Mohawk Industries (NYSE:MHK)
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CALHOUN, Ga., May 3, 2012 /CNW/ - Mohawk Industries, Inc. today announced 2012 first quarter net earnings of $40 million and diluted earnings per share (EPS) of $0.58, a 38% increase over last year's first quarter adjusted EPS. Net sales for the first quarter of 2012 were $1.4 billion, increasing 5% as reported and 6% with a constant exchange rate. For the first quarter of 2011, net earnings were $23 million and EPS was $0.34. Excluding restructuring charges for the first quarter of 2011, adjusted net earnings were $29 million and EPS was $0.42.
Commenting on Mohawk Industries' performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Volume increases, price increases, cost reductions and lower interest expense contributed to our earnings growth in the quarter. In March, Standard & Poor's upgraded our credit rating and Moody's elevated our outlook to positive, reducing the interest rate on our notes. In April, we paid our 2012 maturing notes using our bank revolver which has lower interest rates. Our balance sheet remains strong with net debt to adjusted EBITDA at 2.2 times and approximately $500 million available for strategic opportunities, after the payment of the 2012 notes."
Mohawk segment sales grew 1% as we executed price increases that should cover our material cost in the second period. Higher carpet sales in the segment were offset by lower rug sales from deferred customer promotions, inventory reductions in the channel and lower product mix. In residential, we launched our revolutionary SmartStrand Silk collection, the next generation of soft carpet, with the inherent performance, ease of care and unique environmental features that have made SmartStrand successful. In the commercial business, our hospitality and core business improved, but we experienced weakness in our premium products. To provide greater value in commercial, we have introduced new high-end products, extended our SmartStrand brand into commercial applications and utilized new technology for improved pattern definition in hospitality. Productivity increases, improved yields, product re-engineering, process simplification and reduced complexity improved our cost position and service levels.
Dal-Tile segment net sales grew 14% during the quarter through increased residential remodeling and commercial renovation, successful product launches and growth in the Mexican market. Price increases along with energy surcharges are being implemented to recover material and freight costs. Sales grew in all channels, driven by new products featuring Reveal Imaging, larger sizes, realistic wood designs and a premium commercial collection. In Mexico, we opened our Salamanca plant ahead of schedule. Sales in Mexico are growing dramatically due to our expanded offering of product designs, sizes and price points. We lowered manufacturing costs through higher productivity, reduced waste, and improved formulations that increase production speeds and recycled content.
Unilin segment net sales grew 4% as reported and 7% on a local basis supported by growth of laminate flooring and panels. The impact of the European debt situation on our business has been limited by our lower exposure to Southern European markets. We continue to gain share through new products, channels and regions, offsetting the impact of slowing national economies. We have implemented price increases in European laminate, roofing and most panels to recover higher material costs. We are increasing product placements in the home center and DIY channels with both laminate and wood. Our insulation panels business grew significantly and we are preparing to expand in France. Our strategies to expand internationally are progressing with our new Russian plant increasing production and our Australian distribution being integrated with Unilin.
Low mortgage rates, increasing home sales, and higher employment should sustain industry growth. Our emphasis on product and process innovation, cost management and flexibility has resulted in a stronger company. In the second quarter, we anticipate continued sales growth and improving margins as selling prices align with material inflation. We believe that our new product launches will improve profitability and sales growth. Improvements in productivity, inventory management, and interest expenses will favorably impact our results. With these factors, our guidance for second quarter earnings is $1.07 to $1.16 per share, excluding any restructuring costs. Our recent investments in new markets, technology, production capacity and R&D will improve our results. We have a strong financial position to pursue new strategic opportunities.
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, Daltile, American Olean, Unilin and Quick-Step. Mohawk's unique merchandising and marketing assists the consumer 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, May 4, 2012 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 # 69432176. A replay will also be available until May 18, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 69432176.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Three Months Ended
Operations
(Amounts in thousands, except March 31, 2012 April 2, 2011
per share data)
Net sales $ 1,409,035 1,343,595
Cost of sales 1,049,609 1,002,003
Gross profit 359,426 341,592
Selling, general and 287,450 285,508
administrative expenses
Operating income 71,976 56,084
Interest expense 22,498 26,595
Other (income) expense, net (1,825) (15)
Earnings before income taxes 51,303 29,504
Income tax expense 10,291 4,966
Net earnings 41,012 24,538
Net earnings attributable to (635) (1,096)
noncontrolling interest
Net earnings attributable to $ 40,377 23,442
Mohawk Industries, Inc.
Basic earnings per share
attributable to Mohawk $ 0.59 0.34
Industries, Inc.
Weighted-average common 68,862 68,674
shares outstanding - basic
Diluted earnings per share
attributable to Mohawk $ 0.58 0.34
Industries, Inc.
