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Press release from PR Newswire

Mohawk Industries, Inc. Announces Third Quarter Earnings

Thursday, November 01, 2012

Mohawk Industries, Inc. Announces Third Quarter Earnings16:01 EDT Thursday, November 01, 2012CALHOUN, Ga., Nov. 1, 2012 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 third quarter net earnings of $70 million and diluted earnings per share (EPS) of $1.01. Excluding restructuring charges, net earnings were $72 million and EPS was $1.04, a 25% increase over last year's third quarter adjusted EPS. Net sales for the third quarter of 2012 were $1.5 billion, an increase of 2% versus prior year and an increase of 4% on a constant exchange rate. For the third quarter of 2011, net sales were $1.4 billion, net earnings were $47 million and EPS was $0.68. Excluding unusual items, net earnings for the third quarter of 2011 were $57 million and EPS was $0.83. For the nine months ending September 29, 2012, net sales were $4.4 billion, an increase of 2% versus prior year and 4% on a constant exchange rate. Net earnings and EPS for the nine-month period were $184 million and $2.66, respectively. Excluding restructuring charges, net earnings were $191 million and EPS was $2.76, an increase of 25% over the nine-month adjusted EPS results in 2011. For the nine months ending October 1, 2011, net sales were $4.3 billion, net earnings were $131 million and EPS was $1.90. Excluding unusual items, net earnings and EPS were $152 million and $2.21, respectively.Commenting on Mohawk Industries' third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "All of our segments delivered solid third quarter performances with improvements in product mix, pricing, volume and productivity, as well as lower interest expense contributing to our results. Across the enterprise, we have managed to keep SG&A dollars in line with last year even as we invested significantly more in new product innovations and marketing to improve our future sales and product mix. During the quarter, we generated adjusted EBITDA of $179 million and free cash flow of $156 million. Both our net debt to adjusted EBITDA ratio and net debt to capitalization ratio improved to 1.7 and 22%, respectively.  Mohawk's strong financial position provides us with the flexibility to pursue strategic opportunities such as the recently announced agreement to acquire Pergo, the most recognized brand of premium laminate flooring in the U.S. and Europe."The Mohawk segment increased its adjusted operating income margin 180 basis points with sales remaining flat compared to 2011. The gains stemmed from improved pricing and product mix, reduced manufacturing and distribution costs and increased productivity. Our carpet sales performance was stronger in our specialty and contractor channels but was offset by the timing of product transitions in the home center channel. Our rug sales improved over the prior period, though they still remained below last year as retailers adjusted their strategies with consumer spending.  We saw continued improvement in mix and expanded our SmartStrand® Silk? collection, which has redefined the premium carpet market. We enhanced productivity through improved manufacturing and distribution efficiencies and gains from our capital investments.  Dal-Tile sales grew 9% during the quarter or 10% on a constant exchange rate. The segment improved sales in both residential and commercial categories and continued significant growth in the Mexican market. Operating margins were enhanced from actions that improved productivity and increased yields. Sales grew across all residential channels supported by our new Reveal Imaging designs, fashionable mosaics and larger format tiles that are aligned with today's decorating trends. We are leveraging Dal-Tile's traditional strength in the builder channel across our business segments to expand commitments with regional builders. We have introduced specific value-engineered products to gain position in the growing multi-family category. In Mexico, our new Salamanca tile plant is successfully ramping up and supplying product to satisfy our growing ceramic position. Across the segment, we lowered manufacturing costs through improved material formulations, higher yields and lower waste.Unilin segment sales during the quarter were flat as reported, but grew 9% on a constant exchange rate. Outside North America, laminate and wood flooring sales grew from continued expansion into the DIY channel, increases in the Russian market and our Australian acquisition. Our Russian laminate facility increased its production to satisfy higher demand and implemented productivity improvements.  