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Press release from CNW Group

Mohawk Industries, Inc. Announces Second Quarter Earnings

Thursday, August 02, 2012

Mohawk Industries, Inc. Announces Second Quarter Earnings16:07 EDT Thursday, August 02, 2012CALHOUN, Ga., Aug. 2, 2012 /CNW/ - Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 second quarter net earnings of $73 million and diluted earnings per share (EPS) of $1.06. Net earnings excluding restructuring charges were $79 million and EPS was $1.14, a 20% increase over last year's second quarter adjusted EPS. Net sales for the second quarter of 2012 were $1.5 billion, in line with prior year and an increase of 2% on a constant exchange rate. For the second quarter of 2011, net earnings were $61 million and EPS was $0.88. Net earnings excluding restructuring charges for the second quarter of 2011, were $66 million and EPS was $0.95. For the six months ending June 30, 2012, net sales were $2.9 billion, an increase of 2% versus prior year and 4% on a constant exchange rate. Net earnings and EPS for the six-month period were $114 million and $1.64, respectively. Net earnings excluding restructuring charges were $120 million and EPS was $1.73, an increase of 25% over the six-month adjusted EPS results in 2011. For the six months ending July 2, 2011, net sales were $2.8 billion, net earnings were $84 million and EPS was $1.22. Excluding restructuring charges, net earnings and EPS were $95 million and $1.38, respectively.Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Selling prices offsetting raw material inflation, productivity gains, product mix improvements and lower interest costs all contributed to our results. Sales increased 2% on a constant exchange rate with commercial sales continuing to outpace residential sales. We continue to control SG&A cost while increasing new product investments across all businesses. During the quarter, we generated adjusted EBITDA of $187 million, free cash flow of $96 million and paid off $336 million of senior notes. We have addressed many of today's economic challenges by enhancing our product differentiation, reducing costs, improving efficiencies and entering new product categories and geographies."Mohawk segment adjusted operating income margin increased 110 basis points over 2011 with gains from pricing, improved product mix and lower costs from productivity offsetting lower volume and higher material costs. Segment sales were down 3% during the second quarter. Carpet sales for both the industry and Mohawk were approximately flat compared to last year with residential remodeling activity slow. Our rug sales continued to be soft due to lower retail sales, as well as retailers deferring promotional activities and further reducing inventory within the channel. During the quarter, Mohawk's SmartStrand® Silk™ premium carpet collection experienced strong sales growth due to its unsurpassed softness and proprietary environmental features. We executed productivity improvements across the business with particular gains from our capital investments and reduction of waste.Dal-Tile segment sales grew 7% during the quarter or 8% on a constant exchange rate. The segment posted gains from increases in both residential and commercial sales and growth in the Mexican market. Operating margins were enhanced by higher volumes, greater manufacturing efficiencies, improved material formulations and increased recycling. To address the changing market demand, we converted mosaic and floor tile production to porcelain, increased our ability to make larger sizes and expanded our Reveal Imaging™ capabilities. The new Salamanca facility in Mexico is producing red-body tile for the domestic market. The plant's start-up costs are in line with our expectations, and we anticipate positive contributions in early 2013 due to higher volume and productivity. Unilin segment sales decreased 2% but increased 7% on a constant exchange rate. Outside North America, laminate and wood flooring sales grew from continued expansion in the DIY channel, expanded distribution in the U.K. and Australian sales. Our Russian facility is progressing with increased productivity and is manufacturing more complex products. In North America, laminate sales grew from increased promotional activity by large retailers and greater penetration in the home center channel. Laminate collections featuring richly embossed surfaces, premium long planks and our proprietary GenuEdge Technology ™ improved our mix in both the