Mohawk Industries, Inc. Announces Fourth Quarter Earnings
CALHOUN, Georgia, February 23, 2012 /PRNewswire/ --
Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 fourth quarter net earnings of $43 million and diluted earnings per share (EPS) of $0.62. Excluding unusual items, net earnings for the fourth quarter of 2011 were $50 million and EPS was $0.72, a 9% increase over last year. Net sales for the fourth quarter of 2011 were $1.4 billion, increasing 9% as reported and 10% with a constant exchange rate. For the fourth quarter of 2010, net earnings were $46 million and EPS was $0.66. Excluding unusual items for the fourth quarter of 2010, net earnings were $45 million and EPS was $0.66.
For the full year of 2011, our net earnings were $174 million and EPS was $2.52. Excluding unusual items, net earnings for the full year of 2011 were $202 million and EPS was $2.92, a 16% increase over last year. Net sales for the full year of 2011 were $5.6 billion, representing a 6% increase over 2010. For the full year of 2010, our net earnings were $185 million, and EPS was $2.65. Excluding unusual items for the full year of 2010, net earnings were $173 million and EPS was $2.52.
Commenting on Mohawk Industries' performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The Company's fourth quarter results reflect improvements in sales and adjusted net earnings over last year with all segments showing sales growth for the last three quarters. In the U.S., sales in both the residential and commercial categories expanded, with commercial growing at a faster pace. Increased prices across many product categories are being implemented in the first quarter to recover higher material costs. Each segment has reduced costs through process improvements, investments in technology and strategic realignment of assets. Our net debt to adjusted EBITDA ratio was 2.0 and we have available liquidity of more than $900 million to redeem the 2012 bonds and provide flexibility for future opportunities."
Mohawk segment net sales grew by more than 8% with both the residential and commercial channels showing improvement. Operating margins were compressed by higher material costs and the delay of our price increase until the first quarter of 2012. A price increase of 5-7% is presently being implemented to offset material inflation. We introduced the next generation of soft carpets, branded SmartStrand Silk, which have an unparalleled softness, performance and environmental position. We expanded our filament extrusion and carpet tile capacity to satisfy the growing demand. We reduced our costs with improved manufacturing productivity, re-engineered processes and a more streamlined infrastructure.
Dal-Tile segment net sales grew almost 10% during the quarter with commercial growth exceeding residential. Our residential sales continued their positive growth trends for the third consecutive period. In the first quarter, we are implementing price increases of 3-5% on certain products to recover higher material and transportation costs. We have increased our presence in the home center channel, broadened design alternatives for larger sizes, and introduced ceramic tiles replicating wood. In Mexico, we are significantly growing our sales anticipating the completion of our new facility in April of this year. Our investments in design technology, product expansion, marketing and distribution sustained the growth of our business.
Unilin net sales increased approximately 10% as reported and on a local currency basis. Our laminate and wood flooring products continued growing in Europe, supported by the success of our new product introductions, expansion of our DIY strategy and the addition of Australian distribution and Russian manufacturing. In Europe, we are implementing laminate price increases of 2-3% in the first quarter. In the U.S., wood sales grew, laminate sales were slightly softer, and we received new commitments from home centers for both laminate and wood which will begin shipping in the first quarter. Our Russian laminate plant is manufacturing products comparable to our European production and will expand as we broaden the styles produced locally. We continue the integration of our Australian distributor, re-configuration of our Malaysian wood manufacturing and investments in our DidIt click furniture.
Improving consumer confidence, a positive employment outlook and lower housing inventories are cause for future optimism. In the first quarter, we anticipate additional sales growth, but at a lower rate than the fourth quarter which had easier comparisons. Presently, we are raising the prices on many of our products to recover the inflation of our materials. These increases will not be fully implemented until the second quarter reducing our first quarter margins. The start-up expenses of our major projects will impact our short-term results and the additional costs will decline as they ramp up. We expect continued sales growth, higher pricing, and productivity improvements will impact favorably our full year 2012 results. With these factors, our first quarter guidance for earnings is $0.47 to $0.57 per share, excluding any restructuring costs.
