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Press release from PR Newswire

Mohawk Industries, Inc. Announces Second Quarter Earnings

Thursday, August 01, 2013

Mohawk Industries, Inc. Announces Second Quarter Earnings

16:01 EDT Thursday, August 01, 2013

-- Adjusted EPS increased 61% over PY
-- Net sales up approximately 35% over PY

CALHOUN, Ga., Aug. 1, 2013 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE:MHK) today announced 2013 second quarter net earnings of $85 million and diluted earnings per share (EPS) of $1.16. Excluding unusual charges, net earnings were $134 million and EPS was $1.84, a 61% increase over last year's second quarter adjusted EPS. Net sales for the second quarter of 2013 were $2.0 billion, an increase of approximately 35% versus the prior year's second quarter. For the second quarter of 2012, net sales were $1.5 billion, net earnings were $73 million and EPS was $1.06; excluding unusual charges, net earnings were $79 million and EPS was $1.14.

For the six months ending June 29, 2013, net sales were $3.5 billion, an increase of 20% versus the prior year. Net earnings and EPS for the six-month period were $135 million and $1.89, respectively. Net earnings excluding unusual charges were $195 million and adjusted EPS was $2.73, an increase of 58% over the six-month adjusted EPS results in 2012. For the six months ending June 30, 2012, net sales were $2.9 billion, net earnings were $114 million and EPS was $1.64. Excluding unusual charges, net earnings and EPS were $120 million and $1.73, respectively.

Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Mohawk, the world's largest flooring manufacturer, today reported our most successful second quarter on record with strong revenue and profit growth, as both our legacy business and recent acquisitions delivered solid performances that exceeded our expectations. For the quarter, our legacy net sales increased 6% as reported, with the balance of our growth stemming from our recent acquisitions of Pergo, Marazzi and Spano. Our adjusted SG&A improved by 110 basis points due to continuing control of our costs, and our adjusted operating income rose to 10% of sales, an improvement of 190 basis points."

Carpet segment net sales for the quarter were $771 million, up 5% over last year, rising to their highest levels in more than four years due to improvements in residential new construction and remodeling and continued strength in the commercial sector. Operating income, excluding unusual charges, for the segment was 7% of sales, up 100 basis points due to volume leverage, improved sales mix from new products and lower SG&A. Residential sales in the specialty channel showed substantial growth, and home center business increased during the period. Rugs improved with a greater focus on new distribution channels and product categories. Operating margins continued to expand due to sales from higher volume, super soft products and greater manufacturing and logistics efficiencies. During the period, carpet price increases were implemented and will align to cover the earlier raw material increases in the third quarter.

Ceramic segment net sales were $760 million, up 88% over last year, with strong growth in the legacy Dal-Tile business as well as the Marazzi acquisition. Operating income, excluding unusual charges, was 12% of sales, up 260 basis points over the prior year due to increased volume, the Marazzi acquisition, sales mix and manufacturing efficiencies. North American sales rose in the low teens with strength in commercial specialty retail, home center channels and continued expansion in Mexico. Our Russian ceramic sales are performing well, with double digit growth as a result of our integrated distribution model and increased participation in the stronger construction market. European ceramic sales rose slightly with expansion in Northern Europe and exports to other markets offsetting soft conditions in Southern Europe.

Laminate and wood segment net sales were $471 million, up 33% over last year, primarily due to our acquisitions of Pergo and Spano with stronger sales in legacy North America offsetting our slower legacy European business. Operating income, excluding unusual charges, was 13% of sales, an improvement of 90 basis points over the prior year due to lower amortization and increased North American sales. We have integrated our management of Unilin and Pergo into a single entity, reducing SG&A expenses, consolidating administrative functions, increasing manufacturing productivity and eliminating redundancies. Europe continues to face headwinds with the legacy sales down slightly and margins under pressure. The Pergo integration in Europe is well underway and will create significant synergies in sales, products and production. Our wood manufacturing in Malaysia, distribution in Australia and laminate manufacturing in Russia continue to show improvement. During the period, we completed the acquisition of Spano and have identified many opportunities for improvement including expanding the product offering and distribution, optimizing our manufacturing assets and reducing manufacturing complexity.

