CALHOUN, Ga., Nov. 3, 2011 /PRNewswire via COMTEX/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 third quarter net earnings of $47 million and diluted earnings per share (EPS) of $0.68. Adjusted net earnings were $57 million and EPS was $0.83 excluding the unusual items. For the third quarter of 2010, the net earnings were $51 million and EPS was $0.74 both as reported and excluding unusual items. Net sales for the third quarter of 2011 were $1.4 billion increasing 10% as reported and 8% with a constant exchange rate. Our cash position at the end of the quarter remains strong with $276 million and our net debt to adjusted EBITDA ratio was 2.1.

For the nine months ended October 1, 2011, net sales were $4.3 billion, an increase of approximately 5% as reported and 4% with a constant exchange rate. For the nine-month period, net earnings and EPS were $131 million and $1.90, respectively. Excluding unusual items, net earnings were $152 million and EPS was $2.21. For the nine months ended October 2, 2010, net earnings were $140 million and EPS was $1.99. Excluding unusual items in 2010, net earnings were $128 million and EPS was $1.86.

Commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The Company's third quarter results reflect an improvement in sales and earnings over last year even with increased raw material costs and consumer reluctance to invest in renovation projects. Sales in both the residential and commercial categories expanded with commercial renovation leading the growth and new residential continuing to lag. Each segment continues to lower costs with new processes, reduced infrastructure and investment in more efficient assets."

Our Mohawk segment net sales improved 6% as we improved our position and grew in both residential and commercial categories. Operating margins were lower due to price increases lagging material inflation as well as continued pressure on our product mix as consumers remain cautious about larger discretionary investments. During the quarter, residential sales grew across most channels and product categories. Commercial sales momentum continued from the previous quarter, with both broadloom and carpet tile achieving gains. During 2011, we implemented two price increases that were fully realized by the end of the third quarter. During the period, raw material costs were greater than anticipated and the higher expense will impact our fourth quarter costs and margins. We have implemented hundreds of manufacturing initiatives yielding significant cost savings in 2011.

Our Dal-Tile segment net sales grew almost 11% during the period with both residential and commercial categories showing gains with product mix continuing to decline. In the comparable 2010 period, business was lower than expected due to the flooding in our Mexican facility from Hurricane Alex. During the quarter, we increased sales in all channels with particular strength in home centers due to additional commitments for our innovative mosaics, wall tile and porcelain tile. Our Mexican ceramic sales grew significantly on a local basis as we enhanced our penetration with new products and broader distribution. We have implemented new manufacturing processes to lower raw material costs, improve efficiency, reduce production runs and improve distribution costs.

Our Unilin net sales increased approximately 19% as reported and 11% with a constant exchange rate. Sales in Europe increased across most channels and regions, and our price increases are beginning to catch up with the raw material inflation. We are implementing additional price increases for roof panels and insulation boards to offset further inflation in those products. Innovation in board manufacturing processes is enhancing our efficiency and material yields. Despite challenging market conditions, our European flooring products grew by capitalizing on the strength of our Quick-Step brand, growing our participation in the DIY channel, and expanding our wood flooring category. In the U.S., sales of our laminate flooring grew through expanded programs in all channels. We completed our Russian laminate flooring plant on schedule and are initiating production. We acquired the largest laminate and wood flooring distributor in Australia, which expands our strategy of getting closer to our customers and becoming more responsive to local markets.

Mohawk's strategy to maximize our long term results is reflected in our international expansion in Mexico, Russia, China and Australia, new technologies to increase value, innovative product categories like Didit click furniture and process enhancements to lower our cost position across the enterprise. We remain confident in the future of our business and will continue to adjust our tactics as economic conditions change. In the fourth quarter, we will be impacted by higher third quarter raw material costs; however we are currently seeing some moderation which will benefit next year. We will consider further price increases as appropriate and implement additional cost reductions to improve the business. With these factors, our fourth quarter guidance for earnings is $0.67 to $0.76 per share, excluding any restructuring costs.

