Mohawk Industries, Inc. Announces Second Quarter Earnings

Share Name	Share Symbol	Market	Type
Mohawk Industries Inc	NYSE:MHK	NYSE	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	4.87	3.81%	132.70	132.96	128.85	129.11	871,890	22:30:00

Mohawk Industries (NYSE:MHK)
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CALHOUN, Ga., Aug. 2, 2012 /CNW/ - Mohawk Industries, Inc. today announced 2012 second quarter net earnings of $73 million and diluted earnings per share (EPS) of $1.06. Net earnings excluding restructuring charges were $79 million and EPS was $1.14, a 20% increase over last year's second quarter adjusted EPS. Net sales for the second quarter of 2012 were $1.5 billion, in line with prior year and an increase of 2% on a constant exchange rate. For the second quarter of 2011, net earnings were $61 million and EPS was $0.88. Net earnings excluding restructuring charges for the second quarter of 2011, were $66 million and EPS was $0.95. For the six months ending June 30, 2012, net sales were $2.9 billion, an increase of 2% versus prior year and 4% on a constant exchange rate. Net earnings and EPS for the six-month period were $114 million and $1.64, respectively. Net earnings excluding restructuring charges were $120 million and EPS was $1.73, an increase of 25% over the six-month adjusted EPS results in 2011. For the six months ending July 2, 2011, net sales were $2.8 billion, net earnings were $84 million and EPS was $1.22. Excluding restructuring charges, net earnings and EPS were $95 million and $1.38, respectively. Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Selling prices offsetting raw material inflation, productivity gains, product mix improvements and lower interest costs all contributed to our results. Sales increased 2% on a constant exchange rate with commercial sales continuing to outpace residential sales. We continue to control SG&A cost while increasing new product investments across all businesses. During the quarter, we generated adjusted EBITDA of $187 million, free cash flow of $96 million and paid off $336 million of senior notes. We have addressed many of today's economic challenges by enhancing our product differentiation, reducing costs, improving efficiencies and entering new product categories and geographies." Mohawk segment adjusted operating income margin increased 110 basis points over 2011 with gains from pricing, improved product mix and lower costs from productivity offsetting lower volume and higher material costs. Segment sales were down 3% during the second quarter. Carpet sales for both the industry and Mohawk were approximately flat compared to last year with residential remodeling activity slow. Our rug sales continued to be soft due to lower retail sales, as well as retailers deferring promotional activities and further reducing inventory within the channel. During the quarter, Mohawk's SmartStrand(®) Silk™ premium carpet collection experienced strong sales growth due to its unsurpassed softness and proprietary environmental features. We executed productivity improvements across the business with particular gains from our capital investments and reduction of waste. Dal-Tile segment sales grew 7% during the quarter or 8% on a constant exchange rate. The segment posted gains from increases in both residential and commercial sales and growth in the Mexican market. Operating margins were enhanced by higher volumes, greater manufacturing efficiencies, improved material formulations and increased recycling. To address the changing market demand, we converted mosaic and floor tile production to porcelain, increased our ability to make larger sizes and expanded our Reveal Imaging™ capabilities. The new Salamanca facility in Mexico is producing red-body tile for the domestic market. The plant's start-up costs are in line with our expectations, and we anticipate positive contributions in early 2013 due to higher volume and productivity. Unilin segment sales decreased 2% but increased 7% on a constant exchange rate. Outside North America, laminate and wood flooring sales grew from continued expansion in the DIY channel, expanded distribution in the U.K. and Australian sales. Our Russian facility is progressing with increased productivity and is manufacturing more complex products. In North America, laminate sales grew from increased promotional activity by large retailers and greater penetration in the home center channel. Laminate collections featuring richly embossed surfaces, premium long planks and our proprietary GenuEdge Technology ™ improved our mix in both the remodeling and new construction markets. Our insulated roofing product sales declined in Europe as the housing market contracted but were offset by the growth of