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): October 14, 2002

 
MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
 
Delaware	 	01-19826	 	52-1604305	
(State or other
Jurisdiction of
Incorporation)	 	(Commission File
Number)	 	(IRS Employer
Identification No.)	
 
160 South Industrial Blvd., Calhoun, Georgia 30701	
(Address, including zip code, of principal executive offices)	
 
(706) 629-7721	
(Registrant’s telephone number, including area code)	

 
Item	 	5.    Other Events	
 
On October 14, 2002, Mohawk Industries, Inc. (“Mohawk”) issued a press release announcing earnings for the third quarter, and nine-month period ended September 28, 2002. A copy of such press release is included as an exhibit to this report and is incorporated herein by reference under this Item 5.
 
Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits.
 
 	C.	 	Exhibits	
 
99.1 Press Release dated October 14, 2002

SIGNATURE
 
        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.

 
 
Date:    October 14, 2002

	  	Mohawk Industries, Inc.

By:                 /S/    FRANK H. BOYKIN

Frank H. Boykin
VP & Corporate Controller	

INDEX TO EXHIBITS
 
Exhibit

	  	 	
 	 	 	
    99.1	  	Press  Release dated October 14, 2002	

Exhibit 99.1
 
For Release:	  	Immediately	
 	 	 	
Contact:	  	John D. Swift, Chief Financial Officer	

MOHAWK INDUSTRIES, INC. ANNOUNCES RECORD
QUARTERLY EARNINGS FOR THIRD QUARTER
 
Calhoun, Georgia, October 14, 2002—Mohawk Industries, Inc. (NYSE:MHK) today announced record quarterly net earnings of $81,560,000 (46% above last year) and diluted earnings per share (EPS) of $1.21 (15% above last year) for the third quarter of 2002. This compares to $55,727,000 in net earnings and $1.05 in EPS for the third quarter of 2001. This improvement was the result of (i) the contribution to earnings, net of the acquisition effects, from the Dal-Tile operations of $0.05 EPS, (ii) increased earnings of $0.09 EPS from Mohawk operations as a result of higher sales and lower costs and (iii) an average reduction of approximately 743,000 shares of stock for the third quarter of 2002 which contributed $0.02 EPS. Net sales for the quarter increased 35% to $1,224,403,000 from $907,850,000 in 2001. This increase was the result of the Dal-Tile merger and internal growth of Mohawk products. Net sales for the third quarter increased 3.8% on a proforma basis. The Mohawk segment net sales of $927,065,000 grew 2% primarily from hard surface products and the Dal-Tile segment net sales of $297,338,000 grew 9% (from $271,589,000) primarily from residential products.
 
Net earnings for the first nine months of 2002 were $200,288,000 (55% above last year), or $3.13 in EPS (28% above last year), compared to $129,399,000 in net earnings, or $2.44 in EPS, for the first nine months of 2001. This improvement in EPS and net earnings is attributable to (i) the Dal-Tile acquisition, (ii) sales growth, (iii) operating earnings growth and (iv) an average reduction of approximately 538,000 shares of stock for the first nine months of 2002. Net sales for the first nine months increased 30% to $3,318,860,000 from $2,550,147,000. The Mohawk segment sales of $2,703,738,000 grew 6% and the Dal-Tile segment proforma sales of $851,166,000 grew 9%. Total company net sales increased 7% on a proforma basis.
 
In commenting on the third quarter results, Jeffrey S. Lorberbaum, President and CEO, stated, “We were able to produce all-time record results this quarter even though economic conditions were slower. We are very pleased with our ability to continue to perform at a high level even in difficult times. The structure of our company allows us to react and respond quickly to economic and market changes.
 
We are very pleased with the performance of Dal-Tile and its contribution to our results since the acquisition was completed. The growth prospects for the Dal-Tile

 
products are very good with the opportunity to increase their distribution through new residential channels. We successfully completed the first phase of the Dal-Tile integration during the third quarter. The company can now ship tile products carried in the Dal-Tile warehouses to customers through the Mohawk distribution channels using the existing Mohawk order entry system. We are on schedule with our long-term plan to leverage our two businesses and provide additional value to our customers.
 
Our strategic move to position our company as a leader in all floorcovering products is progressing as planned with approximately 30% of our total sales in hard surface products. With our strong financial position, we are optimistic about our future when the economy fully recovers.”
 
