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Press release from PR Newswire

Mohawk Industries, Inc. Announces Fourth Quarter Earnings

Thursday, February 21, 2013

Mohawk Industries, Inc. Announces Fourth Quarter Earnings16:01 EST Thursday, February 21, 2013CALHOUN, Ga., Feb. 21, 2013 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 fourth quarter net earnings of $66 million and diluted earnings per share (EPS) of $0.95. Excluding restructuring charges, net earnings were $70 million and EPS was $1.01, a 40% increase over last year's fourth quarter adjusted EPS. Net sales for the fourth quarter of 2012 were $1.44 billion, an increase of 4% versus the prior year's fourth quarter and an increase of 5% on a constant exchange rate basis. For the fourth quarter of 2011, net sales were $1.38 billion, net earnings were $43 million and EPS was $0.62. Excluding unusual items, adjusted net earnings for the fourth quarter of 2011 were $50 million and adjusted EPS was $0.72. For the year ended December 31, 2012, net sales were $5.79 billion, an increase of 3% versus the prior year and 4% on a constant exchange rate basis. Net earnings and EPS for the year were $250 million and $3.61, respectively. Excluding restructuring charges, net earnings were $262 million and EPS was $3.78, an increase of 29% over adjusted EPS in 2011. For the year ended December 31, 2011, net sales were $5.64 billion, net earnings were $174 million and EPS was $2.52. Excluding unusual items, adjusted 2011 net earnings and adjusted EPS were $202 million and $2.92, respectively.Commenting on Mohawk Industries' fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Price increases, productivity improvements, mix and lower interest all contributed to solid results for the period. During the quarter, we generated adjusted EBITDA of $165 million and cash flow from operations of $289 million and for the year adjusted EBITDA of $677 million and cash flow from operations of $588 million. In the U.S., we improved our mix as our higher value products gained greater traction with consumers. Our recent expansion into new international markets has generated additional growth in Mexico, Russia and Australia. In 2012, we kept SG&A dollars in line with 2011, while investing in innovative marketing and products. We are continuing to strategically invest in growing our core businesses and since October, we have announced the agreement to acquire three businesses ? Pergo, Marazzi and Spano. All of these transactions in combination with our existing businesses will position Mohawk for significant growth in the future. In January, we successfully issued $600 million of ten year bonds at a coupon rate of 3.85% and plan to use the proceeds to finance a portion of our Marazzi acquisition."Mohawk segment sales were flat during the fourth quarter, with carpet sales performing better than rug sales. Our rug sales improved from last quarter, though they remain below the prior year as lower product mix and retail sales continued to decrease our results. Our new premium carpets have improved our overall selling prices and margins however sales levels were impacted by home center product transitions that we expect to be completed during the first quarter.  We recently announced a carpet price increase of 4-6% to cover rising material costs. By applying the innovative processes used to develop SmartStrand Silk, we introduced our Wear-Dated Embrace nylon collection in the fourth quarter. This extends our leadership position in the ultra-soft premium category. In the commercial category, we grew sales of our new carpet tile introductions made from our premium Duracolor fiber as designers embraced the styling with high performance stain and soil resistance. We executed manufacturing productivity improvements across the business through waste reduction, enhanced recycled content and improved efficiencies.Dal-Tile segment sales grew 15% during the quarter, with gains in the U.S. and Mexico supported by new product introductions with enhanced textures, sophisticated designs and larger formats in both residential and commercial categories. Margin expansion came from higher volumes, enhanced productivity and improved yields partially offset by plant shutdowns to reduce inventory as our new capacity ramped up faster than anticipated. Sales grew in all residential channels with successful launches of new Reveal Imaging designs, coordinated wall, floor and mosaics collections, larger format tiles from our Chinese joint venture and new decorative assortments in the home center channel. Commercial sales continued strong with the hospitality sector leading the category. In Mexico, we increased production at our Salamanca facility and we are optimizing the plant's efficiencies and yields. During the quarter, Dal-Tile lowered overall manufacturing costs with higher efficiencies, improved material formulations, increased recycled content and effective quality initiatives.Unilin segment sales grew 1% or 5% at a constant exchange rate. Increased laminate and hardwood sales in North America, growth in our insulation boards, expanded participation in the DIY