Mohawk Industries, Inc. Announces Fourth Quarter Earnings

- Net sales up 34% over PY

- Adjusted EPS increased 77%

Feb 20, 2014, 16:01 ET from Mohawk Industries, Inc.

CALHOUN, Ga., Feb. 20, 2014 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2013 fourth quarter net earnings of $95 million and diluted earnings per share (EPS) of $1.29. Excluding unusual charges and discontinued operations, net earnings for the quarter were $131 million and EPS was $1.79, a 77% increase over last year's fourth quarter adjusted EPS. Net sales for the fourth quarter of 2013 were approximately $1.9 billion, an increase of 34% versus the prior year's fourth quarter or 33% on a constant exchange basis. For the fourth quarter of 2012, net sales were approximately $1.4 billion, net earnings were $66 million and EPS was $0.95; excluding unusual charges, net earnings were $70 million and EPS was $1.01.

For the twelve months ending December 31, 2013, net sales were approximately $7.3 billion, an increase of approximately 27% versus the prior year or 26% on a constant exchange basis. Net earnings and EPS for the twelve month period were $349 million and $4.82, respectively. Excluding unusual charges and discontinued operations, net earnings were $473 million and EPS was $6.55, an increase of 73% over the twelve month adjusted EPS results in 2012. For the twelve months ending December 31, 2012, net sales were approximately $5.8 billion, net earnings were $250 million and EPS was $3.61. Excluding unusual charges, net earnings and EPS were $262 million and $3.78, respectively.

Commenting on Mohawk Industries' fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Our fourth quarter results were better than projected primarily as a result of higher top-line growth in our U.S. ceramic business, a strong performance from our Pergo acquisition and lower interest expense due to an upgrade in our credit rating. Our legacy net sales increased approximately 6% as reported, with additional revenue growth from our recent acquisitions. As a result of improved product mix, increased productivity and SG&A management, our adjusted operating income for the quarter rose 260 basis points from last year to approximately 10% of net sales and for the year improved by 250 basis points to 9.4% of net sales. We believe we are well positioned for both revenue and earnings growth in 2014."   

Carpet segment net sales for the quarter were $747 million, up 3% over last year, primarily due to strong performances of the Company's ultra-soft residential products and expansion of the polyester product line. Adjusted SG&A decreased both as a percentage of net sales as well as total expenses from cost reductions and improved execution. The segment's operating margins, excluding unusual charges, for the quarter were approximately 9% of net sales, an increase of 160 basis points from increased volumes, productivity gains, cost reduction and improved product mix. In residential, increased premium carpet sales improved our product mix, and polyester product sales rose substantially as our Continuum introductions gained traction across all channels. In commercial, margins expanded due to new product introductions and the use of performance fibers that enhance our value proposition. Productivity gains are positively impacting our margins, and we lowered costs through reduced changeover costs and waste, enhanced manufacturing alignment, quality improvements and material optimization.

Ceramic segment net sales for the quarter were $738 million, up 84% compared to the prior year, with strong growth from the Dal-Tile business and the Marazzi acquisition. During the period, operating margins, excluding unusual charges, grew 320 basis points to 10% of net sales as a result of higher volumes, efficiency gains and improved product mix. In the U.S., the integration of Dal-Tile and Marazzi has been completed, resulting in new collections with enhanced style and design as well as improved technologies across the business. In Mexico, the Company's ceramic business is increasing distribution, enhancing product mix and improving margins. In Russia, sales benefited from expanded participation in the new construction and home center channels, supported with unique products and dedicated sales teams. Restructuring the Company's ceramic business in Europe reduced cost structures, improved the sales organization through a geographic realignment and decreased manufacturing complexities.

Laminate and wood segment net sales for the quarter were $466 million, up 41% over last year, with most of that increase from growth in the U.S. and the acquisitions of Pergo and Spano. Operating margins, excluding unusual charges, were approximately 12% of net sales, up 260 basis points over the prior year due to lower SG&A, higher volume in North America and reduced amortization. The Unilin and Pergo laminate businesses have been fully integrated, reducing SG&A and improving operational efficiencies. The segment's U.S. wood business grew significantly during the quarter along with new home sales. Legacy European sales were about flat with the prior year on a local basis. Laminate flooring was down slightly in Europe, offset by growth in luxury vinyl tile (LVT). Construction of the Company's new LVT facility in Europe is underway, with production scheduled to commence by the end of 2014. All of Spano and Unilin's administrative and sales functions have now been consolidated. A Spano manufacturing facility was closed during the quarter and production was shifted into other operations.