The debt to capitalization ratio decreased to 33% this quarter with approximately $75,000,000 of debt reduction. This debt reduction was the result of strong earnings and effective working capital management offset by the repurchase of 1,128,300 shares of stock. The company has reduced debt by approximately $206,000,000 since the acquisition of Dal-Tile. The company plans to continue with its stock repurchases. The Company has approximately 4,879,000 shares open to repurchase from its original authorization. The effective income tax rate was reduced when compared to the first half of 2002 due to tax credits realized in the third quarter of $2,500,000 with a comparable amount expected in the fourth quarter.
 
The total company third quarter and year-to-date gross profit percentage to net sales increased from 24.2% in 2001 to 27.8% in 2002 and from 24.0% in 2001 to 27.0% in 2002, respectively, due to Dal-Tile’s higher gross profit levels. The gross profit percentage for the Mohawk segment increased due to better cost control. The gross profit percentage for the Dal-Tile segment was also slightly up from last year due to improved manufacturing efficiencies. The total company SG&A percentage to net sales for the third quarter and nine months increased from 14.0% in 2001 to 16.2% in 2002 and from 15.0% in 2001 to 16.2% in 2002, respectively, due to Dal-Tile’s higher SG&A levels. When the Mohawk and Dal-Tile segments are compared to the nine month amounts for 2001 separately, both segments achieved a reduction in the SG&A percentage. Operating income as a percentage for the third quarter and nine months increased from 10.2% in 2001 to 11.7% in 2002 and from 9.0% in 2001 to 10.7% in 2002, respectively, primarily due to the Dal-Tile acquisition.
 
There continues to be much uncertainty in the economy which makes forecasting future periods very difficult. Based on the present economic conditions, we anticipate that the fourth quarter earnings will be 5% to 10% above 2001.
 
Certain of the statements in the immediately preceding paragraphs, particularly anticipating future financial performance, business prospects, growth and operating strategies, proposed acquisitions, and similar matters, and those preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” or similar expressions constitute “forward-looking

 
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. 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. Those statements are based on many assumptions including assumptions regarding the Company’s ability to maintain its sales growth and gross margins and to control costs. These or other assumptions could prove inaccurate and therefore, there can be no assurance that the “forward-looking statements” will prove to be accurate. Forward-looking statements involve a number of risks and uncertainties. The following important factors affect the future results of Mohawk and could cause those results to differ materially from those expressed in the forward-looking statements: materially adverse changes in economic conditions generally in the carpet, rug and floorcovering markets served by Mohawk; competition from other carpet, rug and floorcovering manufacturers; raw material prices; timing and level of capital expenditures; the successful integration of acquisitions including the challenges inherent in diverting Mohawk’s management attention and resources from other strategic matters and from operational matters for an extended period of time; the successful introduction of new products; the successful rationalization of existing operations; and other risks identified from time to time in the Company’s SEC reports and public announcements.
 
Mohawk is a leading supplier of flooring for both residential and commercial applications and a producer of woven and tufted broadloom carpet, rugs and ceramic tile. The Company designs, manufactures and markets premier carpet brand names, which include “Mohawk,” “Karastan,” “Aladdin,” “Bigelow,” “Custom Weave,” “Durkan,” “Galaxy,” “Helios,” “Horizon,” “Mohawk Commercial,” “World,” and “Wunda Weve.” Mohawk offers a broad line of home products including rugs, throws, pillows and bedspreads under the brand names Aladdin, Goodwin Weavers, Karastan, Mohawk Home and Newmark. Mohawk manufactures and distributes ceramic tile and natural stone products under the brand names Dal-Tile, Mohawk and American Olean. Mohawk also offers other products that include laminate, wood and vinyl flooring and carpet padding under the Mohawk brand name.
 
#####
 
There will be a conference call Tuesday, October 15, 2002 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 Tuesday, October 22, 2002 by dialing 1-800-642-1687
for US/local calls and (706) 634-2294 for international calls and entering
Conference ID # 5876683.