channel and solid results from our Australian distribution business contributed to our sales improvement. Our margins were favorably impacted by lower amortization charges partially offset by material inflation and negative mix as European consumers purchased more value based alternatives. In North America, new product introductions, promotions and additional home center business enhanced our sales. To support continuing growth in our insulation board business, we have begun construction of a new manufacturing facility in France. As Western European housing contracted, our roof panel sales have declined and we reduced our workforce to balance accordingly. We have licensed patents for our click furniture to additional manufacturers who are introducing new products that will increase interest in the technology.Through product innovation, expanded distribution and process improvements, Mohawk delivered solid fourth quarter results. We are seeing some inflation in our raw materials and are taking the appropriate actions in the marketplace to address. In the U.S., low mortgage rates, stabilizing home prices and improving employment should sustain the housing recovery. We believe that U.S. residential remodeling should see improvement in the future and that the European economic conditions are near a bottom. We anticipate revenue growth for 2013 as the U.S. market improves and we realize some benefits from recent acquisitions. The first quarter earnings are seasonally the lowest and represented a little less than one sixth of 2012's full year results. With this, our guidance for first quarter earnings is $0.77 to $0.86 per share, excluding any restructuring, acquisition costs and interest on the new bonds for Marazzi. 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, Pergo 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, India, 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, February 22, 2013 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 # 91220581.  A replay will be available until March 8, 2013 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 91220581.MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES  Consolidated Statement of OperationsThree Months EndedTwelve Months Ended(Amounts in thousands, except per share data)December 31, 2012December 31, 2011December 31, 2012December 31, 2011Net sales$1,435,6591,378,2975,787,9805,642,258Cost of sales1,066,3291,042,8804,297,9224,225,379    Gross profit369,330335,4171,490,0581,416,879Selling, general and administrative expenses273,470269,1231,110,5501,101,337Operating income95,86066,294379,508315,542Interest expense15,40224,13074,713101,617Other expense, net1,36625730314,051    Earnings before income taxes79,09241,907304,492199,874Income tax expense12,703(1,990)53,59921,649    Net earnings66,38943,897250,893178,225Net earnings attributable to noncontrolling interest?(966)(635)(4,303)    Net earnings attributable to Mohawk Industries, Inc.$66,38942,931250,258173,922Basic earnings per share attributable to Mohawk Industries, Inc.$0.960.623.632.53Weighted-average common shares outstanding - basic69,09568,76868,98868,736Diluted earnings per share attributable to Mohawk Industries, Inc.$0.950.623.612.52Weighted-average common shares outstanding - diluted69,53669,01669,30668,964Other Financial Information(Amounts in thousands)Net cash provided by operating activities$289,043162,805587,590300,993Depreciation and amortization$63,87874,930280,293297,734Capital expenditures$73,29693,313208,294275,573Consolidated Balance Sheet Data(Amounts in thousands)December 31, 2012December 31, 2011ASSETSCurrent assets:Cash and cash equivalents$477,672311,945Receivables, net679,473686,165Inventories1,133,7361,113,630Prepaid expenses and other current assets147,580135,514Deferred income taxes111,585150,910    Total current assets2,550,0462,398,164Property, plant and equipment, net1,692,8521,712,154Goodwill1,385,7711,375,175Intangible assets, net553,799605,100Deferred income taxes and other non-current assets121,216115,635    Total assets$6,303,6846,206,228LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt$55,213386,255Accounts payable and accrued expenses773,436715,091    Total current liabilities828,6491,101,346Long-term debt, less current portion1,327,7291,200,184Deferred income taxes and other long-term liabilities427,689455,190    Total liabilities2,584,0672,756,720Noncontrolling interest?33,723Total stockholders' equity3,719,6173,415,785Total liabilities and stockholders' equity$6,303,6846,206,228Segment InformationThree Months EndedAs of and for the Twelve Months Ended(Amounts in thousands)December 31, 2012December 31, 2011December 31,2012December 31, 2011Net sales:Mohawk$725,895723,9752,912,0552,927,674Dal-Tile401,637348,5411,616,3831,454,316Unilin329,969326,3211,350,3491,344,764Intersegment sales(21,842)(20,540)(90,807)(84,496)    Consolidated net sales$1,435,6591,378,2975,787,9805,642,258Operating income (loss):Mohawk$51,96830,687158,196109,874Dal-Tile21,03918,387120,951101,298Unilin29,79621,640126,409127,147Corporate and eliminations(6,943)(4,420)(26,048)(22,777)    Consolidated operating income$95,86066,294379,508315,542Assets:Mohawk$1,721,2141,769,065Dal-Tile1,731,2581,732,818Unilin2,672,3892,533,070Corporate and eliminations178,823171,275    Consolidated assets$6,303,6846,206,228Reconciliation 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 EndedTwelve Months EndedDecember 31, 2012December 31, 2011December 31, 2012December 31, 2011Net earnings attributable to Mohawk Industries, Inc.