Mohawk Industries, Inc. Announces Second Quarter Earnings
CALHOUN, Georgia, August 4, 2011 /PRNewswire/ --
Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 second quarter net earnings of $61 million and diluted earnings per share (EPS) of $0.88. Excluding restructuring charges, net earnings were $66 million and EPS was $0.95. For the second quarter of 2010, the net earnings were $68 million and EPS was $0.95. Excluding non-recurring tax benefits, redemption premium on bonds and restructuring charges, net earnings and EPS were $53 million and $0.77 per share. Net sales for the second quarter of 2011 were $1.5 billion increasing 6% as reported and 3% with a constant exchange rate. Our cash position at the end of the quarter was $285 million and our net debt to adjusted EBITDA ratio was 2.1. A new five-year lower cost bank facility was executed in July to support future growth and investments.
For the six months ended July 2, 2011, net sales were $2.8 billion, an increase of approximately 3% as reported and 2% with a constant exchange rate. For the six-month period, net earnings and EPS were $84 million and $1.22, respectively. Excluding restructuring charges, net earnings were $95 million and EPS was $1.38. For the six months ended July 3, 2010, net earnings were $89 million and EPS was $1.24. Excluding unusual items in 2010, net earnings were $77 million and EPS was $1.12.
Commenting on the second quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "All of our businesses reported year over year sales growth and our operating margin improved to 7.3%, an increase of 50 basis points over last year excluding restructuring charges. This is our highest operating margin since 2008 as a result of continuing cost reductions, selling price increases and productivity gains throughout the enterprise. U.S. economic growth was lower than expected in the second quarter with the U.S. residential business remaining soft and the commercial business continuing to grow."
Our Mohawk segment net sales grew about 1% with improving commercial sales offsetting soft residential sales. Excluding restructuring charges, operating margin was 80 basis points higher than last year as a result of reductions in SG&A costs, price increases and improved manufacturing productivity. We are performing in line with the industry with growth in commercial remodeling and lower residential activity. Our commercial business posted sales gains in both tile and broadloom products. The carpet price increase announced in February was fully implemented in the period and the second increase initiated in April will be completed during the third quarter. Our South Carolina extrusion expansion was completed, we consolidated a commercial carpet plant and we announced the closure of a yarn spinning plant. Continued emphasis on productivity improvements has yielded more efficient processes in our manufacturing and administrative areas allowing us to reduce personnel costs by an additional $10 million annually.
Our Dal-Tile segment net sales grew more than 4% this period with commercial sales growth exceeding residential. Sales in all of our channels grew over the prior year as we outperformed the overall market. Higher product prices and fuel surcharges were implemented in the period to recover rising transportation costs. Our market share has improved due to the breadth of our offerings, new products with enhanced visuals, larger sizes and our superior service. We introduced a completely merchandised ceramic tile shop and a new installation warranty to differentiate Dal-Tile products. Our Reveal Imaging technology is being expanded throughout our manufacturing operations. Our business in Mexico is expanding as we broaden our product line and satisfy all price points. The plant near Mexico City is being constructed to produce non-porcelain ceramic tile at much lower costs, beginning in mid-2012. New workforce management systems, increased truck utilization rates and new shipping channels are reducing our freight and distribution costs.
Our Unilin net sales increased approximately 18% as reported and 7% on a constant exchange rate. Sales of our European products were positive with growth in our roofing systems and panels outperforming our flooring products and impacting the mix of our margins. In most of our European products, our price increases are beginning to catch up with the higher raw material costs. Our European flooring is gaining share in a challenging market by increasing our position in the European DIY channel and growing our presence in the UK, Russian and Australian markets. In the U.S., our Unilin flooring sales were impacted by low residential remodeling. Our wood sales continue to expand with an improved product mix and our wood plants have increased their productivity, yields and flexibility. We are growing our Russian customer base to support the new plant under construction near Moscow. In addition, the consolidation and expansion of our Malaysian wood manufacturing operations should be complete by first quarter 2012.
Our second quarter results were accomplished despite the weaker than expected economies in both the U.S. and Europe. During this challenging economic period, we have made many improvements throughout our business resulting in a leaner, more efficient organization. We are introducing innovative products and re-engineering existing ones to improve our sales mix and margins. We are continuing to reduce our cost structure, increase our productivity and invest in new products and geographies. We are increasing prices as needed in response to raw material and energy inflation. We are well positioned to leverage these changes into a more profitable business as residential remodeling and the economy improves. With these factors, our third quarter guidance for earnings is $0.82 to $0.91 per share, excluding any restructuring costs. Mohawk's strategies reflect our evolution from a North American carpet business into a larger, more diverse, total flooring company operating in the global market.
