Mohawk Industries, Inc. Announces Fourth Quarter Earnings

Feb 21, 2013, 16:01 ET from Mohawk Industries, Inc.

CALHOUN, Ga., Feb. 21, 2013 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 fourth quarter net earnings of $66 million and diluted earnings per share (EPS) of $0.95. Excluding restructuring charges, net earnings were $70 million and EPS was $1.01, a 40% increase over last year's fourth quarter adjusted EPS. Net sales for the fourth quarter of 2012 were $1.44 billion, an increase of 4% versus the prior year's fourth quarter and an increase of 5% on a constant exchange rate basis. For the fourth quarter of 2011, net sales were $1.38 billion, net earnings were $43 million and EPS was $0.62. Excluding unusual items, adjusted net earnings for the fourth quarter of 2011 were $50 million and adjusted EPS was $0.72.

For the year ended December 31, 2012, net sales were $5.79 billion, an increase of 3% versus the prior year and 4% on a constant exchange rate basis. Net earnings and EPS for the year were $250 million and $3.61, respectively. Excluding restructuring charges, net earnings were $262 million and EPS was $3.78, an increase of 29% over adjusted EPS in 2011. For the year ended December 31, 2011, net sales were $5.64 billion, net earnings were $174 million and EPS was $2.52. Excluding unusual items, adjusted 2011 net earnings and adjusted EPS were $202 million and $2.92, respectively.

Commenting on Mohawk Industries' fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Price increases, productivity improvements, mix and lower interest all contributed to solid results for the period. During the quarter, we generated adjusted EBITDA of $165 million and cash flow from operations of $289 million and for the year adjusted EBITDA of $677 million and cash flow from operations of $588 million. In the U.S., we improved our mix as our higher value products gained greater traction with consumers. Our recent expansion into new international markets has generated additional growth in Mexico, Russia and Australia. In 2012, we kept SG&A dollars in line with 2011, while investing in innovative marketing and products. We are continuing to strategically invest in growing our core businesses and since October, we have announced the agreement to acquire three businesses – Pergo, Marazzi and Spano. All of these transactions in combination with our existing businesses will position Mohawk for significant growth in the future. In January, we successfully issued $600 million of ten year bonds at a coupon rate of 3.85% and plan to use the proceeds to finance a portion of our Marazzi acquisition."

Mohawk segment sales were flat during the fourth quarter, with carpet sales performing better than rug sales. Our rug sales improved from last quarter, though they remain below the prior year as lower product mix and retail sales continued to decrease our results. Our new premium carpets have improved our overall selling prices and margins however sales levels were impacted by home center product transitions that we expect to be completed during the first quarter.  We recently announced a carpet price increase of 4-6% to cover rising material costs. By applying the innovative processes used to develop SmartStrand Silk, we introduced our Wear-Dated Embrace nylon collection in the fourth quarter. This extends our leadership position in the ultra-soft premium category. In the commercial category, we grew sales of our new carpet tile introductions made from our premium Duracolor fiber as designers embraced the styling with high performance stain and soil resistance. We executed manufacturing productivity improvements across the business through waste reduction, enhanced recycled content and improved efficiencies.

Dal-Tile segment sales grew 15% during the quarter, with gains in the U.S. and Mexico supported by new product introductions with enhanced textures, sophisticated designs and larger formats in both residential and commercial categories. Margin expansion came from higher volumes, enhanced productivity and improved yields partially offset by plant shutdowns to reduce inventory as our new capacity ramped up faster than anticipated. Sales grew in all residential channels with successful launches of new Reveal Imaging designs, coordinated wall, floor and mosaics collections, larger format tiles from our Chinese joint venture and new decorative assortments in the home center channel. Commercial sales continued strong with the hospitality sector leading the category. In Mexico, we increased production at our Salamanca facility and we are optimizing the plant's efficiencies and yields. During the quarter, Dal-Tile lowered overall manufacturing costs with higher efficiencies, improved material formulations, increased recycled content and effective quality initiatives.

