The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Mohawk Industries, Inc. Announces Third Quarter Earnings

Thursday, November 03, 2011

Mohawk Industries, Inc. Announces Third Quarter Earnings16:02 EDT Thursday, November 03, 2011 << >>CALHOUN, Ga., Nov. 3, 2011 /CNW/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 third quarter net earnings of $47 million and diluted earnings per share (EPS) of $0.68. Adjusted net earnings were $57 million and EPS was $0.83 excluding the unusual items. For the third quarter of 2010, the net earnings were $51 million and EPS was $0.74 both as reported and excluding unusual items. Net sales for the third quarter of 2011 were $1.4 billion increasing 10% as reported and 8% with a constant exchange rate. Our cash position at the end of the quarter remains strong with $276 million and our net debt to adjusted EBITDA ratio was 2.1.For the nine months ended October 1, 2011, net sales were $4.3 billion, an increase of approximately 5% as reported and 4% with a constant exchange rate. For the nine-month period, net earnings and EPS were $131 million and $1.90, respectively. Excluding unusual items, net earnings were $152 million and EPS was $2.21. For the nine months ended October 2, 2010, net earnings were $140 million and EPS was $1.99. Excluding unusual items in 2010, net earnings were $128 million and EPS was $1.86.Commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The Company's third quarter results reflect an improvement in sales and earnings over last year even with increased raw material costs and consumer reluctance to invest in renovation projects. Sales in both the residential and commercial categories expanded with commercial renovation leading the growth and new residential continuing to lag. Each segment continues to lower costs with new processes, reduced infrastructure and investment in more efficient assets."Our Mohawk segment net sales improved 6% as we improved our position and grew in both residential and commercial categories. Operating margins were lower due to price increases lagging material inflation as well as continued pressure on our product mix as consumers remain cautious about larger discretionary investments. During the quarter, residential sales grew across most channels and product categories. Commercial sales momentum continued from the previous quarter, with both broadloom and carpet tile achieving gains. During 2011, we implemented two price increases that were fully realized by the end of the third quarter. During the period, raw material costs were greater than anticipated and the higher expense will impact our fourth quarter costs and margins. We have implemented hundreds of manufacturing initiatives yielding significant cost savings in 2011.Our Dal-Tile segment net sales grew almost 11% during the period with both residential and commercial categories showing gains with product mix continuing to decline. In the comparable 2010 period, business was lower than expected due to the flooding in our Mexican facility from Hurricane Alex. During the quarter, we increased sales in all channels with particular strength in home centers due to additional commitments for our innovative mosaics, wall tile and porcelain tile. Our Mexican ceramic sales grew significantly on a local basis as we enhanced our penetration with new products and broader distribution. We have implemented new manufacturing processes to lower raw material costs, improve efficiency, reduce production runs and improve distribution costs.Our Unilin net sales increased approximately 19% as reported and 11% with a constant exchange rate. Sales in Europe increased across most channels and regions, and our price increases are beginning to catch up with the raw material inflation. We are implementing additional price increases for roof panels and insulation boards to offset further inflation in those products. Innovation in board manufacturing processes is enhancing our efficiency and material yields. Despite challenging market conditions, our European flooring products grew by capitalizing on the strength of our Quick-Step brand, growing our participation in the DIY channel, and expanding our wood flooring category. In the U.S., sales of our laminate flooring grew through expanded programs in all channels. We completed our Russian laminate flooring plant on schedule and are initiating production. We acquired the largest laminate and wood flooring distributor in Australia, which expands our strategy of getting closer to our customers and becoming more responsive to local markets.Mohawk's strategy to maximize our long term results is reflected in our international expansion in Mexico, Russia, China