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Press release from PR Newswire

Mohawk Industries, Inc. Announces First Quarter Earnings

Thursday, May 03, 2012

Mohawk Industries, Inc. Announces First Quarter Earnings16:01 EDT Thursday, May 03, 2012CALHOUN, Ga., 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 404-537-3406 for International/Local calls and entering Conference ID # 69432176.  MOHAWK INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statement of OperationsThree Months Ended(Amounts in thousands, except per share data)March 31, 2012April 2, 2011Net sales$            1,409,0351,343,595Cost of sales1,049,6091,002,003    Gross profit359,426341,592Selling, general and administrative expenses287,450285,508Operating income71,97656,084Interest expense22,49826,595Other (income) expense, net(1,825)(15)    Earnings before income taxes51,30329,504Income tax expense10,2914,966Net earnings 41,01224,538Net earnings attributable to noncontrolling interest(635)(1,096)    Net earnings attributable to Mohawk Industries, Inc.$                40,37723,442Basic earnings per share attributable to Mohawk Industries, Inc. $                    0.590.34Weighted-average common shares outstanding - basic68,86268,674Diluted earnings per share attributable to Mohawk Industries, Inc.$                    0.580.34Weighted-average common shares outstanding - diluted69,14168,904Other Financial Information(Amounts in thousands)Net cash used in operating activities$                44,47067,413Depreciation and amortization$                73,28674,253Capital expenditures$                43,25152,811Consolidated Balance Sheet Data(Amounts in thousands)March 31, 2012April 2, 2011ASSETSCurrent assets:    Cash and cash equivalents$               304,775256,231    Receivables, net782,000754,826    Inventories1,164,9911,075,613    Prepaid expenses and other current assets136,75297,846    Deferred income taxes 156,110155,159        Total current assets2,544,6282,339,675Property, plant and equipment, net1,718,3961,715,895Goodwill1,390,7121,406,731Intangible assets, net599,625689,703Deferred income taxes and other non-current assets145,833114,229$           6,399,1946,266,233LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt$                57,30952,706Accounts payable and accrued expenses721,383739,768        Total current liabilities778,692792,474Long-term debt, less current portion1,642,4191,577,188Deferred income taxes and other long-term liabilities458,786449,984        Total liabilities2,879,8972,819,646Noncontrolling interest-33,255Total stockholders' equity3,519,2973,413,332$         6,399,1946,266,233Segment InformationAs of or for the Three Months Ended(Amounts in thousands)March 31, 2012April 2, 2011Net sales:    Mohawk$             699,880691,165    Dal-Tile392,925344,415    Unilin337,424325,832    Intersegment sales(21,194)(17,817)        Consolidated net sales$         1,409,0351,343,595Operating income (loss):    Mohawk$              25,28217,040    Dal-Tile26,02817,700    Unilin27,14626,250    Corporate and eliminations(6,480)(4,906)        Consolidated operating income$              71,97656,084Assets:    Mohawk$         1,820,7851,749,625    Dal-Tile1,759,9341,674,408    Unilin2,620,0132,654,268    Corporate and eliminations198,462187,932        Consolidated assets$         6,399,1946,266,233   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 EndedMarch 31, 2012April 2, 2011Net earnings attributable to Mohawk Industries, Inc.$                40,37723,442Unusual items:Business restructurings-6,813Income taxes-(1,018)Adjusted net earnings attributable to Mohawk Industries, Inc.$                40,37729,237Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $ 0.580.42Weighted-average common shares outstanding - diluted69,14168,904Reconciliation of Total Debt to Net Debt(Amounts in thousands)March 31, 2012Current portion of long-term debt$              57,309Long-term debt, less current portion1,642,419Less: Cash and cash equivalents304,775Net Debt$         1,394,953Reconciliation of Operating Income to Adjusted EBITDA(Amounts in thousands)Trailing TwelveThree Months EndedMonths EndedJuly 2, 2011October 1, 2011December 31, 2011March 31, 2012March 31, 2012Operating income$            101,70091,46466,29471,976331,434Other (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 amortization74,34474,20774,93073,286296,767EBITDA174,457151,208140,001146,452612,118Unrealized foreign currency losses (1)-9,085--9,085Operating lease correction (2)--6,035-6,035Business restructurings6,5142,1867,696-16,396 Adjusted EBITDA $            180,971162,479153,732146,452643,634Net Debt to Adjusted EBITDA2.2Reconciliation of Net Sales to Adjusted Net Sales(Amounts in thousands)Three Months EndedMarch 31, 2012April 2, 2011Net sales$          1,409,0351,343,595Adjustments to net sales:Exchange rate13,636-Adjusted net sales$         1,422,6711,343,595Reconciliation of Segment Net Sales to Adjusted Segment Net Sales(Amounts in thousands)Three Months EndedUnilinMarch 31, 2012April 2, 2011Net sales$            337,424325,832Adjustment to net sales:Exchange rate11,851-Adjusted net sales$            349,275325,832Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands)Three Months EndedMarch 31, 2012April 2, 2011Operating income$              71,97656,084Adjustments to operating income:Business restructurings-6,813Adjusted operating income$              71,97662,897   Adjusted operating margin as a percent of net sales5.1%4.7%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands)Three Months EndedMohawk March 31, 2012April 2, 2011Operating income$              25,28217,040Adjustments to operating income:Business restructurings-6,813Adjusted operating income$              25,28223,853   Adjusted operating margin as a percent of net sales3.6%3.5%Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes(Amounts in thousands)Three Months EndedMarch 31, 2012April 2, 2011Earnings before income taxes$              51,30329,504Unusual items:Business restructurings-6,813Adjusted earnings before income taxes$              51,30336,317Reconciliation of Income Tax Expense to Adjusted Income Tax Expense (Amounts in thousands)Three Months EndedMarch 31, 2012April 2, 2011Income tax expense   $              10,2914,966Unusual items:Income taxes-1,018Adjusted income tax expense$              10,2915,984Adjusted income tax rate20%16%Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses(Amounts in thousands)Three Months EndedMarch 31, 2012April 2, 2011Selling, general and administrative expenses$            287,450285,508Adjustments to selling, general and administrative expenses:Business restructurings-466Exchange rate2,378-Adjusted selling, general and administrative expenses$            289,828285,974Adjusted selling, general and administrative expenses as a percent of net sales20.6%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 leasesThe 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