Mohawk Industries, Inc. Announces Second Quarter Earnings

CALHOUN, Ga., July 30 /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE:
MHK) today announced 2009 second quarter net earnings of $46 million and
diluted earnings per share (EPS) of $0.67. Operating income for the second
quarter was $75 million. A restructuring charge of $12 million was recorded in
the quarter primarily due to the closure of a European laminate facility.
Excluding the restructuring charge, operating income was $87 million and EPS
was $0.79. In the second quarter of 2008, net earnings and EPS were $89
million and $1.29 per share, respectively. Net sales for the quarter were
$1,406 million, a decrease of 24% (22% on a constant exchange rate) from 2008.
The company generated cash flow from operations of $228 million. We
strengthened our balance sheet, by generating over $200 million in free cash
flow, paying $122 million of debt and investing $26 million in capital
expenditures. We ended the period with a balance of over $225 million in
cash. The results benefited from aggressively driving costs down, improving
working capital, tighter control over capital expenditures and an intense
focus on customers.

For the first six months of 2009, our net loss was $60 million or a net loss
per share of $0.87. Our operating loss for the first six months was $71
million. Excluding the year to date charges for carpet tile, FIFO inventory
flow through and restructuring, our operating income was $129 million. In the
first six months of 2008, net earnings and EPS were $154 million and $2.25 per
share, respectively. Net sales for the first six months of 2009 were $2,614
million representing a 27% decrease from 2008. Sales declined 22% based on a
constant exchange rate excluding the first quarter carpet tile charges. The
sales decreases for both the quarter and the year to date in the U.S. and
Europe are attributable to continuing low home sales, soft business investment
and weak consumer discretionary spending.

In commenting on the second quarter results, Jeffery S. Lorberbaum, Chairman
and CEO stated, "Our second quarter earnings surpassed our expectations. Our
results improved from the first quarter as we benefited from increased sales,
lower costs and higher utilization rates. We are transitioning to a leaner,
lower cost structure to emerge in a stronger position when the economy
recovers."

The Mohawk segment sales were down 21% with the residential decline beginning
to stabilize but commercial is expected to continue its contraction. There
remains pressure in the commodity categories and product mix has been
declining as customers trade down to reduce project costs. After peaking, raw
material costs improved and benefited our second quarter results. During the
quarter, improved seasonal sales, higher plant utilization and lower costs
helped offset the deleveraging of our fixed overhead costs. We continue to cut
administrative, manufacturing and logistics costs focusing on productivity,
service and quality enhancements.

Dal-Tile sales were down 22% or 21% using a constant exchange rate. Dal-Tile
has been impacted greater by the present contraction of the commercial
business. Our Mexican business is growing by broadening our product offering
and expanding our distribution. Dal-Tile sales and logistics infrastructures
differentiate our products and services, however, lower business levels have
deleveraged the fixed costs. The Dal-Tile cost structure has been reduced with
many initiatives on productivity, quality and product engineering. Our yields
have improved, raw material costs decreased, direct labor reduced and
controllable unit costs are down.

Unilin sales declined 32% as reported or 24% on a constant exchange rate
basis. Even with revenues down substantially, the operating margin was over
15% excluding restructuring costs. Our laminate sales have declined with
residential remodeling and home sales. Royalties were impacted by declining
industry sales and new licenses. In the second quarter we expensed the closing
costs for a European flooring plant to reduce capacity and costs. We are
expanding our customer base with our warehouse in Russia in preparation for
local manufacturing. Board demand is down in Europe creating excess capacity
and compressing prices in the market. The roofing structure sales are
softening and selling prices have remained stable. We are reducing our costs
by cutting infrastructure, SG&A and headcount while improving productivity.
In addition, working capital, maintenance costs and capital expenditures have
been reduced. New investments are being made in technology, products and
systems to reduce costs and maximize our future.

In the second period, industry conditions were weak and we anticipate the
present trends continuing in the third quarter. U.S. residential appears to be
stabilizing at a low level with signs of improving home sales which are
supported by low mortgage rates. The commercial decline continues and we are
adjusting our business to the demand levels. Our carpet raw material costs
are expected to increase slightly in the second half. The Unilin results are
expected to be lower due to holiday shutdowns, higher period costs and lower
royalties. Our third quarter guidance for earnings is $0.54 to $0.63 per
share. Excluded from this guidance is an estimated restructuring charge of
approximately $25 million, most non-cash, related to infrastructure reductions
in manufacturing and distribution. Each of our businesses is managing the
balance sheet to maximize our cash position, reducing expenditures and
remaining focused on our customers. The investments in our products, systems
and organization will make our business stronger and more competitively
positioned as the economy improves.

