Mohawk Industries, Inc. Announces Third Quarter Earnings

CALHOUN, Ga., Oct. 29 /PRNewswire-FirstCall/ -- Mohawk Industries, Inc. (NYSE:
MHK) today announced 2009 third quarter net earnings of $34 million and
diluted earnings per share (EPS) of $0.50 which included a restructuring
charge of approximately $16 million, primarily related to our distribution and
manufacturing infrastructure. Excluding the restructuring charge, net earnings
and EPS would be $44 million and $0.64 per share, respectively. In the third
quarter of 2008, the net loss was $1,485 million and loss per share was
$21.70. Excluding the 2008 third quarter charges, net earnings and EPS would
have been $84 million and $1.23 per share, respectively. Net sales for the
2009 third quarter were $1,383 million, a decrease of 22% (21% with a constant
exchange rate) from 2008. Continued cost control, reduced capital spending
and lower working capital enabled generation of free cash flow of $128 million
for the quarter.

For the nine months of 2009, our net loss was $25 million or a net loss per
share of $0.37. Excluding year to date charges, net earnings would be $108
million and EPS would be $1.57. In the first nine months of 2008 net loss and
loss per share were $1,331 million and $19.45 per share, respectively.
Excluding the 2008 year to date charges, net earnings and EPS would have been
$244 million and $3.56 per share, respectively. Net sales for the first nine
months of 2009 were $3,997 million representing a 25% decrease from 2008.
Sales declined 22% with a constant exchange rate excluding carpet tile
charges. The sales decrease for both the quarter and the year to date in the
U.S. and Europe is primarily attributable to continuing low home sales, soft
business investment and weak consumer discretionary spending.

In commenting on the third quarter results, Jeffery S. Lorberbaum, Chairman
and CEO stated, "Our third quarter earnings were slightly better than our
guidance due to the many changes we have made to manage through this difficult
environment. Our gross margin of 27%, an improvement of almost 200 basis
points over last year benefited from lower raw material and freight costs,
personnel reductions, cost containment measures and plant consolidations.
Investments in new products, research and development and capital expenditures
are being made to improve sales, efficiencies, quality and service. Our
balance sheet is strong with over $300 million of cash, ample liquidity from
our new $600 million bank facility and free cash flow of over $340 million
exceeding last year by approximately 55% on a year to date basis. Our strategy
continues to be adjusted as the economic environment requires."

Mohawk segment sales were down 21% for the third quarter, in line with the
industry. Much of our efforts to reduce costs and improve processes have been
offset by low industry volumes and unabsorbed overhead. Consumers are
purchasing more value-oriented products and selling prices on commoditized
products have compressed. Residential volume remains weak with commercial
still in decline. We have made improvements in our controllable production
costs and quality throughout our processes. Reductions in our SG&A continue
to be made throughout the organization. The restructuring of our distribution
model and consolidating regional warehouses with Dal-Tile will lower our
infrastructure cost further. The commercial team is focused on the
government, healthcare and education markets, which should be stronger than
the other channels.

Dal-Tile sales for the third quarter were down 23% or 22% with a constant
exchange rate. The decline in new housing sales and commercial is
significantly affecting the ceramic industry. Dal-Tile is taking share from
imports, which make up about half of the industry volume with our broad
product line and strong distribution. We further reduced our SG&A in the
third quarter by merging local service centers, consolidating regional
warehouses and reducing our warehousing infrastructure. Manufacturing costs
continue to improve with increased productivity, lower waste levels, and
higher quality. Our new introductions of engineered stone and terrazzo tile
products are growing in the U.S. market. In Mexico, we are improving our
market position by broadening our product line and expanding our customer
base.

Unilin sales declined 21% or 18% with a constant exchange rate. Our operating
margins for the quarter were approximately 12% and the EBITDA margin was
approximately 26%. Demand in both our U.S. and European markets remained
challenging in the quarter. Lower raw material costs, increased royalty
income, postponement of expenses and better than expected sales volume in some
of our products favorably impacted our earnings. Our laminate business has
been influenced by customers trading down to lower value alternatives. To
improve our laminate sales, we are increasing participation in the DIY
channels, growing sales of our new product introductions, adding new product
features and investing in new product innovation. We broadened our wood
distribution in both the U.S. and Europe under multiple brands to reach all
markets. We continue to invest in research and development in our products to
provide greater value and to lower production costs. The board products remain
under significant pricing pressure due to excess capacity in the markets and
high fixed operating costs. Unilin has implemented many cost reductions to
lower SG&A, reduce manufacturing costs and manage inventory levels.

