UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 21, 2008
MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 01 13697 | 52-1604305 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 160 South Industrial Blvd., Calhoun, Georgia | 30701 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code (706) 629-7721
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communication pursuant to Rule 425 under Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act CFR 240.17R 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
The following information, including the Exhibit attached hereto, is being furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
On July 21, 2008, Mohawk Industries, Inc., issued a press release announcing its second quarter financial results. A copy of the press release is attached hereto and hereby incorporated by reference as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated July 21, 2008.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Mohawk Industries, Inc. | ||||||
| Date: July 21, 2008 | By: | /s/ THOMAS J. KANUK | ||||
| Thomas J. Kanuk | ||||||
| V.P. & Corporate Controller | ||||||
INDEX TO EXHIBITS
Exhibit
99.1. Press release dated July 21, 2008.
Exhibit 99.1
| NEWS RELEASE |
 | |||||
| For Release: |
Immediately | |
| Contact: |
Frank H. Boykin, Chief Financial Officer | |
MOHAWK INDUSTRIES, INC. ANNOUNCES
SECOND QUARTER EARNINGS
Calhoun, Georgia, July 21, 2008—Mohawk Industries, Inc. (NYSE:MHK) today announced 2008 second quarter net earnings of $89 million and diluted earnings per share (EPS) of $1.29 (both 23% below last year). In the second quarter of 2007, net earnings and EPS were $115 million and $1.68 per share, respectively. Net sales for the quarter were $1,840 million, a decrease of 7% from 2007. The company generated cash flow from operations of $267 million. In addition, $183 million of debt was paid down improving the company’s debt to capital ratio to 30%.
For the first six months of 2008, net earnings were $154 million and EPS was $2.25 (both 25% below last year). Net earnings and EPS were $206 million and $3.01 per share, respectively, in the first six months of 2007. Net sales for the first six months of 2008 were $3,578 million representing a 7% decrease from 2007. The sales decreases for both the quarter and the year to date are attributable to slowing U.S. residential housing and European demand.
In commenting on the second quarter results, Jeffery S. Lorberbaum, Chairman and CEO stated, “Our results for the second quarter were impacted by the slowing economies in the U.S. and Europe and rapidly increasing commodity costs. Declining new U.S. home construction and residential remodeling, slowing European demand and rising raw material and energy costs have contributed to the flooring industry cyclical decline. The rapidly increasing costs are impacting our margins even as we raise selling prices to offset these costs.
Our management team remains focused on improving our market position, increasing quality, introducing innovative products and providing excellent customer service. The team is relentlessly pursuing cost control, working capital management, and process improvement to manage the cycle. We believe these efforts will better position our company for growth when the market improves.
The Mohawk segment performance is under pressure with sales declining 13% below last year. The commercial and rug products are performing better while the hard surface and the cushion products are declining more than residential carpet. Higher energy, raw material and freight costs are causing dramatic cost inflation. We have announced three carpet price increases since December to offset rising costs. We are increasing our commercial carpet tile offering with new value, performance and stylized options in our brands. We have re-engineered processes and improved manufacturing productivity, quality and yields.
Dal-Tile sales are down 5% during the quarter and are doing well in a very difficult environment. Commercial and Mexican sales growth continue to buffer the impact of the declining U.S. residential industry. In July, we purchased a stone center in North Carolina to continue expanding our national presence. The major factors affecting margins are rapidly rising energy and freight costs along with customers trading down. In the second quarter we have increased product prices and energy surcharges to offset rising costs and more may be required in the future. Many cost initiatives are being executed to improve labor productivity, control expenses and reduce energy consumption. Freight costs are being reduced by utilizing lower cost transportation modes, increasing weight per load and making more direct shipments.
Unilin sales were up 13% over last year and down 7% on a constant exchange rate basis excluding the Columbia acquisition. Sales declines were experienced in the U.S. and much of Western Europe, with Russia and Eastern Europe growing. Sales in the U.K. and Spain were most impacted by the slowing European industry. Oil based material and energy inflation continues to increase the cost of most products. A 5% - 6% price increase has been announced for the U.S. laminate business during the third quarter. The new laminate production in the U.S. will be operating in the third quarter and will reduce our costs on higher end products presently imported from Europe. We have many cost initiatives to reduce energy consumption, modify processes and lower material cost.