our insulation panels, which help to meet energy efficiency goals. Mohawk's commitment to product innovation, resource management and process improvements yielded improved second quarter results. Our investments in innovative products improved our mix and contributed to higher margins. Though sales softened in the second quarter, U.S. order rates have shown some improvement as we began the third quarter. We do not expect material costs to follow oil price declines due to specific higher chemical costs. In the U.S., low mortgage rates and higher housing starts should support future flooring sales. In Europe, we will have the normal seasonal slowing and expect the present trends to continue with exchange rates being a headwind. Based on these factors, our guidance for third quarter earnings is $0.96 to $1.05 per share, excluding any restructuring costs. We have addressed many of today's economic challenges by enhancing our product differentiation, reducing costs, improving efficiencies and entering new product categories and geographies. We retain a strong financial position, which provides us flexibility to invest in strategic opportunities going forward. 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 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, August 3, 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 # 98256242. A replay will also be available until August 17, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 98256242. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Three Months Ended Six Months Ended Operations (Amounts in June 30, July 2, June 30, July 2, thousands, except 2012 2011 2012 2011 per share data) Net sales $1,469,793 1,477,854 2,878,828 2,821,449 Cost of sales 1,081,329 1,095,607 2,130,938 2,097,610 Gross profit 388,464 382,247 747,890 723,839 Selling, general and administrative 280,746 280,547 568,196 566,055 expenses Operating income 107,718 101,700 179,694 157,784 Interest expense 18,844 25,760 41,342 52,355 Other (income) 440 396 (1,385) 381 expense, net Earnings before 88,434 75,544 139,737 105,048 income taxes Income tax expense 15,246 13,450 25,537 18,416 Net earnings 73,188 62,094 114,200 86,632 Net earnings attributable to - (1,191) (635) (2,287) noncontrolling interest Net earnings attributable to $ 73,188 60,903 113,565 84,345 Mohawk Industries, Inc. Basic earnings per share attributable $ 1.06 0.89 1.65 1.23 to Mohawk Industries, Inc. Weighted-average common shares 68,984 68,744 68,923 68,709 outstanding - basic Diluted earnings per share attributable $ 1.06 0.88 1.64 1.22 to Mohawk Industries, Inc. Weighted-average common shares 69,259 68,981 69,204 68,942 outstanding - diluted Other Financial Information (Amounts in thousands) Net cash provided by $ 140,046 96,003 95,576 28,590 operating activities Depreciation and $ 71,831 74,344 145,117 148,597 amortization Capital expenditures $ 44,436 59,708 87,687 112,519 Consolidated Balance Sheet Data (Amounts in thousands) June 30, July 2, 2012 2011 ASSETS Current assets: Cash and cash $ 319,463 285,422 equivalents Receivables, net 782,122 797,893 Inventories 1,161,073 1,102,769 Prepaid expenses and 144,915 125,815 other current assets Deferred income 126,613 135,338 taxes Total current assets 2,534,186 2,447,237 Property, plant and 1,652,444 1,730,914 equipment, net Goodwill 1,363,356 1,418,830 Intangible assets, 564,948 681,178 net Deferred income taxes and other 149,843 110,841 non-current assets $6,264,777 6,389,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of $ 57,158 453,185 long-term debt Accounts payable and 733,411 771,297 accrued expenses Total current 790,569 1,224,482 liabilities Long-term debt, less 1,570,530 1,155,150 current portion Deferred income taxes and other 427,360 460,109 long-term liabilities Total liabilities 2,788,459 2,839,741 Noncontrolling - 32,300 interest Total stockholders' 3,476,318 3,516,959 equity $ 6,264,777 6,389,000 Segment Information Three Months Ended As of or for the Six Months Ended (Amounts in June 30, July 2, June 30, July 2, thousands) 2012 2011 2012 2011 Net sales: Mohawk $ 734,493 758,064 1,434,373 1,449,229 Dal-Tile 404,288 379,469 797,213 723,884 Unilin 354,374 363,097 691,798 688,929 Intersegment sales (23,362) (22,776) (44,556) (40,593) Consolidated net $1,469,793 1,477,854 2,878,828 2,821,449 sales Operating income (loss): Mohawk $ 37,136 31,201 62,418 48,241 Dal-Tile 36,432 32,138 62,460 49,838 Unilin 40,575 46,209 67,721 72,459 Corporate and (6,425) (7,848) (12,905) (12,754) eliminations Consolidated $ 107,718 101,700 179,694 157,784 operating income Assets: Mohawk $ 1,791,376 1,783,630 Dal-Tile 1,742,563 1,700,482 Unilin 2,539,997 2,717,032 Corporate and 190,841 187,856 eliminations Consolidated assets $ 6,264,777 