remodeling and new construction markets. Our insulated roofing product sales declined in Europe as the housing market contracted but were offset by the growth of our insulation panels, which help to meet energy efficiency goals.Mohawk's commitment to product innovation, resource management and process improvements yielded improved second quarter results. Our investments in innovative products improved our mix and contributed to higher margins. Though sales softened in the second quarter, U.S. order rates have shown some improvement as we began the third quarter. We do not expect material costs to follow oil price declines due to specific higher chemical costs. In the U.S., low mortgage rates and higher housing starts should support future flooring sales. In Europe, we will have the normal seasonal slowing and expect the present trends to continue with exchange rates being a headwind. Based on these factors, our guidance for third quarter earnings is $0.96 to $1.05 per share, excluding any restructuring costs.We have addressed many of today's economic challenges by enhancing our product differentiation, reducing costs, improving efficiencies and entering new product categories and geographies. We retain a strong financial position, which provides us flexibility to invest in strategic opportunities going forward.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, Mohawk Home, 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, August 3, 2012 at 11:00 AM Eastern TimeThe telephone number is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local.Conference ID # 98256242. A replay will also be available until August 17, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 98256242.MOHAWK INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statement of OperationsThree Months EndedSix Months Ended(Amounts in thousands, except per share data)June 30,2012July 2,2011June 30,2012July 2,2011Net sales$1,469,7931,477,8542,878,8282,821,449Cost of sales1,081,3291,095,6072,130,9382,097,610 Gross profit388,464382,247747,890723,839Selling, general and administrative expenses280,746280,547568,196566,055Operating income107,718101,700179,694157,784Interest expense18,84425,76041,34252,355Other (income) expense, net440396(1,385)381 Earnings before income taxes88,43475,544139,737105,048Income tax expense15,24613,45025,53718,416Net earnings 73,18862,094114,20086,632Net earnings attributable to noncontrolling interest-(1,191)(635)(2,287) Net earnings attributable to Mohawk Industries, Inc.$ 73,18860,903113,56584,345Basic earnings per share attributable to Mohawk Industries, Inc. $ 1.060.891.651.23Weighted-average common shares outstanding - basic68,98468,74468,92368,709Diluted earnings per share attributable to Mohawk Industries, Inc.$ 1.060.881.641.22Weighted-average common shares outstanding - diluted69,25968,98169,20468,942Other Financial Information(Amounts in thousands)Net cash provided by operating activities$ 140,04696,00395,57628,590Depreciation and amortization$ 71,83174,344145,117148,597Capital expenditures$ 44,43659,70887,687112,519Consolidated Balance Sheet Data(Amounts in thousands)June 30, 2012July 2,2011ASSETSCurrent assets: Cash and cash equivalents$ 319,463285,422 Receivables, net782,122797,893 Inventories1,161,0731,102,769 Prepaid expenses and other current assets144,915125,815 Deferred income taxes 126,613135,338 Total current assets2,534,1862,447,237Property, plant and equipment, net1,652,4441,730,914Goodwill1,363,3561,418,830Intangible assets, net564,948681,178Deferred income taxes and other non-current assets149,843110,841$6,264,7776,389,000LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt$ 57,158453,185Accounts payable and accrued expenses733,411771,297 Total current liabilities790,5691,224,482Long-term debt, less current portion1,570,5301,155,150Deferred income taxes and other long-term liabilities427,360460,109 Total liabilities2,788,4592,839,741Noncontrolling interest-32,300Total stockholders' equity3,476,3183,516,959$ 6,264,7776,389,000Segment InformationThree Months EndedAs of or for the Six Months Ended(Amounts in thousands)June 30,2012July 2,2011June 30,2012July 2, 2011Net sales: Mohawk$ 734,493758,0641,434,3731,449,229 Dal-Tile404,288379,469797,213723,884 Unilin354,374363,097691,798688,929 Intersegment sales(23,362)(22,776)(44,556)(40,593) Consolidated net sales$1,469,7931,477,8542,878,8282,821,449Operating income (loss): Mohawk$ 37,13631,20162,41848,241 Dal-Tile36,43232,13862,46049,838 Unilin40,57546,20967,72172,459 Corporate and eliminations(6,425)(7,848)(12,905)(12,754) Consolidated operating income$ 107,718101,700179,694157,784Assets: Mohawk$ 1,791,3761,783,630 Dal-Tile1,742,5631,700,482 Unilin2,539,9972,717,032 Corporate and eliminations190,841187,856 Consolidated assets$ 6,264,7776,389,000Reconciliation 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 EndedSix Months EndedJune 30, 2012July 2, 2011June 30,2012July 2, 2011Net earnings attributable to Mohawk Industries, Inc.