Unilin segment sales grew 1% or 5% at a constant exchange rate. Increased laminate and hardwood sales in North America, growth in our insulation boards, expanded participation in the DIY channel and solid results from our Australian distribution business contributed to our sales improvement. Our margins were favorably impacted by lower amortization charges partially offset by material inflation and negative mix as European consumers purchased more value based alternatives. In North America, new product introductions, promotions and additional home center business enhanced our sales. To support continuing growth in our insulation board business, we have begun construction of a new manufacturing facility in France. As Western European housing contracted, our roof panel sales have declined and we reduced our workforce to balance accordingly. We have licensed patents for our click furniture to additional manufacturers who are introducing new products that will increase interest in the technology.

Through product innovation, expanded distribution and process improvements, Mohawk delivered solid fourth quarter results. We are seeing some inflation in our raw materials and are taking the appropriate actions in the marketplace to address. In the U.S., low mortgage rates, stabilizing home prices and improving employment should sustain the housing recovery. We believe that U.S. residential remodeling should see improvement in the future and that the European economic conditions are near a bottom. We anticipate revenue growth for 2013 as the U.S. market improves and we realize some benefits from recent acquisitions. The first quarter earnings are seasonally the lowest and represented a little less than one sixth of 2012's full year results. With this, our guidance for first quarter earnings is $0.77 to $0.86 per share, excluding any restructuring, acquisition costs and interest on the new bonds for Marazzi.

Mohawk is a leading supplier of flooring for both residential and commercial applications.  Mohawk provides a complete selection for all markets of carpet, ceramic tile, laminate, wood, stone, vinyl and rugs. These products are marketed under the premier brands in the industry including Mohawk, Karastan, Lees, Bigelow, Durkan, Mohawk Home, Daltile, American Olean, Unilin, Pergo and Quick-Step.  Mohawk's unique merchandising and marketing assists consumers in creating exquisite floors to fulfill their dreams. Mohawk provides a premium level of service with its own trucking fleet and local distribution in the U.S.  Mohawk's international presence includes operations in Australia, Brazil, China, Europe, India, Malaysia, Mexico and Russia.

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; inflation in raw material prices and other input costs; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company's products; impairment charges; integration of acquisitions; international operations; introduction of new products; rationalization of operations; tax, product and other claims; litigation; and other risks identified in Mohawk's SEC reports and public announcements.

Conference call Friday, February 22, 2013 at 11:00 AM Eastern Time

The telephone number is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 91220581.  A replay will be available until March 8, 2013 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 91220581.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES  

Consolidated Statement of Operations

Three Months Ended

Twelve Months Ended

(Amounts in thousands, except per share data)

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Net sales

$

1,435,659

1,378,297

5,787,980

5,642,258

Cost of sales

1,066,329

1,042,880

4,297,922

4,225,379

    Gross profit

369,330

335,417

1,490,058

1,416,879

Selling, general and administrative expenses

273,470

269,123

1,110,550

1,101,337

Operating income

95,860

66,294

379,508

315,542

Interest expense

15,402

24,130

74,713

101,617

Other expense, net

1,366

257

303

14,051

    Earnings before income taxes

79,092

41,907

304,492

199,874

Income tax expense

12,703

(1,990)

53,599

21,649

    Net earnings

66,389

43,897

250,893

178,225

Net earnings attributable to noncontrolling interest

(966)

(635)

(4,303)

    Net earnings attributable to Mohawk Industries, Inc.

$

66,389

42,931

250,258

173,922

Basic earnings per share attributable to Mohawk Industries, Inc.

$

0.96

0.62

3.63

2.53

Weighted-average common shares outstanding - basic

69,095

68,768

68,988

68,736

Diluted earnings per share attributable to Mohawk Industries, Inc.

