2014

Mohawk Industries, Inc. Announces Third Quarter Earnings

CALHOUN, Ga., Nov. 1, 2012 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 third quarter net earnings of $70 million and diluted earnings per share (EPS) of $1.01. Excluding restructuring charges, net earnings were $72 million and EPS was $1.04, a 25% increase over last year's third quarter adjusted EPS. Net sales for the third quarter of 2012 were $1.5 billion, an increase of 2% versus prior year and an increase of 4% on a constant exchange rate. For the third quarter of 2011, net sales were $1.4 billion, net earnings were $47 million and EPS was $0.68. Excluding unusual items, net earnings for the third quarter of 2011 were $57 million and EPS was $0.83.

For the nine months ending September 29, 2012, net sales were $4.4 billion, an increase of 2% versus prior year and 4% on a constant exchange rate. Net earnings and EPS for the nine-month period were $184 million and $2.66, respectively. Excluding restructuring charges, net earnings were $191 million and EPS was $2.76, an increase of 25% over the nine-month adjusted EPS results in 2011. For the nine months ending October 1, 2011, net sales were $4.3 billion, net earnings were $131 million and EPS was $1.90. Excluding unusual items, net earnings and EPS were $152 million and $2.21, respectively.

Commenting on Mohawk Industries' third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "All of our segments delivered solid third quarter performances with improvements in product mix, pricing, volume and productivity, as well as lower interest expense contributing to our results. Across the enterprise, we have managed to keep SG&A dollars in line with last year even as we invested significantly more in new product innovations and marketing to improve our future sales and product mix. During the quarter, we generated adjusted EBITDA of $179 million and free cash flow of $156 million. Both our net debt to adjusted EBITDA ratio and net debt to capitalization ratio improved to 1.7 and 22%, respectively.  Mohawk's strong financial position provides us with the flexibility to pursue strategic opportunities such as the recently announced agreement to acquire Pergo, the most recognized brand of premium laminate flooring in the U.S. and Europe."

The Mohawk segment increased its adjusted operating income margin 180 basis points with sales remaining flat compared to 2011. The gains stemmed from improved pricing and product mix, reduced manufacturing and distribution costs and increased productivity. Our carpet sales performance was stronger in our specialty and contractor channels but was offset by the timing of product transitions in the home center channel. Our rug sales improved over the prior period, though they still remained below last year as retailers adjusted their strategies with consumer spending.  We saw continued improvement in mix and expanded our SmartStrand® Silk™ collection, which has redefined the premium carpet market. We enhanced productivity through improved manufacturing and distribution efficiencies and gains from our capital investments. 

Dal-Tile sales grew 9% during the quarter or 10% on a constant exchange rate. The segment improved sales in both residential and commercial categories and continued significant growth in the Mexican market. Operating margins were enhanced from actions that improved productivity and increased yields. Sales grew across all residential channels supported by our new Reveal Imaging designs, fashionable mosaics and larger format tiles that are aligned with today's decorating trends. We are leveraging Dal-Tile's traditional strength in the builder channel across our business segments to expand commitments with regional builders. We have introduced specific value-engineered products to gain position in the growing multi-family category. In Mexico, our new Salamanca tile plant is successfully ramping up and supplying product to satisfy our growing ceramic position. Across the segment, we lowered manufacturing costs through improved material formulations, higher yields and lower waste.

Unilin segment sales during the quarter were flat as reported, but grew 9% on a constant exchange rate. Outside North America, laminate and wood flooring sales grew from continued expansion into the DIY channel, increases in the Russian market and our Australian acquisition. Our Russian laminate facility increased its production to satisfy higher demand and implemented productivity improvements.  In North America, we grew our laminate and wood products through all customer channels during the quarter. New product introductions, increased home center penetration, gains within the builder channel and promotional activity increased our sales. Declining new construction in Benelux and France created headwinds for our insulated roofing panels. To reduce costs in this category, we are consolidating our brands and sales forces as well as implementing process improvements. By helping meet European energy goals, our insulation panels delivered strong sales increases in both Belgium and France.

Mohawk's third quarter results reflect our strengths in delivering innovative products, driving operational excellence and entering new geographic markets. We continue to invest strategically by introducing differentiated products, lowering our manufacturing and administrative costs and acquiring new companies that will enhance our results.  We have taken the necessary steps to align our pricing with our raw material inflation and we will react as required. In the U.S., increasing new home construction and improved sales of existing homes provide a positive outlook for future flooring growth. In Europe, soft market conditions due to economic uncertainty and changes in exchange rates are anticipated to be a headwind. Based on these factors, our guidance for fourth quarter earnings is $.89 to $.98 per share, excluding any restructuring costs.