The flooring industry should continue its improvement throughout 2012. We have many initiatives to strengthen our product offering, expand our geographical reach, recover raw material inflation and reduce our costs. Our financial structure is strong and we can take advantage of new 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, 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, February 24, 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 # 45556735. A replay will also be available until March 9, 2012 by dialing 855-859-2056 for US/local calls and +1-404-537-3406 for International/Local calls and entering Conference ID # 45556735.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated
Statement of
Operations
(Amounts in Three Months Ended Twelve Months Ended
thousands, December December December December
except per share 31, 31, 31, 31,
data) 2011 2010 2011 2010
Net sales $ 1,378,297 1,262,198 5,642,258 5,319,072
Cost of sales 1,042,880 920,532 4,225,379 3,916,472
Gross profit 335,417 341,666 1,416,879 1,402,600
Selling, general and
administrative
expenses 269,123 256,026 1,101,337 1,088,431
Operating income 66,294 85,640 315,542 314,169
Interest expense 24,130 30,166 101,617 133,151
Other (income)
expense, net 257 (3,002) 14,051 (11,630)
Earnings before
income taxes 41,907 58,476 199,874 192,648
Income tax expense
(benefit) (1,990) 11,040 21,649 2,713
Net earnings 43,897 47,436 178,225 189,935
Net earnings
attributable to
noncontrolling
interest (966) (1,678) (4,303) (4,464)
Net earnings
attributable to
Mohawk
Industries, Inc. $ 42,931 45,758 173,922 185,471
Basic earnings per
share attributable to
Mohawk Industries,
Inc. (1) $ 0.62 0.67 2.53 2.66
Weighted-average
common shares
outstanding -
basic 68,768 68,612 68,736 68,578
Diluted earnings per
share attributable to
Mohawk Industries,
Inc. (1) $ 0.62 0.66 2.52 2.65
Weighted-average
common shares
outstanding -
diluted 69,016 68,843 68,964 68,764
(1) Basic and diluted earnings per share attributable to Mohawk
Industries, Inc. for the twelve months ended December 31, 2010,
includes a decrease of approximately $0.04 and $0.05,
respectively, related to the change in fair value for a redeemable
noncontrolling interest in a consolidated subsidiary of the
Company.
Other Financial Information
(Amounts in thousands)
Net cash
provided by
operating
activities $ 162,805 109,318 300,993 319,712
Depreciation and
amortization $ 74,930 74,522 297,734 296,773
Capital
expenditures $ 93,313 69,940 275,573 156,180
Consolidated Balance Sheet Data
(Amounts in thousands)
December December
31, 31,
2011 2010
ASSETS
Current assets:
Cash and cash
equivalents $ 311,945 354,217
Restricted cash - 27,954
Receivables, net 686,165 614,473
Inventories 1,113,630 1,007,503
Prepaid expenses
and other
current assets 135,514 111,162
Deferred income
taxes 150,910 133,304
Total current
assets 2,398,164 2,248,613
Property, plant
and equipment,
net 1,712,154 1,687,124
Goodwill 1,375,175 1,369,394
Intangible
assets, net 605,100 677,127
Deferred income
taxes and other
non-current
assets 115,635 116,668
$ 6,206,228 6,098,926
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion
of long-term
debt $ 386,255 350,588
Accounts payable
and accrued
expenses 715,091 698,326
Total current
liabilities 1,101,346 1,048,914
Long-term debt,
less current
portion 1,200,184 1,302,994
Deferred income
taxes and other
long-term
liabilities 455,190 440,021
Total
liabilities 2,756,720 2,791,929
Noncontrolling
interest 33,723 35,441
Total
stockholders'
equity 3,415,785 3,271,556
$ 6,206,228 6,098,926
Segment As of or for the
Information Three Months Ended Twelve Months Ended
December December December December
(Amounts in 31, 31, 31, 31,
thousands) 2011 2010 2011 2010
Net sales:
Mohawk $ 723,975 667,230 2,927,674 2,844,876
Dal-Tile 348,541 317,354 1,454,316 1,367,442
Unilin 326,321 297,415 1,344,764 1,188,274
Intersegment
sales (20,540) (19,801) (84,496) (81,520)
Consolidated net
sales $ 1,378,297 1,262,198 5,642,258 5,319,072
Operating income
(loss):
Mohawk $ 30,687 48,804 109,874 122,904
Dal-Tile 18,387 19,902 101,298 97,334
Unilin 21,640 20,864 127,147 114,298
Corporate and
eliminations (4,420) (3,930) (22,777) (20,367)
Consolidated
operating income $ 66,294 85,640 315,542 314,169
Assets:
Mohawk $ 1,769,065 1,637,319
Dal-Tile 1,732,818 1,644,448
Unilin 2,533,070 2,475,049
Corporate and
eliminations 171,275 342,110
Consolidated
assets $ 6,206,228 6,098,926
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 December December December
31, 31, 31, 31,
2011 2010 2011 2010
Net earnings
attributable to