and Australia, new technologies to increase value, innovative product categories like Didit click furniture and process enhancements to lower our cost position across the enterprise. We remain confident in the future of our business and will continue to adjust our tactics as economic conditions change. In the fourth quarter, we will be impacted by higher third quarter raw material costs; however we are currently seeing some moderation which will benefit next year. We will consider further price increases as appropriate and implement additional cost reductions to improve the business. With these factors, our fourth quarter guidance for earnings is $0.67 to $0.76 per share, excluding any restructuring costs.Our strategy in this environment focuses on lowering our cost infrastructure, creating innovative products, maintaining a strong balance sheet and targeting new investments for future growth. Although the macro outlook is somewhat uncertain, we believe our results for next year will reflect continued improvement.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, Durkan, Daltile, 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 in the U.S. 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; tax, product and other claims; litigation; and other risks identified in Mohawk's SEC reports and public announcements.There will be a conference call Friday, November 4, 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 # 17731505. A conference call replay will also be available until November 18, 2011 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 17731505 << >> << MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES >> << Consolidated Statement of Operations Three Months Ended Nine Months Ended ------------------ ----------------- (Amounts in thousands, October 1, October 2, October 1, October 2, except per share data) 2011 2010 2011 2010 ----------- ----------- ----------- ----------- >> << Net sales $1,442,512 1,309,5524,263,961 4,056,874 Cost of sales 1,084,889 964,6203,182,499 2,995,940 ------------- --------- ---------------- --------- Gross profit 357,623 344,9321,081,462 1,060,934 Selling, general and administrative expenses 266,159 259,750832,214 832,405 ------------------------ ------- -------------- ------- Operating income 91,464 85,182249,248 228,529 Interest expense 25,132 30,04677,487 102,985 Other (income) expense, net 13,413 (4,641) 13,794 (8,628) --------------------------- ------ ------------ ------ Earnings before income taxes 52,919 59,777157,967 134,172 Income tax expense (benefit) 5,223 7,51323,639 (8,327) ------------------ ----- ----------- ------ Net earnings 47,696 52,264134,328 142,499 ------------ ------ ------------- ------- Net earnings attributable to noncontrolling interest (1,050) (1,170) (3,337) (2,786) --------------------------- ------ ------------ ------ Net earnings attributable to Mohawk Industries, Inc. $46,646 51,094130,991 139,713 --------------------------- ------- ------------- ------- Basic earnings per share attributable to Mohawk Industries, Inc. (1) $0.68 0.741.91 1.99 ------------------------ ----- -------- ---- Weighted-average common shares outstanding - basic 68,759 68,59368,725 68,567 ----------------------- ------ ------------ ------ Diluted earnings per share attributable to Mohawk Industries, Inc. (1) $0.68 0.741.90 1.99 -------------------------- ----- -------- ---- Weighted-average common shares outstanding - diluted 68,954 68,77368,946 68,764 ----------------------- ------ ------------ ------ >> << (1) Basic earnings per share attributable to Mohawk Industries, Inc.for the nine months ended October 2, 2010, includes a decrease of approximately $0.05,and diluted earnings per share attributable to Mohawk Industries, Inc. for the nine monthsended October 2, 2010, includes a decrease of approximately $0.04, related to thechange in fair value for a redeemable noncontrolling interest in a consolidated subsidiary ofthe Company. >> << Other Financial Information (Amounts in thousands) Net cash provided by operating activities $109,598 121,417138,188 210,394 --------------------- -------- -------------- ------- Depreciation and amortization $74,207 72,956222,804 222,251 ---------------- ------- ------------- ------- Capital expenditures $69,741 39,101182,260 86,240 -------------------- ------- ------------- ------ >> << Consolidated Balance Sheet Data (Amounts in thousands) October 1, October 2, 2011 2010 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $276,156 365,835 Receivables, net 775,421 697,491 Inventories 1,132,073 996,271 Prepaid expenses and other current assets 125,007 114,876 Deferred income taxes 131,931 119,729 --------------------- Total