Our strategy in this environment focuses on lowering our cost infrastructure, creating innovative products, maintaining a strong balance sheet and targeting new investments for future growth. Although the macro outlook is somewhat uncertain, we believe our results for next year will reflect continued improvement.

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, Lees, Bigelow, Durkan, Daltile, 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 local distribution in the U.S. Mohawk's operational international presence includes China, Europe, Malaysia, Mexico and Russia.

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; inflation in raw material prices and other input costs; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company's products; impairment charges; integration of acquisitions; international operations; introduction of new products; rationalization of operations; tax, product and other claims; litigation; and other risks identified in Mohawk's SEC reports and public announcements.

There will be a conference call Friday, November 4, 2011 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 # 17731505. A conference call replay will also be available until November 18, 2011 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 17731505

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES


















Consolidated Statement of Operations


Three Months Ended


Nine Months Ended

(Amounts in thousands, except per share data)


October 1, 2011


October 2, 2010


October 1, 2011


October 2, 2010










Net sales


$ 1,442,512


1,309,552


4,263,961


4,056,874

Cost of sales


1,084,889


964,620


3,182,499


2,995,940

Gross profit


357,623


344,932


1,081,462


1,060,934

Selling, general and administrative expenses


266,159


259,750


832,214


832,405

Operating income


91,464


85,182


249,248


228,529

Interest expense


25,132


30,046


77,487


102,985

Other (income) expense, net


13,413


(4,641)


13,794


(8,628)

Earnings before income taxes


52,919


59,777


157,967


134,172

Income tax expense (benefit)


5,223


7,513


23,639


(8,327)

Net earnings


47,696


52,264


134,328


142,499

Net earnings attributable to noncontrolling interest


(1,050)


(1,170)


(3,337)


(2,786)

Net earnings attributable to Mohawk Industries, Inc.


$ 46,646


51,094


130,991


139,713

Basic earnings per share attributable to Mohawk Industries, Inc. (1)

$ 0.68


0.74


1.91


1.99

Weighted-average common shares outstanding - basic


68,759


68,593


68,725


68,567

Diluted earnings per share attributable to Mohawk Industries, Inc. (1)

$ 0.68


0.74


1.90


1.99

Weighted-average common shares outstanding - diluted


68,954


68,773


68,946


68,764










(1) Basic earnings per share attributable to Mohawk Industries, Inc. for the nine months ended October 2, 2010, includes a decrease of approximately $0.05, and diluted earnings per share attributable to Mohawk Industries, Inc. for the nine months ended October 2, 2010, includes a decrease of approximately $0.04, related to the change in fair value for a redeemable noncontrolling interest in a consolidated subsidiary of the Company.










Other Financial Information









(Amounts in thousands)









Net cash provided by operating activities


$ 109,598


121,417


138,188


210,394

Depreciation and amortization


$ 74,207


72,956


222,804


222,251

Capital expenditures


$ 69,741


39,101


182,260


86,240










Consolidated Balance Sheet Data









(Amounts in thousands)















October 1, 2011


October 2, 2010

ASSETS









Current assets:









Cash and cash equivalents






$ 276,156


365,835

Receivables, net






775,421


697,491

Inventories






1,132,073


996,271

Prepaid expenses and other current assets






125,007


114,876

Deferred income taxes






131,931


119,729

Total current assets






2,440,588


2,294,202

Property, plant and equipment, net






1,696,182


1,680,541

Goodwill






1,389,430


1,389,057

Intangible assets, net






634,164


710,934

Deferred income taxes and other non-current assets






117,204


117,176







$ 6,277,568


6,191,910

LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt






$ 438,300


351,486

Accounts payable and accrued expenses






774,939


779,825

Total current liabilities






1,213,239


1,131,311

Long-term debt, less current portion






1,173,038


1,303,151

Deferred income taxes and other long-term liabilities






439,798


441,948

Total liabilities






2,826,075


2,876,410

Noncontrolling interest






32,758


34,121

Total stockholders' equity






3,418,735


3,281,379







$ 6,277,568


6,191,910










Segment Information


Three Months Ended


As of or for the Nine Months Ended

(Amounts in thousands)


