Mohawk Industries, Inc. Announces First Quarter Earnings
CALHOUN, Georgia, May 5, 2011 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 first quarter net earnings of $23 million and diluted earnings per share (EPS) of $0.34. Excluding restructuring charges, 2011 first quarter net earnings were $29 million and EPS of $0.42. For the first quarter of 2010, the net earnings were $21 million and EPS was $0.30. Excluding restructuring charges, 2010 first quarter net earnings and EPS were $24 million and $0.35 per share. Net sales for the first quarter of 2011 were $1.3 billion which was flat versus 2010. Our cash and net debt to adjusted EBITDA ratio stand at $256 million and 2.2 respectively, providing flexibility to pursue strategic opportunities.
Commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "We grew our operating margin to 4.7% excluding restructuring charges, an improvement of approximately 40 basis points over the first quarter last year by continuing to drive cost reductions, manufacturing improvements and efficiency gains throughout the enterprise. Sales reported during the period were flat with last year with the outlook strengthening for the balance of the year. In the U.S., both remodeling and home sales are expected to improve over last year, and non-residential investment is estimated to increase over 8% in 2011."
Our Mohawk segment net sales declined 3.5% with commercial seeing improvement and the residential category still lagging. The residential order trends turned positive at the end of the first quarter and continued into April. The commercial business continues its recovery with modular tile products growing significantly. The hospitality channel is rebounding after several years of reduced capital spending. We expect continued improvement in our business from our new product introductions, additional customer commitments, price increases to cover raw materials and operational improvements. We announced two carpet price increases to offset the dramatic raw material inflation with the first increase in February followed by the second increase in April. Operational enhancements to optimize productivity, material and service are being executed and will improve our cost position this year. We are completing the consolidation of a carpet facility in South Georgia and relocating the production to our other manufacturing plants. Our many Greenworks initiatives continue to increase the recycled content utilized in our products and processes furthering our sustainable manufacturing commitments while lowering our costs.
Our Dal-Tile segment net sales increased approximately 1% versus last year. The sales trends improved during the period with commercial outperforming residential. We continued the expansion of our Reveal Imaging technology receiving multiple product awards and increased our position in the home center channel. To recover the rising freight costs, we have increased prices on our products and transportation. Cost reductions continue from new investments in technology, lean manufacturing, material innovations and improvements in the supply chain. We are implementing our ceramic strategy in Mexico where the market is growing 5%. We are expanding our sales organization, product offering and customer base to support a new facility in Mexico which should be operational in mid-2012. Our Chinese joint venture is investing to gain market share, increase product mix, improve efficiencies and strengthen management systems. We are building a strong platform to be positioned as a leader in the market.
Our Unilin net sales increased approximately 7% both as reported and on a constant exchange rate. Sales of most of our European products were positive while U.S. markets remain difficult but are showing improvement. Our margins were under pressure from escalating raw material costs which are ahead of our price increases. Price increases were implemented in European flooring, roofing and boards to offset material inflation and additional increases for some products have been announced in the second quarter. We are continuing to expand sales in home centers across Europe with Quick Step products positioned as a premium offering. The U.S. flooring business improved as we proceeded through the first quarter and we strengthened our position in the home center and specialized hard surface channels. We improved our U.S. wood manufacturing costs and enhanced the sales mix with higher value products and additional performance features.
After the seasonally slow first quarter, we believe the industry recovery will continue the balance of the year. Commercial renovation is improving as companies begin to reinvest. We anticipate pent-up demand in the residential remodeling market and improving home sales will positively impact results this year. Price and volume increases, along with cost reductions will enhance profitability. With these factors, our second quarter guidance for earnings is $0.87 to $0.97 per share, excluding any restructuring charges.
We have improved our organization's ability to drive innovation in product, processes and costs. We have managed through a challenging period and significantly redesigned our businesses to maximize our long term results. Our investments in new assets, geographic expansion and systems will enhance our core businesses and create new growth opportunities.
Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, and rugs. These products are marketed under the premier brands in the industry, which include Mohawk, Karastan, Lees, Bigelow, Dal-Tile, American Olean, Unilin and Quick Step. Mohawk's unique merchandising and marketing assist our customers in creating the consumers' dream. Mohawk provides a premium level of service with its own trucking fleet and local distribution. Mohawk's operational international presence includes Mexico, Europe, China, Russia and Malaysia.