"Our performance during the second quarter underscored the value of our recent acquisitions and our ability to integrate them into our business. We have a talented management team that is focused on driving our historical businesses while optimizing our new acquisitions. We have quickly identified and executed many significant changes including cost and efficiency improvements, asset consolidation, realignment of sales and brand strategies and the enhancement of our product offering. We are committed to bringing innovation to the market in all our products, and our new acquisitions have enhanced our ability to realize this. We are increasingly confident in the continued strengthening of the U.S. market, and we believe that continued job growth, expanded new home construction and greater remodeling investments along with our new acquisitions will improve our future results. With these factors, our guidance for third quarter earnings is $1.81 to $1.91 per share, excluding any restructuring or acquisition costs. With business improvement and acquisitions in 2013, we anticipate the fourth quarter seasonality impact to be slightly more than 2010 and 2011."

Mohawk Industries is the 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, Kerama 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, August 2, 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 # 17299279.  A replay will be available until Friday August 23, 2013 by dialing 855-859-2056 for US/local calls and 404-537-3406 forInternational/Local calls and entering Conference ID # 17299279.

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three Months Ended

Six Months Ended

(Amounts in thousands, except per share data)

June 29, 2013

June 30, 2012

June 29, 2013

June 30, 2012

Net sales

$ 1,976,299

1,469,793

3,463,114

2,878,828

Cost of sales

1,462,243

1,081,329

2,571,992

2,130,938

    Gross profit

514,056

388,464

891,122

747,890

Selling, general and administrative expenses

380,858

280,746

671,082

568,196

Operating income

133,198

107,718

220,040

179,694

Interest expense

25,312

18,844

44,468

41,342

Other (income) expense, net

(1,097)

440

5,290

(1,385)

    Earnings from continuing operations before       income taxes

108,983

88,434

170,282

139,737

Income tax expense

23,240

15,246

33,972

25,537

    Earnings from continuing operations

85,743

73,188

136,310

114,200

Loss from discontinued operations, net of income   tax benefit of $485

(1,361)

-

(1,361)

-

    Net Earnings including noncontrolling interest

84,382

73,188

134,949

114,200

Net (loss) earnings attributable to noncontrolling   interest

(190)

-

(118)

635

Net earnings attributable to Mohawk Industries, Inc.

$ 84,572

73,188

135,067

113,565

Basic earnings per share attributable to  Mohawk Industries, Inc.

Income from continuing operations

$ 1.19

1.06

1.92

1.65

Loss from discontinued operations, net of income   taxes

(0.02)

-

(0.02)

-

Basic earnings per share attributable to Mohawk   Industries, Inc.

$ 1.17

1.06

1.90

1.65

Weighted-average common shares outstanding -   basic

72,406

68,984

70,907

68,923

Diluted earnings per share attributable to   Mohawk Industries, Inc.

Income from continuing operations

$ 1.18

1.06

1.91

1.64

Loss from discontinued operations, net of income   taxes

(0.02)

-

(0.02)

-

Diluted earnings per share attributable to Mohawk   Industries, Inc.

$ 1.16

1.06

1.89

1.64

Weighted-average common shares outstanding -   diluted

72,867

69,259

71,405

69,204

Other Financial Information

(Amounts in thousands)

Depreciation and amortization

$ 80,643

71,831

140,992

145,117

Capital expenditures

$ 82,815

44,436

146,097

87,687

Consolidated Balance Sheet Data

(Amounts in thousands)

June 29,2013

June 30, 2012

ASSETS

Current assets:

    Cash and cash equivalents

$ 168,745

319,463

    Receivables, net

1,145,550

782,122

    Inventories

1,591,552

1,161,073

    Prepaid expenses and other current assets

229,859

144,915

    Deferred income taxes

134,489

126,613

        Total current assets

3,270,195

2,534,186

Property, plant and equipment, net

2,594,256

1,652,444

Goodwill

1,690,622

1,363,356

Intangible assets, net

800,529

564,948

Deferred income taxes and other non-current assets

153,362

149,843

$ 8,508,964

6,264,777

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

    Current portion of long-term debt

$ 83,171

57,158

    Accounts payable and accrued expenses

1,261,791

733,411

        Total current liabilities

1,344,962

790,569

Long-term debt, less current portion

2,450,584

1,570,530

Deferred income taxes and other long-term   liabilities

609,125

427,360

        Total liabilities

4,404,671

2,788,459

Total stockholders' equity

4,104,293

3,476,318

$ 8,508,964

6,264,777

Segment Information

Three Months Ended

As of or for the Six Months Ended

(Amounts in thousands)