In North America, we grew our laminate and wood products through all customer channels during the quarter. New product introductions, increased home center penetration, gains within the builder channel and promotional activity increased our sales. Declining new construction in Benelux and France created headwinds for our insulated roofing panels. To reduce costs in this category, we are consolidating our brands and sales forces as well as implementing process improvements. By helping meet European energy goals, our insulation panels delivered strong sales increases in both Belgium and France.Mohawk's third quarter results reflect our strengths in delivering innovative products, driving operational excellence and entering new geographic markets. We continue to invest strategically by introducing differentiated products, lowering our manufacturing and administrative costs and acquiring new companies that will enhance our results.  We have taken the necessary steps to align our pricing with our raw material inflation and we will react as required. In the U.S., increasing new home construction and improved sales of existing homes provide a positive outlook for future flooring growth. In Europe, soft market conditions due to economic uncertainty and changes in exchange rates are anticipated to be a headwind. Based on these factors, our guidance for fourth quarter earnings is $.89 to $.98 per share, excluding any restructuring costs.Mohawk's strong financial position allowed us to enter into an agreement to acquire Pergo which will benefit our worldwide laminate business and we are well positioned to invest in other opportunities as they arise.  We continue to execute our long-term strategy of product innovation, cost reduction, asset maximization and geographic expansion. Each of our businesses is well situated to benefit from the improvements in the U.S. remodeling and construction category, which remains substantially below peak levels. Our organization is focused on bringing value to our customers while maximizing our results. 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 consumers 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, November 2, 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 # 37587426.  A replay will also be available until November 16, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 37587426. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statement of OperationsThree Months EndedNine Months Ended(Amounts in thousands, except per share data)September 29, 2012October 1, 2011September 29, 2012October 1, 2011Net sales$1,473,4931,442,5124,352,3214,263,961Cost of sales1,100,6561,084,8893,231,5943,182,499Gross profit372,837357,6231,120,7271,081,462Selling, general and administrative expenses268,883266,159837,079832,214Operating income103,95491,464283,648249,248Interest expense17,96925,13259,31177,487Other expense (income), net32213,413(1,063)13,794Earnings before income taxes85,66352,919225,400157,967Income tax expense15,3595,22340,89623,639Net earnings70,30447,696184,504134,328Net earnings attributable to noncontrolling interest?(1,050)(635)(3,337)Net earnings attributable to Mohawk Industries, Inc.$70,30446,646183,869130,991Basic earnings per share attributable to Mohawk Industries, Inc.$1.020.682.671.91Weighted-average common shares outstanding - basic69,01068,75968,95268,725Diluted earnings per share attributable to Mohawk Industries, Inc.$1.010.682.661.90Weighted-average common shares outstanding - diluted69,33768,95469,24768,946Other Financial Information(Amounts in thousands)Net cash provided by operating activities$202,971109,598298,547138,188Depreciation and amortization$71,29874,207216,415222,804Capital expenditures$47,31169,741134,998182,260Consolidated Balance Sheet Data(Amounts in thousands)September 29, 2012October 1, 2011ASSETSCurrent assets:Cash and cash equivalents$380,842276,156Receivables, net817,214775,421Inventories1,139,4031,132,073Prepaid expenses and other current assets146,275125,007Deferred income taxes112,995131,931Total current assets2,596,7292,440,588Property, plant and equipment, net1,657,2261,696,182Goodwill1,371,4941,389,430Intangible assets, net554,257634,164Deferred income taxes and other non-current assets122,906117,204Total assets$6,302,6126,277,568LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt$57,673438,300Accounts payable and accrued expenses761,186774,939Total current liabilities818,8591,213,239Long-term debt, less current portion1,467,2691,173,038Deferred income taxes and other long-term liabilities421,549439,798Total liabilities2,707,6772,826,075Noncontrolling interest?32,758Total stockholders' equity3,594,9353,418,735Total liabilities and stockholders' equity$6,302,6126,277,568Segment InformationThree Months EndedAs of or for the Nine Months Ended(Amounts in thousands)September 29, 2012October 1, 2011September 29, 2012October 1, 2011Net