2014

Mohawk Industries, Inc. Announces Second Quarter Earnings

CALHOUN, Ga., Aug. 2, 2012 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 second quarter net earnings of $73 million and diluted earnings per share (EPS) of $1.06. Net earnings excluding restructuring charges were $79 million and EPS was $1.14, a 20% increase over last year's second quarter adjusted EPS. Net sales for the second quarter of 2012 were $1.5 billion, in line with prior year and an increase of 2% on a constant exchange rate. For the second quarter of 2011, net earnings were $61 million and EPS was $0.88. Net earnings excluding restructuring charges for the second quarter of 2011, were $66 million and EPS was $0.95.

For the six months ending June 30, 2012, net sales were $2.9 billion, an increase of 2% versus prior year and 4% on a constant exchange rate. Net earnings and EPS for the six-month period were $114 million and $1.64, respectively. Net earnings excluding restructuring charges were $120 million and EPS was $1.73, an increase of 25% over the six-month adjusted EPS results in 2011. For the six months ending July 2, 2011, net sales were $2.8 billion, net earnings were $84 million and EPS was $1.22. Excluding restructuring charges, net earnings and EPS were $95 million and $1.38, respectively.

Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Selling prices offsetting raw material inflation, productivity gains, product mix improvements and lower interest costs all contributed to our results. Sales increased 2% on a constant exchange rate with commercial sales continuing to outpace residential sales. We continue to control SG&A cost while increasing new product investments across all businesses. During the quarter, we generated adjusted EBITDA of $187 million, free cash flow of $96 million and paid off $336 million of senior notes. We have addressed many of today's economic challenges by enhancing our product differentiation, reducing costs, improving efficiencies and entering new product categories and geographies."

Mohawk segment adjusted operating income margin increased 110 basis points over 2011 with gains from pricing, improved product mix and lower costs from productivity offsetting lower volume and higher material costs. Segment sales were down 3% during the second quarter. Carpet sales for both the industry and Mohawk were approximately flat compared to last year with residential remodeling activity slow. Our rug sales continued to be soft due to lower retail sales, as well as retailers deferring promotional activities and further reducing inventory within the channel. During the quarter, Mohawk's SmartStrand® Silk™ premium carpet collection experienced strong sales growth due to its unsurpassed softness and proprietary environmental features. We executed productivity improvements across the business with particular gains from our capital investments and reduction of waste.

Dal-Tile segment sales grew 7% during the quarter or 8% on a constant exchange rate. The segment posted gains from increases in both residential and commercial sales and growth in the Mexican market. Operating margins were enhanced by higher volumes, greater manufacturing efficiencies, improved material formulations and increased recycling. To address the changing market demand, we converted mosaic and floor tile production to porcelain, increased our ability to make larger sizes and expanded our Reveal Imaging™ capabilities. The new Salamanca facility in Mexico is producing red-body tile for the domestic market. The plant's start-up costs are in line with our expectations, and we anticipate positive contributions in early 2013 due to higher volume and productivity.

Unilin segment sales decreased 2% but increased 7% on a constant exchange rate. Outside North America, laminate and wood flooring sales grew from continued expansion in the DIY channel, expanded distribution in the U.K. and Australian sales. Our Russian facility is progressing with increased productivity and is manufacturing more complex products. In North America, laminate sales grew from increased promotional activity by large retailers and greater penetration in the home center channel. Laminate collections featuring richly embossed surfaces, premium long planks and our proprietary GenuEdge Technology ™ improved our mix in both the remodeling and new construction markets. Our insulated roofing product sales declined in Europe as the housing market contracted but were offset by the growth of our insulation panels, which help to meet energy efficiency goals.

Mohawk's commitment to product innovation, resource management and process improvements yielded improved second quarter results. Our investments in innovative products improved our mix and contributed to higher margins. Though sales softened in the second quarter, U.S. order rates have shown some improvement as we began the third quarter. We do not expect material costs to follow oil price declines due to specific higher chemical costs. In the U.S., low mortgage rates and higher housing starts should support future flooring sales. In Europe, we will have the normal seasonal slowing and expect the present trends to continue with exchange rates being a headwind. Based on these factors, our guidance for third quarter earnings is $0.96 to $1.05 per share, excluding any restructuring costs.

We have addressed many of today's economic challenges by enhancing our product differentiation, reducing costs, improving efficiencies and entering new product categories and geographies. We retain a strong financial position, which provides us flexibility to invest in strategic opportunities going forward.