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 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; claims; litigation; and other risks identified in Mohawk's SEC reports and public announcements.
There will be a conference call Friday, August 5, 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 # 82606045. A conference call replay will also be available until August 19, 2011 by dialing 855-859-2056 for US/local calls and +1-404-537-3406 for International/Local calls and entering Conference ID # 82606045.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations Three Months Ended
------------------
(Amounts in thousands, except per share July 2, July 3,
data) 2011 2010
-------- --------
Net sales $1,477,854 1,400,086
Cost of sales 1,095,607 1,025,330
--------------------------------------- --------- ---------
Gross profit 382,247 374,756
Selling, general and administrative
expenses 280,547 285,030
----------------------------------- ------- -------
Operating income 101,700 89,726
Interest expense 25,760 39,031
Other (income) expense, net 396 544
--------------------------- --- ---
Earnings before income taxes 75,544 50,151
Income tax expense (benefit) 13,450 (18,814)
---------------------------- ------ -------
Net earnings 62,094 68,965
------------ ------ ------
Net earnings attributable to
noncontrolling interest (1,191) (884)
---------------------------- ------ ----
Net earnings attributable to Mohawk
Industries, Inc. $60,903 68,081
----------------------------------- ------- ------
Basic earnings per share attributable
to Mohawk Industries, Inc. (1) $0.89 0.95
------------------------------------- ----- ----
Weighted-average common shares
outstanding - basic 68,744 68,585
------------------------------ ------ ------
Diluted earnings per share attributable
to Mohawk Industries, Inc. (1) $0.88 0.95
--------------------------------------- ----- ----
Weighted-average common shares
outstanding - diluted 68,981 68,789
------------------------------ ------ ------
(1) Basic earnings per share
attributable to Mohawk Industries,
Inc. for the three and six months
ended July 3, 2010, includes a
decrease of approximately $0.04, and
diluted earnings per share
attributable to Mohawk Industries,
Inc. for the three and six months
ended July 3, 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 $96,003 135,169
------------------------------ ------- -------
Depreciation and amortization $74,344 72,497
----------------------------- ------- ------
Capital expenditures $59,708 23,830
-------------------- ------- ------
Consolidated Statement of Operations Six Months Ended
----------------
(Amounts in thousands, except per share July 2, July 3,
data) 2011 2010
-------- ---------
Net sales 2,821,449 2,747,322
Cost of sales 2,097,610 2,031,320
------------- --------- ---------
Gross profit 723,839 716,002
Selling, general and administrative
expenses 566,055 572,655
----------------------------------- ------- -------
Operating income 157,784 143,347
Interest expense 52,355 72,939
Other (income) expense, net 381 (3,987)
--------------------------- --- ------
Earnings before income taxes 105,048 74,395
Income tax expense (benefit) 18,416 (15,840)
---------------------------- ------ -------
Net earnings 86,632 90,235
------------ ------ ------
Net earnings attributable to
noncontrolling interest (2,287) (1,616)
---------------------------- ------ ------
Net earnings attributable to Mohawk
Industries, Inc. 84,345 88,619
----------------------------------- ------ ------
Basic earnings per share attributable
to Mohawk Industries, Inc. (1) 1.23 1.25
------------------------------------- ---- ----
Weighted-average common shares
outstanding - basic 68,709 68,554
------------------------------ ------ ------
Diluted earnings per share attributable
to Mohawk Industries, Inc. (1) 1.22 1.24
--------------------------------------- ---- ----
Weighted-average common shares
outstanding - diluted 68,942 68,760
------------------------------ ------ ------
(1) Basic earnings per share
attributable to Mohawk Industries,
Inc. for the three and six months
ended July 3, 2010, includes a
decrease of approximately $0.04, and
diluted earnings per share
attributable to Mohawk Industries,
Inc. for the three and six months
ended July 3, 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 28,590 88,977
------------------------------ ------ ------
Depreciation and amortization 148,597 149,295
