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Press release from PR Newswire

Mohawk Industries, Inc. Announces First Quarter Earnings

Thursday, May 02, 2013

Mohawk Industries, Inc. Announces First Quarter Earnings

16:01 EDT Thursday, May 02, 2013

CALHOUN, Ga., May 2, 2013 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2013 first quarter net earnings of $50 million and diluted earnings per share (EPS) of $0.72. Excluding unusual charges, net earnings were $61 million and EPS was $0.87, a 50% increase over last year's first quarter EPS. Net sales for the first quarter of 2013 were $1.5 billion, an increase of 5.5% versus the prior year's first quarter. For the first quarter of 2012, net sales were $1.4 billion, net earnings were $40 million and EPS was $0.58.

Commenting on Mohawk Industries' first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Improvements in the U.S. market, product mix, productivity improvements, lower amortization and the Pergo acquisition all contributed to our results, offset by the negative impact of a slower European economy and one less day in the period compared to last year. During the quarter, we generated adjusted EBITDA of $151 million and reduced SG&A by 90 basis points, relative to net sales, across the enterprise even as we increased investment in growth areas of the business."

"In January we completed the acquisition of Pergo. In both the U.S. and Europe, we are executing our Pergo integration strategy, which includes asset consolidation, manufacturing process improvements, product line enhancements, and management, sales and administrative restructuring. After the first quarter closed, we completed the acquisition of the Marazzi Group, which makes Mohawk the global leader in ceramic tile. We also received regulatory approval of our proposed acquisition of the Belgian board manufacturer Spano in late April and expect to complete the transaction shortly. For two decades, we have created significant shareholder value through a dual strategy of growing our established business while enhancing the performance of acquired companies. With an experienced management team, we have the resources and talent to execute these strategies. Regardless of the pace of the global economic recovery, we remain committed to driving innovation, operational excellence and geographic expansion to optimize our business."

Mohawk segment sales were relatively flat during the first quarter, with operating income rising 24%, excluding unusual charges. Carpet sales growth was partially offset by home center transitions that were completed late in the first quarter and lower rug sales. Sales of our premium products in the specialty channel continued to show strength, with expected improvement in the home center channel as new introductions gain traction in the second quarter. We began implementing a 4-6% carpet price increase during the quarter to offset our material cost changes; however, the timing of the implementation will not cover an estimated $5 - $10 million of those higher costs in the second quarter. We anticipate the price increase will align with our material costs in the third quarter. During the quarter, we built upon the success of our revolutionary SmartStrand® Silk® collection by adding twelve products that combine Silk's unsurpassed softness with contemporary styling. Our exclusive Duracolor® commercial broadloom and tile products expanded due to their exceptional styling, superior stain and soil resistance, and improved value. We executed productivity improvements across the business resulting in material yield improvements, waste reduction, increased recycled content and improved efficiencies.

Dal-Tile sales increased 5% as new residential construction, commercial sales and our Mexican business continued to show strength. Our positive results for the quarter were supported by new product introductions featuring both rustic and polished surfaces, new larger sizes and unique Reveal Imaging® designs. Our margins were supported by higher volumes and improved labor productivity, but were partially offset by rising energy costs. We added sales representatives in both our Dal-Tile and American Olean brands to increase our focus on new home construction, multifamily projects and commercial specifications.  Commercial sales grew in the restaurant, retail and hospitality channels with large projects utilizing high fashion designs, contemporary sizes and sophisticated colors. In Mexico, we continue to grow faster than the market by aggressively pursuing new construction projects, adding distributors, improving product mix and expanding home center penetration. During the quarter, Dal-Tile improved costs by reducing off-quality production and waste, increasing machine efficiency, achieving higher plant utilization rates, and enhancing material formulations.

Unilin sales grew 20% or 19% at a constant exchange rate due primarily to the Pergo acquisition. In the legacy Unilin business sales improved in all product categories in the U.S., and in insulation boards and wood flooring outside the U.S. This was partially offset by lower Unilin laminate, wood panels and roofing sales in Western Europe. Margins improved from increased U.S. volume and lower amortization costs, offset by volume, lower mix and material inflation in Europe excluding acquisitions. Our Livyn® luxury vinyl tile collection is gaining traction across Western Europe differentiated by our Quick-Step® brand industry leading realism and an advanced click installation system. In North America our laminate flooring sales were enhanced by introductions with rustic wood visuals in wide plank formats with highly textured surfaces. Our wood flooring products are growing with performance features such as Scotchgard® and ArmorMax® that provide easy maintenance and industry-leading wear resistance and new products with scraped surfaces that create fashionable distressed looks. To offset rising lumber costs, we announced another price increase of 10% for wood flooring that will be effective in late May. Sales of our insulation board continue to grow with an expanded product offering and increased geographic penetration in France and Germany. Construction of our new insulation board plant in France is ahead of schedule with production anticipated to begin in the third quarter.