current assets 2,440,588 2,294,202 Property, plant and equipment, net 1,696,182 1,680,541 Goodwill 1,389,430 1,389,057 Intangible assets, net 634,164 710,934 Deferred income taxes and other non-current assets 117,204 117,176 ------------------------- ------- ------- $6,277,568 6,191,910 ---------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long- term debt $438,300 351,486 Accounts payable and accrued expenses 774,939 779,825 -------------------- ------- ------- Total current liabilities 1,213,239 1,131,311 Long-term debt, less current portion 1,173,038 1,303,151 Deferred income taxes and other long-term liabilities 439,798 441,948 ------------------------- ------- ------- Total liabilities 2,826,075 2,876,410 ----------------- --------- --------- Noncontrolling interest 32,758 34,121 ----------------------- ------ ------ Total stockholders' equity 3,418,735 3,281,379 -------------------------- --------- --------- $6,277,568 6,191,910 ---------- --------- >> << As of or for the Nine Months Segment Information Three Months Ended Ended ------------------ ----------------------------- October 1, October 2, October 1, October 2, (Amounts in thousands) 2011 2010 2011 2010 ----------- ----------- ----------- ----------- >> << Net sales: Mohawk $754,470 713,4812,203,699 2,177,646 Dal-Tile 381,891 345,0741,105,775 1,050,088 Unilin 329,514 276,5941,018,443 890,859 Intersegment sales (23,363) (25,597) (63,956) (61,719) >> << Consolidated net sales $1,442,512 1,309,5524,263,961 4,056,874 ---------------------- ---------- ------------------ --------- >> << Operating income (loss): Mohawk $30,946 31,12779,187 74,100 Dal-Tile 33,073 33,91382,911 77,432 Unilin 33,048 24,640105,507 93,434 Corporate and eliminations (5,603) (4,498) (18,357) (16,437) >> << Consolidated operating income $91,464 85,182249,248 228,529 ---------------------- ------- ------------- ------- >> << Assets: Mohawk $1,810,191 1,652,737 Dal-Tile 1,735,718 1,677,957 Unilin 2,569,103 2,542,233 Corporate and eliminations 162,556 318,983 ------- Consolidated assets $6,277,568 6,191,910 ------------------- ---------- --------- >> << Reconciliation of Net Earnings Attributable to Mohawk Industries, Inc. toAdjusted Net Earnings Attributable to Mohawk Industries, Inc. and Adjusted Diluted Earnings PerShare Attributable to Mohawk Industries, Inc. (Amounts in thousands, except per share data) Three Months Ended Nine Months Ended ------------------ ----------------- October 1, October 2, October 1, October 2, 2011 2010 2011 2010 ----------- ----------- ----------- ----------- Net earnings attributable to Mohawk Industries, Inc. $46,646 51,094 130,991 139,713 Unusual items: Unrealized foreign currency losses (1) 9,085 - 9,085 - Business restructurings 2,186 3,330 15,513 12,263 Debt extinguishment costs 1,116 - 1,116 7,514 Acquisitions purchase accounting - 1,713 - 1,713 U.S. customs refund - (5,765) - (5,765) Discrete tax items, net - - - (24,407) Income taxes (1,761) 760 (4,597) (2,999) ------------ ------ --- ------ ------ Adjusted net earnings attributable to Mohawk Industries, Inc. $57,272 51,132 152,108 128,032 ------------------------------------- ------- ------ ------- ------- >> << Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. (2) 0.83 0.74 2.21 1.86 Weighted-average common shares outstanding - diluted 68,954 68,773 68,946 68,764 >> << (1) Unrealized foreign currency losses for certain of the Company's consolidated foreign subsidiaries that measure financial conditionsand results using the U.S. dollar rather than the local currency. (2) Diluted earnings per share attributable to Mohawk Industries, Inc. for the nine months ended October 2, 2010, excludes approximately$0.04 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) October 1, 2011 ----------- Current portion of long- term debt $438,300 Long-term debt, less current portion 1,173,038 Less: Cash and cash equivalents 276,156 ------------------- ------- Net Debt $1,335,182 -------- ---------- >> << Reconciliation of Operating Income to Adjusted EBITDA Trailing (Amounts in thousands) Twelve ThreeMonths Ended Months Ended ------------------ December 31, April2, July 2, October 1, October 1, 2010 2011 2011 2011 2011 ------------- --------- -------- ----------- ----------- Operating income $85,640 56,084 101,700 91,464 334,888 Other (expense) income 1,037 (15) 396 (13,413) (11,995) Unrealized foreign currency losses (1) - - - 9,085 9,085 U.S. customs refund 1,965 - - - 1,965 Net earnings attributable to noncontrolling interest (1,678) (1,096) (1,191) (1,050) (5,015) Depreciation and amortization 74,522 74,253 74,344 74,207 297,326 ---------------- ------ ------ ------ ------ ------- EBITDA 161,486 