Mohawk Industries (NYSE:MHK)
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Mohawk Industries, Inc. Announces Second Quarter Earnings
CALHOUN, Ga., July 20 /PRNewswire-FirstCall/ -- Mohawk Industries, Inc.
(NYSE:MHK) today announced 2005 second quarter net earnings of $93,811,000 and
diluted earnings per share (EPS) of $1.39 (both 8% above last year). This
compares to $87,158,000 in net earnings and $1.29 in EPS for the second quarter
of 2004. Net sales for the quarter were $1,624,692,000 in 2005 compared to net
sales of $1,485,897,000 in 2004, an increase of 9%. The growth in EPS resulted
from selling price increases, lower selling, general and administrative
expenses as a percent of net sales and growing hard surface sales partially
offset by continuing raw material and energy cost increases. The net sales
growth was attributable to price increases and internal growth. The Mohawk
segment net sales of $1,184,914,000 in the second quarter of 2005 were up 7%
from $1,105,493,000. This was primarily attributable to increases in prices as
well as growth in commercial and hard surface sales. The Dal-Tile segment net
sales of $439,778,000 in the second quarter grew 16% from $380,404,000
primarily as a result of internal growth and improved product mix.
EPS for the first half of 2005 was $2.42 and net earnings were $163,831,000
(both 7% above last year) compared to EPS of $2.27 and $153,465,000 in net
earnings for the first half of 2004. This increase in EPS and net earnings is
attributable to selling price increases, lower selling, general and
administrative expenses as a percent of net sales and growing hard surface
sales partially offset by continuing raw material and energy cost increases.
Net sales for the first half of 2005 were $3,117,914,000, representing an 8%
increase over the first half of 2004 sales of $2,875,622,000. This sales
growth was attributable to price increases and internal growth.
In commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and
CEO, stated, "Mohawk turned in another strong performance for the quarter. I
am especially pleased with the excellent Dal-Tile performance which continues
to exceed our expectations. The 15.8% operating margin is one of the highest
we have recorded. Our investments in Dal-Tile including the expansion of our
manufacturing plants in Muskogee and Mexico, adding distribution points and
opening new design galleries are continuing as planned. This should support
continued growth in the ceramic tile business and increase capacity to satisfy
our customers' requirements.
The Mohawk segment also reported good results for the quarter with both the
commercial and residential new construction business expanding as demand
remains strong. We continue to broaden our carpet tile offerings through our
Lees and Mohawk brands. Carpet tile is a growing category among designers and
architects. Our retail replacement business was soft during the quarter as a
result of fewer consumers shopping in retail stores. Sales of our Home
products are still under pressure as we have exited some marginal products and
some customers have reduced their inventory levels. The profitability is in
line with the Mohawk segment and we are investigating alternatives to maximize
our business.
Price increases were implemented in the second quarter as a result of raw
material and energy cost increases. This impacts our margins as the timing of
price increases lags behind the cost increases. Many of the raw material cost
increases appear to have moderated during the quarter. However, increases in
oil costs and worldwide commodity demand could further affect our costs.
Our new SmartStrand(TM) carpet introduction with Dupont(TM) Sorona(R) is being
implemented across the country and has been well received in the marketplace.
The product is targeted for the mid to high-end market with comprehensive
merchandising and advertising programs. Many of the sample displays are in the
process of being installed across the country. Additional products will be
introduced by the end of the year.
I am also proud to announce that Mohawk won two awards at Neocon, the national
commercial show, for innovative products in our Karastan and Lees divisions.
In addition, FloorCovering News presented Mohawk awards for the Carpet
Manufacturer of the Year and the Overall Floorcovering Manufacturer of the
Year.
We recently announced the acquisition of Unilin, who is leader in high-end
laminate in both the U.S. and European market. We expect to close in the
fourth quarter this year. This is the second significant step, after our 2002
Dal-Tile acquisition, in broadening our participation in the hard surface
flooring market. Unilin is the only fully integrated U.S. manufacturer with a
history of innovation and cutting edge products. Unilin's management will
remain in place and lead our laminate efforts.
