CALHOUN, Georgia, November 3, 2011 /PRNewswire/ --
Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 third
quarter net earnings of $47 million
and diluted earnings per share (EPS) of $0.68. Adjusted net earnings were $57 million and EPS was $0.83 excluding the unusual items. For the third
quarter of 2010, the net earnings were $51
million and EPS was $0.74 both
as reported and excluding unusual items. Net sales for the third
quarter of 2011 were $1.4 billion
increasing 10% as reported and 8% with a constant exchange rate.
Our cash position at the end of the quarter remains strong with
$276 million and our net debt to
adjusted EBITDA ratio was 2.1.
For the nine months ended October 1,
2011, net sales were $4.3
billion, an increase of approximately 5% as reported and 4%
with a constant exchange rate. For the nine-month period, net
earnings and EPS were $131 million
and $1.90, respectively. Excluding
unusual items, net earnings were $152
million and EPS was $2.21. For
the nine months ended October 2,
2010, net earnings were $140
million and EPS was $1.99.
Excluding unusual items in 2010, net earnings were $128 million and EPS was $1.86.
Commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated,
"The Company's third quarter results reflect an improvement in
sales and earnings over last year even with increased raw material
costs and consumer reluctance to invest in renovation projects.
Sales in both the residential and commercial categories expanded
with commercial renovation leading the growth and new residential
continuing to lag. Each segment continues to lower costs with new
processes, reduced infrastructure and investment in more efficient
assets."
Our Mohawk segment net sales improved 6% as we improved our
position and grew in both residential and commercial categories.
Operating margins were lower due to price increases lagging
material inflation as well as continued pressure on our product mix
as consumers remain cautious about larger discretionary
investments. During the quarter, residential sales grew across most
channels and product categories. Commercial sales momentum
continued from the previous quarter, with both broadloom and carpet
tile achieving gains. During 2011, we implemented two price
increases that were fully realized by the end of the third quarter.
During the period, raw material costs were greater than anticipated
and the higher expense will impact our fourth quarter costs and
margins. We have implemented hundreds of manufacturing initiatives
yielding significant cost savings in 2011.
Our Dal-Tile segment net sales grew almost 11% during the period
with both residential and commercial categories showing gains with
product mix continuing to decline. In the comparable 2010 period,
business was lower than expected due to the flooding in our Mexican
facility from Hurricane Alex. During the quarter, we increased
sales in all channels with particular strength in home centers due
to additional commitments for our innovative mosaics, wall tile and
porcelain tile. Our Mexican ceramic sales grew significantly on a
local basis as we enhanced our penetration with new products and
broader distribution. We have implemented new manufacturing
processes to lower raw material costs, improve efficiency, reduce
production runs and improve distribution costs.
Our Unilin net sales increased approximately 19% as reported and
11% with a constant exchange rate. Sales in Europe increased across most channels and
regions, and our price increases are beginning to catch up with the
raw material inflation. We are implementing additional price
increases for roof panels and insulation boards to offset further
inflation in those products. Innovation in board manufacturing
processes is enhancing our efficiency and material yields. Despite
challenging market conditions, our European flooring products grew
by capitalizing on the strength of our Quick-Step brand, growing
our participation in the DIY channel, and expanding our wood
flooring category. In the U.S., sales of our laminate flooring grew
through expanded programs in all channels. We completed our Russian
laminate flooring plant on schedule and are initiating production.
We acquired the largest laminate and wood flooring distributor in
Australia, which expands our
strategy of getting closer to our customers and becoming more
responsive to local markets.
Mohawk's strategy to maximize our long term results is reflected
in our international expansion in Mexico, Russia, China
and Australia, new technologies to
increase value, innovative product categories like Didit click
furniture and process enhancements to lower our cost position
across the enterprise. We remain confident in the future of our
business and will continue to adjust our tactics as economic
conditions change. In the fourth quarter, we will be impacted
by higher third quarter raw material costs; however we are
currently seeing some moderation which will benefit next year. We
will consider further price increases as appropriate and implement
additional cost reductions to improve the business. With these
factors, our fourth quarter guidance for earnings is $0.67 to $0.76 per share, excluding any
restructuring costs.
Our strategy in this environment focuses on lowering our cost
infrastructure, creating innovative products, maintaining a strong
balance sheet and targeting new investments for future growth.
Although the macro outlook is somewhat uncertain, we believe our
results for next year will reflect continued improvement.
Mohawk is a leading supplier of flooring for both residential
and commercial applications. Mohawk offers a complete
selection of carpet, ceramic tile, laminate, wood, stone, vinyl,
and rugs. These products are marketed under the premier
brands in the industry, which include Mohawk, Karastan, Lees,
Bigelow, Durkan, Daltile, American Olean, Unilin and Quick-Step.
Mohawk's unique merchandising and marketing assist our
customers in creating the consumers' dream. Mohawk provides a
premium level of service with its own trucking fleet and local
distribution in the U.S. Mohawk's operational international
presence includes 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.
There will be a conference call Friday,
November 4, 2011 at 11:00 AM Eastern
Time.
The telephone number to call is +1-800-603-9255 for
US/Canada and +1-706-634-2294 for
International/Local.