----------------------------- ------- -------
Capital expenditures 112,519 47,139
-------------------- ------- ------
Consolidated Balance Sheet Data
(Amounts in thousands)
July 2, July 3,
2011 2010
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $285,422 342,673
Receivables, net 797,893 703,458
Inventories 1,102,769 965,778
Prepaid expenses and other
current assets 125,815 137,338
Deferred income taxes 135,338 135,613
---------------------
Total current assets 2,447,237 2,284,860
Property, plant and equipment,
net 1,730,914 1,654,161
Goodwill 1,418,830 1,340,003
Intangible assets, net 681,178 686,156
Deferred income taxes and other
non-current assets 110,841 38,736
------------------------------- ------- ------
$6,389,000 6,003,916
---------- ---------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term
debt $453,185 351,307
Accounts payable and accrued
expenses 771,297 808,909
---------------------------- ------- -------
Total current liabilities 1,224,482 1,160,216
Long-term debt, less current
portion 1,155,150 1,303,155
Deferred income taxes and other
long-term liabilities 460,109 431,355
------------------------------- ------- -------
Total liabilities 2,839,741 2,894,726
----------------- --------- ---------
Noncontrolling interest 32,300 33,309
----------------------- ------ ------
Total stockholders' equity 3,516,959 3,075,881
-------------------------- --------- ---------
$6,389,000 6,003,916
---------- ---------
Segment Information
(Amounts in thousands)
Three Months Ended
------------------
July 2, July 3,
2011 2010
-------- --------
Net sales:
Mohawk $758,064 747,582
Dal-Tile 379,469 363,618
Unilin 363,097 308,385
Intersegment sales (22,776) (19,499)
------------------ ------- -------
Consolidated net sales $1,477,854 1,400,086
---------------------- ---------- ---------
Operating income (loss):
Mohawk $31,201 26,345
Dal-Tile 32,138 28,124
Unilin 46,209 42,336
Corporate and
eliminations (7,848) (7,079)
------------- ------ ------
Consolidated operating
income $101,700 89,726
---------------------- -------- ------
Assets:
Mohawk
Dal-Tile
Unilin
Corporate and
eliminations
-------------
Consolidated assets
-------------------
As of or for the Six
Months Ended
--------------------
July 2, July 3,
2011 2010
-------- --------
Net sales:
Mohawk 1,449,229 1,464,165
Dal-Tile 723,884 705,014
Unilin 688,929 614,265
Intersegment sales (40,593) (36,122)
------------------ ------- -------
Consolidated net sales 2,821,449 2,747,322
---------------------- --------- ---------
Operating income (loss):
Mohawk 48,241 42,973
Dal-Tile 49,838 43,519
Unilin 72,459 68,794
Corporate and
eliminations (12,754) (11,939)
------------- ------- -------
Consolidated operating
income 157,784 143,347
---------------------- ------- -------
Assets:
Mohawk $1,783,630 1,675,226
Dal-Tile 1,700,482 1,570,238
Unilin 2,717,032 2,423,695
Corporate and
eliminations 187,856 334,757
------------- ------- -------
Consolidated assets $6,389,000 6,003,916
------------------- ---------- ---------
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
------------------
July 2, July 3,
2011 2010
-------- --------
Net earnings attributable to Mohawk
Industries, Inc. $60,903 68,081
Unusual items:
Business restructurings 6,514 4,929
Debt extinguishment costs - 7,514
Discrete tax items, net - (24,407)
Income taxes (1,818) (3,290)
------------ ------ ------
Adjusted net earnings attributable to
Mohawk Industries, Inc. $65,599 52,827
------------------------------------- ------- ------
Adjusted diluted earnings per share
attributable to Mohawk Industries,
Inc.(1) 0.95 0.77
Weighted-average common shares
outstanding - diluted 68,981 68,789
Six Months Ended
----------------
July 2, July 3,
2011 2010
-------- --------
Net earnings attributable to Mohawk
Industries, Inc. 84,345 88,619
Unusual items:
Business restructurings 13,327 8,933
Debt extinguishment costs - 7,514
Discrete tax items, net - (24,407)
Income taxes (2,836) (3,759)
------------ ------ ------
Adjusted net earnings attributable to
Mohawk Industries, Inc. 94,836 76,900
------------------------------------- ------ ------
Adjusted diluted earnings per share
attributable to Mohawk Industries,
Inc.(1) 1.38 1.12
Weighted-average common shares
outstanding - diluted 68,942 68,760
(1) Diluted earnings per share attributable to Mohawk Industries,
Inc. for the three and six months ended July 3, 2010, excludes
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.
