Article Number: 6096
Mohawk Industries, Inc. Announces Third Quarter Earnings
CALHOUN, Ga., Nov. 4, 2010 /PRNewswire via COMTEX/ -- Mohawk Industries, Inc. today announced 2010 third quarter net earnings of $51 million and diluted earnings per share (EPS) of $0.74 which included unusual items that were offsetting. For the third quarter of 2009, the net earnings were $34 million and EPS was $0.50. Excluding the 2009 unusual items, net earnings and EPS would have been $44 million and $0.64 per share. Net sales for the third quarter of 2010 were $1.3 billion which was a decrease of 5.3% versus 2009 net sales or 3.8% decrease with a constant exchange rate. We have a strong financial position with free cash flow of $87 million in the quarter and an improving net debt to EBITDA ratio of 2.0.
For the first nine months of 2010, our net earnings were $140 million and EPS was $2.03. Excluding unusual items, net earnings would have been $128 million and EPS would have been $1.86. In the first nine months of 2009, our net loss was $25 million and loss per share was $0.37. Excluding the 2009 unusual items, net earnings and EPS would have been $108 million and $1.57. Net sales for the first nine months of 2010 were $4.1 billion representing a 1.5% increase from 2009. On a constant exchange rate, constant days and excluding 2009 sales adjustments, net sales decreased 2.9%.
In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings were in line with our expectations though the industry slowdown continued into the third quarter. All of our businesses were impacted by soft industry conditions during the quarter. In response, we reduced our operating costs, implemented product promotions to drive sales, introduced new products to satisfy market changes and continued our international expansion strategies in Mexico, China and Russia. Our cost containment and restructuring initiatives resulted in the lowest SG&A expense in over twelve quarters. Liquidity remains strong with over $850 million available of which approximately $300 million will be used to retire our 2011 bonds."
Our Mohawk segment made progress improving operating margins excluding restructuring charges, by 34%, however, some of the progress came at the expense of lower sales which were down 6%. The margins were benefited by price increases, product mix and productivity improvements. To improve our position, we have adjusted prices on specific products, initiated selected promotions and introduced additional polyester products which are gaining share. We are seeing higher demand levels in our commercial business as the remodeling markets improve. Commercial carpet tile is growing faster and we are expanding our tile assortment with new styling and broader price points. We are reducing our manufacturing and administrative costs, increasing service levels, improving quality and introducing innovative products.
Our Dal-Tile segment net sales were down 5% due to continued softness in the ceramic markets and the impact of lost production at our Monterrey, Mexico facility. We have announced a price increase for selective products to cover increased transportation costs beginning in November. We introduced more new products primarily focused on the residential remodeling with enhanced merchandising to maximize sales and minimize disruptions from our lost production. Commercial ceramic sales appear to have reached a cyclical bottom and the health care, education and institutional channels are outperforming. Our manufacturing team continues to implement cost savings by increasing production speeds, improving productivity and utilizing more local materials. A hurricane in July caused a flash flood which completely shut down our Monterrey, Mexico ceramic facility and it is currently operating at normal levels. The insurance claim for the damage and disruption was resolved during the quarter with proceeds compensating for damage, repair, lost sales and margin impact. During the period our ceramic investment in China was completed and we have begun developing new products for both the Chinese and American markets. A new site near Mexico City has been selected for a tile plant which will begin production of low to medium priced tile in 2012.
Our Unilin segment net sales decreased 2% as reported, but increased 6% using a constant exchange rate. Business in Europe improved while conditions remained difficult in the U.S. markets. Margins declined in the quarter as prices lagged material costs, U.S. sales slowed and maintenance expense increased. Our European sales improved in most markets and products except for roofing systems. Conditions in the U.S. remain weak and we are stimulating demand with promotions. We are broadening our distribution with Home Centers and National accounts by providing fashionable products. In Russia we are expanding our laminate customer base to support the new flooring plant which should be operational in mid 2011. Sales of our insulation boards are rising and we are increasing production to satisfy demand. The plants are improving productivity and reducing indirect expenses.