sales:Mohawk$751,787754,4702,186,1602,203,699Dal-Tile417,533381,8911,214,7461,105,775Unilin328,582329,5141,020,3801,018,443Intersegment sales(24,409)(23,363)(68,965)(63,956)Consolidated net sales$1,473,4931,442,5124,352,3214,263,961Operating income (loss):Mohawk$43,81030,946106,22879,187Dal-Tile37,45233,07399,91282,911Unilin28,89233,04896,613105,507Corporate and eliminations(6,200)(5,603)(19,105)(18,357)Consolidated operating income$103,95491,464283,648249,248Assets:Mohawk$1,760,8281,810,191Dal-Tile1,783,1471,735,718Unilin2,586,0842,569,103Corporate and eliminations172,553162,556Consolidated assets$6,302,6126,277,568  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 EndedNine Months EndedSeptember 29, 2012October 1, 2011September 29, 2012October 1, 2011Net earnings attributable to Mohawk Industries, Inc.$70,30446,646183,869130,991Adjusting items:Unrealized foreign currency losses (1)?9,085?9,085Business restructurings4,2292,18612,45515,513Debt extinguishment costs?1,116?1,116Income taxes(2,691)(1,761)(4,892)(4,597)Adjusted net earnings attributable to Mohawk Industries, Inc.$71,84257,272191,432152,108Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.$1.040.832.762.21Weighted-average common shares outstanding - diluted69,33768,95469,24768,946Reconciliation of Operating Cash Flow to Free Cash Flow(Amounts in thousands)Three Months EndedSeptember 29, 2012Net cash provided by operating activities$202,971Capital expenditures(47,311)Free cash flow$155,660Reconciliation of Total Debt to Net Debt(Amounts in thousands)September 29, 2012Current portion of long-term debt$57,673Long-term debt, less current portion1,467,269Cash and cash equivalents(380,842)Net Debt$1,144,100Reconciliation of Capitalization(Amounts in thousands)September 29, 2012Current portion of long-term debt$57,673Long-term debt, less current portion1,467,269Total stockholders' equity3,594,935Capitalization$5,119,877Net Debt to Capitalization22%Reconciliation of Operating Income to Adjusted EBITDA(Amounts in thousands)Three Months EndedTrailing Twelve Months EndedDecember 31, 2011March 31, 2012June 30, 2012September 29, 2012September 29, 2012Operating income$66,29471,976107,718103,954349,942Other (expense) income(257)1,825(440)(322)806Net earnings attributable to noncontrolling interest(966)(635)??(1,601)Depreciation and amortization74,93073,28671,83171,298291,345EBITDA140,001146,452179,109174,930640,492Operating lease correction (2)6,035???6,035Business restructurings7,696?8,2264,22920,151Adjusted EBITDA$153,732146,452187,335179,159666,678Net Debt to Adjusted EBITDA1.7Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedNine Months EndedSeptember 29, 2012October 1, 2011September 29, 2012October 1, 2011Net sales$1,473,4931,442,5124,352,3214,263,961Adjustment to net sales on a constant exchange rate32,777?82,877?Net sales on a constant exchange rate$1,506,2701,442,5124,435,1984,263,961Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedDal-TileSeptember 29, 2012October 1, 2011Net sales$417,533381,891Adjustment to segment net sales on a constant exchange rate1,935?Segment net sales on a constant exchange rate$419,468381,891Three Months EndedUnilinSeptember 29, 2012October 1, 2011Net sales$328,582329,514Adjustment to segment net sales on a constant exchange rate30,842?Segment net sales on a constant exchange rate$359,424329,514Reconciliation of Operating Income to Adjusted Operating Income(Amounts in thousands)Three Months EndedSeptember 29, 2012October 1, 2011Operating income$103,95491,464Business restructurings4,2292,186Adjusted operating income$108,18393,650Adjusted operating margin as a percent of net sales7.3%6.5%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands)Three Months EndedMohawkSeptember 29, 2012October 1, 2011Operating income$43,81030,946Business restructurings3,1222,186Adjusted segment operating income$46,93233,132Adjusted operating margin as a percent of net sales6.2%4.4%Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes(Amounts in thousands)Three Months EndedSeptember 29, 2012October 1, 2011Earnings before income taxes$85,66352,919Adjustments to earnings before income taxes:Unrealized foreign currency losses (1)?9,085Business restructurings4,2292,186Debt extinguishment costs?1,116Adjusted earnings before income taxes$89,89265,306Reconciliation of Income Tax Expense to Adjusted Income Tax Expense(Amounts in thousands)Three Months EndedSeptember 29, 2012October 1, 2011Income tax expense$15,3595,223Income tax effect of business restructurings2,6911,761Adjusted income tax expense$18,0506,984Adjusted income tax rate20%11%(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 the planning and forecasting in subsequent periods. SOURCE Mohawk Industries, Inc.For further information: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695