"Through investments in acquisitions and capital expenditures, productivity improvements and product innovation, we have positioned Mohawk for growth and improved profitability in all segments during 2014," said Lorberbaum. "We have made excellent progress with integrating our acquisitions to maximize their market positions and improve their cost structures. In the U.S., Mohawk is the largest flooring provider with significant shares of the carpet, ceramic, laminate, wood, stone, rug and carpet underlay markets. We are well positioned to improve our results as new construction and remodeling expand in both the residential and commercial categories. In Europe, we continue to lower our cost structure, enhance productivity and improve our product offerings to position the Company for future growth as the industry improves from its cyclical bottom. This year, we anticipate growing both our sales and margins in our legacy businesses and recent acquisitions. We continue to assess additional acquisition opportunities in flooring products around the world to further expand the business. With these factors, our guidance for first quarter earnings is $1.13 to $1.19 per share, excluding any restructuring charges. Our first quarter results are seasonally our lowest and in the past four years represented about 1/7th of our total annual earnings. While the weather in the first half of this quarter has impacted the timing of some of our U.S. orders and shipments, our first quarter results are expected to be in line with normal seasonal patterns. We anticipate orders improving and our backlog declining, limiting the impact on the quarter. 

"We are optimistic about the future of the flooring industry and our participation in it. This year, we anticipate increasing capital investments in our businesses to support additional growth, expand our product offerings and reduce costs. We will continue driving all aspects of our business to improve profits and increase shareholder value." 

Mohawk Industries is the leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawk's vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Our industry-leading innovation has yielded products and technologies that differentiate our brands in the marketplace and satisfy all remodeling and new construction requirements. Our brands are among the most recognized in the industry and include American Olean, Bigelow, Daltile, Durkan, Karastan, Lees, Marazzi, Kerama Marazzi, Mohawk, Pergo, Unilin and Quick-Step. During the past decade, Mohawk has transformed its business from an American carpet manufacturer into the world's largest flooring company with operations in Australia, Brazil, Canada, China, Europe, India, Malaysia, Mexico, Russia and the United States. 

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 21, 2014 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 # 31815143.  A replay will be available until Wednesday, March 5, 2014 by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 31815143.

 

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three Months Ended

Twelve Months Ended

(Amounts in thousands, except per share data)

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Net sales

$                    1,924,104

1,435,659

7,348,754

5,787,980

Cost of sales

1,411,307

1,066,328

5,427,945

4,297,922

Gross profit

512,797

369,331

1,920,809

1,490,058

Selling, general and administrative expenses

361,809

273,471

1,373,878

1,110,550

Operating income

150,988

95,860

546,931

379,508

Interest expense

22,148

15,402

92,246

74,713

Other expense, net

2,656

1,366

9,114

303

Earnings from continuing operations before income taxes

126,184

79,092

445,571

304,492

Income tax expense

15,420

12,703

78,385

53,599

Earnings from continuing operations

110,764

66,389

367,186

250,893

Loss from discontinued operations, net of income tax benefit of $268 and $1,050

(15,981)

-

(17,895)

-

Net earnings including noncontrolling interest

94,783

66,389

349,291

250,893

Net earnings attributable to noncontrolling interest

132

-

505

635

Net earnings attributable to Mohawk Industries, Inc.

$                           94,651

66,389

348,786

250,258

Basic earnings per share attributable to Mohawk Industries, Inc.

  Income from continuing operations 

$                                1.52

0.96

5.11

3.63

  Loss from discontinued operations, net of income taxes

(0.22)

-

(0.25)

-

Basic earnings per share attributable to Mohawk Industries, Inc.

$                                1.30

0.96

4.86

3.63

Weighted-average common shares outstanding - basic

72,654

69,095

71,773

68,988

Diluted earnings per share attributable to Mohawk Industries, Inc.

  Income from continuing operations 

$                                1.51

0.95

5.07

3.61

  Loss from discontinued operations, net of income taxes

(0.22)

-

(0.25)

-

Diluted earnings per share attributable to Mohawk Industries, Inc.