$

0.95

0.62

3.61

2.52

Weighted-average common shares outstanding - diluted

69,536

69,016

69,306

68,964

Other Financial Information

(Amounts in thousands)

Net cash provided by operating activities

$

289,043

162,805

587,590

300,993

Depreciation and amortization

$

63,878

74,930

280,293

297,734

Capital expenditures

$

73,296

93,313

208,294

275,573

Consolidated Balance Sheet Data

(Amounts in thousands)

December 31, 2012

December 31, 2011

ASSETS

Current assets:

Cash and cash equivalents

$

477,672

311,945

Receivables, net

679,473

686,165

Inventories

1,133,736

1,113,630

Prepaid expenses and other current assets

147,580

135,514

Deferred income taxes

111,585

150,910

    Total current assets

2,550,046

2,398,164

Property, plant and equipment, net

1,692,852

1,712,154

Goodwill

1,385,771

1,375,175

Intangible assets, net

553,799

605,100

Deferred income taxes and other non-current assets

121,216

115,635

    Total assets

$

6,303,684

6,206,228

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

55,213

386,255

Accounts payable and accrued expenses

773,436

715,091

    Total current liabilities

828,649

1,101,346

Long-term debt, less current portion

1,327,729

1,200,184

Deferred income taxes and other long-term liabilities

427,689

455,190

    Total liabilities

2,584,067

2,756,720

Noncontrolling interest

33,723

Total stockholders' equity

3,719,617

3,415,785

Total liabilities and stockholders' equity

$

6,303,684

6,206,228

Segment Information

Three Months Ended

As of and for the Twelve Months Ended

(Amounts in thousands)

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Net sales:

Mohawk

$

725,895

723,975

2,912,055

2,927,674

Dal-Tile

401,637

348,541

1,616,383

1,454,316

Unilin

329,969

326,321

1,350,349

1,344,764

Intersegment sales

(21,842)

(20,540)

(90,807)

(84,496)

    Consolidated net sales

$

1,435,659

1,378,297

5,787,980

5,642,258

Operating income (loss):

Mohawk

$

51,968

30,687

158,196

109,874

Dal-Tile

21,039

18,387

120,951

101,298

Unilin

29,796

21,640

126,409

127,147

Corporate and eliminations

(6,943)

(4,420)

(26,048)

(22,777)

    Consolidated operating income

$

95,860

66,294

379,508

315,542

Assets:

Mohawk

$

1,721,214

1,769,065

Dal-Tile

1,731,258

1,732,818

Unilin

2,672,389

2,533,070

Corporate and eliminations

178,823

171,275

    Consolidated assets

$

6,303,684

6,206,228

Reconciliation of Net Earnings Attributable to Mohawk Industries, Inc. to Adjusted Net Earnings Attributable to Mohawk Industries, Inc. and Adjusted Diluted Earnings Per Share Attributable to Mohawk Industries, Inc.

(Amounts in thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Net earnings attributable to Mohawk Industries, Inc.

$

66,389

42,931

250,258

173,922

Adjusting items:

Unrealized foreign currency losses (1)

9,085

Operating lease correction (2)

6,035

6,035

Business restructurings

6,109

7,696

18,564

23,209

Debt extinguishment costs

1,116

Income taxes

(2,111)

(7,152)

(7,003)

(11,749)

    Adjusted net earnings attributable to Mohawk Industries, Inc.

$

70,387

49,510

261,819

201,618

Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.

$

1.01

0.72

3.78

2.92

Weighted-average common shares outstanding - diluted

69,536

69,016

69,306

68,964

 

Reconciliation of Operating Cash Flow to Free Cash Flow

(Amounts in thousands)

Three Months Ended

December 31, 2012

Net cash provided by operating activities

$

289,043

Capital expenditures

73,296

    Free cash flow

$

215,747

Reconciliation of Total Debt to Net Debt

(Amounts in thousands)

December 31, 2012

December 31, 2011

Current portion of long-term debt

$

55,213

386,255

Long-term debt, less current portion

1,327,729

1,200,184

Less:  Cash and cash equivalents

477,672

311,945

    Net Debt

$

905,270

1,274,494

 