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; raw material and energy costs; timing and level of capital expenditures; integration of acquisitions; rationalization of operations; claims; litigation and other risks identified in Mohawk's SEC reports and public announcements.
There will be a conference call Friday, May 6, 2011 at 11:00 AM Eastern Time.
The telephone number to call is 1-800-603-9255 for US/Canada and +1-706-634-2294 for International/Local. Conference ID # 57677152. A conference call replay will also be available until May 20, 2011 by dialing 800-642-1687 for US/local calls and +1-706-645-9291 for International/Local calls and entering Conference ID # 57677152.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations Three Months Ended
------------------
(Amounts in thousands, except April 2, April 3,
per share data) 2011 2010
------- -------
Net sales $1,343,595 1,347,236
Cost of sales 1,002,003 1,005,990
----------------------------- --------- ---------
Gross profit 341,592 341,246
Selling, general and
administrative expenses 285,508 287,625
------------------------ ------- -------
Operating income 56,084 53,621
Interest expense 26,595 33,908
Other expense (income), net (15) (4,531)
--------------------------- --- ------
Earnings before income taxes 29,504 24,244
Income tax expense 4,966 2,974
------------------ ----- -----
Net earnings 24,538 21,270
Net earnings attributable to
noncontrolling interest (1,096) (732)
Net earnings attributable to
Mohawk Industries, Inc. $23,442 20,538
---------------------------- ------- ------
Basic earnings per share
attributable to Mohawk
Industries, Inc. $0.34 0.30
------------------------ ----- ----
Weighted-average common
shares outstanding - basic 68,674 68,523
--------------------------- ------ ------
Diluted earnings per share
attributable to Mohawk
Industries Inc. $0.34 0.30
-------------------------- ----- ----
Weighted-average common
shares outstanding - diluted 68,904 68,730
----------------------------- ------ ------
Other Financial Information
(Amounts in thousands)
Net cash used in operating
activities $67,413 46,192
-------------------------- ------- ------
Depreciation and amortization $74,253 76,798
----------------------------- ------- ------
Capital expenditures $52,811 23,309
-------------------- ------- ------
Consolidated Balance Sheet Data
(Amounts in thousands)
April 2, April 3,
2011 2010
------- -------
ASSETS
Current assets:
Cash and cash equivalents $256,231 452,335
Receivables, net 754,826 788,124
Inventories 1,075,613 932,785
Prepaid expenses 97,846 109,968
Deferred income taxes and
other current assets 155,159 160,246
------------------------- ------- -------
Total current assets 2,339,675 2,443,458
Property, plant and equipment, net 1,715,895 1,719,051
Goodwill 1,406,731 1,377,518
Intangible assets, net 689,703 736,353
Deferred income taxes and
other non-current assets 114,229 42,520
------------------------- ------- ------
$6,266,233 6,318,900
---------- ---------
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $52,706 551,426
Accounts payable and accrued
expenses 739,768 859,690
---------------------------- ------- -------
Total current liabilities 792,474 1,411,116
Long-term debt, less current
portion 1,577,188 1,303,437
Deferred income taxes and
other long-term liabilities 449,984 452,858
---------------------------- ------- -------
Total liabilities 2,819,646 3,167,411
----------------- --------- ---------
Noncontrolling interest 33,255 29,866
-----------------------
Total stockholders' equity 3,413,332 3,121,623
-------------------------- --------- ---------
$6,266,233 6,318,900
---------- ---------
As of or for the Three
Segment Information Months Ended
-----------------------
April 2, April 3,
(Amounts in thousands) 2011 2010
------- --------
Net sales:
Mohawk $691,165 716,583
Dal-Tile 344,415 341,396
Unilin 325,832 305,880
Intersegment sales (17,817) (16,623)
Consolidated net sales $1,343,595 1,347,236
---------------------- ---------- ---------
Operating income:
Mohawk $17,040 16,628
Dal-Tile 17,700 15,395
Unilin 26,250 26,458
Corporate and eliminations (4,906) (4,860)
Consolidated operating income $56,084 53,621
----------------------------- ------- ------
Assets:
Mohawk $1,749,625 1,673,264
Dal-Tile 1,674,408 1,568,605
Unilin 2,654,268 2,525,731
Corporate and eliminations 187,932 551,300
-------
Consolidated assets $6,266,233 6,318,900