June 29, 2013

June 30, 2012

June 29,2013

June 30, 2012

Net sales:

    Carpet

$ 770,868

734,493

1,466,202

1,434,373

    Ceramic

760,168

404,288

1,172,049

797,213

    Laminate and Wood

470,980

354,374

875,455

691,798

    Intersegment sales

(25,717)

(23,362)

(50,592)

(44,556)

        Consolidated net sales

$ 1,976,299

1,469,793

3,463,114

2,878,828

Operating income (loss):

    Carpet

$ 54,862

37,136

80,100

62,418

    Ceramic

46,304

36,432

76,280

62,460

    Laminate and Wood

41,362

40,575

80,055

67,721

    Corporate and eliminations

(9,330)

(6,425)

(16,395)

(12,905)

        Consolidated operating income

$ 133,198

107,718

220,040

179,694

Assets:

    Carpet

$ 1,803,212

1,791,376

    Ceramic

3,832,888

1,742,563

    Laminate and Wood

2,691,553

2,539,997

    Corporate and eliminations

181,311

190,841

        Consolidated assets

$ 8,508,964

6,264,777

 

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

Six Months Ended

June 29,2013

June 30, 2012

June 29, 2013

June 30, 2012

Net earnings attributable to Mohawk Industries, Inc.

$ 84,572

73,188

135,067

113,565

Adjusting items:

Restructuring, acquisition and integration-related costs

41,321

8,226

51,177

8,226

Acquisitions purchase accounting (inventory step-up)

18,744

-

18,744

-

Discontinued operations

1,845

-

1,845

-

Interest on 3.85% senior notes

-

-

3,559

-

Income taxes

(12,668)

(2,201)

(15,448)

(2,201)

Adjusted net earnings attributable to Mohawk Industries, Inc.

$ 133,814

79,213

194,944

119,590

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

$ 1.84

1.14

2.73

1.73

Weighted-average common shares outstanding - diluted

72,867

69,259

71,405

69,204

Reconciliation of Total Debt to Net Debt

(Amounts in thousands)

June 29, 2013

Current portion of long-term debt

$ 83,171

Long-term debt, less current portion

2,450,584

Less: Cash and cash equivalents

168,745

Net Debt

$ 2,365,010

Reconciliation of Operating Income to Proforma Adjusted EBITDA

(Amounts in thousands)

Trailing Twelve

Three Months Ended

Months Ended

September 29,2012

December 31, 2012

March 30,2013

June 29,2013

June 29, 2013

Operating income

$ 103,954

95,860

86,842

133,198

419,854

Other (expense) income

(322)

(1,366)

(6,387)

1,097

(6,978)

Net (earnings) loss attributable to noncontrolling interest

-

-

(72)

190

118

Depreciation and amortization

71,298

63,878

60,349

80,643

276,168

EBITDA

174,930

158,372

140,732

215,128

689,162

Restructuring, acquisition and integration-related costs

4,229

6,109

9,856

41,321

61,515

Acquisitions purchase accounting (inventory step-up)

-

-

-

18,744

18,744

Acquisitions EBITDA

60,077

55,046

40,542

-

155,665

Proforma Adjusted EBITDA

$ 239,236

219,527

191,130

275,193

925,086

Net Debt to Proforma Adjusted EBITDA

2.6

Reconciliation of Proforma Total Debt to Proforma Net Debt

(Amounts in thousands)

March 30,2013

Current portion of proforma long-term debt

$ 205,575

Proforma long-term debt, less current portion

2,306,925

Less: Cash and cash equivalents

-

Proforma Net Debt

$ 2,512,500

Reconciliation of Operating Income to Proforma 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) loss 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

Restructuring, acquisition and integration-related costs

8,226

4,229

6,109

9,856

28,420

Acquisitions EBITDA

66,400

60,077

55,046

40,542

222,065

Proforma Adjusted EBITDA

$ 253,735

239,236

219,527

191,130

903,628

Proforma Net Debt to Proforma Adjusted EBITDA

2.8

 

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

(Amounts in thousands)

Three Months Ended

June 29, 2013

June 30, 2012

Net sales

$ 1,976,299

1,469,793

Adjustment to net sales on a constant exchange rate

(6,588)