We delivered solid results this quarter through product innovation, productivity improvements, market expansion and strategic acquisitions. In all areas, we are driving cost and sales initiatives to enhance our results. We are implementing price increases as required, though our carpet prices will lag our costs in the second quarter. We believe that both commercial and new housing growth will continue this year, and we are anticipating some improvement in residential remodeling. We remain optimistic about the long-term prospects of our international businesses even while challenges persist in some regional economies. In each of these regions, we have leading market positions, highly recognized brands, outstanding distribution channels and efficient manufacturing that will benefit our results as those economies improve. We anticipate each of our acquisitions contributing to our sales and earnings this year, as we implement strategies to maximize their potential. With these factors, our guidance for second quarter earnings is $1.58 - $1.67 per share, excluding any restructuring or acquisition costs.

Mohawk Industries is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawk's vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Our industry-leading innovation has yielded products and technologies that differentiate our brands in the marketplace and satisfy all remodeling and new construction requirements. Our brands are among the most recognized in the industry and include American Olean, Bigelow, Dal-Tile, Durkan, Karastan, Lees, Marazzi, Mohawk, Pergo, Unilin and Quick-Step. During the past decade, Mohawk has transformed its business from an American carpet manufacturer into the world's largest flooring company with operations in Australia, Brazil, Canada, China, Europe, India, Malaysia, Mexico,  Russia and the United States.

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 3, 2013 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 # 32039923.  A replay will be available until May 17, 2013 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 32039923.

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three Months Ended

(Amounts in thousands, except per share data)

March 30, 2013

March 31, 2012

Net sales

$                    1,486,815

1,409,035

Cost of sales

1,109,749

1,049,609

    Gross profit

377,066

359,426

Selling, general and administrative expenses

290,224

287,450

Operating income

86,842

71,976

Interest expense

19,156

22,498

Other expense (income), net

6,387

(1,825)

    Earnings before income taxes

61,299

51,303

Income tax expense

10,732

10,291

Net earnings 

50,567

41,012

Net earnings attributable to noncontrolling interest

(72)

(635)

    Net earnings attributable to Mohawk Industries, Inc.

$                           50,495

40,377

Basic earnings per share attributable to Mohawk Industries, Inc. 

$                                 0.73

0.59

Weighted-average common shares outstanding - basic

69,375

68,862

Diluted earnings per share attributable to Mohawk Industries, Inc.

$                                 0.72

0.58

Weighted-average common shares outstanding - diluted

69,897

69,141

Other Financial Information

(Amounts in thousands)

Net cash used in operating activities

$                           38,944

44,470

Depreciation and amortization

$                           60,349

73,286

Capital expenditures

$                           63,282

43,251

Consolidated Balance Sheet Data

(Amounts in thousands)

March 30, 2013

March 31, 2012

ASSETS

Current assets:

    Cash and cash equivalents

$                    1,120,167

304,775

    Receivables, net

825,659

782,000

    Inventories

1,230,250

1,164,991

    Prepaid expenses and other current assets

157,011

136,752

    Deferred income taxes 

113,519

156,110

        Total current assets

3,446,606

2,544,628

Property, plant and equipment, net

1,729,916

1,718,396

Goodwill

1,394,062

1,390,712

Intangible assets, net

569,356

599,625

Deferred income taxes and other non-current assets

121,905

145,833

Total assets

$                    7,261,845

6,399,194

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$                           53,496

57,309

Accounts payable and accrued expenses

824,135

721,383

        Total current liabilities

877,631

778,692

Long-term debt, less current portion

2,253,020

1,642,419

Deferred income taxes and other long-term liabilities

406,610

458,786

        Total liabilities

3,537,261

2,879,897

Total stockholders' equity

3,724,584

3,519,297

Total liabilities and stockholders' equity

$                    7,261,845

6,399,194

Segment Information

As of or for the Three Months Ended

(Amounts in thousands)

March 30, 2013

March 31, 2012

Net sales:

    Mohawk

$                        695,334

699,880

    Dal-Tile

411,881

392,925

    Unilin

404,475

337,424

    Intersegment sales

(24,875)

(21,194)

        Consolidated net sales

$                    1,486,815

1,409,035

Operating income (loss):

    Mohawk

$                           25,238

25,282

    Dal-Tile

29,976

26,028

    Unilin

38,693

27,146

    Corporate and eliminations

(7,065)

(6,480)

        Consolidated operating income

$                           86,842

71,976

Assets:

    Mohawk

$                    1,802,241

1,820,785

    Dal-Tile

1,795,828

1,759,934

    Unilin

2,469,264

2,620,013

    Corporate and eliminations

1,194,512

198,462

        Consolidated assets

$                    7,261,845

6,399,194

 

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 Ended

March 30, 2013

March 31, 2012

Net earnings attributable to Mohawk Industries, Inc.