Mohawk's strong financial position allowed us to enter into an agreement to acquire Pergo which will benefit our worldwide laminate business and we are well positioned to invest in other opportunities as they arise.  We continue to execute our long-term strategy of product innovation, cost reduction, asset maximization and geographic expansion. Each of our businesses is well situated to benefit from the improvements in the U.S. remodeling and construction category, which remains substantially below peak levels. Our organization is focused on bringing value to our customers while maximizing our results.

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 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, 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, November 2, 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 # 37587426.  A replay will also be available until November 16, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 37587426.

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES













Consolidated Statement of Operations


Three Months Ended



Nine Months Ended


(Amounts in thousands, except per share data)


September 29, 2012


October 1, 2011


September 29, 2012


October 1, 2011










Net sales


$

1,473,493



1,442,512



4,352,321



4,263,961


Cost of sales


1,100,656



1,084,889



3,231,594



3,182,499


Gross profit


372,837



357,623



1,120,727



1,081,462


Selling, general and administrative expenses


268,883



266,159



837,079



832,214


Operating income


103,954



91,464



283,648



249,248


Interest expense


17,969



25,132



59,311



77,487


Other expense (income), net


322



13,413



(1,063)



13,794


Earnings before income taxes


85,663



52,919



225,400



157,967


Income tax expense


15,359



5,223



40,896



23,639


Net earnings


70,304



47,696



184,504



134,328


Net earnings attributable to noncontrolling interest




(1,050)



(635)



(3,337)


Net earnings attributable to Mohawk Industries, Inc.


$

70,304



46,646



183,869



130,991


Basic earnings per share attributable to Mohawk Industries, Inc.


$

1.02



0.68



2.67



1.91


Weighted-average common shares outstanding - basic


69,010



68,759



68,952



68,725


Diluted earnings per share attributable to Mohawk Industries, Inc.


$

1.01



0.68



2.66



1.90


Weighted-average common shares outstanding - diluted


69,337



68,954



69,247



68,946











Other Financial Information









(Amounts in thousands)









Net cash provided by operating activities


$

202,971



109,598



298,547



138,188


Depreciation and amortization


$

71,298



74,207



216,415



222,804


Capital expenditures


$

47,311



69,741



134,998



182,260











Consolidated Balance Sheet Data









(Amounts in thousands)















September 29, 2012


October 1, 2011

ASSETS









Current assets:









Cash and cash equivalents






$

380,842



276,156


Receivables, net






817,214



775,421


Inventories






1,139,403



1,132,073


Prepaid expenses and other current assets






146,275



125,007


Deferred income taxes






112,995



131,931


Total current assets






2,596,729



2,440,588


Property, plant and equipment, net






1,657,226



1,696,182


Goodwill






1,371,494



1,389,430


Intangible assets, net






554,257



634,164


Deferred income taxes and other non-current assets






122,906



117,204


Total assets






$

6,302,612



6,277,568


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt






$

57,673



438,300


Accounts payable and accrued expenses






761,186



774,939


Total current liabilities






818,859



1,213,239


Long-term debt, less current portion






1,467,269



1,173,038


Deferred income taxes and other long-term liabilities






421,549



439,798


Total liabilities






2,707,677



2,826,075


Noncontrolling interest








32,758


Total stockholders' equity






3,594,935



3,418,735


Total liabilities and stockholders' equity






$

6,302,612



6,277,568











Segment Information


Three Months Ended



As of or for the Nine Months Ended


(Amounts in thousands)


September 29, 2012


October 1, 2011


September 29, 2012


October 1, 2011










Net sales:









Mohawk


$

751,787



754,470



2,186,160



2,203,699


Dal-Tile


417,533



381,891



1,214,746



1,105,775


Unilin


328,582



329,514



1,020,380



1,018,443


Intersegment sales


(24,409)



(23,363)



(68,965)



(63,956)


Consolidated net sales


$

1,473,493



1,442,512



4,352,321



4,263,961











Operating income (loss):









Mohawk


$

43,810



30,946



106,228



79,187


Dal-Tile


37,452



33,073



99,912



82,911


Unilin


28,892



33,048



96,613



105,507


Corporate and eliminations


(6,200)



(5,603)



(19,105)



(18,357)


Consolidated operating income


$

103,954



91,464



283,648



249,248











Assets:









Mohawk






$

1,760,828



1,810,191


Dal-Tile






1,783,147



1,735,718


Unilin






2,586,084



2,569,103


Corporate and eliminations






172,553



162,556


Consolidated assets






$

6,302,612



6,277,568











 

 

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



Nine Months Ended







September 29,
2012


October 1,
2011


September 29,
2012


October 1,
2011

Net earnings attributable to Mohawk Industries, Inc.