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 and Quick-Step.  Mohawk's unique merchandising and marketing assists the consumer 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, 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, August 3, 2012 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 # 98256242.  A replay will also be available until August 17, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 98256242.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES









Consolidated Statement of Operations

Three Months Ended


Six Months Ended

(Amounts in thousands, except per share data)

June 30,
2012


July 2,
2011


June 30,
2012


July 2,
2011









Net sales

$1,469,793


1,477,854


2,878,828


2,821,449

Cost of sales

1,081,329


1,095,607


2,130,938


2,097,610

    Gross profit

388,464


382,247


747,890


723,839

Selling, general and administrative expenses

280,746


280,547


568,196


566,055

Operating income

107,718


101,700


179,694


157,784

Interest expense

18,844


25,760


41,342


52,355

Other (income) expense, net

440


396


(1,385)


381

    Earnings before income taxes

88,434


75,544


139,737


105,048

Income tax expense

15,246


13,450


25,537


18,416

Net earnings 

73,188


62,094


114,200


86,632

Net earnings attributable to noncontrolling interest

-


(1,191)


(635)


(2,287)

    Net earnings attributable to Mohawk Industries, Inc.

$ 73,188


60,903


113,565


84,345

Basic earnings per share attributable to Mohawk Industries, Inc. 

$ 1.06


0.89


1.65


1.23

Weighted-average common shares outstanding - basic

68,984


68,744


68,923


68,709

Diluted earnings per share attributable to Mohawk Industries, Inc.

$ 1.06


0.88


1.64


1.22

Weighted-average common shares outstanding - diluted

69,259


68,981


69,204


68,942

























Other Financial Information








(Amounts in thousands)








Net cash provided by operating activities

$ 140,046


96,003


95,576


28,590

Depreciation and amortization

$ 71,831


74,344


145,117


148,597

Capital expenditures

$ 44,436


59,708


87,687


112,519









Consolidated Balance Sheet Data








(Amounts in thousands)













June 30,
2012


July 2,
2011

ASSETS








Current assets:








    Cash and cash equivalents





$ 319,463


285,422

    Receivables, net





782,122


797,893

    Inventories





1,161,073


1,102,769

    Prepaid expenses and other current assets





144,915


125,815

    Deferred income taxes 





126,613


135,338

        Total current assets





2,534,186


2,447,237

Property, plant and equipment, net





1,652,444


1,730,914

Goodwill





1,363,356


1,418,830

Intangible assets, net





564,948


681,178

Deferred income taxes and other non-current assets





149,843


110,841






$6,264,777


6,389,000

LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:








Current portion of long-term debt





$ 57,158


453,185

Accounts payable and accrued expenses





733,411


771,297

        Total current liabilities





790,569


1,224,482

Long-term debt, less current portion





1,570,530


1,155,150

Deferred income taxes and other long-term liabilities





427,360


460,109

        Total liabilities





2,788,459


2,839,741

Noncontrolling interest





-


32,300

Total stockholders' equity





3,476,318


3,516,959






$ 6,264,777


6,389,000









Segment Information

Three Months Ended


As of or for the Six Months Ended

(Amounts in thousands)

June 30,
2012


July 2,
2011


June 30,
2012


July 2,
2011









Net sales:








    Mohawk

$ 734,493


758,064


1,434,373


1,449,229

    Dal-Tile

404,288


379,469


797,213


723,884

    Unilin

354,374


363,097


691,798


688,929

    Intersegment sales

(23,362)


(22,776)


(44,556)


(40,593)

        Consolidated net sales

$1,469,793


1,477,854


2,878,828


2,821,449









Operating income (loss):








    Mohawk

$ 37,136


31,201


62,418


48,241

    Dal-Tile

36,432


32,138


62,460


49,838

    Unilin

40,575


46,209


67,721


72,459

    Corporate and eliminations

(6,425)


(7,848)


(12,905)


(12,754)

        Consolidated operating income

$ 107,718


101,700


179,694


157,784









Assets:








    Mohawk





$ 1,791,376


1,783,630

    Dal-Tile





1,742,563


1,700,482

    Unilin





2,539,997


2,717,032

    Corporate and eliminations





190,841


187,856

        Consolidated assets





$ 6,264,777


6,389,000

















 

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


Six Months Ended


June 30,
2012


July 2,
2011


June 30,
2012


July 2,
2011

Net earnings attributable to Mohawk Industries, Inc.

$ 73,188


60,903


113,565


84,345

Adjusting items:








Business restructurings

8,226


6,514


8,226


13,327

Income taxes

(2,201)


(1,818)


(2,201)


(2,836)

Adjusted net earnings attributable to Mohawk Industries, Inc.