$                           50,495

40,377

Adjusting items:

Integration costs

1,634

-

Interest on 3.85% senior notes

3,559

-

Business restructurings

8,222

-

Income taxes

(2,780)

-

Adjusted net earnings attributable to Mohawk Industries, Inc.

$                           61,130

40,377

Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. 

$                                 0.87

0.58

Weighted-average common shares outstanding - diluted

69,897

69,141

Reconciliation of Total Debt to Net Debt

(Amounts in thousands)

March 30, 2013

Current portion of long-term debt

$                            53,496

Long-term debt, less current portion

2,253,020

Less: Cash and cash equivalents

1,120,167

Net Debt

$                     1,186,349

Reconciliation of Operating Income to Adjusted EBITDA

(Amounts in thousands)

Trailing Twelve

Three Months Ended

Months Ended

June 30, 2012

September 29, 2012

December 31, 2012

March 30, 2013

March 30, 2013

Operating income

$                         107,718

103,954

95,860

86,842

394,374

Other (expense) income

(440)

(322)

(1,366)

(6,387)

(8,515)

    Net earnings attributable to noncontrolling interest

-

-

-

(72)

(72)

Depreciation and amortization

71,831

71,298

63,878

60,349

267,356

EBITDA

179,109

174,930

158,372

140,732

653,143

     Integration costs

-

-

-

1,634

1,634

Business restructurings

8,226

4,229

6,109

8,222

26,786

 Adjusted EBITDA 

$                         187,335

179,159

164,481

150,588

681,563

Net Debt to Adjusted EBITDA

1.7

Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended

March 30, 2013

March 31, 2012

Net sales

$                     1,486,815

1,409,035

Adjustment to net sales on a constant exchange rate

(2,079)

-

Net sales on a constant exchange rate

$                     1,484,736

1,409,035

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended

Dal-Tile

March 30, 2013

March 31, 2012

Net sales

$                         411,881

392,925

Adjustment to segment net sales on a constant exchange rate

(489)

-

Segment net sales on a constant exchange rate

$                         411,392

392,925

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended

Unilin

March 30, 2013

March 31, 2012

Net sales

$                         404,475

337,424

Adjustment to segment net sales on a constant exchange rate

(1,590)

-

Segment net sales on a constant exchange rate

$                         402,885

337,424

Reconciliation of Operating Income to Adjusted Operating Income 

(Amounts in thousands)

Three Months Ended

March 30, 2013

March 31, 2012

Operating income

$                            86,842

71,976

Adjustments to operating income:

Integration costs

1,634

-

Business restructurings

8,222

-

  Adjusted operating income

$                            96,698

71,976

   Adjusted operating margin as a percent of net sales

6.5%

5.1%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)

Three Months Ended

Mohawk 

March 30, 2013

March 31, 2012

Operating income

$                            25,238

25,282

Adjustment to segment operating income:

Business restructurings

6,217

-

  Adjusted segment operating income

$                            31,455

25,282

   Adjusted operating margin as a percent of net sales

4.5%

3.6%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)

Three Months Ended

Unilin 

March 30, 2013

March 31, 2012

Operating income

$                            38,693

27,146

Adjustments to segment operating income:

Integration costs

1,634

-

Business restructurings

1,542

-

  Adjusted segment operating income

$                            41,869

27,146

   Adjusted operating margin as a percent of net sales

10.4%

8.0%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 

(Amounts in thousands)

Three Months Ended

Dal-Tile

March 30, 2013

March 31, 2012

Operating income

$                            29,976

26,028

Adjustment to segment operating income:

Business restructurings

463

-

  Adjusted segment operating income

$                            30,439

26,028

   Adjusted operating margin as a percent of net sales

7.4%

6.6%

Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes

(Amounts in thousands)

Three Months Ended

March 30, 2013

March 31, 2012

Earnings before income taxes

$                            61,299

51,303

Adjustment to earnings before income taxes:

Integration costs

1,634

-

Interest on 3.85% senior notes

3,559

-

Business restructurings

8,222

-

  Adjusted earnings before income taxes

$                            74,714

51,303

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense 

(Amounts in thousands)

Three Months Ended

March 30, 2013

March 31, 2012

Income tax expense 

$                            10,732

10,291

Income tax effect of adjusting items

2,780

-

  Adjusted income tax expense

$                            13,512

10,291

Adjusted income tax rate

18%

20%

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 (706) 624-2695

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