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Press release from PR Newswire

Mohawk Industries, Inc. Announces First Quarter Earnings

Thursday, May 05, 2011

Mohawk Industries, Inc. Announces First Quarter Earnings16:01 EDT Thursday, May 05, 2011CALHOUN, Ga., 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 706-645-9291 for International/Local calls and entering Conference ID # 57677152.MOHAWK INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statement of OperationsThree Months Ended(Amounts in thousands, except per share data)April 2, 2011April 3, 2010Net sales$               1,343,5951,347,236Cost of sales1,002,0031,005,990    Gross profit341,592341,246Selling, general and administrative expenses285,508287,625Operating income56,08453,621Interest expense26,59533,908Other expense (income), net(15)(4,531)    Earnings before income taxes29,50424,244Income tax expense4,9662,974Net earnings24,53821,270Net earnings attributable to noncontrolling interest(1,096)(732)    Net earnings attributable to Mohawk Industries, Inc.$                    23,44220,538Basic earnings per share attributable to Mohawk Industries, Inc.$                        0.340.30Weighted-average common shares outstanding - basic68,67468,523Diluted earnings per share attributable to Mohawk Industries Inc.$                        0.340.30Weighted-average common shares outstanding - diluted68,90468,730Other Financial Information(Amounts in thousands)Net cash used in operating activities$                   67,41346,192Depreciation and amortization$                   74,25376,798Capital expenditures$                   52,81123,309Consolidated Balance Sheet Data(Amounts in thousands)April 2, 2011April 3, 2010ASSETSCurrent assets:    Cash and cash equivalents$                  256,231452,335    Receivables, net754,826788,124    Inventories1,075,613932,785    Prepaid expenses97,846109,968    Deferred income taxes and other current assets155,159160,246        Total current assets2,339,6752,443,458Property, plant and equipment, net1,715,8951,719,051Goodwill1,406,7311,377,518Intangible assets, net689,703736,353Deferred income taxes and other non-current assets114,22942,520$               6,266,2336,318,900LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt$                    52,706551,426Accounts payable and accrued expenses739,768859,690        Total current liabilities792,4741,411,116Long-term debt, less current portion1,577,1881,303,437Deferred income taxes and other long-term liabilities449,984452,858        Total liabilities2,819,6463,167,411Noncontrolling interest33,25529,866Total stockholders' equity3,413,3323,121,623$               6,266,2336,318,900Segment InformationAs of or for the Three Months Ended(Amounts in thousands)April 2, 2011April 3, 2010Net sales:    Mohawk$                  691,165716,583    Dal-Tile344,415341,396    Unilin325,832305,880    Intersegment sales(17,817)(16,623)        Consolidated net sales$               1,343,5951,347,236Operating income:    Mohawk$                    17,04016,628    Dal-Tile17,70015,395    Unilin26,25026,458    Corporate and eliminations(4,906)(4,860)        Consolidated operating income$                    56,08453,621Assets:    Mohawk$               1,749,6251,673,264    Dal-Tile1,674,4081,568,605    Unilin2,654,2682,525,731    Corporate and eliminations187,932551,300        Consolidated assets$               6,266,2336,318,900Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted Diluted Earnings Per Share(Amounts in thousands, except per share data)Three Months EndedApril 2, 2011April 3, 2010Net earnings attributable to Mohawk Industries, Inc.$                     23,44220,538Unusual items:Business restructurings6,8134,004Income taxes(1,018)(469)Adjusted net earnings $                     29,23724,073Adjusted diluted earnings per share$                         0.420.35Weighted-average common shares outstanding - diluted68,90468,730Reconciliation of Total Debt to Net DebtAs of(Amounts in thousands)April 2, 2011Current portion of long-term debt$                       52,706Long-term debt, less current portion1,577,188Less: Cash and cash equivalents256,231Net Debt$                  1,373,663Reconciliation of Operating Income to Adjusted EBITDA(Amounts in thousands)Trailing TwelveThree Months EndedMonths EndedJuly 3, 2010October 2, 2010December 31, 2010April 2, 2011April 2, 2011Operating income$                       89,72685,18285,64056,084316,632Other income (expense)(544)(1,124)1,037(15)(646)U.S. customs refund-5,7651,965-7,730      Net earnings attributable to noncontrolling interest(884)(1,170)(1,678)(1,096)(4,828)Depreciation and amortization72,49772,95674,52274,253294,228   EBITDA160,795161,609161,486129,226613,116Business restructurings4,9293,330-6,81315,072 Adjusted EBITDA $                     165,724164,939161,486136,039628,188Net Debt to Adjusted EBITDA2.2Reconciliation of Segment Net Sales to Adjusted Segment Net Sales(Amounts in thousands)Three Months EndedUnilin segmentApril 2, 2011April 3, 2010Net sales$                     325,832305,880Adjustments to net sales:Exchange rate2,319-Adjusted net sales$                     328,151305,880Reconciliation of Gross Profit to Adjusted Gross Profit(Amounts in thousands)Three Months EndedApril 2, 2011April 3, 2010Gross profit$                     341,592341,246Adjustments to gross profit:Business restructurings6,3473,857Adjusted gross profit$                     347,939345,103   Adjusted gross profit as a percent of net sales25.9%25.6%Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands)Three Months EndedApril 2, 2011April 3, 2010Operating income$                       56,08453,621Adjustments to operating income:Business restructurings6,8134,004Adjusted operating income$                       62,89757,625   Adjusted operating income as a percent of net sales4.7%4.3%Three Months EndedMohawk segmentApril 2, 2011April 3, 2010Operating income$                       17,04016,628Adjustments to operating income:Business restructurings6,8133,229Adjusted operating income$                       23,85319,857   Adjusted operating income as a percent of net sales3.5%2.8%Three Months EndedUnilin segmentApril 2, 2011April 3, 2010Operating income$                       26,25026,458Adjustments to operating income:Business restructurings-775Adjusted operating income$                       26,25027,233   Adjusted operating income as a percent of net sales8.1%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.SOURCE Mohawk Industries, Inc.For further information: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695