Mohawk Industries, Inc. Announces First Quarter Earnings

News provided by

Mohawk Industries, Inc.

03 May, 2012, 20:13 GMT

CALHOUN, Georgia, May 3, 2012 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE:MHK) today announced 2012 first quarter net earnings of $40 million and diluted earnings per share (EPS) of $0.58, a 38% increase over last year's first quarter adjusted EPS. Net sales for the first quarter of 2012 were $1.4 billion, increasing 5% as reported and 6% with a constant exchange rate. For the first quarter of 2011, net earnings were $23 million and EPS was $0.34. Excluding restructuring charges for the first quarter of 2011, adjusted net earnings were $29 million and EPS was $0.42.

Commenting on Mohawk Industries' performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Volume increases, price increases, cost reductions and lower interest expense contributed to our earnings growth in the quarter. In March, Standard & Poor's upgraded our credit rating and Moody's elevated our outlook to positive, reducing the interest rate on our notes. In April, we paid our 2012 maturing notes using our bank revolver which has lower interest rates. Our balance sheet remains strong with net debt to adjusted EBITDA at 2.2 times and approximately $500 million available for strategic opportunities, after the payment of the 2012 notes."

Mohawk segment sales grew 1% as we executed price increases that should cover our material cost in the second period. Higher carpet sales in the segment were offset by lower rug sales from deferred customer promotions, inventory reductions in the channel and lower product mix. In residential, we launched our revolutionary SmartStrand Silk collection, the next generation of soft carpet, with the inherent performance, ease of care and unique environmental features that have made SmartStrand successful. In the commercial business, our hospitality and core business improved, but we experienced weakness in our premium products. To provide greater value in commercial, we have introduced new high-end products, extended our SmartStrand brand into commercial applications and utilized new technology for improved pattern definition in hospitality. Productivity increases, improved yields, product re-engineering, process simplification and reduced complexity improved our cost position and service levels.

Dal-Tile segment net sales grew 14% during the quarter through increased residential remodeling and commercial renovation, successful product launches and growth in the Mexican market. Price increases along with energy surcharges are being implemented to recover material and freight costs. Sales grew in all channels, driven by new products featuring Reveal Imaging, larger sizes, realistic wood designs and a premium commercial collection. In Mexico, we opened our Salamanca plant ahead of schedule. Sales in Mexico are growing dramatically due to our expanded offering of product designs, sizes and price points. We lowered manufacturing costs through higher productivity, reduced waste, and improved formulations that increase production speeds and recycled content.

Unilin segment net sales grew 4% as reported and 7% on a local basis supported by growth of laminate flooring and panels. The impact of the European debt situation on our business has been limited by our lower exposure to Southern European markets. We continue to gain share through new products, channels and regions, offsetting the impact of slowing national economies. We have implemented price increases in European laminate, roofing and most panels to recover higher material costs. We are increasing product placements in the home center and DIY channels with both laminate and wood. Our insulation panels business grew significantly and we are preparing to expand in France. Our strategies to expand internationally are progressing with our new Russian plant increasing production and our Australian distribution being integrated with Unilin.

Low mortgage rates, increasing home sales, and higher employment should sustain industry growth. Our emphasis on product and process innovation, cost management and flexibility has resulted in a stronger company. In the second quarter, we anticipate continued sales growth and improving margins as selling prices align with material inflation. We believe that our new product launches will improve profitability and sales growth. Improvements in productivity, inventory management, and interest expenses will favorably impact our results. With these factors, our guidance for second quarter earnings is $1.07 to $1.16 per share, excluding any restructuring costs. Our recent investments in new markets, technology, production capacity and R&D will improve our results. We have a strong financial position to pursue new strategic opportunities.

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, 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, May 4, 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 # 69432176. A replay will also be available until May 18, 2012 by dialing 855-859-2056 for US/local calls and +1-404-537-3406 for International/Local calls and entering Conference ID # 69432176.







MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES









Consolidated Statement of Operations

Three Months Ended


(Amounts in thousands, except per share data)

March 31, 2012

April 2, 2011











Net sales

$            1,409,035

1,343,595


Cost of sales

1,049,609

1,002,003


    Gross profit

359,426

341,592


Selling, general and administrative expenses

287,450

285,508


Operating income

71,976

56,084


Interest expense

22,498

26,595


Other (income) expense, net

(1,825)

(15)


    Earnings before income taxes

51,303

29,504


Income tax expense

10,291

4,966


Net earnings 

41,012

24,538


Net earnings attributable to noncontrolling interest

(635)

(1,096)


    Net earnings attributable to Mohawk Industries, Inc.

$                40,377

23,442


Basic earnings per share attributable to Mohawk Industries, Inc. 

$                    0.59

0.34


Weighted-average common shares outstanding - basic

68,862

68,674


Diluted earnings per share attributable to Mohawk Industries, Inc.