Our leverage at 24% debt to capitalization provided the opportunity to acquire
Unilin. We are in the process of obtaining regulatory approvals for the
combination in the United States and Europe. The combined management team is
developing a long-term strategy to maximize our laminate business. We expect
the acquisition to be slightly accretive in 2006."
A strong housing market and declining unemployment continue to support the
overall economy. Our business in the residential new construction and
commercial markets has continued to show strength. Other economic factors such
as high oil and gasoline prices have affected our retail replacement business.
Future raw material and energy prices are not predictable and may affect our
industry. After considering these factors, the third quarter earnings forecast
is from $1.71 to $1.80 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 "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; 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, wood, stone, laminate, 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, July 21, 2005 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 Friday, July 29, 2005 by
dialing 1-800-642-1687 for US/local calls and (706) 645-9291 for international
calls and entering Conference ID # 7842048.
DATE FOR FUTURE PRESS RELEASE AND CONFERENCE CALL:
PRESS CONFERENCE
RELEASE CALL
3rd QTR 2005 OCT. 19, 2005 OCT. 20, 2005 11:00AM (800-603-9255)
Contact: Frank H. Boykin, Chief Financial Officer
Mohawk Industries, Inc. (706) 624-2695
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings Data
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Net sales $1,624,692 1,485,897 3,117,914 2,875,622
Cost of sales 1,193,183 1,082,578 2,301,703 2,106,757
Gross profit 431,509 403,319 816,211 768,865
Selling, general and
administrative expenses 271,020 252,646 532,092 499,153
Operating income 160,489 150,673 284,119 269,712
Interest expense 12,515 13,212 24,391 27,166
Other (income) expense, net 922 991 2,926 2,413
Earnings before income
taxes 147,052 136,470 256,802 240,133
Income taxes 53,241 49,312 92,971 86,668
Net earnings $93,811 87,158 163,831 153,465
Basic earnings per share $1.40 1.31 2.45 2.30
Weighted-average shares
outstanding 66,811 66,742 66,807 66,686
Diluted earnings per share $1.39 1.29 2.42 2.27
Weighted-average common and
dilutive potential common
shares outstanding 67,504 67,564 67,598 67,582
Other Financial Information
(Amounts in thousands)
Net cash provided by
operating activities $104,079 54,421 154,780 57,682
Depreciation & amortization $31,497 30,100 63,762 61,110
Capital expenditures $64,832 25,507 99,353 38,674
Consolidated Balance Sheet Data
(Amounts in thousands)
July 2, 2005 July 3, 2004
ASSETS
Current assets:
Receivables $775,992 698,852
Inventories 1,125,145 926,396
Prepaid expenses 49,125 43,436
Deferred income taxes 55,311 84,260
Total current assets 2,005,573 1,752,944
Property, plant and equipment, net 973,627 899,458
Goodwill 1,377,349 1,376,381
Other assets 333,700 339,287
$4,690,249 4,368,070
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $183,835 274,459
Accounts payable and accrued expenses 757,813 715,074
Total current liabilities 941,648 989,533
Long-term debt, less current portion 700,000 709,425
Deferred income taxes and other long-
term liabilities 221,244 213,911
Total liabilities 1,862,892 1,912,869
Total stockholders' equity 2,827,357 2,455,201
$4,690,249 4,368,070
As of or for the Three As of or for the Six
Segment Information Months Ended Months Ended
(Amounts in thousands) July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Net sales:
Mohawk $1,184,914 1,105,493 2,276,260 2,135,935
Dal-Tile 439,778 380,404 841,654 739,687
Consolidated net
sales $1,624,692 1,485,897 3,117,914 2,875,622
Operating income:
Mohawk $95,743 97,050 161,368 168,822
Dal-Tile 69,291 55,895 127,761 105,297
Corporate and eliminations (4,545) (2,272) (5,010) (4,407)
Consolidated
operating income $160,489 150,673 284,119 269,712
Assets:
Mohawk $2,492,341 2,249,124
Dal-Tile 2,147,812 2,035,850
Corporate and eliminations 50,096 83,096
Consolidated assets $4,690,249 4,368,070
DATASOURCE: Mohawk Industries, Inc.
CONTACT: Frank H. Boykin, Chief Financial Officer of Mohawk Industries,
Inc., +1-706-624-2695
Web site: http://www.mohawkind.com/