$                                1.29

0.95

4.82

3.61

Weighted-average common shares outstanding - diluted

73,214

69,536

72,301

69,306

Other Financial Information

(Amounts in thousands)

Net cash provided by  operating activities

$                       198,190

289,043

525,163

587,590

Depreciation and amortization

$                         86,329

63,878

308,871

280,293

Capital expenditures

$                       111,027

73,296

366,550

208,294

Consolidated Balance Sheet Data

(Amounts in thousands)

December 31, 2013

December 31, 2012

ASSETS

Current assets:

    Cash and cash equivalents

$                          54,066

477,672

    Receivables, net

1,062,875

679,473

    Inventories

1,572,325

1,133,736

    Prepaid expenses and other current assets

248,918

147,580

    Deferred income taxes 

147,534

111,585

        Total current assets

3,085,718

2,550,046

Property, plant and equipment, net

2,701,743

1,692,852

Goodwill

1,736,092

1,385,771

Intangible assets, net

811,602

553,799

Deferred income taxes and other non-current assets

159,022

121,216

    Total assets

$                   8,494,177

6,303,684

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$                       127,218

55,213

Accounts payable and accrued expenses

1,193,593

773,436

        Total current liabilities

1,320,811

828,649

Long-term debt, less current portion

2,132,790

1,327,729

Deferred income taxes and other long-term liabilities

570,270

427,689

        Total liabilities

4,023,871

2,584,067

Total stockholders' equity

4,470,306

3,719,617

    Total liabilities and stockholders' equity

$                   8,494,177

6,303,684

Segment Information

Three Months Ended

As of or for the Twelve Months Ended

(Amounts in thousands)

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Net sales:

    Carpet

$                       747,143

725,895

2,986,096

2,912,055

    Ceramic

738,004

401,637

2,677,058

1,616,383

    Laminate and Wood

466,082

329,969

1,792,260

1,350,349

    Intersegment sales

(27,125)

(21,842)

(106,660)

(90,807)

        Consolidated net sales

$                   1,924,104

1,435,659

7,348,754

5,787,980

Operating income (loss):

    Carpet

$                          60,087

51,968

209,023

158,196

    Ceramic

57,637

21,039

209,825

120,951

    Laminate and Wood

40,290

29,796

159,365

126,409

    Corporate and eliminations

(7,026)

(6,943)

(31,282)

(26,048)

        Consolidated operating income

$                       150,988

95,860

546,931

379,508

Assets:

    Carpet

$                   1,786,085

1,721,214

    Ceramic

3,787,785

1,731,258

    Laminate and Wood

2,716,759

2,672,389

    Corporate and eliminations

203,548

178,823

        Consolidated assets

$                   8,494,177

6,303,684

 

 

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, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Net earnings attributable to Mohawk Industries, Inc.

$                           94,651

66,389

348,786

250,258

Adjusting items:

Restructuring, acquisition and integration-related costs

37,812

6,109

113,420

18,564

Acquisitions purchase accounting (inventory step-up)

-

-

31,041

-

Discontinued operations

16,249

-

18,945

-

Deferred loan costs

-

-

490

-

Interest on 3.85% senior notes

-

-

3,559

-

Income taxes

(17,621)

(2,111)

(42,841)

(7,003)

Adjusted net earnings attributable to Mohawk Industries, Inc.

$                        131,091

70,387

473,400

261,819

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

1.79

1.01

6.55

3.78

Weighted-average common shares outstanding - diluted

73,214

69,536

72,301

69,306

Reconciliation of Operating Cash Flow to Free Cash Flow

(Amounts in thousands)

Three Months Ended

December 31, 2013

Net cash provided by operating activities

$                         198,190

Less:  Capital expenditures

111,027

  Free cash flow

$                            87,163

Reconciliation of Total Debt to Net Debt

(Amounts in thousands)

December 31, 2013

Current portion of long-term debt

$                         127,218

Long-term debt, less current portion

2,132,790

Less: Cash and cash equivalents

54,066

Net Debt

$                     2,205,942

Reconciliation of Operating Income to Proforma Adjusted EBITDA

(Amounts in thousands)

Trailing Twelve

Three Months Ended

Months Ended

March 30, 2013

June 29, 2013

September 28, 2013

December 31, 2013

December 31, 2013

Operating income

$                            86,842

133,198

175,903

150,988

546,931

Other (expense) income

(6,387)

1,097

(1,168)

(2,656)

(9,114)

    Net (earnings) loss attributable to noncontrolling interest

(72)

190

(491)

(132)

(505)

Depreciation and amortization

60,349

80,643

81,550

86,329

308,871

EBITDA

140,732

215,128

255,794

234,529

846,183

Restructuring, acquisition and integration-related costs

9,856

41,321

24,431

37,812

113,420

Acquisitions purchase accounting (inventory step-up)