 
DATES FOR FUTURE PRESS RELEASES AND CONFERENCE CALLS:

 
 	 	PRESS RELEASE

	 	CONFERENCE
CALL

	 	 	
3rd QUARTER 2002	 	OCTOBER 14, 2002	 	OCTOBER 15, 2002	 	11:00 AM (800-603-9255)	
4th QUARTER 2002	 	FEBRUARY 6, 2003	 	FEBRUARY 7, 2003	 	11:00 AM (800-603-9255)	
1st QUARTER 2003	 	APRIL 16, 2003	 	APRIL 17, 2003	 	11:00 AM (800-603-9255)	
2nd QUARTER 2003	 	JULY 16, 2003	 	JULY 17, 2003	 	11:00 AM (800-603-9255)	
3rd QUARTER 2003	 	OCTOBER 16, 2003	 	OCTOBER 17, 2003	 	11:00 AM (800-603-9255)	

 
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
 	    	Three Months Ended

	 	  	 	  	Nine months ended

	 	
Consolidated Statement of Earnings Data
(Amounts in thousands, except per share data)	    	September 28, 2002

	 	    	September 29, 2001

	 	  	 	  	September 28, 2002

	 	  	September 29, 2001

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	    	$	1,224,403	 	    	907,850	 	  	 	  	 	3,318,860	 	  	2,550,147	 	
Cost of sales	    	 	883,746	 	    	688,426	 	  	 	  	 	2,424,422	 	  	1,937,247	 	

	

	

	

	

	 	 	

	

	

	

	
Gross profit	    	 	340,657	 	    	219,424	 	  	 	  	 	894,438	 	  	612,900	 	
Selling, general and administrative expenses	    	 	197,779	 	    	127,016	 	  	 	  	 	538,229	 	  	383,326	 	

	

	

	

	

	 	 	

	

	

	

	
Operating income	    	 	142,878	 	    	92,408	 	  	 	  	 	356,209	 	  	229,574	 	
Interest expense	    	 	16,426	 	    	6,869	 	  	 	  	 	42,377	 	  	24,053	 	
Other (income) expense, net	    	 	888	 	    	1,051	 	  	 	  	 	(109	)	  	4,094	 	

	

	

	

	

	 	 	

	

	

	

	
Earnings before income taxes	    	 	125,564	 	    	84,488	 	  	 	  	 	313,941	 	  	201,427	 	
Income taxes	    	 	44,004	 	    	28,761	 	  	 	  	 	113,653	 	  	72,028	 	

	

	

	

	

	 	 	

	

	

	

	
Net earnings	    	$	81,560	 	    	55,727	 	  	 	  	 	200,288	 	  	129,399	 	

	

	

	

	

	 	 	

	

	

	

	
Basic earnings per share	    	$	1.22	 	    	1.06	 	  	 	  	 	3.19	 	  	2.47	 	

	

	

	

	

	 	 	

	

	

	

	
Weighted-average common shares outstanding	    	 	66,824	 	    	52,412	 	  	 	  	 	62,855	 	  	52,347	 	

	

	

	

	

	 	 	

	

	

	

	
Diluted earnings per share	    	$	1.21	 	    	1.05	 	  	 	  	 	3.13	 	  	2.44	 	

	

	

	

	

	 	 	

	

	

	

	
Weighted-average common and dilutive potential common shares outstanding	    	 	67,683	 	    	53,211	 	  	 	  	 	64,086	 	  	53,021	 	

	

	

	

	

	 	 	

	

	

	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Financial Information
(Amounts in thousands)	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Depreciation & amortization	    	$	25,024	 	    	20,677	 	  	 	  	 	75,500	 	  	62,696	 	

	

	

	

	

	 	 	

	

	

	

	
Capital expenditures	    	$	26,831	 	    	14,306	 	  	 	  	 	74,072	 	  	40,953	 	

	

	

	

	

	 	 	

	

	

	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Balance Sheet Data
(Amounts in thousands)	    	 	 	 	    	 	 	  	 	  	 

	September 28, 2002

	 

	  	September 29, 2001

	 

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ASSETS	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Current assets:	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Receivables	    	 	 	 	    	 	 	  	 	  	$	569,567	 	  	432,651	 	
Inventories	    	 	 	 	    	 	 	  	 	  	 	742,647	 	  	576,218	 	
Prepaid expenses	    	 	 	 	    	 	 	  	 	  	 	22,732	 	  	13,337	 	
Deferred income taxes	    	 	 	 	    	 	 	  	 	  	 	83,056	 	  	66,474	 	

