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01.08.2013 22:01:00

Mohawk Industries, Inc. Announces Second Quarter Earnings

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 Time
The 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 for
International/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 before
income 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.

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