-

18,744

12,297

-

31,041

 Acquisitions EBITDA

43,072

-

-

-

43,072

 Proforma Adjusted EBITDA 

$                         193,660

275,193

292,522

272,341

1,033,716

Net Debt to Proforma Adjusted EBITDA

2.1

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

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Net sales

$                     1,924,104

1,435,659

7,348,754

5,787,980

Adjustment to net sales on a constant exchange rate

(12,250)

-

(34,536)

-

Net sales on a constant exchange rate

$                     1,911,854

1,435,659

7,314,218

5,787,980

Reconciliation of Gross Profit to Adjusted Gross Profit 

(Amounts in thousands)

Three Months Ended

December 31, 2013

December 31, 2012

Gross Profit

$                         512,797

369,331

Adjustments to gross profit:

Restructuring and integration-related costs

16,707

5,197

  Adjusted gross profit

$                         529,504

374,528

   Adjusted gross profit as a percent of net sales

27.5%

26.1%

Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses

(Amounts in thousands)

Three Months Ended

December 31, 2013

December 31, 2012

Selling, general and administrative expenses

$                         361,809

273,471

Adjustments to selling, general and administrative expenses:

Restructuring, acquisition and integration-related costs

(19,644)

(912)

  Adjusted selling, general and administrative expenses

$                         342,165

272,559

Adjusted selling, general and administrative expenses as a percent of net sales

17.8%

19.0%

Reconciliation of Segment Selling, General and Administrative Expenses to Adjusted Segment Selling, General and Administrative Expenses

(Amounts in thousands)

Three Months Ended

Carpet

December 31, 2013

December 31, 2012

Selling, general and administrative expenses

$                         120,808

118,417

Adjustments to selling, general and administrative expenses:

Restructuring, acquisition and integration-related costs

(3,487)

-

  Adjusted selling, general and administrative expenses

$                         117,321

118,417

Adjusted selling, general and administrative expenses as a percent of net sales

15.7%

16.3%

Reconciliation of Operating Income to Adjusted Operating Income 

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Operating income

$                         150,988

95,860

546,931

379,508

Adjustment to operating income:

Restructuring, acquisition and integration-related costs

36,351

6,109

111,939

18,564

Acquisitions purchase accounting (inventory step-up)

-

-

31,041

-

  Adjusted operating income

$                         187,339

101,969

689,911

398,072

   Adjusted operating margin as a percent of net sales

9.7%

7.1%

9.4%

6.9%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

Carpet

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Operating income

$                            60,087

51,968

209,023

158,196

Adjustment to segment operating income:

Restructuring, acquisition and integration-related costs

6,005

-

13,603

10,504

  Adjusted segment operating income

$                            66,092

51,968

222,626

168,700

   Adjusted operating margin as a percent of net sales

8.8%

7.2%

7.5%

5.8%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

Ceramic

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Operating income

$                            57,637

21,039

209,825

120,951

Adjustment to segment operating income:

Restructuring, acquisition and integration-related costs

15,982

6,109

42,876

6,109

Acquisitions purchase accounting (inventory step-up)

-

-

31,041

-

  Adjusted segment operating income

$                            73,619

27,148

283,742

127,060

   Adjusted operating margin as a percent of net sales

10.0%

6.8%

10.6%

7.9%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)

Three Months Ended

Twelve Months Ended

Laminate and Wood

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Operating income

$                            40,290

29,796

159,365

126,409

Adjustment to segment operating income:

Restructuring, acquisition and integration-related costs

13,852

-

54,235

1,951

  Adjusted segment operating income

$                            54,142

29,796

213,600

128,360

   Adjusted operating margin as a percent of net sales

11.6%

9.0%

11.9%

9.5%

Reconciliation of Earnings from Continuing Operations Before Income Taxes to Adjusted Earnings from Continuing Operations Before Income Taxes

(Amounts in thousands)

Three Months Ended

December 31, 2013

December 31, 2012

Earnings from continuing operations before income taxes

$                         126,184

79,092

Adjustment to earnings from continuing operations before income taxes:

Restructuring, acquisition and integration-related costs

37,812

6,109

  Adjusted earnings before income taxes

$                         163,996

85,201

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense 

(Amounts in thousands)

Three Months Ended

December 31, 2013

December 31, 2012

Income tax expense 

$                            15,420

12,703

Income tax effect of adjusting items

17,353

2,111

  Adjusted income tax expense

$                            32,773

14,814

Adjusted income tax rate

20%

17%

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.

In particular, the Company believes excluding the impact of Restructuring, acquisition and integration-related costs is useful because it allows investors to evaluate our performance for different periods on a more comparable basis.

 

 

SOURCE Mohawk Industries, Inc.



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