EX-99.1 2 q4ex9911.htm or Release:

 Exhibit 99.1

 

For Release:              Immediately                                                                                                              
Contact:                      Frank H. Boykin, Chief Financial Officer

 

 

MOHAWK INDUSTRIES, INC. ANNOUNCES
 

FOURTH QUARTER EARNINGS

 

 

Calhoun, Georgia, February 15, 2007 - Mohawk Industries, Inc. (NYSE:MHK) today announced 2006 fourth quarter net earnings of $129.5 million (30% above last year) and diluted earnings per share (EPS) of  $1.90 (29% above last year).  The 2006 fourth quarter net earnings include $3.3 million in closing costs for a ceramic plant, $1.8 million for stock options charges not required in the prior year and income of $2.8 million for a partially paid customs refund, all net of taxes.  Net sales for the quarter were $1,898.6 million, an increase of 5% from 2005.  The sales growth resulted from the Unilin acquisition (completed October 31, 2005), hard surfaces sales growth and price increases.

 

Cash flow from operations and EBITDA during the quarter remained strong at $235.8 million and $303.9 million, respectively. After paying down debt of $602.7 million during the year and $190.9 million during the fourth quarter, debt to EBITDA ratio improved to 2.5 and our debt to capitalization ratio improved to 43%.  Working capital also showed improvement over last year.

 

For the year 2006, net earnings were $455.8 million (18% above last year) and EPS were $6.70 (17% above last year).  The 2006 net earnings include $3.3 million in closing costs for a ceramic plant, $7.5 million for stock options charges not required in the prior year and income of $12.3 million for a partially paid customs refund, all net of taxes. Net sales for the year were $7,905.8 million, an increase of 19% from 2005.  This increase is attributable to the Unilin acquisition, hard surface sales growth, and price increases.  

 

In commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated: "Even though the industry remains soft, our business results were good for the quarter. We benefited from strong growth in the Unilin business and business initiatives to reduce costs. Our overall strategy of offering a total flooring solution combined with an expanded geographical presence has positively influenced results.  The U.S. flooring industry continued slowing. The residential new construction market and the retail remodeling channel have continued their decline. The commercial channel continues to out perform the residential channel. 

 

The Mohawk segment sales were down 6% as industry sales continued to contract. The cost reduction programs put in place last quarter partially offset lower margins which were impacted by higher costs and reduced volume.    There continues to be an increased level of promotional activity to stimulate customer activity. Our new and replacement residential carpet sales continued to fall. The commercial channel continued to grow during the quarter with some softening in the high end category as customers have traded down.  Our material costs have remained high but could improve if commodity prices soften. There are many initiatives on cost reduction, efficiency and sales growth in process. We continue to review the industry and adjust to the changing environment. 

 

Our Dal-Tile segment sales grew 4% during the quarter despite a deteriorating residential market.  Dal-Tile is following industry trends with residential sales slowing and commercial sales growing. We are reducing expenses, increasing productivity, and focusing on the commercial and redecorating channels.   Our plant expansions were completed and will enhance our position.  Margins were impacted by the closing of a high cost ceramic facility and higher transportation costs.  Our ceramic business is well positioned for the long-term.

 

The Unilin segment performed above our expectations. Both the European and U.S. markets were strong with a proforma sales increase of 24% using a constant exchange rate.   The Mohawk brand laminate continues to increase sales of Unilin products.  Operating margins at 20% were higher than anticipated due to volume increases, improved product mix, and later raw material cost increases than anticipated.  The Unilin management team continues to produce strong results and has proven to be a positive addition to our business.  We received a favorable International Trade Commission ruling which precluded many importers from bringing laminate products into the U.S. that infringe on patents."

 

The Company is anticipating continued slow U.S. industry sales in the first quarter of 2007 that will impact margins and earnings.  It has reduced manufacturing, administration, and marketing expenses based on current industry conditions and will continue to adjust as required. Based on these factors, earnings guidance for the first quarter of 2007 is from $1.01 to $1.10 EPS.  This guidance includes refunds of approximately $5 million received from U.S. customs in January 2007.

 

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, February 16, 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 February 23, 2007 by dialing 1-800-642-1687
for US/local calls and 1-706-645-9291 for International/Local calls and entering Conference ID # 6034022.


MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

 

 

 

 

 

Consolidated Statement of Earnings Data

Three Months Ended

 

Twelve Months Ended

(Amounts in thousands, except per share data)

December 31, 2006

December 31, 2005

 

December 31, 2006

December 31, 2005

 

 

 

 

 

 

Net sales

 $

1,898,594 

1,804,551 

7,905,842 

6,620,099 

Cost of sales

1,344,516 

1,327,793 

5,674,531 

4,851,853 

    Gross profit

554,078 

476,758 

2,231,311 

1,768,246 

Selling, general and administrative expenses

324,704 

289,718 

1,392,251 

1,095,862 

    Operating income

229,374 

187,040 

839,060 

672,384 

Interest expense

42,584 

31,625 

173,697 

66,791 

Other (income) expense, net

2,108 

934 

8,488 

3,460 

U.S. Customs refund, net

(4,370)

- 

(19,436)