October 1, 2011


October 2, 2010


October 1, 2011


October 2, 2010










Net sales:









Mohawk


$ 754,470


713,481


2,203,699


2,177,646

Dal-Tile


381,891


345,074


1,105,775


1,050,088

Unilin


329,514


276,594


1,018,443


890,859

Intersegment sales


(23,363)


(25,597)


(63,956)


(61,719)

Consolidated net sales


$ 1,442,512


1,309,552


4,263,961


4,056,874










Operating income (loss):









Mohawk


$ 30,946


31,127


79,187


74,100

Dal-Tile


33,073


33,913


82,911


77,432

Unilin


33,048


24,640


105,507


93,434

Corporate and eliminations


(5,603)


(4,498)


(18,357)


(16,437)

Consolidated operating income


$ 91,464


85,182


249,248


228,529










Assets:









Mohawk






$ 1,810,191


1,652,737

Dal-Tile






1,735,718


1,677,957

Unilin






2,569,103


2,542,233

Corporate and eliminations






162,556


318,983

Consolidated assets






$ 6,277,568


6,191,910

Reconciliation of Net Earnings Attributable to Mohawk Industries, Inc. to Adjusted Net Earnings Attributable to Mohawk Industries, Inc. and Adjusted Diluted Earnings Per Share Attributable to Mohawk Industries, Inc.

(Amounts in thousands, except per share data)

















Three Months Ended


Nine Months Ended







October 1, 2011


October 2, 2010


October 1, 2011


October 2, 2010

Net earnings attributable to Mohawk Industries, Inc.




$ 46,646


51,094


130,991


139,713

Unusual items:












Unrealized foreign currency losses (1)




9,085


-


9,085


-

Business restructurings




2,186


3,330


15,513


12,263

Debt extinguishment costs




1,116


-


1,116


7,514

Acquisitions purchase accounting




-


1,713


-


1,713

U.S. customs refund





-


(5,765)


-


(5,765)

Discrete tax items, net





-


-


-


(24,407)

Income taxes





(1,761)


760


(4,597)


(2,999)

Adjusted net earnings attributable to Mohawk Industries, Inc.



$ 57,272


51,132


152,108


128,032














Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. (2)


0.83


0.74


2.21


1.86

Weighted-average common shares outstanding - diluted




68,954


68,773


68,946


68,764














(1) Unrealized foreign currency losses for certain of the Company's consolidated foreign subsidiaries that measure financial conditions and results using the U.S. dollar rather than the local currency.





(2) Diluted earnings per share attributable to Mohawk Industries, Inc. for the nine months ended October 2, 2010, excludes approximately $0.04 related to the change in fair value for a redeemable noncontrolling interest in a consolidated subsidiary of the Company.


















Reconciliation of Total Debt to Net Debt











(Amounts in thousands)
















October 1, 2011









Current portion of long-term debt


$ 438,300









Long-term debt, less current portion


1,173,038









Less: Cash and cash equivalents


276,156









Net Debt




$ 1,335,182






















Reconciliation of Operating Income to Adjusted EBITDA









(Amounts in thousands)











Trailing Twelve





Three Months Ended


Months Ended





December 31, 2010


April 2, 2011


July 2, 2011


October 1, 2011


October 1, 2011

Operating income



$ 85,640


56,084


101,700


91,464


334,888

Other (expense) income


1,037


(15)


396


(13,413)


(11,995)

Unrealized foreign currency losses (1)


-


-


-


9,085


9,085

U.S. customs refund



1,965


-


-


-


1,965

Net earnings attributable to noncontrolling interest


(1,678)


(1,096)


(1,191)


(1,050)


(5,015)

Depreciation and amortization


74,522


74,253


74,344


74,207


297,326

EBITDA



161,486


129,226


175,249


160,293


626,254

Business restructurings


-


6,813


6,514


2,186


15,513

Adjusted EBITDA



$ 161,486


136,039


181,763


162,479


641,767














Net Debt to Adjusted EBITDA










2.1














(1) Unrealized foreign currency losses for certain of the Company's consolidated foreign subsidiaries that measure financial conditions and results using the U.S. dollar rather than the local currency.


















