 1, (Amounts in thousands) 2007 2006 2007 2006 Net sales: Mohawk $1,113,412 1,241,992 2,161,073 2,392,538 Dal-Tile 505,187 506,914 972,148 980,824 Unilin 363,531 313,765 715,627 616,395 Corporate and eliminations (4,920) (4,548) (7,775) (6,528) Consolidated net sales $1,977,210 2,058,123 3,841,073 3,983,229 Operating income: Mohawk $59,730 98,993 108,175 164,606 Dal-Tile 69,353 74,042 133,748 143,644 Unilin 81,737 59,657 142,236 99,676 Corporate and eliminations (12,572) (9,647) (15,334) (20,980) Consolidated operating income $198,248 223,045 368,825 386,946 Assets: Mohawk $2,448,907 2,622,196 Dal-Tile 2,297,745 2,270,910 Unilin 3,333,319 3,353,389 Corporate and eliminations 229,837 101,316 Consolidated assets $8,309,808 8,347,811 Reconciliation of EBITDA and Debt to capital percentage Three Months Ended (Amounts in thousands) June 30, 2007 EBITDA reconciliation: Operating income $198,248 Other (expense)/income 2,783 Depreciation and amortization 75,382 EBITDA $276,413 Outstanding Debt (a) $2,501,463 Total stockholders' equity 4,008,830 Total capital (b) $6,510,293 Debt to capital (a)/(b) 38% 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 of Mohawk Industries, Inc., +1-706-624-2695