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MOHAWK INDUSTRIES, INC. ANNOUNCES
THIRD QUARTER AND FIRST NINE MONTHS RESULTSCalhoun, Georgia, October 16, 1996 - Mohawk Industries, Inc. ( NASDAQ/NMS-MOHK)today announced results for the quarter ended September 28, 1996. Net earnings before nonrecurring costs were $15,617,000, or $0.45 per share, for the current quarter, and $14,800,000,or $0.43 per share after nonrecurring costs. This compares to net earnings for the third quarter of 1995 before restructuring costs were $8,429,000, or $0.25 per share, and $6,629,000, or $0.20 per share, after restructuring costs. The improvement in net earnings results from better leveraging of costs on strong sales growth, improvements in manufacturing costs through restructuring changes,and product mix.
Net sales for the quarter increased 11% to $471,199,000 compared to $425,594,000 for the third quarter of 1995. The sales increase was attributable to a gain in market share which the Company believes primarily results from changes in the retail segment of the industry and Mohawk's realignment of its residential sales forces under a regional structure. Additionally, American Rug Craftsmen continues to experience strong sales growth. The Company recorded an additional $1,350,000 charge for nonrecurring costs related to the mill closings that occurred in 1995. The additional charge arises from a revision in the estimate of the fair value of certain land and buildings based upon current market conditions.
Net earnings for the first nine months of 1996 were the highest first nine months earnings in the Company's history. Net earnings before nonrecurring costs were $37,350,000, or $1.08 per share, and $36,533,000, or $1.06 per share after nonrecurring costs. This compares to net earnings in the first nine months of 1995 before nonrecurring costs of $21,656,000 or $0.64 per share and $16,555,000 or $0.49 per share after nonrecurring costs. The improvement in net earnings results from better leveraging of costs on strong sales growth, improvements in manufacturing costs through restructuring changes, and product mix. Net sales for the first nine months of 1996 were $1,329,418,000 representing an 8% increase over net sales of $1,233,596,000 in the first nine months of 1995.
On October 11, 1996, the Company announced it signed a letter of intent to acquire certain assets of Diamond Rug and Carpet Mills, Inc. The proposed purchase price will be a maximum of $43,000,000 in cash, subject to adjustment based on the level of inventory at closing. Mohawk will also purchase selected facilities owned by Diamond's principal shareholders. The acquisition will be accomplished through a prepackaged or other plan of reorganization under Chapter 11 of the United States Bankruptcy Code.
In commenting on the third quarter performance, David L. Kolb, Chairman and CEO, stated, We carried much of the momentum from our second quarter into the third quarter of 1996, breaking another sales and earnings record. We continue to increase our market share and maintain strong margins. Our nylon carpet price increases held up well during most of the quarter but we noticed some softening of the pricing toward the end of the quarter due to an imbalance in supply between staple fiber and continuous filament fiber. Additionally, we experienced some margin erosion in our polypropylene products in the latter part of the quarter due to cost increases. However, we believe the rise in the polypropylene resin prices will abate during the next six months.
The consolidation of our residential operations, expansion of our distribution system and installation of our company-wide management information systems are progressing well. If completed, the acquisition of the selected assets of Diamond will be complementary to Mohawk's current manufacturing capabilities. These assets will facilitate entry into a new product line of cut pile polypropylene products and a significant expansion of our polyester product line. In addition these assets provide our Company with significant increased production capacity to support continued strong growth. Also, we continue to be committed to aligning with our independent retailers to ensure the mutual success of both Mohawk and our customers.
Some of the statements contained in this press release are forward looking statements that involve risks and uncertainties. A variety of factors could cause actual results to differ materially from those anticipated, some of which are market conditions in the carpet industry, raw material prices and other risk factors that are discussed from time to time in the Company's SEC reports.
Mohawk is a leading producer of woven and tufted broadloom carpet and rugs for residential and commercial applications. The Company designs, manufactures and markets carpet in a broad range of colors, textures and patterns and is widely recognized through its premier brand names, some of which include "Aladdin," "Alexander Smith," "Bigelow," "Eden," "Galaxy," "Harbinger," "Helios," "Horizon," "Karastan," "Mohawk" and "Mohawk Commercial." Mohawk offers a broad line of washable accent and bath rugs through Aladdin and area rugs through Karastan and American Rug Craftsmen. The Company markets its products primarily through retailers and commercial dealers.
Mohawk Industries, Inc. and Subsidiaries
Consolidated Statement of Earnings Data
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended Sept 28, 1996 Sept 30, 1995(1) Sept 28, 1996 Sept 30, 1995(1) Net sales $ 471,199 425,594 1,329,418 1,233.596 Cost of sales 361,870 330,683 1,015,791 962,670 Gross profit 109,329 94,911 313,627 270,926 Selling, general and administrative expenses 74,782 72,345 224,134 206,964 Restructuring costs - 2,936 - 5,610 Carrying value reduction of property, plant and equipment 1,350 - 1,350 2,711 Operating income 33,197 19,630 88,143 55,641 Interest expense 7,944 8,603 25,126 27,081 Other expense, net 795 212 2,640 1,553 Earnings before income taxes 24,458 10,815 60,377 27,007 Income taxes 9,658 4,186 23,844 10,452 Net earnings $ 14,800 6,629 36,533 16,555 Earnings per common and common equivalent share $ 0.43 0.20 1.06 0.49 Weighted average common and common equivalent shares outstanding 34,823 33,994 34,479 33,809
Consolidated Balance Sheet Data
(Amounts in thousands)
Sept 28, 1996 Sept 30, 1995 (1) ASSETS
Current assets:
Receivables $ 258,803 213,250 Inventories 328,034 301,835 Prepaid expenses 18,131 22,180 Deferred income taxes 12,858 4,453 Total current assets 617,826 541,718 Property, plant and equipment, net 330,538 345,212 Other assets 76,451 83,334 Total assets $ 1,024,815 970,264 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and note payable $ 41,822 5,548 Accounts payable and accrued expenses 235,400 215,367 Total current liabilities 277,222 220,915 Long-term debt 400,911 438,400 Deferred income taxes and other long-term liabilities 26,815 26,214 Total liabilities 704,948 685,529 Total stockholders' equity 319,867 284,735 Total liabilities and stockholders' equity $ 1,024,815 970,264
- (1) Certain prior year financial statement balances have been reclassified to conform with the current year's presentation.
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