Reconciliation of Net Sales to Adjusted Net Sales











(Amounts in thousands)
















Three Months Ended


Nine Months Ended







October 1, 2011


October 2, 2010


October 1, 2011


October 2, 2010



Net sales




$ 1,442,512


1,309,552


4,263,961


4,056,874



Adjustments to net sales:












Exchange rate



(22,724)


-


(57,554)


-



Adjusted net sales



$ 1,419,788


1,309,552


4,206,407


4,056,874
















Reconciliation of Segment Net Sales to Adjusted Segment Net Sales









(Amounts in thousands)
















Three Months Ended







Unilin



October 1, 2011


October 2, 2010







Net sales




$ 329,514


276,594







Adjustment to net sales:












Exchange rate



(21,205)


-







Adjusted net sales



$ 308,309


276,594




















Reconciliation of Operating Income to Adjusted Operating Income









(Amounts in thousands)
















Three Months Ended











October 1, 2011


October 2, 2010







Operating income



$ 91,464


85,182







Adjustments to operating income:











Business restructurings


2,186


3,330







Adjusted operating income


$ 93,650


88,512







Adjusted operating margin as a percent of net sales


6.5%


6.8%




















Reconciliation of Segment Operating Income to Adjusted Segment Operating Income







(Amounts in thousands)
















Three Months Ended







Mohawk



October 1, 2011


October 2, 2010







Operating income



$ 30,946


31,127







Adjustments to operating income:











Business restructurings


2,186


1,292







Adjusted operating income


$ 33,132


32,419







Adjusted operating margin as a percent of net sales


4.4%


4.5%




















Dal-Tile












Operating income



$ 33,073


33,913







Adjustments to operating income:











Business restructurings


-


1,223







Adjusted operating income


$ 33,073


35,136







Adjusted operating margin as a percent of net sales


8.7%


10.2%




















Unilin












Operating income



$ 33,048


24,640







Adjustments to operating income:











Business restructurings


-


815







Adjusted operating income


$ 33,048


25,455







Adjusted operating margin as a percent of net sales


10.0%


9.2%




















Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes







(Amounts in thousands)
















Three Months Ended











October 1, 2011


October 2, 2010







Earnings before income taxes


$ 52,919


59,777







Unusual items:












Unrealized foreign currency losses (1)


9,085


-







Business restructurings


2,186


3,330







Debt extinguishment costs


1,116


-







Acquisitions purchase accounting


-


1,713







U.S. customs refund



-


(5,765)







Adjusted earnings before income taxes


$ 65,306


59,055




















(1) Unrealized foreign currency losses for certain of the Company's consolidated foreign subsidiaries that measure financial conditions and results using the U.S. dollar rather than the local currency.


















Reconciliation of Income Tax Expense to Adjusted Income Tax Expense









(Amounts in thousands)
















Three Months Ended











October 1, 2011


October 2, 2010







Income tax expense



$ 5,223


7,513







Unusual items:












Income taxes



1,761


(760)







Adjusted income tax expense


$ 6,984


6,753




















Adjusted income tax rate



11%


11%




















Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses



(Amounts in thousands)
















Three Months Ended











October 1, 2011


October 2, 2010







Selling, general and administrative expenses


$ 266,159


259,750







Adjustments to selling, general and administrative expenses:










Exchange rate



(3,920)


-







Adjusted selling, general and administrative expenses


$ 262,239


259,750







Adjusted selling, general and administrative expenses as a percent of net sales

18.2%


19.8%




















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.



















SOURCE Mohawk Industries, Inc.