Weighted-average common 69,141 68,904
shares outstanding - diluted
Other Financial Information
(Amounts in thousands)
Net cash used in operating $ 44,470 67,413
activities
Depreciation and amortization $ 73,286 74,253
Capital expenditures $ 43,251 52,811
Consolidated Balance Sheet
Data
(Amounts in thousands)
March 31, 2012 April 2, 2011
ASSETS
Current assets:
Cash and cash equivalents $ 304,775 256,231
Receivables, net 782,000 754,826
Inventories 1,164,991 1,075,613
Prepaid expenses and other 136,752 97,846
current assets
Deferred income taxes 156,110 155,159
Total current assets 2,544,628 2,339,675
Property, plant and 1,718,396 1,715,895
equipment, net
Goodwill 1,390,712 1,406,731
Intangible assets, net 599,625 689,703
Deferred income taxes and 145,833 114,229
other non-current assets
$ 6,399,194 6,266,233
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term $ 57,309 52,706
debt
Accounts payable and accrued 721,383 739,768
expenses
Total current liabilities 778,692 792,474
Long-term debt, less current 1,642,419 1,577,188
portion
Deferred income taxes and 458,786 449,984
other long-term liabilities
Total liabilities 2,879,897 2,819,646
Noncontrolling interest - 33,255
Total stockholders' equity 3,519,297 3,413,332
$ 6,399,194 6,266,233
Segment Information As of or for the Three Months Ended
(Amounts in thousands) March 31, 2012 April 2, 2011
Net sales:
Mohawk $ 699,880 691,165
Dal-Tile 392,925 344,415
Unilin 337,424 325,832
Intersegment sales (21,194) (17,817)
Consolidated net sales $ 1,409,035 1,343,595
Operating income (loss):
Mohawk $ 25,282 17,040
Dal-Tile 26,028 17,700
Unilin 27,146 26,250
Corporate and eliminations (6,480) (4,906)
Consolidated operating income $ 71,976 56,084
Assets:
Mohawk $ 1,820,785 1,749,625
Dal-Tile 1,759,934 1,674,408
Unilin 2,620,013 2,654,268
Corporate and eliminations 198,462 187,932
Consolidated assets $ 6,399,194 6,266,233
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 April 2,
31, 2012 2011
Net earnings
attributable to $ 40,377 23,442
Mohawk
Industries, Inc.
Unusual items:
Business - 6,813
restructurings
Income taxes - (1,018)
Adjusted net
earnings
attributable to $ 40,377 29,237
Mohawk
Industries, Inc.
Adjusted diluted
earnings per
share $ 0.58 0.42
attributable to
Mohawk
Industries, Inc.
Weighted-average
common shares 69,141 68,904
outstanding -
diluted
Reconciliation
of Total Debt to
Net Debt
(Amounts in
thousands)
March 31,
2012
Current portion
of long-term $ 57,309
debt
Long-term debt,
less current 1,642,419
portion
Less: Cash and 304,775
cash equivalents
Net Debt $
1,394,953
Reconciliation of Operating Income to
Adjusted EBITDA
(Amounts in Trailing
thousands) Twelve
Three Months Ended Months
Ended
July 2, October December March March 31,
2011 1, 2011 31, 2011 31, 2012 2012
Operating income $ 101,700 91,464 66,294 71,976 331,434
Other (expense) (396) (13,413) (257) 1,825 (12,241)
income
Net earnings
attributable to (1,191) (1,050) (966) (635) (3,842)
noncontrolling
interest
Depreciation and 74,344 74,207 74,930 73,286 296,767
amortization
EBITDA 174,457 151,208 140,001 146,452 612,118
Unrealized
foreign currency - 9,085 - - 9,085
losses (1)
Operating lease - - 6,035 - 6,035
correction (2)
Business 6,514 2,186 7,696 - 16,396
restructurings
Adjusted EBITDA $ 180,971 162,479 153,732 146,452 643,634
Net Debt to 2.2
Adjusted EBITDA
Reconciliation of Net Sales to
Adjusted Net Sales
(Amounts in thousands)
Three Months Ended
March 31, 2012 April 2, 2011
Net sales $ 1,409,035 1,343,595
Adjustments to net sales:
Exchange rate 13,636 -
Adjusted net sales $ 1,422,671 1,343,595
Reconciliation of Segment Net
Sales to Adjusted Segment Net
Sales
(Amounts in thousands)
Three Months Ended
Unilin March 31, 2012 April 2, 2011
Net sales $ 337,424 325,832
Adjustment to net sales:
Exchange rate 11,851 -
Adjusted net sales $ 349,275 325,832
Reconciliation of Operating
Income to Adjusted Operating
Income
(Amounts in thousands)
Three Months Ended
March 31, 2012 April 2, 2011
Operating income $ 71,976 56,084
Adjustments to operating
income:
Business restructurings - 6,813
Adjusted operating income $ 71,976 62,897
Adjusted operating margin as a 5.1% 4.7%
percent of net sales
Reconciliation of Segment
Operating Income to Adjusted
Segment Operating Income
(Amounts in thousands)
Three Months Ended
Mohawk March 31, 2012 April 2, 2011
Operating income $ 25,282 17,040
Adjustments to operating
income:
Business restructurings - 6,813
Adjusted operating income $ 25,282 23,853
Adjusted operating margin as a 3.6% 3.5%
percent of net sales
Reconciliation of Earnings
Before Income Taxes to Adjusted
Earnings Before Income Taxes
(Amounts in thousands)
Three Months Ended
March 31, 2012 April 2, 2011
Earnings before income taxes $ 51,303 29,504
Unusual items:
Business restructurings - 6,813
Adjusted earnings before income $ 51,303 36,317
taxes
Reconciliation of Income Tax
Expense to Adjusted Income Tax
Expense
(Amounts in thousands)
Three Months Ended
March 31, 2012 April 2, 2011
Income tax expense $ 10,291 4,966
Unusual items:
Income taxes - 1,018
Adjusted income tax expense $ 10,291 5,984
Adjusted income tax rate 20% 16%
Reconciliation of Selling,
General and Administrative
Expenses to Adjusted Selling,
General and Administrative
Expenses
(Amounts in thousands)
Three Months Ended
March 31, 2012 April 2, 2011
Selling, general and $ 287,450 285,508
administrative expenses
Adjustments to selling, general
and administrative expenses:
Business restructurings - 466
Exchange rate 2,378 -
Adjusted selling, general and $ 289,828 285,974
administrative expenses
Adjusted selling, general and
administrative expenses as a 20.6% 21.3%
percent of net sales
(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 leases
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.
Mohawk Industries, Inc.
CONTACT: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695http://www.mohawkind.com