The third quarter sales demand and raw material trends are expected to continue through the fourth quarter. Next year, we anticipate increased sales growth, higher selling prices and margin improvement as we gain leverage from the changes we have implemented in the business. Our fourth quarter guidance for earnings is $0.53 to $0.63 per share. The fourth quarter of this year includes four fewer days in the period compared to last year.
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, 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 local distribution.
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.
There will be a conference call Friday, November 5, 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 # 15970034. A conference call replay will also be available until November 19, 2010 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 15970034.
For the first nine months of 2010, our net earnings were $140 million and EPS was $2.03. Excluding unusual items, net earnings would have been $128 million and EPS would have been $1.86. In the first nine months of 2009, our net loss was $25 million and loss per share was $0.37. Excluding the 2009 unusual items, net earnings and EPS would have been $108 million and $1.57. Net sales for the first nine months of 2010 were $4.1 billion representing a 1.5% increase from 2009. On a constant exchange rate, constant days and excluding 2009 sales adjustments, net sales decreased 2.9%.
In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "Our earnings were in line with our expectations though the industry slowdown continued into the third quarter. All of our businesses were impacted by soft industry conditions during the quarter. In response, we reduced our operating costs, implemented product promotions to drive sales, introduced new products to satisfy market changes and continued our international expansion strategies in Mexico, China and Russia. Our cost containment and restructuring initiatives resulted in the lowest SG&A expense in over twelve quarters. Liquidity remains strong with over $850 million available of which approximately $300 million will be used to retire our 2011 bonds."
Our Mohawk segment made progress improving operating margins excluding restructuring charges, by 34%, however, some of the progress came at the expense of lower sales which were down 6%. The margins were benefited by price increases, product mix and productivity improvements. To improve our position, we have adjusted prices on specific products, initiated selected promotions and introduced additional polyester products which are gaining share. We are seeing higher demand levels in our commercial business as the remodeling markets improve. Commercial carpet tile is growing faster and we are expanding our tile assortment with new styling and broader price points. We are reducing our manufacturing and administrative costs, increasing service levels, improving quality and introducing innovative products.
Our Dal-Tile segment net sales were down 5% due to continued softness in the ceramic markets and the impact of lost production at our Monterrey, Mexico facility. We have announced a price increase for selective products to cover increased transportation costs beginning in November. We introduced more new products primarily focused on the residential remodeling with enhanced merchandising to maximize sales and minimize disruptions from our lost production. Commercial ceramic sales appear to have reached a cyclical bottom and the health care, education and institutional channels are outperforming. Our manufacturing team continues to implement cost savings by increasing production speeds, improving productivity and utilizing more local materials. A hurricane in July caused a flash flood which completely shut down our Monterrey, Mexico ceramic facility and it is currently operating at normal levels. The insurance claim for the damage and disruption was resolved during the quarter with proceeds compensating for damage, repair, lost sales and margin impact. During the period our ceramic investment in China was completed and we have begun developing new products for both the Chinese and American markets. A new site near Mexico City has been selected for a tile plant which will begin production of low to medium priced tile in 2012.
Our Unilin segment net sales decreased 2% as reported, but increased 6% using a constant exchange rate. Business in Europe improved while conditions remained difficult in the U.S. markets. Margins declined in the quarter as prices lagged material costs, U.S. sales slowed and maintenance expense increased. Our European sales improved in most markets and products except for roofing systems. Conditions in the U.S. remain weak and we are stimulating demand with promotions. We are broadening our distribution with Home Centers and National accounts by providing fashionable products. In Russia we are expanding our laminate customer base to support the new flooring plant which should be operational in mid 2011. Sales of our insulation boards are rising and we are increasing production to satisfy demand. The plants are improving productivity and reducing indirect expenses.
The third quarter sales demand and raw material trends are expected to continue through the fourth quarter. Next year, we anticipate increased sales growth, higher selling prices and margin improvement as we gain leverage from the changes we have implemented in the business. Our fourth quarter guidance for earnings is $0.53 to $0.63 per share. The fourth quarter of this year includes four fewer days in the period compared to last year.
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, 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 local distribution.
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.
There will be a conference call Friday, November 5, 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 # 15970034. A conference call replay will also be available until November 19, 2010 by dialing 800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 15970034.
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