Mohawk Industries, Inc. Announces First Quarter Earnings

CALHOUN, Ga., April 29  /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2010 first quarter net earnings of $21 million and diluted earnings per share (EPS) of $0.30 which included a restructuring charge of approximately $4 million primarily related to manufacturing infrastructure. Excluding the restructuring charge, net earnings and EPS would have been $24 million and $0.35 per share, respectively.  In the first quarter of 2009, the net loss was $106 million and loss per share was $1.55. Excluding the 2009 charges, net earnings and earnings per share would have been $10 million and $0.14 per share, respectively. Net sales for the first quarter of 2010 were $1,347 million which was a 2% increase from 2009 adjusted net sales or a 1% increase with a constant exchange rate. In the quarter we had four more shipping days or about a 6% impact.  Our cash position and liquidity remain strong with over $450 million in cash and a capital structure that supports our business.

In commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings were higher than expected as the economic cycle has bottomed and we had more favorable cost reductions and foreign exchange. Our first quarter sales were flat compared to the fourth quarter due to an improving residential business. During the first quarter, we have introduced innovative new products, enhanced manufacturing and distribution processes, reduced the cost structure and improved quality and productivity throughout the business. We purchased $200 million of our bonds in April that will save cash and improve earnings this year. Both rating agencies upgraded their outlook of Mohawk to stable, in recognition of our strong cash flow and the improving economy."

Our Mohawk segment net sales were up 2% compared to adjusted sales last year.  The industry is lagging the overall economy as compressed housing prices reduced consumer remodeling. Consumer tests show our SmartStrand Sorona carpets are the softest products available in the market place and are favored by our consumers.   Mohawk's Etchware, part of our bio-based SmartStrand carpet collection, was recently voted the number one carpet choice by retailers in 2010. Restructurings initiated in 2009 in both carpet and backing plants are substantially complete and are generating cost savings in the business. The 4-6% carpet price increase announced in December will be fully implemented in the second quarter. All our raw materials have increased further than we anticipated in the first quarter with commodity and transportation costs continuing to rise. Consistent with past changes in costs, we have recently announced an additional carpet price increase of 5-7% to recover the change in material costs.

Our Dal-Tile sales were down 5% in the quarter due to the impact of new home construction and the commercial market in the ceramic business. Our market share remains strong and is about five times larger than our nearest competitor. Our Reveal Imaging technology creates random patterns only seen in nature. Using this technology, our new San Michele product offers the industry's most realistic natural stone visuals and was voted the Best Ceramic Tile by retailers this year. We have updated our stone tile offering with additional products at lower price points to satisfy today's value conscious customer. In the first quarter, the Mexican ceramic industry turned positive growing 3% and we continued to outpace the industry improving our market share. Process improvements in tile manufacturing have resulted in increased productivity and quality. New investments have increased capacity and reduced costs in color mixing, glaze and trim production.  

Unilin sales improved 14% as reported or 9% on a constant exchange rate.  Our operating margin for the quarter was 9% and the EBITDA margin was approximately 21%.   Our European business in the period performed better than the fourth quarter even with more severe weather affecting business and difficulty in some local economies. We saw improvements in some Western European markets as well as Russia. In the U.S., business conditions appear to have bottomed and our customers are more optimistic about the future. In Europe, sales of our two meter laminate planks are continuing to grow as a premium alternative. New products using our GenuEdge technology have the most natural wood looks ever introduced in the laminate flooring category. We are testing new printing technology for high end laminate products that do not use a printed paper layer like most products today. Demand for our board products continues to improve and is increasing capacity utilization of our plants. We have implemented price increases on boards during the first quarter but raw materials have escalated faster than our prices. We are continuing to raise board prices further in the second quarter which should improve margins in the future.

The residential category is expected to improve as we proceed through the year while the commercial business is expected to remain difficult. This year we have already increased prices of carpet, wood flooring, boards and vinyl. We are presently implementing a second price increase in both carpet and board products to offset material inflation but the lag will negatively impact the second quarter. The future periods should improve as we come out of our seasonally slower first quarter. Our second quarter guidance for earnings is $0.60-$0.68 per share which excludes the cost of purchasing our bonds.

The infrastructure improvements, cost reductions and product innovations we have implemented will benefit us as we move through the year. We are well positioned to take advantage of the economic recovery which is just beginning. Our balance sheet remains strong and our capital structure has ample liquidity to allow financial flexibility. We are committed to deliver sustainable growth and increase the value of our company over the long term.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words "could," "should," "believes," "anticipates," "expects," and "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 costs; timing and level of capital expenditures; integration of acquisitions; rationalization of operations; claims; 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, and rugs.  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 30, 2010 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. Conference ID # 68016043.  A conference call replay will also be available until May 14,  2010 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 68016043.

SOURCE Mohawk Industries, Inc.