$ 79,213


65,599


119,590


94,836









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

$ 1.14


0.95


1.73


1.38

Weighted-average common shares outstanding - diluted

69,259


68,981


69,204


68,942



Reconciliation of Operating Cash Flow to Free Cash Flow


(Amounts in thousands)



Three Months Ended


June 30, 2012

Net cash provided by operating activities

$ 140,046

Additions to property, plant and equipment

(44,436)

  Free cash flow

$   95,610



Reconciliation of Net Earnings to Adjusted EBITDA


(Amounts in thousands)



Three Months Ended


June 30, 2012

Net earnings

$ 73,188

Income tax expense

15,246

Interest expense

18,844

Depreciation and amortization

71,831

EBITDA

179,109

Business restructurings

8,226

 Adjusted EBITDA 

$ 187,335



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

(Amounts in thousands)









Three Months Ended


Six Months Ended


June 30,
2012


July 2,
2011


June 30,
2012


July 2,
2011

Net sales

$ 1,469,793


1,477,854


2,878,828


2,821,449

Adjustment to net sales on a constant exchange rate:








      Exchange rate

36,326


-


49,962


-

      Net sales on a constant exchange rate

$ 1,506,119


1,477,854


2,928,790


2,821,449










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

(Amounts in thousands)





Three Months Ended

Dal-Tile

June 30, 2012


July 2, 2011

Net sales

$ 404,288


379,469

Adjustment to segment net sales on a constant exchange rate:




      Exchange rate

3,555


-

      Segment net sales on a constant exchange rate

$ 407,843


379,469





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

(Amounts in thousands)





Three Months Ended

Unilin

June 30, 2012


July 2, 2011

Net sales

$ 354,374


363,097

Adjustment to segment net sales on a constant exchange rate:



      Exchange rate

32,771


-

      Segment net sales on a constant exchange rate

$ 387,145


363,097





Reconciliation of Gross Profit to Adjusted Gross Profit 




(Amounts in thousands)





Three Months Ended


June 30, 2012


July 2, 2011

Gross Profit

$ 388,464


382,247

Adjustment to gross profit:




      Business restructurings

6,636


5,532

          Adjusted gross profit

$ 395,100


387,779

   Adjusted gross profit as a percent of net sales

26.9%


26.2%





Reconciliation of Operating Income to Adjusted Operating Income 

(Amounts in thousands)





Three Months Ended


June 30, 2012


July 2, 2011

Operating income

$ 107,718


101,700

Adjustment to operating income:




      Business restructurings

8,226


6,514

          Adjusted operating income

$ 115,944


108,214

   Adjusted operating margin as a percent of net sales

7.9%


7.3%





Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)





Three Months Ended

Mohawk 

June 30, 2012


July 2, 2011

Operating income

$ 37,136


31,201

Adjustment to segment operating income:




      Business restructurings

7,383


6,514

        Adjusted segment operating income

$ 44,519


37,715

     Adjusted operating margin as a percent of net sales

6.1%


5.0%





Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)





Three Months Ended

Unilin 

June 30, 2012


July 2, 2011

Operating income

$ 40,575


46,209

Adjustment to segment operating income:




      Business restructurings

843


-

        Adjusted segment operating income

$ 41,418


46,209

      Adjusted operating margin as a percent of net sales

11.7%


12.7%





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

(Amounts in thousands)





Three Months Ended


June 30, 2012


July 2, 2011

Earnings before income taxes

$ 88,434


75,544

Adjustment to earnings before income taxes:




      Business restructurings

8,226


6,514

        Adjusted earnings before income taxes

$ 96,660


82,058









Reconciliation of Income Tax Expense to Adjusted Income Tax Expense 

(Amounts in thousands)





Three Months Ended


June 30, 2012


July 2, 2011

Income tax expense 

$ 15,246


13,450

Adjustment to income tax expense:




      Income tax effect of business restructurings

2,201


1,818

          Adjusted income tax expense

$ 17,447


15,268





Adjusted income tax rate

18%


19%





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

(Amounts in thousands)





Three Months Ended


June 30, 2012


July 2, 2011

Selling, general and administrative expenses

$ 280,746


280,547

Adjustments to selling, general and administrative expenses:




      Business restructurings

(1,590)


(982)

      Exchange rate

(6,042)


-

          Adjusted selling, general and administrative expenses

$ 273,114


279,565

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

18.6%


18.9%


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.


SOURCE Mohawk Industries, Inc.



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