129,226 175,249 160,293 626,254 Business restructurings - 6,813 6,514 2,186 15,513 ----------------------- --- ----- ----- ----- ------ Adjusted EBITDA $161,486 136,039 181,763 162,479 641,767 --------------- -------- ------- ------- ------- ------- >> << Net Debt to Adjusted EBITDA 2.1 -------------------- --- >> << (1) Unrealized foreign currency losses for certain of the Company's consolidated foreign subsidiaries that measure financial conditionsand results using the U.S. dollar rather than the local currency. >> << Reconciliation of Net Sales to Adjusted Net Sales (Amounts in thousands) Three Months Ended Nine Months Ended ------------------ ----------------- October 1, October 2, October 1, October 2, 2011 2010 2011 2010 ----------- ----------- ----------- ----------- Net sales $1,442,512 1,309,552 4,263,961 4,056,874 Adjustments to net sales: Exchange rate (22,724) - (57,554) - Adjusted net sales $1,419,788 1,309,552 4,206,407 4,056,874 ---------------------------- ---------- --------- --------- --------- >> << Reconciliation of Segment Net Sales to Adjusted Segment Net Sales (Amounts in thousands) Three Months Ended ------------------ October 1, October 2, Unilin 2011 2010 ------ ----------- ----------- Net sales $329,514 276,594 Adjustment to net sales: Exchange rate (21,205) - Adjusted net sales $308,309 276,594 ------------------ -------- ------- >> << Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands) Three Months Ended ------------------ October 1, October 2, 2011 2010 ----------- ----------- Operating income $91,464 85,182 Adjustments to operating income: Business restructurings 2,186 3,330 Adjusted operating income $93,650 88,512 ------------------------- ------- ------ Adjusted operating margin as a percent of net sales 6.5% 6.8% >> << Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands) Three Months Ended ------------------ October 1, October 2, Mohawk 2011 2010 ------ ----------- ----------- Operating income $30,946 31,127 Adjustments to operating income: Business restructurings 2,186 1,292 Adjusted operating income $33,132 32,419 ------------------------- ------- ------ Adjusted operating margin as a percent of net sales 4.4% 4.5% >> << Dal-Tile -------- Operating income $33,073 33,913 Adjustments to operating income: Business restructurings - 1,223 Adjusted operating income $33,073 35,136 ------------------------- ------- ------ Adjusted operating margin as a percent of net sales 8.7% 10.2% >> << Unilin ------ Operating income $33,048 24,640 Adjustments to operating income: Business restructurings - 815 Adjusted operating income $33,048 25,455 ------------------------- ------- ------ Adjusted operating margin as a percent of net sales 10.0% 9.2% >> << Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes (Amounts in thousands) Three Months Ended ------------------ October 1, October 2, 2011 2010 ----------- ----------- Earnings before income taxes $52,919 59,777 Unusual items: Unrealized foreign currency losses (1) 9,085 - Business restructurings 2,186 3,330 Debt extinguishment costs 1,116 - Acquisitions purchase accounting - 1,713 U.S. customs refund - (5,765) ------------------- --- ------ Adjusted earnings before income taxes $65,306 59,055 ------------------------ ------- ------ >> << (1) Unrealized foreign currency losses for certain of the Company's consolidated foreign subsidiaries that measure financial conditionsand results using the U.S. dollar rather than the local currency. >> << Reconciliation of Income Tax Expense to Adjusted Income Tax Expense (Amounts in thousands) Three Months Ended ------------------ October 1, October 2, 2011 2010 ----------- ----------- Income tax expense $5,223 7,513 Unusual items: Income taxes 1,761 (760) ------------ ----- ---- Adjusted income tax expense $6,984 6,753 ------------------- ------ ----- >> << Adjusted income tax rate 11% 11% ------------------- --- --- >> << Reconciliation of Selling, General and Administrative Expenses to AdjustedSelling, General and Administrative Expenses (Amounts in thousands) Three Months Ended ------------------ October 1, October 2, 2011 2010 ----------- ----------- Selling, general and administrative expenses $266,159 259,750 Adjustments to selling, general and administrative expenses: Exchange rate (3,920) - ------------- ------ --- Adjusted selling, general and administrative expenses $262,239 259,750 ------------------------- -------- ------- Adjusted selling, general and administrative expenses as a percent of net sales 18.2% 19.8% >> << 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. >>For further information: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695 Web Site: http://www.mohawkind.com