$                    0.58

0.34


Weighted-average common shares outstanding - diluted

69,141

68,904





























Other Financial Information







(Amounts in thousands)







Net cash used in operating activities

$                44,470

67,413


Depreciation and amortization

$                73,286

74,253


Capital expenditures

$                43,251

52,811











Consolidated Balance Sheet Data







(Amounts in thousands)










March 31, 2012

April 2, 2011


ASSETS







Current assets:







    Cash and cash equivalents

$               304,775

256,231


    Receivables, net

782,000

754,826


    Inventories

1,164,991

1,075,613


    Prepaid expenses and other current assets

136,752

97,846


    Deferred income taxes 

156,110

155,159


        Total current assets

2,544,628

2,339,675


Property, plant and equipment, net

1,718,396

1,715,895


Goodwill

1,390,712

1,406,731


Intangible assets, net

599,625

689,703


Deferred income taxes and other non-current assets

145,833

114,229





$           6,399,194

6,266,233


LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







Current portion of long-term debt

$                57,309

52,706


Accounts payable and accrued expenses

721,383

739,768


        Total current liabilities

778,692

792,474


Long-term debt, less current portion

1,642,419

1,577,188


Deferred income taxes and other long-term liabilities

458,786

449,984


        Total liabilities

2,879,897

2,819,646


Noncontrolling interest

-

33,255


Total stockholders' equity

3,519,297

3,413,332





$         6,399,194

6,266,233











Segment Information

As of or for the Three Months Ended


(Amounts in thousands)

March 31, 2012

April 2, 2011











Net sales:







    Mohawk

$             699,880

691,165


    Dal-Tile

392,925

344,415


    Unilin

337,424

325,832


    Intersegment sales

(21,194)

(17,817)


        Consolidated net sales

$         1,409,035

1,343,595











Operating income (loss):







    Mohawk

$              25,282

17,040


    Dal-Tile

26,028

17,700


    Unilin

27,146

26,250


    Corporate and eliminations

(6,480)

(4,906)


        Consolidated operating income

$              71,976

56,084











Assets:







    Mohawk

$         1,820,785

1,749,625


    Dal-Tile

1,759,934

1,674,408


    Unilin

2,620,013

2,654,268


    Corporate and eliminations

198,462

187,932


        Consolidated assets

$         6,399,194

6,266,233





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



March 31, 2012

April 2, 2011

Net earnings attributable to Mohawk Industries, Inc.

$                40,377

23,442

Unusual items:




Business restructurings

-

6,813

Income taxes

-

(1,018)

Adjusted net earnings attributable to Mohawk Industries, Inc.

$                40,377

29,237






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

$ 0.58

0.42

Weighted-average common shares outstanding - diluted

69,141

68,904












Reconciliation of Total Debt to Net Debt




(Amounts in thousands)






March 31, 2012


Current portion of long-term debt

$              57,309


Long-term debt, less current portion

1,642,419


Less: Cash and cash equivalents

304,775


Net Debt

$         1,394,953


Reconciliation of Operating Income to Adjusted EBITDA

(Amounts in thousands)


Three Months Ended

Trailing Twelve Months Ended


July 2, 2011

October 1, 2011

December 31, 2011

March 31, 2012

March 31, 2012

Operating income

$      101,700

91,464

66,294

71,976

331,434

Other (expense) income

(396)

(13,413)

(257)

1,825

(12,241)

    Net earnings attributable to noncontrolling interest

(1,191)

(1,050)

(966)

(635)

(3,842)

Depreciation and amortization

74,344

74,207

74,930

73,286

296,767

EBITDA

174,457

151,208

140,001

146,452

612,118

Unrealized foreign currency losses (1)

-

9,085

-

-

9,085

Operating lease correction (2)

-

-

6,035

-

6,035

Business restructurings

6,514

2,186

7,696

-

16,396

 Adjusted EBITDA 

$      180,971

162,479

153,732

146,452

643,634











Net Debt to Adjusted EBITDA








2.2






Reconciliation of Net Sales to Adjusted Net Sales



(Amounts in thousands)





Three Months Ended


March 31, 2012

April 2, 2011

Net sales

$     1,409,035

1,343,595

Adjustments to net sales:



Exchange rate

13,636

-

Adjusted net sales

$     1,422,671

1,343,595





Reconciliation of Segment Net Sales to Adjusted Segment Net Sales



(Amounts in thousands)





Three Months Ended

Unilin

March 31, 2012

April 2, 2011

Net sales

$      337,424

325,832

Adjustment to net sales:



Exchange rate

11,851

-

Adjusted net sales

$      349,275

325,832





Reconciliation of Operating Income to Adjusted Operating Income 



(Amounts in thousands)





Three Months Ended


March 31, 2012

April 2, 2011

Operating income

$       71,976

56,084

Adjustments to operating income:



Business restructurings

-

6,813

Adjusted operating income

$       71,976

62,897

   Adjusted operating margin as a percent of net sales

5.1%

4.7%





Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 



(Amounts in thousands)





Three Months Ended

Mohawk 

March 31, 2012

April 2, 2011

Operating income

$       25,282

17,040

Adjustments to operating income:



Business restructurings

-

6,813

Adjusted operating income

$       25,282

23,853

   Adjusted operating margin as a percent of net sales

3.6%

3.5%





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



(Amounts in thousands)





Three Months Ended


March 31, 2012

April 2, 2011

Earnings before income taxes

$       51,303

29,504

Unusual items:



Business restructurings

-

6,813

Adjusted earnings before income taxes

$       51,303

36,317










Reconciliation of Income Tax Expense to Adjusted Income Tax Expense 



(Amounts in thousands)





Three Months Ended


March 31, 2012

April 2, 2011

Income tax expense   

$       10,291

4,966

Unusual items:



Income taxes

-

1,018

Adjusted income tax expense

$       10,291

5,984





Adjusted income tax rate

20%

16%





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



(Amounts in thousands)





Three Months Ended


March 31, 2012

April 2, 2011

Selling, general and administrative expenses

$      287,450

285,508

Adjustments to selling, general and administrative expenses:



Business restructurings

-

466

Exchange rate

2,378

-

Adjusted selling, general and administrative expenses

$      289,828

285,974

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

20.6%

21.3%

















(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 planning and forecasting in subsequent periods.