-

Net sales on a constant exchange rate

$ 1,969,711

1,469,793

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

(Amounts in thousands)

Three Months Ended

Ceramic

June 29, 2013

June 30, 2012

Net sales

$ 760,168

404,288

Adjustment to segment net sales on a constant exchange rate

(1,555)

-

Segment net sales on a constant exchange rate

$ 758,613

404,288

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

(Amounts in thousands)

Three Months Ended

Laminate and Wood

June 29, 2013

June 30, 2012

Net sales

$ 470,980

354,374

Adjustment to segment net sales on a constant exchange rate

(5,033)

-

Segment net sales on a constant exchange rate

$ 465,947

354,374

Reconciliation of Gross Profit to Adjusted Gross Profit

(Amounts in thousands)

Three Months Ended

June 29, 2013

June 30, 2012

Gross Profit

$ 514,056

388,464

Adjustments to gross profit:

Restructuring and integration-related costs

14,334

6,636

Acquisitions purchase accounting (inventory step-up)

18,744

-

Adjusted gross profit

$ 547,134

395,100

Adjusted gross profit as a percent of net sales

27.7%

26.9%

Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling,   General and Administrative Expenses

(Amounts in thousands)

Three Months Ended

June 29, 2013

June 30, 2012

Selling, general and administrative expenses

$ 380,858

280,746

Adjustments to selling, general and administrative expenses:

Restructuring, acquisition and integration-related costs

(26,987)

(1,590)

Adjusted selling, general and administrative expenses

$ 353,871

279,156

Adjusted selling, general and administrative expenses as a percent of net sales

17.9%

19.0%

Reconciliation of Operating Income to Adjusted Operating Income

(Amounts in thousands)

Three Months Ended

June 29, 2013

June 30, 2012

Operating income

$ 133,198

107,718

Adjustments to operating income:

Restructuring, acquisition and integration-related costs

41,321

8,226

Acquisitions purchase accounting (inventory step-up)

18,744

-

Adjusted operating income

$ 193,263

115,944

Adjusted operating margin as a percent of net sales

9.8%

7.9%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended

Carpet

June 29, 2013

June 30, 2012

Operating income

$ 54,862

37,136

Adjustment to segment operating income:

Restructuring, acquisition and integration-related costs

-

7,383

Adjusted segment operating income

$ 54,862

44,519

Adjusted operating margin as a percent of net sales

7.1%

6.1%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended

Ceramic

June 29, 2013

June 30, 2012

Operating income

$ 46,304

36,432

Adjustment to segment operating income:

Restructuring, acquisition and integration-related costs

23,361

-

Acquisitions purchase accounting (inventory step-up)

18,744

-

Adjusted segment operating income

$ 88,409

36,432

Adjusted operating margin as a percent of net sales

11.6%

9.0%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended

Laminate and Wood

June 29, 2013

June 30, 2012

Operating income

$ 41,362

40,575

Adjustment to segment operating income:

Restructuring, acquisition and integration-related costs

17,960

843

Adjusted segment operating income

$ 59,322

41,418

Adjusted operating margin as a percent of net sales

12.6%

11.7%

Reconciliation of Earnings from Continuing Operations Before Income Taxes to Adjusted   Earnings from Continuing Operations Before Income Taxes

(Amounts in thousands)

Three Months Ended

June 29, 2013

June 30, 2012

Earnings from continuing operations before income taxes

$ 108,983

88,434

Adjustment to earnings from continuing operations beforeincome taxes:

Restructuring, acquisition and integration-related costs

41,321

8,226

Acquisitions purchase accounting (inventory step-up)

18,744

-

Adjusted earnings before income taxes

$ 169,048

96,660

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense

(Amounts in thousands)

Three Months Ended

June 29, 2013

June 30, 2012

Income tax expense

$ 23,240

15,246

Income tax effect of adjusting items

12,183

2,201

Adjusted income tax expense

$ 35,423

17,447

Adjusted income tax rate

21%

18%

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.  In particular, the Company believes excluding the impact of restructuring, acquisition and integration-related costs is useful because it allows investors to evaluate our performance for different periods on a more comparable basis. 

 

SOURCE Mohawk Industries, Inc.

For further information: Frank H. Boykin, Chief Financial Officer, (706) 624-2695

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