6,389,000 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 30, July 2, June 30, July 2, 2012 2011 2012 2011 Net earnings attributable to $ 73,188 60,903 113,565 84,345 Mohawk Industries, Inc. Adjusting items: Business restructurings 8,226 6,514 8,226 13,327 Income taxes (2,201) (1,818) (2,201) (2,836) Adjusted net earnings attributable to Mohawk $ 79,213 65,599 119,590 94,836 Industries, Inc. Adjusted diluted earnings per share attributable to Mohawk $ 1.14 0.95 1.73 1.38 Industries, Inc. Weighted-average common shares 69,259 68,981 69,204 68,942 outstanding - diluted Reconciliation of Operating Cash Flow to Free Cash Flow (Amounts in thousands) Three Months Ended June 30, 2012 Net cash provided by operating activities $ 140,046 Additions to property, plant and equipment (44,436) Free cash flow $ 95,610 Reconciliation of Net Earnings to Adjusted EBITDA (Amounts in thousands) Three Months Ended June 30, 2012 Net earnings $ 73,188 Income tax expense 15,246 Interest expense 18,844 Depreciation and amortization 71,831 EBITDA 179,109 Business restructurings 8,226 Adjusted EBITDA $ 187,335 Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate (Amounts in thousands) Three Months Ended Six Months Ended June 30, July 2, June 30, July 2, 2012 2011 2012 2011 Net sales $ 1,469,793 1,477,854 2,878,828 2,821,449 Adjustment to net sales on a constant exchange rate: Exchange rate 36,326 - 49,962 - Net sales on a constant $ 1,506,119 1,477,854 2,928,790 2,821,449 exchange rate Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate (Amounts in thousands) Three Months Ended Dal-Tile June 30, 2012 July 2, 2011 Net sales $ 404,288 379,469 Adjustment to segment net sales on a constant exchange rate: Exchange rate 3,555 - Segment net sales on a constant exchange $ 407,843 379,469 rate Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate (Amounts in thousands) Three Months Ended Unilin June 30, 2012 July 2, 2011 Net sales $ 354,374 363,097 Adjustment to segment net sales on a constant exchange rate: Exchange rate 32,771 - Segment net sales on a constant exchange $ 387,145 363,097 rate Reconciliation of Gross Profit to Adjusted Gross Profit (Amounts in thousands) Three Months Ended June 30, 2012 July 2, 2011 Gross Profit $ 388,464 382,247 Adjustment to gross profit: Business restructurings 6,636 5,532 Adjusted gross profit $ 395,100 387,779 Adjusted gross profit as a percent of net 26.9% 26.2% sales Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands) Three Months Ended June 30, 2012 July 2, 2011 Operating income $ 107,718 101,700 Adjustment to operating income: Business restructurings 8,226 6,514 Adjusted operating income $ 115,944 108,214 Adjusted operating margin as a percent of 7.9% 7.3% net sales Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands) Three Months Ended Mohawk June 30, 2012 July 2, 2011 Operating income $ 37,136 31,201 Adjustment to segment operating income: Business restructurings 7,383 6,514 Adjusted segment operating income $ 44,519 37,715 Adjusted operating margin as a percent of 6.1% 5.0% net sales Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands) Three Months Ended Unilin June 30, 2012 July 2, 2011 Operating income $ 40,575 46,209 Adjustment to segment operating income: Business restructurings 843 - Adjusted segment operating income $ 41,418 46,209 Adjusted operating margin as a percent of 11.7% 12.7% net sales Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes (Amounts in thousands) Three Months Ended June 30, 2012 July 2, 2011 Earnings before income taxes $ 88,434 75,544 Adjustment to earnings before income taxes: Business restructurings 8,226 6,514 Adjusted earnings before income taxes $ 96,660 82,058 Reconciliation of Income Tax Expense to Adjusted Income Tax Expense (Amounts in thousands) Three Months Ended June 30, 2012 July 2, 2011 Income tax expense $ 15,246 13,450 Adjustment to income tax expense: Income tax effect of business 2,201 1,818 restructurings Adjusted income tax expense $ 17,447 15,268 Adjusted income tax rate 18% 19% Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses (Amounts in thousands) Three Months Ended June 30, 2012 July 2, 2011 Selling, general and administrative $ 280,746 280,547 expenses Adjustments to selling, general and administrative expenses: Business restructurings (1,590) (982) Exchange rate (6,042) - Adjusted selling, general and $ 273,114 279,565 administrative expenses Adjusted selling, general and administrative expenses as a percent of net 18.6% 18.9% sales 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. Mohawk Industries, Inc. CONTACT: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695http://www.mohawkind.com

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MHK Mohawk Industries Inc