Reconciliation of Total Debt to Net Debt
(Amounts in thousands)
July 2,
2011
--------
Current portion of
long-term debt $453,185
Long-term debt,
less current
portion 1,155,150
Less: Cash and cash
equivalents 285,422
------------------- -------
Net Debt $1,322,913
-------- ----------
Reconciliation of Operating Income to Adjusted EBITDA
(Amounts in thousands)
Three Months Ended
------------------
October 2, December 31,
2010 2010
----------- -------------
Operating income $85,182 85,640
Other income
(expense) (1,124) 1,037
U.S. customs refund 5,765 1,965
Net earnings
attributable to
noncontrolling
interest (1,170) (1,678)
Depreciation and
amortization 72,956 74,522
---------------- ------ ------
EBITDA 161,609 161,486
Business
restructurings 3,330 -
--------------- ----- ---
Adjusted EBITDA $164,939 161,486
--------------- -------- -------
Net Debt to Adjusted
EBITDA
--------------------
Three Months Ended
------------------
April 2, July 2,
2011 2011
--------- --------
Operating income 56,084 101,700
Other income
(expense) (15) 396
U.S. customs refund - -
Net earnings
attributable to
noncontrolling
interest (1,096) (1,191)
Depreciation and
amortization 74,253 74,344
---------------- ------ ------
EBITDA 129,226 175,249
Business
restructurings 6,813 6,514
--------------- ----- -----
Adjusted EBITDA 136,039 181,763
--------------- ------- -------
Net Debt to Adjusted
EBITDA
--------------------
Trailing Twelve
Months Ended
------------
July 2, 2011
------------
Operating income 328,606
Other income
(expense) 294
U.S. customs refund 7,730
Net earnings
attributable to
noncontrolling
interest (5,135)
Depreciation and
amortization 296,075
---------------- -------
EBITDA 627,570
Business
restructurings 16,657
--------------- ------
Adjusted EBITDA 644,227
--------------- -------
Net Debt to Adjusted
EBITDA 2.1
-------------------- ---
Reconciliation of Net Sales to Adjusted Net Sales
(Amounts in thousands)
Three Months Ended
------------------
July 2, 2011 July 3, 2010
------------ ------------
Net sales $1,477,854 1,400,086
Adjustments to
net sales:
Exchange rate (35,604) -
------------- ------- ---
Adjusted net
sales $1,442,250 1,400,086
------------ ---------- ---------
Six Months Ended
----------------
July 2, 2011 July 3, 2010
------------ ------------
Net sales 2,821,449 2,747,322
Adjustments to
net sales:
Exchange rate (33,285) -
------------- ------- ---
Adjusted net
sales 2,788,164 2,747,322
------------ --------- ---------
Reconciliation of Segment Net Sales to Adjusted Segment
Net Sales
(Amounts in thousands)
Three Months Ended
------------------
Unilin segment July 2, 2011 July 3, 2010
-------------- ------------ ------------
Net sales $363,097 308,385
Adjustments to net sales:
Exchange rate (33,558) -
------------- ------- ---
Adjusted net sales $329,539 308,385
------------------ -------- -------
Reconciliation of Operating Income to Adjusted
Operating Income
(Amounts in thousands)
Three Months Ended
------------------
July 2, 2011 July 3, 2010
------------ ------------
Operating income $101,700 89,726
Adjustments to operating income:
Business restructurings 6,514 4,929
----------------------- ----- -----
Adjusted operating income $108,214 94,655
------------------------- -------- ------
Adjusted operating margin
as a percent of net sales 7.3% 6.8%
Mohawk segment
--------------
Operating income $31,201 26,345
Adjustments to operating income:
Business restructurings 6,514 4,929
----------------------- ----- -----
Adjusted operating income $37,715 31,274
------------------------- ------- ------
Adjusted operating margin
as a percent of net sales 5.0% 4.2%
Reconciliation of Earnings Before Income Taxes to
Adjusted Earnings Before Income Taxes
(Amounts in thousands)
Three Months Ended
------------------
July 2, 2011 July 3, 2010
------------- ------------
Earnings before income
taxes $75,544 50,151
Unusual items:
Business restructurings 6,514 4,929
Debt extinguishment costs - 7,514
------------------------- --- -----
Adjusted earnings before
income taxes $82,058 62,594
------------------------ ------- ------
Reconciliation of Income Tax Expense (Benefit) to
Adjusted Income Tax Expense
(Amounts in thousands)
Three Months Ended
------------------
July 2, 2011 July 3, 2010
------------ ------------
Income tax expense
(benefit) $13,450 (18,814)
Unusual items:
Discrete tax items, net - 24,407
Income taxes 1,818 3,290
------------ ----- -----
Adjusted income tax expense $15,268 8,883
Adjusted income tax rate 19% 14%
------------------------ --- ---
Reconciliation of Selling, General and
Administrative Expenses to
Adjusted Selling, General and Administrative
Expenses
(Amounts in
thousands)
Three Months Ended
------------------
July 2, July 3,
2011 2010
-------- --------
Selling, general and
administrative
expenses $280,547 285,030
Adjustments to
selling, general
and administrative
expenses:
Exchange rate (5,821) -
------------- ------ ---
Adjusted selling,
general and
administrative
expenses $274,726 285,030
----------------- -------- -------
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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