Business conditions remain weak as we move into seasonally slower quarters.
The residential business appears to have stabilized and the commercial
business will continue to be difficult next year. Sequentially, lower plant
utilization rates in the fourth quarter will result in higher unabsorbed
overhead. Carpet material costs will reduce margins until we pass them through
with higher prices. Our fourth quarter guidance for earnings is $0.28 to
$0.38 per share. Excluded from the guidance is an estimated restructuring
charge of $25 million, primarily non-cash reductions of our manufacturing and
distribution infrastructure. We continue to make the necessary structural
changes to strengthen our long-term business. Each segment is executing
innovative ways to positively position us in all product categories. All of
our efforts to strengthen the business during this downturn will significantly
benefit us in the future as the industry recovers.

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, October 30, 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 # 34166688.
A conference call replay will also be available until
November 13, 2009 by dialing 800-642-1687 for US/local calls and
706-645-9291 for International/Local calls and entering
Conference ID # 34166688.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three Months Ended Nine Months Ended
-------------------- --------------------
(Amounts in thousands, Sept. 26, Sept. 27, Sept. 26, Sept. 27,
except per share data) 2009 2008 2009 2008
--------- --------- --------- ---------

Net sales $1,382,565 1,763,034 3,996,916 5,341,176
Cost of sales 1,013,106 1,323,963 3,106,380 3,959,374
--------- --------- --------- ---------
Gross profit 369,459 439,071 890,536 1,381,802
Selling, general and
administrative expenses 301,388 321,259 893,671 993,609
Impairment of goodwill
and other intangibles - 1,418,912 - 1,418,912
--------- --------- --------- ---------
Operating income (loss) 68,071 (1,301,100) (3,135)(1,030,719)
Interest expense 32,318 30,540 92,504 97,049
Other (income) expense, net (610) 4,201 (2,617) 8,630
--------- --------- --------- ---------
Earnings (loss) before
income taxes 36,363 (1,335,841) (93,022)(1,136,398)
Income tax expense (benefit) 2,015 148,940 (67,744) 194,215
--------- --------- --------- ---------
Net earnings (loss) $34,348 (1,484,781) (25,278)(1,330,613)
--------- --------- --------- ---------
Basic earnings (loss)
per share $0.50 (21.70) (0.37) (19.45)
--------- --------- --------- ---------
Weighted-average common
shares outstanding - basic 68,456 68,411 68,446 68,396
--------- --------- --------- ---------
Diluted earnings (loss)
per share $0.50 (21.70) (0.37) (19.45)
--------- --------- --------- ---------
Weighted-average common
shares outstanding - diluted 68,653 68,411 68,446 68,396
--------- --------- --------- ---------

Other Financial Information
(Amounts in thousands)
Net cash provided by
operating activities $146,549 190,287 412,594 376,979
--------- --------- --------- ---------
Depreciation and amortization $76,435 77,712 221,177 226,020
--------- --------- --------- ---------
Capital expenditures $18,678 49,512 71,281 155,322
--------- --------- --------- ---------

Consolidated Balance Sheet Data
(Amounts in thousands)

September 26, 2009 September 27, 2008
------------------ ------------------
ASSETS
Current assets:
Cash and cash equivalents $306,145 62,025
Receivables, net 832,105 933,741
Inventories 939,478 1,234,651
Prepaid expenses 117,367 122,464
Deferred income taxes and
other current assets 164,016 151,160
----------------------------------------------------------------
Total current assets 2,359,111 2,504,041
Property, plant and equipment,
net 1,841,779 1,963,939
Goodwill 1,424,391 1,529,321
Intangible assets, net 817,586 954,826
Deferred income taxes and
other non-current assets 45,588 20,259
----------------------------------------------------------------
$6,488,455 6,972,386
----------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of
long-term debt $53,163 131,663
Accounts payable and
accrued expenses 876,579 980,873
----------------------------------------------------------------
Total current liabilities 929,742 1,112,536
Long-term debt, less
current portion 1,802,138 1,924,698
Deferred income taxes and
other long-term liabilities 510,486 558,471
----------------------------------------------------------------
Total liabilities 3,242,366 3,595,705
----------------------------------------------------------------
Total equity 3,246,089 3,376,681
----------------------------------------------------------------
$6,488,455 6,972,386
----------------------------------------------------------------

As of or for the As of or for the
Segment Information Three Months Ended Nine Months Ended
(Amounts in thousands) ----------------------- ---------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2009 2008 2009 2008
--------- --------- --------- ---------