$

70,304



46,646



183,869



130,991


Adjusting items:









Unrealized foreign currency losses (1)




9,085





9,085


Business restructurings


4,229



2,186



12,455



15,513


Debt extinguishment costs




1,116





1,116


Income taxes


(2,691)



(1,761)



(4,892)



(4,597)


Adjusted net earnings attributable to Mohawk Industries, Inc.


$

71,842



57,272



191,432



152,108














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


$

1.04



0.83



2.76



2.21


Weighted-average common shares outstanding - diluted


69,337



68,954



69,247



68,946














Reconciliation of Operating Cash Flow to Free Cash Flow







(Amounts in thousands)












Three Months Ended












September 29, 2012









Net cash provided by operating activities


$

202,971










Capital expenditures


(47,311)










Free cash flow


$

155,660






















Reconciliation of Total Debt to Net Debt









(Amounts in thousands)














September 29, 2012









Current portion of long-term debt


$

57,673










Long-term debt, less current portion


1,467,269










Cash and cash equivalents


(380,842)










Net Debt


$

1,144,100






















Reconciliation of Capitalization









(Amounts in thousands)














September 29, 2012









Current portion of long-term debt


$

57,673










Long-term debt, less current portion


1,467,269










Total stockholders' equity


3,594,935










Capitalization


$

5,119,877





















Net Debt to Capitalization


22%














































Reconciliation of Operating Income to Adjusted EBITDA







(Amounts in thousands)












Three Months Ended



Trailing Twelve Months Ended




December 31, 2011


March 31, 2012


June 30, 2012


September 29, 2012


September 29,
2012

Operating income


$

66,294



71,976



107,718



103,954



349,942


Other (expense) income


(257)



1,825



(440)



(322)



806


Net earnings attributable to noncontrolling interest


(966)



(635)







(1,601)


Depreciation and amortization


74,930



73,286



71,831



71,298



291,345


EBITDA


140,001



146,452



179,109



174,930



640,492


Operating lease correction (2)


6,035









6,035


Business restructurings


7,696





8,226



4,229



20,151


Adjusted EBITDA


$

153,732



146,452



187,335



179,159



666,678














Net Debt to Adjusted EBITDA










1.7














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




(Amounts in thousands)












Three Months Ended


Nine Months Ended







September 29,
2012


October 1,
2011


September 29,
2012


October 1,
2011



Net sales


$

1,473,493



1,442,512



4,352,321



4,263,961




Adjustment to net sales on a constant exchange rate


32,777





82,877






Net sales on a constant exchange rate


$

1,506,270



1,442,512



4,435,198



4,263,961
















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







(Amounts in thousands)














Three Months Ended







Dal-Tile


September 29,
2012


October 1,
2011







Net sales


$

417,533



381,891








Adjustment to segment net sales on a constant exchange rate


1,935










Segment net sales on a constant exchange rate


$

419,468



381,891























Three Months Ended







Unilin



September 29,
2012


October 1,
2011







Net sales


$

328,582



329,514








Adjustment to segment net sales on a constant exchange rate


30,842










Segment net sales on a constant exchange rate


$

359,424



329,514
















































































Reconciliation of Operating Income to Adjusted Operating Income







(Amounts in thousands)














Three Months Ended










September 29,
2012


October 1,
2011







Operating income


$

103,954



91,464








Business restructurings


4,229



2,186








Adjusted operating income


$

108,183



93,650








Adjusted operating margin as a percent of net sales


7.3%



6.5%




















Reconciliation of Segment Operating Income to Adjusted Segment Operating Income







(Amounts in thousands)














Three Months Ended







Mohawk


September 29,
2012


October 1,
2011







Operating income


$

43,810



30,946








Business restructurings


3,122



2,186








Adjusted segment operating income


$

46,932



33,132








Adjusted operating margin as a percent of net sales


6.2%



4.4%




















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







(Amounts in thousands)














Three Months Ended










September 29,
2012


October 1,
2011







Earnings before income taxes


$

85,663



52,919








Adjustments to earnings before income taxes:











Unrealized foreign currency losses (1)




9,085








Business restructurings


4,229



2,186








Debt extinguishment costs




1,116








Adjusted earnings before income taxes


$

89,892



65,306




















Reconciliation of Income Tax Expense to Adjusted Income Tax Expense







(Amounts in thousands)














Three Months Ended










September 29,
2012


October 1,
2011







Income tax expense


$

15,359



5,223








Income tax effect of business restructurings


2,691



1,761








Adjusted income tax expense


$

18,050



6,984




















Adjusted income tax rate


20%



11%




















(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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