Server: Microsoft-IIS/4.0 Date: Thu, 18 Dec 1997 04:43:51 GMT Content-Type: text/html Accept-Ranges: bytes Last-Modified: Fri, 19 Sep 1997 22:33:31 GMT ETag: "1425e8e4cc5bc1:15814" Content-Length: 20673 Mohawk Industries - Press Releases - 1996 (Fourth Quarter)

Press Releases - 1996 (Fourth Quarter)
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For Release: Immediately

Contact: John D. Swift, Chief Financial Officer

MOHAWK INDUSTRIES, INC. ANNOUNCES RECORD
RESULTS FOR THE 1996 FOURTH QUARTER AND YEAR

Calhoun, Georgia, February 10, 1997 - Mohawk Industries, Inc. (NASDAQ/NMS-MOHK) today announced record results for the quarter and year ended December 31, 1996. Net earnings for the quarter were a record $13,867,000, or $0.40 per share before a nonrecurring charge related to a plant closing (which included restructuring costs and a write-down of certain assets to fair value). After the nonrecurring charge, net earnings were $12,517,000, or $0.36 per share for the fourth quarter of 1996. This compares to net earnings before nonrecurring charges for the fourth quarter of 1995 of $6,916,000 or $0.20 per share. The fourth quarter 1995 results included nonrecurring charges for the adoption of a new accounting standard, a charge for compensation expense related to stock option exercises and restructuring costs for mill closings, all of which are described in the chart below. The net loss for the fourth quarter of 1995 after nonrecurring charges was $10,143,000 or $0.31 per share. This 100% improvement in net earnings and earnings per share, before nonrecurring charges, results from better leveraging of costs on higher sales, improvements in manufacturing costs through restructuring changes, product mix and lower material costs.

Net sales for the current quarter increased 12% to $465,638,000 compared to $414,921,000 for the fourth quarter of 1995. This sales increase was attributable to a gain in market share which the Company believes primarily results from competitive changes in the retail segment of the industry, Mohawk’s realignment of its residential sales forces under a regional structure and Mohawk’s strong product lines.

Net earnings for the year 1996 of $51,280,000, or $1.48 per share, before nonrecurring charges, were the highest in the Company’s history. After nonrecurring charges, net earnings were $49,050,000 or $1.42 per share. The improvement in net earnings results from better leveraging of costs on higher sales, improvements in manufacturing costs through restructuring changes and product mix. Net earnings for the year 1995 were $28,572,000, or $0.84 per share, before nonrecurring charges. The nonrecurring charges are all more fully described in the chart below. For the year ended December 31, 1995, the Company recorded net earnings of $6,412,000, or $0.19 per share, after the nonrecurring charges.

 During the fourth quarter of 1996, the Company decided to close a spinning mill in Belton, South Carolina to continue improvement of internal efficiencies and recorded pre-tax nonrecurring charges totaling $1,600,000. Management believes this closing will improve operating efficiencies and reduce costs, beginning in 1997. Third and fourth quarter 1996 pre-tax adjustments of $1,350,000 and $810,000, respectively, were recorded for nonproductive assets that were written down pursuant to FAS No. 121.

 Net sales for the year totaled $1,795,056,000, representing an increase of approximately 9% over the $1,648,517,000 recorded in the prior year. The majority of the sales increase was attributable to a gain in market share which the Company believes primarily results from competitive changes in the retail segment of the industry, Mohawk’s realignment of its residential sales forces under a regional structure and Mohawk’s strong product lines.

 The following chart describes the effect of the nonrecurring items on net earnings (amounts in thousands, except per share data):

 

 Three Months Ended

Years Ended

  December 31,1996 December 31, 1995 December 31, 1996 December 31, 1995
  Earnings EPS Earnings EPS Earnings EPS Earnings EPS
Net earnings(loss), as reported

$12,517

$0.36

($10,143)

($0.31)

$49,050

$1.42

$6,412

$0.19

Nonrecurring items
(net of taxes):
FAS No. 121

$958

$0.03

$12,873

$0.39

$1,815

$0.05

$14,535

$0.43

Compensation expense    

$2,452

$0.07

   

$2,452

$0.07

Restructuring charges

$392

$0.01

$1,734

$0.05

$415

$0.01

$5,173

$0.15

Net earnings before nonrecurring items

$13,867

$0.40

$6,916

$0.20

$51,280

$1.48

$28,572

$0.84

During the fourth quarter of 1995, the Company adopted the accounting standard FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." A pre-tax charge of $21,000,000 was recorded for the reduction of the carrying value of property, plant and equipment at certain mills. The after tax impact of this charge was $12,873,000 or $0.39 per share for the quarter. A one-time charge of $4,000,000 was recorded in the fourth quarter of 1995 for income tax reimbursements to be made to certain executives for the exercise of stock options. The income tax gross-up payments were accrued in accordance with the stock option agreements issued in 1989 and 1990 in connection with the Company's 1988 leveraged buyout.

In commenting on the fourth quarter performance, David L. Kolb, Chairman and CEO, stated, "We are very pleased with fourth quarter results which included a 12% increase in sales as compared to an industry increase of approximately 2% over the fourth quarter of 1995. Each of Mohawk’s three businesses, residential, commercial and rugs, reflected strong sales growth for both the quarter and the year when compared to 1995 resulting in increased market share for each business unit. The ongoing changes in our internal operations during 1996 have allowed us to improve service and product quality while reducing production and administrative costs. As a result, we have been able to capitalize on changes in the retail segment and deliver very competitive products to our customers, improving earnings and adding value for our investors. We have further changes in manufacturing, distribution and systems planned for 1997 which should allow Mohawk to continue improvements in many areas. We entered into a definitive agreement in January to acquire selected assets of Diamond Rug and Carpet Mills which we believe will further enhance our competitive position within the industry. The Carpet and Rug Institute’s industry-wide advertising campaign is scheduled to kick off in the first quarter of 1997. This is a four year campaign with a targeted annual budget of $25,000,000 that we believe will benefit both the industry and Mohawk."

 Certain of the statements in the immediately preceding paragraph regarding planned changes to manufacturing, distribution and systems, the Diamond acquisition and the industry- wide advertising campaign constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and are subject to the safe harbor provisions thereof. Those statements are based on assumptions regarding the Company’s ability to successfully implement the manufacturing, distribution and system changes, to consummate the Diamond acquisition and the operation and effect of the advertising campaign. These or other assumptions could prove inaccurate and, therefore, there can be no assurance that the "forward-looking statements" will prove to be accurate.

 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," "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.

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