$66,38942,931250,258173,922Adjusting items:Unrealized foreign currency losses (1)???9,085Operating lease correction (2)?6,035?6,035Business restructurings6,1097,69618,56423,209Debt extinguishment costs???1,116Income taxes(2,111)(7,152)(7,003)(11,749)    Adjusted net earnings attributable to Mohawk Industries, Inc.$70,38749,510261,819201,618Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.$1.010.723.782.92Weighted-average common shares outstanding - diluted69,53669,01669,30668,964 Reconciliation of Operating Cash Flow to Free Cash Flow(Amounts in thousands)Three Months EndedDecember 31, 2012Net cash provided by operating activities$289,043Capital expenditures73,296    Free cash flow$215,747Reconciliation of Total Debt to Net Debt(Amounts in thousands)December 31,2012December 31, 2011Current portion of long-term debt$55,213386,255Long-term debt, less current portion1,327,7291,200,184Less:  Cash and cash equivalents477,672311,945    Net Debt$905,2701,274,494 Reconciliation of Operating Income to Adjusted EBITDA(Amounts in thousands)Three Months EndedTrailing TwelveMonths EndedMarch 31, 2012June 30, 2012September 29, 2012December 31, 2012December 31, 2012Operating income$71,976107,718103,95495,860379,508Other (expense) income1,825(440)(322)(1,366)(303)Net earnings attributable to noncontrolling interest(635)???(635)Depreciation and amortization73,28671,83171,29863,878280,293    EBITDA146,452179,109174,930158,372658,863Business restructurings?8,2264,2296,10918,564    Adjusted EBITDA$146,452187,335179,159164,481677,427Net Debt to Adjusted EBITDA1.3 Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedTwelve Months EndedDecember 31, 2012December 31, 2011December 31, 2012December 31, 2011Net sales$1,435,6591,378,2975,787,9805,642,258Adjustment to net sales on a constant exchange rate9,423?92,300?    Net sales on a constant exchange rate$1,445,0821,378,2975,880,2805,642,258 Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedDal-TileDecember 31, 2012December 31, 2011Net sales$401,637348,541Adjustment to segment net sales on a constant exchange rate(1,635)?    Segment net sales on a constant   exchange rate$400,002348,541Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate(Amounts in thousands)Three Months EndedUnilinDecember 31, 2012December 31, 2011Net sales$329,969326,321Adjustment to segment net sales on a constant exchange rate11,058?    Segment net sales on a constant exchange rate$341,027326,321 Reconciliation of Operating Income to Adjusted Operating Income(Amounts in thousands)Three Months EndedTwelve Months EndedDecember 31, 2012December 31, 2011December 31, 2012December 31, 2011Operating income$95,86066,294379,508315,542Operating lease correction (2)?6,035?6,035Business restructurings6,1097,69618,56423,209    Adjusted operating income$101,96980,025398,072344,786Adjusted operating margin as a percent of net sales7.1%5.8%6.9%6.1%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands)Three Months EndedTwelve Months EndedMohawkDecember 31, 2012December 31, 2011December 31, 2012December 31, 2011Operating income$51,96830,687158,196109,874Operating lease correction (2)?2,761?2,761Business restructurings?7,69610,50423,209    Adjusted segment operating income$51,96841,144168,700135,844Adjusted operating margin as a percent of net sales7.2%5.7%5.8%4.6%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands)Three Months EndedTwelve Months EndedDal-TileDecember 31, 2012December 31, 2011December 31, 2012December 31, 2011Operating income$21,03918,387120,951101,298Operating lease correction (2)?3,274?3,274Business restructurings6,109?6,109?    Adjusted segment operating income$27,14821,661127,060104,572Adjusted operating margin as a percent of net sales6.8%6.2%7.9%7.2%Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands)Three Months EndedTwelve Months EndedUnilinDecember 31, 2012December 31, 2011December 31, 2012December 31, 2011Operating income29,79621,640126,409127,147Business restructurings??1,951?    Adjusted segment operating income$29,79621,640128,360127,147Adjusted operating margin as a percent of net sales9.0%6.6%9.5%9.5% Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes(Amounts in thousands)Three Months EndedDecember 31, 2012December 31, 2011Earnings before income taxes$79,09241,907Adjustments to earnings before income taxes:Operating lease correction (2)?6,035Business restructurings6,1097,696    Adjusted earnings before income taxes$85,20155,638Reconciliation of Income Tax Expense to Adjusted Income Tax Expense(Amounts in thousands)Three Months EndedDecember 31, 2012December 31, 2011Income tax expense$12,703(1,990)Income tax effect of adjusting items2,1117,152    Adjusted income tax expense$14,8145,162Adjusted income tax rate17%9%(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