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, July 31, 2009 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 # 19457479. A
conference call replay will also be available until August 14, 2009 by
dialing 800-642-1687 for US/local calls and 706-645-9291 for
International/Local calls and entering Conference ID # 19457479.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations
(Amounts in thousands, except per share data)

Three Months Ended Six Months Ended
------------------- ------------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
-------- -------- -------- --------

Net sales $1,406,012 1,840,045 2,614,351 3,578,142
Cost of sales 1,038,624 1,357,153 2,093,274 2,635,411
------------- --------- --------- --------- ---------
Gross profit 367,388 482,892 521,077 942,731
Selling, general and
administrative expenses 292,710 336,829 592,283 672,350
------------------------ ------- ------- ------- -------
Operating income (loss) 74,678 146,063 (71,206) 270,381
Interest expense 30,002 32,742 60,186 66,509
Other (income) expense, net (4,622) 1,650 (2,007) 4,429
--------------------------- ------ ----- ------ -----
Earnings (loss) before
income taxes 49,298 111,671 (129,385) 199,443
Income tax expense (benefit) 3,037 22,893 (69,759) 45,275
---------------------------- ----- ------ ------- ------
Net earnings (loss) $46,261 88,778 (59,626) 154,168
----------------------- ------- ------ ------- -------
Basic earnings (loss)
per share $0.68 1.30 (0.87) 2.25
--------------------- ----- ---- ----- ----
Weighted-average common
shares outstanding - basic 68,449 68,403 68,441 68,389
--------------------------- ------ ------ ------ ------
Diluted earnings (loss)
per share $0.67 1.29 (0.87) 2.25
----------------------- ----- ---- ----- ----
Weighted-average common
shares outstanding -
diluted 68,613 68,617 68,441 68,598
----------------------- ------ ------ ------ ------

Other Financial Information
(Amounts in thousands)

Net cash provided by
operating activities $228,126 266,871 266,045 186,692
--------------------- -------- ------- ------- -------
Depreciation and
amortization $77,062 75,052 144,742 148,308
---------------- ------- ------ ------- -------
Capital expenditures $25,830 49,839 52,923 105,810
-------------------- ------- ------ ------ -------

Consolidated Balance
Sheet Data
(Amounts in thousands)
June 27, June 28,
2009 2008
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $226,543 64,038
Receivables, net 778,456 982,378
Inventories 936,336 1,250,300
Prepaid expenses 127,866 131,218
Deferred income taxes and
other assets 186,572 138,332
---------------------------- ------- -------
Total current assets 2,255,773 2,566,266
Property, plant and equipment,
net 1,864,301 2,018,813
Goodwill 1,399,277 2,876,724
Intangible assets, net 812,190 1,190,157
Deferred income taxes and
other assets 24,148 307,572
----------------------------- ------ -------
$6,355,689 8,959,532
---------------------- ---------- ---------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of
long-term debt $55,335 290,392
Accounts payable and
accrued expenses 875,590 965,743
--------------------- ------- -------
Total current
liabilities 930,925 1,256,135
Long-term debt, less
current portion 1,804,086 1,896,642
Deferred income taxes and
other long-term liabilities 490,355 734,150
---------------------------- ------- -------
Total liabilities 3,225,366 3,886,927
------------------------- --------- ---------
Total equity 3,130,323 5,072,605
------------ --------- ---------
$6,355,689 8,959,532
---------- ---------

Segment Information
(Amounts in thousands)
As of or for the As of or for the
Three Months Ended Six Months Ended
------------------- ------------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
-------- -------- -------- --------
Net sales:
Mohawk $767,790 968,426 1,362,121 1,873,470
Dal-Tile 376,704 481,511 735,182 930,562
Unilin 279,715 411,525 548,181 815,280
Corporate and
eliminations (18,197) (21,417) (31,133) (41,170)
---------------- ------- ------- ------- -------
Consolidated
net sales $1,406,012 1,840,045 2,614,351 3,578,142
------------------ ---------- --------- --------- ---------