Mohawk Industries, Inc. $ 42,931 45,758 173,922 185,471
Unusual items:
Unrealized foreign
currency losses (1) - - 9,085 -
Operating lease
correction (2) 6,035 - 6,035 -
Business
restructurings 7,696 893 23,209 13,156
Debt extinguishment
costs - - 1,116 7,514
Acquisitions
purchase accounting - - - 1,713
U.S. customs
refund - (1,965) - (7,730)
Discrete tax items,
net - - - (24,407)
Income taxes (7,152) 407 (11,749) (2,592)
Adjusted net earnings
attributable to Mohawk
Industries, Inc. $ 49,510 45,093 201,618 173,125
Adjusted diluted earnings per
share attributable to Mohawk
Industries, Inc. $ 0.72 0.66 2.92 2.52
Weighted-average
common shares
outstanding -
diluted 69,016 68,843 68,964 68,764
Reconciliation of Total Debt to Net Debt
(Amounts in thousands)
December
31, 2011
Current portion of
long-term debt $ 386,255
Long-term debt, less
current portion 1,200,184
Less: Cash and cash
equivalents 311,945
Net Debt $ 1,274,494
Reconciliation of Operating Income to Adjusted EBITDA
(Amounts in thousands) Trailing
Twelve
Months
Three Months Ended Ended
December
April 2, July 2, October December 31,
2011 2011 1, 2011 31, 2011 2011
Operating
income $ 56,084 101,700 91,464 66,294 315,542
Other (expense)
income 15 (396) (13,413) (257) (14,051)
Net earnings
attributable to
noncontrolling
interest (1,096) (1,191) (1,050) (966) (4,303)
Depreciation and
amortization 74,253 74,344 74,207 74,930 297,734
EBITDA 129,256 174,457 151,208 140,001 594,922
Unrealized foreign
currency losses (1) - - 9,085 - 9,085
Operating lease
correction (2) - - - 6,035 6,035
Business
restructurings 6,813 6,514 2,186 7,696 23,209
Adjusted EBITDA $ 136,069 180,971 162,479 153,732 633,251
Net Debt to Adjusted
EBITDA 2.0
Reconciliation of Net Sales to Adjusted Net Sales
(Amounts in thousands)
Three Months Ended Twelve Months Ended
December December December December
31, 31, 31, 31,
2011 2010 2011 2010
Net sales $ 1,378,297 1,262,198 5,642,258 5,319,072
Adjustments to net sales:
Exchange rate 4,193 - (53,337) -
Adjusted net
sales $ 1,382,490 1,262,198 5,588,921 5,319,072
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
(Amounts in thousands)
Three Months Ended
December December
Unilin 31, 2011 31, 2010
Net sales $ 326,321 297,415
Adjustment to net sales:
Exchange rate 1,996 -
Adjusted net sales $ 328,317 297,415
Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands)
Three Months Ended
December December
31, 2011 31, 2010
Operating
income $ 66,294 85,640
Adjustments to
operating income:
Operating lease
correction (2) 6,035 -
Business
restructurings 7,696 893
Adjusted operating
income $ 80,025 86,533
Adjusted operating
margin as a percent
of net sales 5.8% 6.9%
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
(Amounts in thousands)
Three Months Ended
December December
Mohawk 31, 2011 31, 2010
Operating
income $ 30,687 48,804
Adjustments to
operating income:
Operating lease
correction (2) 2,761 -
Business
restructurings 7,696 893
Adjusted operating
income $ 41,144 49,697
Adjusted operating
margin as a percent
of net sales 5.7% 7.4%
Dal-Tile
Operating
income $ 18,387 19,902
Adjustments to
operating income:
Operating lease
correction (2) 3,274 -
Adjusted operating
income $ 21,661 19,902
Adjusted operating
margin as a percent
of net sales 6.2% 6.3%
Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before
Income Taxes
(Amounts in thousands)
Three Months Ended
December December
31, 2011 31, 2010
Earnings before
income taxes $ 41,907 58,476
Unusual items:
Operating lease
correction (2) 6,035 -
Business
restructurings 7,696 893
U.S. customs
refund - (1,965)
Adjusted earnings
before income taxes $ 55,638 57,404
Reconciliation of Income Tax Expense (Benefit) to Adjusted Income Tax Expense
(Amounts in thousands)
Three Months Ended
December December
31, 2011 31, 2010
Income tax expense
(benefit) $ (1,990) 11,040
Unusual items:
Income taxes 7,152 (407)
Adjusted income tax
expense $ 5,162 10,633
Adjusted income tax
rate 9% 19%
Reconciliation of Selling, General and Administrative Expenses to Adjusted
Selling, General and Administrative Expenses
(Amounts in thousands)
Three Months Ended
December December
31, 2011 31, 2010
Selling, general and
administrative
expenses $ 269,123 256,026
Adjustments to selling,
generaland administrative
expenses:
Operating lease
correction (2) (6,035) -
Business
restructurings (3,214) 403
Exchange rate 765 -
Adjusted selling,
general and
administrative
expenses $ 260,639 256,429
Adjusted selling,
general and
administrative expenses
as a percent of net
sales 18.9% 20.3%
(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.
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