The wood operations continue to operate at a loss. New products are being launched in the third quarter to reposition both the Columbia and Mohawk brands in the market. We have made significant improvements in manufacturing processes, reducing labor, improving quality and material yields, but negative overhead absorption is offsetting the progress. We expect our new product strategy will improve our wood sales and product mix.”
The third quarter outlook is challenging given the environment. Slow demand with higher material and energy costs will continue to compress our margins. As a result, we are raising product prices and transportation fees on most products. We will adapt our strategy to the changing environment. Based on these factors our guidance for the third quarter of 2008 is $1.06 to $1.15. We have many focused initiatives under way to reduce cost, minimize working capital, improve service and bring new products to market. We remain convinced Mohawk will be a stronger company as we come out of this cycle.
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; 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 Tuesday, July 22, 2008 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 # 54459485. A conference call replay will also be available until Monday, July 28, 2008 by
dialing 1-800-642-1687 for US/local calls and 1-706-645-9291 for International/Local calls and entering
Conference ID # 54459485.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
| Consolidated Statement of Earnings Data | Three Months Ended | Six Months Ended | ||||||||||||
| (Amounts in thousands, except per share data) | June 28, 2008 | June 30, 2007 | June 28, 2008 | June 30, 2007 | ||||||||||
| Net sales |
$ | 1,840,045 | 1,977,210 | 3,578,142 | 3,841,073 | |||||||||
| Cost of sales |
1,357,153 | 1,420,512 | 2,635,411 | 2,760,935 | ||||||||||
| Gross profit |
482,892 | 556,698 | 942,731 | 1,080,138 | ||||||||||
| Selling, general and administrative expenses |
336,829 | 358,450 | 672,350 | 711,313 | ||||||||||
| Operating income |
146,063 | 198,248 | 270,381 | 368,825 | ||||||||||
| Interest expense |
32,742 | 39,138 | 66,509 | 80,717 | ||||||||||
| Other (income) expense, net |
1,650 | (2,783 | ) | 4,429 | 1,476 | |||||||||
| U.S. Customs refund |
— | — | — | (9,154 | ) | |||||||||
| Earnings before income taxes |
111,671 | 161,893 | 199,443 | 295,786 | ||||||||||
| Income taxes |
22,893 | 46,625 | 45,275 | 90,140 | ||||||||||
| Net earnings |
$ | 88,778 | 115,268 | 154,168 | 205,646 | |||||||||
| Basic earnings per share |
$ | 1.30 | 1.69 | 2.25 | 3.02 | |||||||||
| Weighted-average shares outstanding |
68,403 | 68,167 | 68,389 | 68,037 | ||||||||||
| Diluted earnings per share |
$ | 1.29 | 1.68 | 2.25 | 3.01 | |||||||||
| Weighted-average common and dilutive potential common shares outstanding |
68,617 | 68,533 | 68,598 | 68,394 | ||||||||||
| Other Financial Information |
||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Net cash provided by operating activities |
$ | 266,871 | 225,685 | 186,692 | 314,452 | |||||||||
| Depreciation & amortization |
$ | 75,052 | 75,382 | 148,308 | 149,228 | |||||||||
| Capital expenditures |
$ | 49,839 | 35,428 | 105,810 | 60,384 | |||||||||
| Consolidated Balance Sheet Data |
||||||||||||||
| (Amounts in thousands) | June 28, 2008 | June 30, 2007 | ||||||||||||
| ASSETS |
||||||||||||||
| Current assets: |
||||||||||||||
| Cash & cash equivalents |
$ | 64,038 | 57,763 | |||||||||||
| Receivables |
982,378 | 998,023 | ||||||||||||
| Inventories |
1,250,300 | 1,229,326 | ||||||||||||
| Prepaid expenses |
131,218 | 121,625 | ||||||||||||
| Deferred income taxes |
138,332 | 173,252 | ||||||||||||
| Total current assets |
2,566,266 | 2,579,989 | ||||||||||||
| Property, plant and equipment, net |
2,018,813 | 1,858,282 | ||||||||||||