Net sales:
Mohawk $755,904 953,827 2,118,025 2,827,297
Dal-Tile 361,590 472,031 1,096,772 1,402,593
Unilin 281,803 357,785 829,984 1,173,065
Intersegment sales (16,732) (20,609) (47,865) (61,779)
-------------------------------------------------------------------------
Consolidated net
sales $1,382,565 1,763,034 3,996,916 5,341,176
-------------------------------------------------------------------------

Operating income (loss):
Mohawk $16,261 (224,376) (142,234) (167,542)
Dal-Tile 21,166 (479,918) 72,626 (364,808)
Unilin 34,929 (592,549) 80,622 (482,472)
Corporate and
eliminations (4,285) (4,257) (14,149) (15,897)
-------------------------------------------------------------------------
Consolidated
operating income
(loss) $68,071 (1,301,100) (3,135) (1,030,719)
-------------------------------------------------------------------------

Assets:
Mohawk $1,697,334 2,122,463
Dal-Tile 1,622,502 1,736,212
Unilin 2,754,233 2,912,235
Corporate and eliminations 414,386 201,476
-------------------------------------------------------------------------
Consolidated assets $6,488,455 6,972,386
-------------------------------------------------------------------------

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

Three Months Ended Nine Months Ended
-------------------- --------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $1,382,565 1,763,034 3,996,916 5,341,176
Add: Commercial carpet
tile reserve - 14,614 110,224 23,651
Add: Exchange rate 16,825 - 89,825 -
--------- --------- --------- ---------
Adjusted net sales $1,399,390 1,777,648 4,196,965 5,364,827
--------- --------- --------- ---------

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

Three Months Ended
--------------------
Sept. 26, Sept. 27,
2009 2008
--------- ---------
Dal-Tile segment
-------------------------------------------------
Net sales $361,590 472,031
Add: Exchange rate 4,518 -
-------------------------------------------------
Adjusted net sales $366,108 472,031
-------------------------------------------------

Unilin segment
-------------------------------------------------
Net sales $281,803 357,785
Add: Exchange rate 12,307 -
-------------------------------------------------
Adjusted net sales $294,110 357,785
-------------------------------------------------

Reconciliation of Net Earnings (Loss) to Adjusted Net Earnings
(Amounts in thousands, except per share data)

Three Months Ended Nine Months Ended
-------------------- --------------------
Sept. 26, Sept. 27, Sept. 26, Sept. 27,
2009 2008 2009 2008
---------- --------- --------- ---------
Net earnings (loss) $34,348 (1,484,781) (25,278) (1,330,613)
Unusual charges:
Add: Impairment of goodwill
and other intangibles - 1,418,912 - 1,418,912
Add: Commercial
carpet tile reserve - 14,614 122,492 23,651
Add: FIFO inventory - - 61,794 -
Add: Business restructurings 16,019 - 31,936 -
Add: Income tax
expense (benefit) (6,167) 135,620 (83,004) 132,140
-------------------------------------------------------------------------
Adjusted net earnings $44,200 84,365 107,940 244,090
-------------------------------------------------------------------------

Basic earnings
(loss) per share $0.50 (21.70) (0.37) (19.45)
Weighted-average common shares
outstanding - basic 68,456 68,411 68,446 68,396
Adjusted Diluted
earnings per share $0.64 1.23 1.57 3.56
Weighted-average common shares
outstanding - diluted 68,653 68,600 68,606 68,599

Reconciliation of Free Cash Flow
(Amounts in thousands)

Three Months Ended Nine Months Ended
------------------ ------------------------------
Sept. 26, 2009 Sept. 26, 2009 Sept. 27, 2008
------------------ -------------- --------------
Net cash provided
by operations $146,549 412,594 376,979
Net cash used in
investing (24,282) (77,205) (163,668)
less:
Acquisitions,
net of cash 5,604 5,924 8,346
---------------------------------------- ------------------------------
Free cash flow $127,871 341,313 221,657
---------------------------------------- ------------------------------

Reconciliation of Unilin Segment Operating Income to Unilin Segment EBITDA
(Amounts in thousands)
Three Months Ended
------------------
EBITDA reconciliation September 26, 2009
-----------------------------------------
Operating income $34,929
Add: Other income 833
Add:
Depreciation and
amortization 38,247
----------------- ------
EBITDA $74,009
-------- -------

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.

Frank H. Boykin, Chief Financial Officer of Mohawk Industries, Inc.,
+1-706-624-2695