------------------- ---------- ---------
Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted
Diluted Earnings Per Share
(Amounts in thousands, except per share data)
Three Months Ended
------------------
April 2, 2011 April 3, 2010
------------- -------------
Net earnings
attributable to
Mohawk Industries,
Inc. $23,442 20,538
Unusual items:
Business
restructurings 6,813 4,004
Income taxes (1,018) (469)
------------ ------ ----
Adjusted net earnings $29,237 24,073
--------------------- ------- ------
Adjusted diluted
earnings per share $0.42 0.35
Weighted-average
common shares
outstanding -
diluted 68,904 68,730
Reconciliation of Total Debt to Net Debt
As of
(Amounts in thousands) April 2, 2011
---------------------- -------------
Current portion of long-
term debt $52,706
Long-term debt, less
current portion 1,577,188
Less: Cash and cash
equivalents 256,231
------------------- -------
Net Debt $1,373,663
-------- ----------
Reconciliation of Operating Income to Adjusted EBITDA
(Amounts in thousands)
Three Months Ended
------------------
July 3, 2010 October 2, 2010
------------ ---------------
Operating income $89,726 85,182
Other income (expense) (544) (1,124)
U.S. customs refund - 5,765
Net earnings
attributable to
noncontrolling
interest (884) (1,170)
Depreciation and
amortization 72,497 72,956
---------------- ------ ------
EBITDA 160,795 161,609
Business restructurings 4,929 3,330
Adjusted EBITDA $165,724 164,939
--------------- -------- -------
Net Debt to Adjusted
EBITDA
--------------------
Three Months Ended
------------------
December 31, April 2,
2010 2011
------------- ---------
Operating income 85,640 56,084
Other income (expense) 1,037 (15)
U.S. customs refund 1,965 -
Net earnings
attributable to
noncontrolling
interest (1,678) (1,096)
Depreciation and
amortization 74,522 74,253
---------------- ------ ------
EBITDA 161,486 129,226
Business restructurings - 6,813
--- -----
Adjusted EBITDA 161,486 136,039
--------------- ------- -------
Net Debt to Adjusted
EBITDA
--------------------
Trailing Twelve
Months Ended
April 2, 2011
-------------
Operating income 316,632
Other income (expense) (646)
U.S. customs refund 7,730
Net earnings
attributable to
noncontrolling
interest (4,828)
Depreciation and
amortization 294,228
---------------- -------
EBITDA 613,116
Business restructurings 15,072
------
Adjusted EBITDA 628,188
--------------- -------
Net Debt to Adjusted
EBITDA 2.2
-------------------- ---
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
(Amounts in thousands)
Three Months Ended
------------------
Unilin segment April 2, 2011 April 3, 2010
-------------- ------------- -------------
Net sales $325,832 305,880
Adjustments to net
sales:
Exchange rate 2,319 -
Adjusted net sales $328,151 305,880
------------------ -------- -------
Reconciliation of Gross Profit to Adjusted Gross Profit
(Amounts in thousands)
Three Months Ended
------------------
April 2, 2011 April 3, 2010
------------- -------------
Gross profit $341,592 341,246
Adjustments to gross
profit:
Business
restructurings 6,347 3,857
Adjusted gross profit $347,939 345,103
--------------------- -------- -------
Adjusted gross profit as
a percent of net sales 25.9% 25.6%
Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands)
Three Months Ended
------------------
April 2, 2011 April 3, 2010
------------- -------------
Operating income $56,084 53,621
Adjustments to operating
income:
Business
restructurings 6,813 4,004
Adjusted operating
income $62,897 57,625
------------------ ------- ------
Adjusted operating income
as a percent of net
sales 4.7% 4.3%
Three Months Ended
------------------
Mohawk segment April 2, 2011 April 3, 2010
-------------- ------------- -------------
Operating income $17,040 16,628
Adjustments to operating
income:
Business
restructurings 6,813 3,229
Adjusted operating
income $23,853 19,857
------------------ ------- ------
Adjusted operating income
as a percent of net
sales 3.5% 2.8%
Three Months Ended
------------------
Unilin segment April 2, 2011 April 3, 2010
-------------- ------------- -------------
Operating income $26,250 26,458
Adjustments to operating
income:
Business
restructurings - 775
Adjusted operating
income $26,250 27,233
------------------ ------- ------
Adjusted operating income
as a percent of net
sales 8.1% 8.9%
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.
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