Reconciliation of Operating Income to Adjusted EBITDA

(Amounts in thousands)

Three Months Ended

Trailing Twelve Months Ended

March 31, 2012

June 30, 2012

September 29, 2012

December 31, 2012

December 31, 2012

Operating income

$

71,976

107,718

103,954

95,860

379,508

Other (expense) income

1,825

(440)

(322)

(1,366)

(303)

Net earnings attributable to noncontrolling interest

(635)

(635)

Depreciation and amortization

73,286

71,831

71,298

63,878

280,293

    EBITDA

146,452

179,109

174,930

158,372

658,863

Business restructurings

8,226

4,229

6,109

18,564

    Adjusted EBITDA

$

146,452

187,335

179,159

164,481

677,427

Net Debt to Adjusted EBITDA

1.3

 

Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Net sales

$

1,435,659

1,378,297

5,787,980

5,642,258

Adjustment to net sales on a constant exchange rate

9,423

92,300

    Net sales on a constant exchange rate

$

1,445,082

1,378,297

5,880,280

5,642,258

 

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended

Dal-Tile

December 31, 2012

December 31, 2011

Net sales

$

401,637

348,541

Adjustment to segment net sales on a constant exchange rate

(1,635)

    Segment net sales on a constant   exchange rate

$

400,002

348,541

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended

Unilin

December 31, 2012

December 31, 2011

Net sales

$

329,969

326,321

Adjustment to segment net sales on a constant exchange rate

11,058

    Segment net sales on a constant exchange rate

$

341,027

326,321

 

Reconciliation of Operating Income to Adjusted Operating Income

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Operating income

$

95,860

66,294

379,508

315,542

Operating lease correction (2)

6,035

6,035

Business restructurings

6,109

7,696

18,564

23,209

    Adjusted operating income

$

101,969

80,025

398,072

344,786

Adjusted operating margin as a percent of net sales

7.1%

5.8%

6.9%

6.1%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

Mohawk

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Operating income

$

51,968

30,687

158,196

109,874

Operating lease correction (2)

2,761

2,761

Business restructurings

7,696

10,504

23,209

    Adjusted segment operating income

$

51,968

41,144

168,700

135,844

Adjusted operating margin as a percent of net sales

7.2%

5.7%

5.8%

4.6%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

Dal-Tile

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Operating income

$

21,039

18,387

120,951

101,298

Operating lease correction (2)

3,274

3,274

Business restructurings

6,109

6,109

    Adjusted segment operating income

$

27,148

21,661

127,060

104,572

Adjusted operating margin as a percent of net sales

6.8%

6.2%

7.9%

7.2%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

Unilin

December 31, 2012

December 31, 2011

December 31, 2012

December 31, 2011

Operating income

29,796

21,640

126,409

127,147

Business restructurings

1,951

    Adjusted segment operating income

$

29,796

21,640

128,360

127,147

Adjusted operating margin as a percent of net sales

9.0%

6.6%

9.5%

9.5%

 

Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes

(Amounts in thousands)

Three Months Ended

December 31, 2012

December 31, 2011

Earnings before income taxes

$

79,092

41,907

Adjustments to earnings before income taxes:

Operating lease correction (2)

6,035

Business restructurings

6,109

7,696

    Adjusted earnings before income taxes

$

85,201

55,638

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense

(Amounts in thousands)

Three Months Ended

December 31, 2012

December 31, 2011

Income tax expense

$

12,703

(1,990)

Income tax effect of adjusting items

2,111

7,152

    Adjusted income tax expense

$

14,814

5,162

Adjusted income tax rate

17%

9%

(1)  Unrealized foreign currency losses in Q3 2011 for certain of the Company's consolidated foreign subsidiaries that measure financial position and results using the U.S. dollar rather than the local currency.

(2)  Correction of an immaterial error related to accounting for operating leases

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 the planning and forecasting in subsequent periods.

 

SOURCE Mohawk Industries, Inc.



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