Exhibit 99.1
For Release: Immediately
Contact: Frank H. Boykin, Chief Financial Officer
MOHAWK INDUSTRIES, INC. ANNOUNCES
FIRST QUARTER EARNINGS
Calhoun, Georgia, April 27, 2006 - Mohawk Industries, Inc. (NYSE:MHK) today announced first quarter net sales of $1,925,106,000 in 2006 compared to net sales of $1,493,222,000 in 2005, an increase of 29%. The net sales growth was primarily attributable to the Unilin acquisition, internal growth and price increases. Adjusted net earnings for the first quarter of 2006 were $72,862,000 (4% above last year) or $1.07 diluted earnings per share (EPS), representing a 3% improvement above last year's earnings. The adjusted net earnings exclude a $3 million stock option charge that was not required in 2005. During the first quarter of 2006, a non-cash LIFO charge impacted earnings by $14 million ($8.7 million, net of tax) or $.13 EPS compared to $6 million ($4.0 million, net of tax) or $.06 EPS in the first quarter of 2005. In accordance with U.S. Generally Accepted Accounting Principles (GAAP) net earnings for the first quarter of 2006 were $71,120,000 and EPS were $1.04 per share. The first quarter of 2005 net earnings were $70,020,000 or $1.03 in EPS.
The Mohawk segment net sales of $1,150,546,000 in the first quarter of 2006 were up 5% from $1,091,346,000. This was primarily attributable to increases in prices in all product lines as well as growth in hard surface sales. The Dal-Tile segment net sales of $473,910,000 in the first quarter grew 18% from $401,876,000 from internal growth and improved product mix. The Unilin segment net sales were $302,630,000.
In commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "The results for the quarter were in line with our guidance that we revised earlier. The revision was attributable to our Mohawk segment which was negatively impacted by a $14 million non-cash LIFO charge as well as lower sales growth and margins in the residential replacement carpet category. The slower carpet industry sales also impacted pricing on some opening price point products more than we anticipated. Our material costs moderated slightly from the high levels after the hurricanes and remained relatively stable through the quarter.
During the quarter, we started up a new manufacturing facility to increase capacity of fiber extrusion and yarn manufacturing in South Carolina. A carpet padding plant in the Northwest was started up during the period. We completed the purchase of a carpet backing plant early in the second quarter of this year. We anticipate improving residential replacement carpet demand which is historically affected by gains in employment levels and consumer confidence. In addition, homeowners usually replace their flooring at a faster rate when interest rates rise and people move less frequently.
Our Dal-Tile segment results included strong sales and operating profit growth. All product categories performed well as this business continues to gain market share. The Oklahoma ceramic expansion is progressing as planned while the Mexican expansion was completed at the end of last year. The management has transitioned smoothly to Harold Turk from Chris Wellborn who was promoted to Mohawk COO.
Unilin results included growing sales in both the U.S. and Europe. Our U.S. laminate strategy is in the implementation stage and we expect a sales benefit in the second half of 2006. The Unilin operating margin is lower in the first quarter due to seasonally lower sales, distribution inventory adjustments, higher wood and energy costs, and slightly lower laminate prices. Our U.S. laminate plant expansion was completed during the quarter to support additional growth in the U.S. The first quarter sales results were negatively impacted by inventory reductions of our distributors' due to shorter delivery times from this facility. There will be additional adjustments in the second quarter. Board price increases are being implemented to reflect higher wood and chemical costs. New products are being introduced under the Mohawk brand to increase our laminate distribution.
Our balance sheet continues to strengthen as the debt to capitalization ratio was further reduced to 51%. Our inventory turnover also improved to 4.8 times from 3.9 times the prior year. We will continue to focus on debt reduction in the future."
The strong economy along with improving consumer confidence should positively affect our business in future periods. We continue to anticipate continued growth in commercial and an improvement in the replacement category, which is our largest channel, with some slowing of new residential construction business later this year. The recent change in oil prices has not presently impacted our raw materials. We cannot predict the affect on our costs or customer demand in the future. After considering these factors, we estimate the earnings forecast for the second quarter of 2006 to range from $1.51 to $1.60.
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 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, April 28, 2006 at 11:00 AM Eastern Time.