| Goodwill |
2,876,724 | 2,719,724 | ||||||||||||
| Intangible assets |
1,190,157 | 1,153,761 | ||||||||||||
| Deferred income taxes and other assets |
307,572 | 27,972 | ||||||||||||
| $ | 8,959,532 | 8,339,728 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||
| Current liabilities: |
||||||||||||||
| Current portion of long-term debt |
$ | 290,392 | 364,114 | |||||||||||
| Accounts payable and accrued expenses |
965,743 | 1,061,157 | ||||||||||||
| Total current liabilities |
1,256,135 | 1,425,271 | ||||||||||||
| Long-term debt, less current portion |
1,896,642 | 2,137,349 | ||||||||||||
| Deferred income taxes and other long-term liabilities |
763,858 | 768,278 | ||||||||||||
| Total liabilities |
3,916,635 | 4,330,898 | ||||||||||||
| Total stockholders’ equity |
5,042,897 | 4,008,830 | ||||||||||||
| $ | 8,959,532 | 8,339,728 | ||||||||||||
| Segment Information | As of or for the Three Months Ended | As of or for the Six Months Ended | ||||||||||||
| (Amounts in thousands) | June 28, 2008 | June 30, 2007 | June 28, 2008 | June 30, 2007 | ||||||||||
| Net sales: |
||||||||||||||
| Mohawk |
$ | 968,426 | 1,113,412 | 1,873,470 | 2,161,073 | |||||||||
| Dal-Tile |
481,511 | 505,187 | 930,562 | 972,148 | ||||||||||
| Unilin |
411,525 | 363,531 | 815,280 | 715,627 | ||||||||||
| Corporate and eliminations |
(21,417 | ) | (4,920 | ) | (41,170 | ) | (7,775 | ) | ||||||
| Consolidated net sales |
$ | 1,840,045 | 1,977,210 | 3,578,142 | 3,841,073 | |||||||||
| Operating income: |
||||||||||||||
| Mohawk |
$ | 34,593 | 59,730 | 56,834 | 108,175 | |||||||||
| Dal-Tile |
58,169 | 69,353 | 115,110 | 133,748 | ||||||||||
| Unilin |
60,121 | 81,737 | 110,077 | 142,236 | ||||||||||
| Corporate and eliminations |
(6,820 | ) | (12,572 | ) | (11,640 | ) | (15,334 | ) | ||||||
| Consolidated operating income |
$ | 146,063 | 198,248 | 270,381 | 368,825 | |||||||||
| Assets: |
||||||||||||||
| Mohawk |
$ | 2,400,869 | 2,474,276 | |||||||||||
| Dal-Tile |
2,259,255 | 2,297,745 | ||||||||||||
| Unilin |
4,109,314 | 3,337,870 | ||||||||||||
| Corporate and eliminations |
190,094 | 229,837 | ||||||||||||
| Consolidated assets |
$ | 8,959,532 | 8,339,728 | |||||||||||
Reconciliation of Debt to Capital
| (Amounts in thousands) | As of June 28, 2008 | |||||||||||||||
| Outstanding Debt (a) |
$ | 2,187,034 | ||||||||||||||
| Total stockholders’ equity |
5,042,897 | |||||||||||||||
| Total capital (b) |
$ | 7,229,931 | ||||||||||||||
| Debt to capital percentage (a)/(b) |
30 | % | ||||||||||||||
| Reconciliation of Operating Income to EBITDA |
||||||||||||||||
| Three Months Ended | Trailing Four Quarters Ended June 28, 2008 |
|||||||||||||||
| (Amounts in thousands) | September 29, 2007 | December 31, 2007 | March 29, 2008 | June 28, 2008 | ||||||||||||
| EBITDA reconciliation: |
||||||||||||||||
| Operating income |
200,814 | 180,467 | 124,318 | 146,063 | 651,662 | |||||||||||
| Other (expense)/income |
799 | 3 | (2,779 | ) | (1,650 | ) | (3,627 | ) | ||||||||
| Depreciation and amortization |
75,636 | 81,573 | 73,256 | 75,052 | 305,517 | |||||||||||
| EBITDA |
277,249 | 262,043 | 194,795 | 219,465 | (c ) 953,552 | |||||||||||
| Reconciliation of Debt to EBITDA |
||||||||||||||||
| Debt to EBITDA (a)/(c) |
2.3 | |||||||||||||||
| Reconciliation of Unilin Segment Net Sales to Adjusted Unilin Segment Net Sales |
|
|||||||||||||||
| (Amounts in thousands) | Three Months Ended June 28, 2008 |
|||||||||||||||
| Unilin segment net sales |
$ | 411,525 | ||||||||||||||
| Less: Exchange rate gain |
41,000 | |||||||||||||||
| Adjusted Unilin segment net sales |
370,525 | |||||||||||||||
| Less: Wood acquisition net sales |
33,863 | |||||||||||||||
| Adjusted Unilin segment net sales |
$ | 336,662 | ||||||||||||||
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.