EX-99.1 2 mhk3q20051.htm or Release:

Exhibit  99.1

                                                                                          

For Release:              Immediately

Contact:                      Frank H. Boykin, Chief Financial Officer

 

MOHAWK INDUSTRIES, INC. ANNOUNCES

THIRD QUARTER RESULTS

Calhoun, Georgia, October 19, 2005 - Mohawk Industries, Inc. (NYSE:MHK) today announced net sales for the third quarter of 2005 increased 11% to $1,697,634,000 from $1,529,651,000 for the third quarter of 2004.  Diluted earnings per share (EPS) and net earnings for the third quarter of 2005 were $1.61 (4% below last year) and $108,652,000 (4% below last year), respectively.  This compares to EPS and net earnings of $1.67 and $112,687,000, respectively, for the third quarter of 2004.  The third quarter results were impacted by higher raw material costs, increasing energy costs and additional ceramic tile introductions that were shifted from the second to the third quarter partially offset by higher sales volume.  The sales increase was due to higher sales volume in both the Mohawk and Dal-Tile segments as well as price increases.  In the third quarter of 2005, the Mohawk segment net sales of $1,248,216,000 increased 11% from $1,129,422,000 and the Dal-Tile segment net sales of $449,418,000 grew 12% from $400,229,000.  The growth in both segments resulted from unit growth and price increases.

EPS for the first nine months of 2005 was $4.03 (2% above last year) and net earnings were $272,483,000 (2% above last year) compared to $3.94 EPS and $266,152,000 in net earnings for the first nine months of 2004.  This increase in EPS and earnings is attributable to sales growth, partially offset by higher raw material and energy costs.  Net sales for the first nine months of 2005 were $4,815,548,000, representing a 9% increase from 2004 sales of $4,405,273,000.  The sales increase resulted from volume growth and price increases. 

In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The effect of both Hurricanes Katrina and Rita has reduced our results in the third quarter as we previously reported.  As our raw material supply chain has begun to bring production capacity back on line, we are seeing cost increases and some supply disruptions.  Additionally, natural gas, diesel fuel, and gasoline prices have substantially increased in the quarter.  As disclosed earlier, Mohawk implemented carpet price increases of between 5% to 8% in early October and also increased hard surface prices.  In addition, Mohawk announced another carpet price increase of similar size to be implemented in mid-November to offset the continuing cost increases.

"The petrochemical industry on the Gulf Coast continues to struggle with the aftermath of the storms.  We expect to see continued high costs and some supply limitations until these issues are resolved.  Given the present conditions, we believe we will be able to maintain reasonable service levels as we manage the business with lower inventory.  Although it is difficult for both Mohawk and our customers to adapt to these rapidly increasing costs, I believe we both will be successful in passing these to the end consumer.  The industry will benefit as the Gulf Coast is being rebuilt over the next few years.

"The Mohawk segment grew 11% in sales with new residential construction and commercial channels continuing to out pace the residential replacement business.  During the latter part of the quarter, we saw carpet purchases and shipments increase ahead of our price increase.  Price increases continue to lag the rapidly rising costs for energy and raw materials.  Lower consumer confidence and the impact of the storms on gas and energy costs could influence spending in the future.  The Dal-Tile segment continues to perform well with sales growing at 12% from the previous year.  The segment was impacted by higher energy, transportation and product introductions in the third quarter.  The expansion of our ceramic manufacturing operations in Mexico and Oklahoma is on track for completion.

"The acquisition of Unilin is scheduled to close in the fourth quarter of this year.  As previously reported, we have determined to permanently finance the transaction with debt.  We are currently evaluating the appropriate combination of prepayable and term debt.  The acquisition is not expected to have a significant impact on the fourth quarter before any one-time non-cash purchase accounting charges.  Our outside advisors are reviewing these charges and the intangible asset amortization amounts as required under the purchase accounting rules.   The Unilin acquisition will be another transformational event for our company making Mohawk a leader in the fast growing U.S. laminate market.

"Our economy continues to show strength but the short term impact of the Gulf Coast storms on energy and the petrochemical industry has created uncertainty and higher costs.  Additionally, consumer confidence and interest rates could impact the economy.  Unforeseen changes in our supply chain may affect our results.   Based on these factors, our fourth quarter earnings forecast is from $1.49 to $1.58."