The telephone number to call is 1-800-603-9255. A conference call replay will also be available until Monday, May 1, 2006 by dialing 1-800-642-1687 for US/local calls and (706) 645-9291 for international calls and entering Conference ID # 8208904.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES | | | |
| | | |
Consolidated Statement of Earnings Data | Three months ended |
(Amounts in thousands, except per share data) | April 1, 2006 | | April 2, 2005 |
| | | |
Net sales | $ | 1,925,106 | | 1,493,222 |
Cost of sales | 1,422,096 | | 1,108,520 |
Gross profit | 503,010 | | 384,702 |
Selling, general and administrative expenses | 352,443 | | 261,072 |
Operating income | 150,567 | | 123,630 |
Interest expense | 40,335 | | 11,876 |
Other (income) expense, net | 2,727 | | 2,004 |
Earnings before income taxes | 107,505 | | 109,750 |
Income taxes | 36,385 | | 39,730 |
Net earnings | $ | 71,120 | | 70,020 |
Basic earnings per share | $ | 1.05 | | 1.05 |
Weighted-average shares outstanding | 67,564 | | 66,804 |
Diluted earnings per share | $ | 1.04 | | 1.03 |
Weighted-average common and dilutive potential common | | | |
shares outstanding | 68,079 | | 67,692 |
| | | |
Other Financial Information | | | |
(Amounts in thousands) | | | |
| | | |
Net cash provided by operating activities | $ | 104,526 | | 50,701 |
Depreciation & amortization | $ | 64,853 | | 32,265 |
Capital expenditures | $ | 45,632 | | 34,521 |
| | | |
Consolidated Balance Sheet Data | | | |
(Amounts in thousands) | | | |
| April 1, 2006 | | April 2, 2005 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 82,174 | | - |
Receivables | 948,229 | | 739,789 |
Inventories | 1,186,626 | | 1,145,747 |
Prepaid expenses | 140,194 | | 46,428 |
Deferred income taxes | 34,857 | | 55,311 |
Total current assets | 2,392,080 | | 1,987,275 |
Property, plant and equipment, net | 1,822,424 | | 940,086 |
Goodwill | 2,642,389 | | 1,377,349 |
Tradenames | 630,402 | | 272,280 |
Intangible assets | 542,734 | | 49,366 |
Other assets | 30,704 | | 14,672 |
| $ | 8,060,733 | | 4,641,028 |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
Current liabilities: | | | |
Current portion of long-term debt | $ | 100,156 | | 218,501 |
Accounts payable and accrued expenses | 1,033,726 | | 756,895 |
Total current liabilities | 1,133,882 | | 975,396 |
Long-term debt, less current portion | 3,148,000 | | 700,000 |
Deferred income taxes and other long-term liabilities | 628,020 | | 221,531 |
Total liabilities | 4,909,902 | | 1,896,927 |
Total stockholders' equity | 3,150,831 | | 2,744,101 |
| $ | 8,060,733 | | 4,641,028 |
| | | |
Segment Information | As of or for the Three Months Ended |
(Amounts in thousands) | April 1, 2006 | | April 2, 2005 |
| | | |
Net sales: | | | |
Mohawk | $ | 1,150,546 | | 1,091,346 |
Dal-Tile | 473,910 | | 401,876 |
Unilin | 302,630 | | - |
Corporate and eliminations | (1,980) | | - |
Consolidated net sales | $ | 1,925,106 | | 1,493,222 |
| | | |
Operating income: | | | |
Mohawk | $ | 52,279 | | 65,625 |
Dal-Tile | 69,602 | | 58,470 |
Unilin | 40,019 | | - |
Corporate and eliminations | (11,333) | | (465) |
Consolidated operating income | $ | 150,567 | | 123,630 |
| | | |
Assets: | | | |
Mohawk | $ | 2,458,587 | | 2,472,133 |
Dal-Tile | 2,257,052 | | 2,117,843 |
Unilin | 3,255,582 | | - |
Corporate and eliminations | 89,512 | | 51,052 |
Consolidated assets | $ | 8,060,733 | | 4,641,028 |
| | | |
Reconciliation of reported net earnings to adjusted net earnings | | |
| | | | |
| | Three Months Ended |
| | April 1, 2006 | | April 2, 2005 |
Net earnings reported | | $ | 71,120 | | 70,020 |
Add: | | | | |
Stock option expense, net of taxes of $1,008 | | 1,742 | | - |
Adjusted net earnings | | $ | 72,862 | | 70,020 |
| | | | |
Adjusted net earnings per common share (basic) | | $ | 1.08 | | 1.05 |
Adjusted net earnings per common share (diluted) | | $ | 1.07 | | 1.03 |
The Company believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the stock compensation impact of SFAS 123R, and the non-GAAP measure that excludes such information in order to assess the performance of the Company's business for planning and forecasting in subsequent periods.