	

	

	

	

	

	

	

	

	

	

	
Total current assets	    	 	 	 	    	 	 	  	 	  	 	1,418,002	 	  	1,088,680	 	
Property, plant and equipment, net	    	 	 	 	    	 	 	  	 	  	 	843,782	 	  	630,049	 	
Goodwill	    	 	 	 	    	 	 	  	 	  	 	1,277,453	 	  	109,969	 	
Other assets	    	 	 	 	    	 	 	  	 	  	 	165,916	 	  	5,831	 	

	

	

	

	

	

	

	

	

	

	

	
 	    	 	 	 	    	 	 	  	 	  	$	3,705,153	 	  	1,834,529	 	

	

	

	

	

	

	

	

	

	

	

	
LIABILITIES AND STOCKHOLDERS' EQUITY	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Current liabilities:	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Current portion of long-term debt	    	 	 	 	    	 	 	  	 	  	$	42,366	 	  	238,215	 	
Accounts payable and accrued expenses	    	 	 	 	    	 	 	  	 	  	 	681,299	 	  	412,075	 	

	

	

	

	

	

	

	

	

	

	

	
Total current liabilities	    	 	 	 	    	 	 	  	 	  	 	723,665	 	  	650,290	 	
Long-term debt, less current portion	    	 	 	 	    	 	 	  	 	  	 	903,104	 	  	219,571	 	
Deferred income taxes and other long-term liabilities	    	 	 	 	    	 	 	  	 	  	 	180,890	 	  	80,614	 	

	

	

	

	

	

	

	

	

	

	

	
Total liabilities	    	 	 	 	    	 	 	  	 	  	 	1,807,659	 	  	950,475	 	

	

	

	

	

	

	

	

	

	

	

	
Total stockholders' equity	    	 	 	 	    	 	 	  	 	  	 	1,897,494	 	  	884,054	 	

	

	

	

	

	

	

	

	

	

	

	
 	    	 	 	 	    	 	 	  	 	  	$	3,705,153	 	  	1,834,529	 	

	

	

	

	

	

	

	

	

	

	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	    	As of or for the Three Months Ended

	 	  	 	  	As of or for the Nine Months Ended

	 	
Segment Information
(Amounts in thousands)	    	September 28, 2002

	 	    	September 29, 2001

	 	  	 	  	September 28, 2002

	 	  	September 29, 2001

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales:	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Mohawk	    	$	927,065	 	    	907,850	 	  	 	  	 	2,703,738	 	  	2,550,147	 	
Dal-Tile	    	 	297,338	 	    	—  	 	  	 	  	 	615,122	 	  	—  	 	

	

	

	

	

	

	

	

	

	

	

	
Consolidated net sales	    	$	1,224,403	 	    	907,850	 	  	 	  	 	3,318,860	 	  	2,550,147	 	

	

	

	

	

	

	

	

	

	

	

	
Operating income:	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Mohawk	    	$	96,890	 	    	92,838	 	  	 	  	 	264,419	 	  	232,722	 	
Dal-Tile	    	 	47,791	 	    	—  	 	  	 	  	 	96,928	 	  	—  	 	
Corporate and eliminations	    	 	(1,803	)	    	(430	)	  	 	  	 	(5,138	)	  	(3,148	)	

	

	

	

	

	

	

	

	

	

	

	
Consolidated operating income	    	$	142,878	 	    	92,408	 	  	 	  	 	356,209	 	  	229,574	 	

	

	

	

	

	

	

	

	

	

	

	
Assets:	    	 	 	 	    	 	 	  	 	  	 	 	 	  	 	 	
Mohawk	    	 	 	 	    	 	 	  	 	  	$	1,733,632	 	  	1,729,819	 	
Dal-Tile	    	 	 	 	    	 	 	  	 	  	 	1,839,261	 	  	—  	 	
Corporate and eliminations	    	 	 	 	    	 	 	  	 	  	 	132,260	 	  	104,710	 	

	

	

	

	

	

	

	

	

	

	

	
Consolidated assets	    	 	 	 	    	 	 	  	 	  	$	3,705,153	 	  	1,834,529	 	

	

	

	

	

	

	

	

	

	

	

	
5