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 "believes," "anticipates," "forecast," "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 broadloom 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 and American Olean.  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 Thursday October 20, 2005 at 11:00 AM Eastern Time.

The telephone number to call is 1-800-603-9255 for US/local and 706-634-2294 for international calls.  A conference call replay will also be available until Thursday, October 27, 2005 by dialing 1-800-642-1687 for US/local calls and (706) 645-9291 for international calls and entering Conference ID # 1485856.


MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings Data Three Months Ended Nine Months Ended
(Amounts in thousands, except per share data) October 1, 2005 October 2, 2004 October 1, 2005 October 2, 2004
Net sales  $            1,697,634                   1,529,651                 4,815,548                   4,405,273 
Cost of sales                1,245,766                     1,093,598                   3,547,469                     3,200,355 
    Gross profit                   451,868                      436,053                 1,268,079                   1,204,918 
Selling, general and administrative expenses                   274,052                        242,995                      806,144                        742,148 
    Operating income                   177,816                      193,058                    461,935                      462,770 
Interest expense                     10,775                        13,918                      35,166                        41,084 
Other (income) expense, net                         (400)                           2,467                          2,526                            4,880 
    Earnings before income taxes                   167,441                      176,673                    424,243                      416,806 
Income taxes                     58,789                          63,986                      151,760                        150,654 
    Net earnings  $               108,652                        112,687                      272,483                        266,152 
Basic earnings per share  $                     1.62                              1.69                            4.08                              3.99 
Weighted-average shares outstanding                     66,865                          66,669                        66,827                          66,680 
Diluted earnings per share  $                     1.61                              1.67                            4.03                              3.94 
Weighted-average common and dilutive
 potential common shares outstanding                     67,519                          67,468                        67,572                          67,544 
Other Financial Information
(Amounts in thousands)
Net cash provided by operating activities  $               173,253                        138,356                      328,033                        196,038 
Depreciation & amortization  $                 31,138                        31,964                      94,900                        93,074 
Capital expenditures  $                 51,448                          31,708                      150,801                          70,382 
Consolidated Balance Sheet Data
(Amounts in thousands)
October 1, 2005 October 2, 2004
ASSETS
Current assets:
    Receivables  $               811,628                      718,006 
    Inventories                1,089,970                   1,000,802 
    Prepaid expenses                     44,160                        40,993 
    Deferred income taxes                             55,311                          84,260 
        Total current assets                2,001,069                   1,844,061 
Property, plant and equipment, net                   995,204                      898,824 
Goodwill                1,378,849                   1,377,881 
Other assets                           332,652                        338,404 
           $            4,707,774                     4,459,170 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt  $                 68,679                      207,315 
Accounts payable and accrued expenses                           776,199                        779,080 
        Total current liabilities                   844,878                      986,395 
Long-term debt, less current portion                   700,000                      700,009 
Deferred income taxes and other long-term liabilities                           221,134                        213,668 
        Total liabilities                        1,766,012                     1,900,072 
Total stockholders' equity                        2,941,762                     2,559,098 
           $            4,707,774                     4,459,170 
Segment Information

As of or for the Three Months Ended

As of or for the Nine Months Ended
(Amounts in thousands) October 1, 2005 October 2, 2004 October 1, 2005 October 2, 2004
Net sales:
    Mohawk  $            1,248,216                   1,129,422                 3,524,477                   3,265,357 
    Dal-Tile                   449,418                        400,229                   1,291,071                     1,139,916 
        Consolidated net sales  $            1,697,634                     1,529,651                   4,815,548                     4,405,273 
Operating income:
    Mohawk  $               110,854                      131,361                    272,222                      300,183 
    Dal-Tile                     69,137                        62,750                    196,898                      168,047 
    Corporate and eliminations                      (2,175)                         (1,053)                        (7,185)                         (5,460)
        Consolidated operating income  $               177,816                        193,058                      461,935                        462,770 
Assets:
    Mohawk  $            2,482,741                   2,304,347 
    Dal-Tile                2,174,055                   2,072,761 
    Corporate and eliminations                             50,978                          82,062 
        Consolidated assets          $            4,707,774                     4,459,170