Operating income (loss):
Mohawk $20,560 34,593 (158,495) 56,834
Dal-Tile 30,331 58,169 51,460 115,110
Unilin 31,141 60,121 45,693 110,077
Corporate and
eliminations (7,354) (6,820) (9,864) (11,640)
------------------------ ------ ------ ------ -------
Consolidated
operating
income (loss) $74,678 146,063 (71,206) 270,381
---------------------- ------- ------- ------- -------

Assets:
Mohawk $1,723,006 2,400,869
Dal-Tile 1,621,409 2,259,255
Unilin 2,646,999 4,109,314
Corporate and
eliminations 364,275 190,094
---------------- ------- -------
Consolidated assets $6,355,689 8,959,532
------------------------- ---------- ---------

Reconciliation of Operating Income (Loss) to Adjusted Operating Income
(Amounts in thousands)

Three Months Ended June 27, 2009
--------------------------------------------------
Segment Information Mohawk
-------------------------------------
Mohawk Dal-Tile Unilin Corporate Consolidated
--------------------------------------------------

Operating income $20,560 30,331 31,141 (7,354) 74,678
Add: Restructuring 605 - 11,455 - 12,060
--- --- ------ --- ------
Adjusted operating
income $21,165 30,331 42,596 (7,354) 86,738
======= ====== ====== ====== ======

Six Months Ended
June 27, 2009
----------------
Operating loss $(71,206)
Add: Restructuring 15,960
Add: Commercial Carpet Tile Reserve 122,492
Add: FIFO Inventory 61,794
------
Adjusted operating income $129,040
========

Reconciliation of Net Earnings to Adjusted Net Earnings
(Amounts in thousands)

Three Months Ended
June 27, 2009
------------------
Net earnings $46,261
Add: Restructuring 12,060
Less: Taxes (4,402)
------
Adjusted net earning $53,919
=======

Reconciliation of Net Sales to Adjusted Net Sales
(Amounts in thousands)

Three Months Ended June 27, 2009
--------------------------------------------------
Segment Information Mohawk
-------------------------------------
Mohawk Dal-Tile Unilin Corporate Consolidated
--------------------------------------------------

Net sales $767,790 376,704 279,715 (18,197) 1,406,012
Add: Exchange
rate - 6,122 31,268 - 37,390
--- ----- ------ --- ------
Adjusted net
sales $767,790 382,826 310,983 (18,197) 1,443,402
======== ======= ======= ======= =========

Six Months Ended June 27, 2009
--------------------------------------------------
Segment Information Mohawk
-------------------------------------
Mohawk Dal-Tile Unilin Corporate Consolidated
--------------------------------------------------

Net sales $1,362,121 735,182 548,181 (31,133) 2,614,351
Add: Exchange
rate - 12,143 60,924 - 73,067
Add: Commercial
Carpet Tile
Reserve 110,224 - - - 110,224
------- -- -- -- -------
Adjusted net
sales $1,472,345 747,325 609,105 (31,133) 2,797,642
========== ======= ======= ======= =========

Reconciliation of Gross Profit to Adjusted Gross Profit
(Amounts in thousands)
Three Months
Ended June 27,
2009
------------
Gross profit $367,388
Add: Restructuring 12,060
------
Adjusted gross profit $379,448
========

Reconciliation of Unilin Segment Operating Income to Unilin Segment
EBITDA
(Amounts in thousands)

Three Months
Ended
-------------
June 27, 2009
-------------
EBITDA reconciliation
Operating income $31,141
Add: Restructuring 11,455
Other (expense)/Income 910
Depreciation and amortization 39,441
------
EBITDA $82,947
=======

Reconciliation of Net Cash Provided by Operating Activities to Free
Cash Flow
(Amounts in thousands)
Trailing Four
Three Months Ended Quarters Ended
-----------------------------------------------------
Sept. 27, Dec. 31, March 29, June 27, June 27,
2008 2008 2009 2009 2009
--------- -------- --------- -------- --------

Net cash provided
by operating
activities $184,837 198,505 37,919 228,126 649,387
Less: Capital
expenditures (49,512) (62,502) (27,093) (25,830) (164,937)
------- ------- ------- ------- --------
Free Cash Flow $135,325 136,003 10,826 202,296 484,450
======== ======= ====== ======= =======

SOURCE Mohawk Industries, Inc.

Frank H. Boykin, Chief Financial Officer, Mohawk Industries, Inc.,
+1-706-624-2246