- 

    Earnings before income taxes

189,052 

154,481 

676,311 

602,133 

Income taxes

59,561 

54,848 

220,478 

214,995 

    Net earnings

 $

129,491 

99,633 

455,833 

387,138 

Basic earnings per share

 $

1.91 

1.48 

6.74 

5.78 

Weighted-average shares outstanding

67,733 

67,248 

67,674 

66,932 

Diluted earnings per share

 $

1.90 

1.47 

6.70 

5.72 

Weighted-average common and dilutive

potential common shares outstanding

68,058 

67,860 

68,056 

67,644 

Other Financial Information

 

(Amounts in thousands)

 

Net cash provided by operating activities

 $

235,804 

233,511 

782,045 

561,544 

Depreciation & amortization

 $

72,278 

55,757 

274,952 

150,657 

Capital expenditures

 $

41,721 

96,505 

165,769 

247,306 

Consolidated Balance Sheet Data

 

(Amounts in thousands)

 

December 31, 2006

December 31, 2005

ASSETS

 

 

 

 

 

 

 

Current assets:

    Cash & cash equivalents

 $

63,492 

  

134,585 

    Receivables

851,428 

  

848,666 

    Inventories

1,225,874 

  

1,215,427 

    Prepaid expenses

138,866 

  

140,789 

    Deferred income taxes

99,251 

  

49,534 

        Total current assets

2,378,911 

  

2,389,001 

Property, plant and equipment, net

1,888,088 

  

1,810,728 

Goodwill

2,699,639 

  

2,621,963 

Intangible assets

1,180,094 

  

1,174,097 

Other assets

31,662 

  

44,248 

 $

8,178,394 

  

8,040,037 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current liabilities:

Current portion of long-term debt

 $

576,134 

113,809 

Accounts payable and accrued expenses

1,019,629 

998,105 

        Total current liabilities

1,595,763 

  

1,111,914 

Long-term debt, less current portion

2,207,547 

3,194,561 

Deferred income taxes and other long-term liabilities

659,821 

675,324 

        Total liabilities

4,463,131 

  

4,981,799 

Total stockholders' equity

3,715,263 

3,058,238 

 $

8,178,394 

  

8,040,037 


Segment Information

As of or for the Three Months Ended

 

As of or for the Twelve Months Ended

(Amounts in thousands)

December 31, 2006

December 31, 2005

 

December 31, 2006

December 31, 2005

Net sales:

    Mohawk

 $

1,115,689 

1,192,182 

4,742,060 

4,716,659 

    Dal-Tile

459,754 

443,710 

1,941,819 

1,734,781 

    Unilin

327,599 

168,814 

1,236,918 

168,814 

    Corporate and eliminations

(4,448)

(155)

(14,955)

(155)

        Consolidated net sales

 $

1,898,594 

1,804,551 

7,905,842 

6,620,099 

Operating income:

    Mohawk

 $

112,275 

131,180 

387,386 

426,811 

    Dal-Tile

57,615 

63,296 

270,901 

260,194 

    Unilin

64,669 

(5,162)

214,093 

(5,162)

    Corporate and eliminations

(5,185)

(2,274)

(33,320)

(9,459)

        Consolidated operating income

 $

229,374 

187,040 

839,060 

672,384 

Assets:

    Mohawk

 $

2,462,420 

2,473,497 

    Dal-Tile

2,257,107 

2,207,514 

    Unilin

3,302,195 

3,263,248 

    Corporate and eliminations

156,672 

95,778 

        Consolidated assets

 $

8,178,394 

8,040,037 


Reconciliation of EBITDA, debt to EBITDA ratio, Debt to capital percentage

and Unilin pro forma sales increase

 

 

 

Three Months Ended

Twelve Months Ended

(Amounts in thousands)

 

December 31, 2006

December 31, 2006

 

 

 

EBITDA reconciliation:

   Operating income

 $

229,374 

839,060 

Other expense

(2,108)

(8,488)

U.S. Customs refund, net

4,370 

19,436 

Depreciation and amortization

72,278 

274,952 

     EBITDA (a)

 $

303,914 

1,124,960 

Ratio of outstanding debt to EBITDA reconciliation:

Outstanding Debt (b)

 $

2,783,681 

         Ratio of outstanding debt to EBITDA (b)/(a)

2.5 

Debt to capital reconciliation:

Outstanding Debt (b)

 $

2,783,681 

Outstanding Debt

 $

2,783,681 

    Total stockholders' equity

3,715,263 

     Total capital (c)

 $

6,498,944 

          Debt to capital (b)/(c)

43%

Three Months Ended

Three Months Ended

December 31, 2006

December 31, 2005

Unilin proforma sales reconciliation:

   Net sales reported

 $

327,599 

168,814 

   Unilin net sales prior to acquisition

- 

76,275 

   Impact of applying constant foreign

     exchange rate of $1.28 (1)

- 

18,266 

 $

327,599 

263,355 

   Proforma net sales percentage change

24%
(1) Represents the incremental foreign exchange impact by applying the 2006 fourth quarter exchange rate to the 2005 fourth
quarter results.
 

The Company believes it is useful for itself and investors to review, as applicable, both GAAP information and the above non-

GAAP measures in order to assess the performance of the Company's business for planning and forecasting in subsequent periods.