$ 73,18860,903113,56584,345Adjusting items:Business restructurings8,2266,5148,22613,327Income taxes(2,201)(1,818)(2,201)(2,836)Adjusted net earnings attributable to Mohawk Industries, Inc.$ 79,21365,599119,59094,836Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $ 1.140.951.731.38Weighted-average common shares outstanding - diluted69,25968,98169,20468,942Reconciliation of Operating Cash Flow to Free Cash Flow(Amounts in thousands)Three Months EndedJune 30, 2012Net cash provided by operating activities$ 140,046Additions to property, plant and equipment(44,436) Free cash flow$ 95,610Reconciliation of Net Earnings to Adjusted EBITDA(Amounts in thousands)Three Months EndedJune 30, 2012Net earnings$ 73,188Income tax expense15,246Interest expense18,844Depreciation and amortization71,831EBITDA179,109Business restructurings8,226 Adjusted EBITDA $ 187,335Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedSix Months EndedJune 30,2012July 2, 2011June 30,2012July 2, 2011Net sales$ 1,469,7931,477,8542,878,8282,821,449Adjustment to net sales on a constant exchange rate: Exchange rate36,326-49,962- Net sales on a constant exchange rate$ 1,506,1191,477,8542,928,7902,821,449Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedDal-TileJune 30, 2012July 2, 2011Net sales$ 404,288379,469Adjustment to segment net sales on a constant exchange rate: Exchange rate3,555- Segment net sales on a constant exchange rate$ 407,843379,469Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedUnilinJune 30, 2012July 2, 2011Net sales$ 354,374363,097Adjustment to segment net sales on a constant exchange rate: Exchange rate32,771- Segment net sales on a constant exchange rate$ 387,145363,097Reconciliation of Gross Profit to Adjusted Gross Profit (Amounts in thousands)Three Months EndedJune 30, 2012July 2, 2011Gross Profit$ 388,464382,247Adjustment to gross profit: Business restructurings6,6365,532 Adjusted gross profit$ 395,100387,779 Adjusted gross profit as a percent of net sales26.9%26.2%Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands)Three Months EndedJune 30, 2012July 2, 2011Operating income$ 107,718101,700Adjustment to operating income: Business restructurings8,2266,514 Adjusted operating income$ 115,944108,214 Adjusted operating margin as a percent of net sales7.9%7.3%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands)Three Months EndedMohawk June 30, 2012July 2, 2011Operating income$ 37,13631,201Adjustment to segment operating income: Business restructurings7,3836,514 Adjusted segment operating income$ 44,51937,715 Adjusted operating margin as a percent of net sales6.1%5.0%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands)Three Months EndedUnilin June 30, 2012July 2, 2011Operating income$ 40,57546,209Adjustment to segment operating income: Business restructurings843- Adjusted segment operating income$ 41,41846,209 Adjusted operating margin as a percent of net sales11.7%12.7%Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes(Amounts in thousands)Three Months EndedJune 30, 2012July 2, 2011Earnings before income taxes$ 88,43475,544Adjustment to earnings before income taxes: Business restructurings8,2266,514 Adjusted earnings before income taxes$ 96,66082,058Reconciliation of Income Tax Expense to Adjusted Income Tax Expense (Amounts in thousands)Three Months EndedJune 30, 2012July 2, 2011Income tax expense $ 15,24613,450Adjustment to income tax expense: Income tax effect of business restructurings2,2011,818 Adjusted income tax expense$ 17,44715,268Adjusted income tax rate18%19%Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses(Amounts in thousands)Three Months EndedJune 30, 2012July 2, 2011Selling, general and administrative expenses$ 280,746280,547Adjustments to selling, general and administrative expenses: Business restructurings(1,590)(982) Exchange rate(6,042)- Adjusted selling, general and administrative expenses$ 273,114279,565Adjusted selling, general and administrative expenses as a percent of net sales18.6%18.9%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, +1-706-624-2695http://www.mohawkind.com