Conference ID # 17731505. A conference call replay will
also be available until November 18,
2011 by dialing +1-855-859-2056 for US/local calls and
+1-404-537-3406 for International/Local calls and entering
Conference ID # 17731505
MOHAWK INDUSTRIES, INC. AND
SUBSIDIARIES
Consolidated Statement of
Operations Three Months Ended
(Amounts in thousands, except per
share data) October 1, 2011 October 2, 2010
Net sales $ 1,442,512 1,309,552
Cost of sales 1,084,889 964,620
Gross profit 357,623 344,932
Selling, general and
administrative expenses 266,159 259,750
Operating income 91,464 85,182
Interest expense 25,132 30,046
Other (income) expense, net 13,413 (4,641)
Earnings before income taxes 52,919 59,777
Income tax expense (benefit) 5,223 7,513
Net earnings 47,696 52,264
Net earnings attributable to
noncontrolling interest (1,050) (1,170)
Net earnings attributable to
Mohawk Industries, Inc. $ 46,646 51,094
Basic earnings per share
attributable to Mohawk
Industries, Inc. (1) $ 0.68 0.74
Weighted-average common shares
outstanding - basic 68,759 68,593
Diluted earnings per share
attributable to Mohawk
Industries, Inc. (1) $ 0.68 0.74
Weighted-average common shares
outstanding - diluted 68,954 68,773 (1) Basic earnings per share attributable to Mohawk Industries, Inc.
for the nine months ended October 2, 2010, includes a decrease of
approximately $0.05, and diluted earnings per share attributable to
Mohawk Industries, Inc. for the nine months ended October 2, 2010,
includes a decrease of approximately $0.04, related to the change in
fair value for a redeemable noncontrolling interest in a consolidated
subsidiary of the Company.
Other Financial Information
(Amounts in thousands)
Net cash provided by operating
activities $ 109,598 121,417
Depreciation and amortization $ 74,207 72,956
Capital expenditures $ 69,741 39,101
Consolidated Balance Sheet Data
(Amounts in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Receivables, net
Inventories
Prepaid expenses and other
current assets
Deferred income taxes
Total current assets
Property, plant and equipment,
net
Goodwill
Intangible assets, net
Deferred income taxes and other
non-current assets
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable and accrued
expenses
Total current liabilities
Long-term debt, less current
portion
Deferred income taxes and other
long-term liabilities
Total liabilities
Noncontrolling interest
Total stockholders' equity
Segment Information Three Months Ended
(Amounts in thousands) October 1, 2011 October 2, 2010
Net sales:
Mohawk $ 754,470 713,481
Dal-Tile 381,891 345,074
Unilin 329,514 276,594
Intersegment sales (23,363) (25,597)
Consolidated net sales $ 1,442,512 1,309,552
Operating income (loss):
Mohawk $ 30,946 31,127
Dal-Tile 33,073 33,913
Unilin 33,048 24,640
Corporate and eliminations (5,603) (4,498)
Consolidated operating income $ 91,464 85,182
Assets:
Mohawk
Dal-Tile
Unilin
Corporate and eliminations
Consolidated assets
MOHAWK INDUSTRIES, INC. AND
SUBSIDIARIES
Consolidated Statement of
Operations Nine Months Ended
(Amounts in thousands, except per
share data) October 1, 2011 October 2, 2010
Net sales 4,263,961 4,056,874
Cost of sales 3,182,499 2,995,940
Gross profit 1,081,462 1,060,934
Selling, general and
administrative expenses 832,214 832,405
Operating income 249,248 228,529
Interest expense 77,487 102,985
Other (income) expense, net 13,794 (8,628)
Earnings before income taxes 157,967 134,172
Income tax expense (benefit) 23,639 (8,327)
Net earnings 134,328 142,499
Net earnings attributable to
noncontrolling interest (3,337) (2,786)
Net earnings attributable to
Mohawk Industries, Inc. 130,991 139,713
Basic earnings per share
attributable to Mohawk Industries,
Inc. (1) 1.91 1.99
Weighted-average common shares
outstanding - basic 68,725 68,567
Diluted earnings per share
attributable to Mohawk Industries,
Inc. (1) 1.90 1.99
Weighted-average common shares
outstanding - diluted 68,946 68,764
(1) Basic earnings per share attributable to Mohawk Industries, Inc.
for the nine months ended October 2, 2010, includes a decrease of
approximately $0.05, and diluted earnings per share attributable to
Mohawk Industries, Inc. for the nine months ended October 2, 2010,
includes a decrease of approximately $0.04, related to the change in
fair value for a redeemable noncontrolling interest in a consolidated
subsidiary of the Company.
Other Financial Information
(Amounts in thousands)
Net cash provided by operating
activities 138,188 210,394
Depreciation and amortization 222,804 222,251
Capital expenditures 182,260 86,240 Consolidated Balance Sheet Data
(Amounts in thousands)
October 1, 2011 October 2, 2010
ASSETS
Current assets:
Cash and cash equivalents $ 276,156 365,835
Receivables, net 775,421 697,491
Inventories 1,132,073 996,271
Prepaid expenses and other current
assets 125,007 114,876
Deferred income taxes 131,931 119,729
Total current assets 2,440,588 2,294,202
Property, plant and equipment, net 1,696,182 1,680,541
Goodwill 1,389,430 1,389,057
Intangible assets, net 634,164 710,934
Deferred income taxes and other
non-current assets 117,204 117,176
$ 6,277,568 6,191,910
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt $ 438,300 351,486
Accounts payable and accrued
expenses 774,939 779,825
Total current liabilities 1,213,239 1,131,311
Long-term debt, less current
portion 1,173,038 1,303,151
Deferred income taxes and other
long-term liabilities 439,798 441,948
Total liabilities 2,826,075 2,876,410
Noncontrolling interest 32,758 34,121
Total stockholders' equity 3,418,735 3,281,379
$ 6,277,568 6,191,910
Segment Information As of or for the Nine Months Ended
(Amounts in thousands) October 1, 2011 October 2, 2010
Net sales:
Mohawk 2,203,699 2,177,646
Dal-Tile 1,105,775 1,050,088
Unilin 1,018,443 890,859
Intersegment sales (63,956) (61,719)
Consolidated net sales 4,263,961 4,056,874
Operating income (loss):
Mohawk 79,187 74,100
Dal-Tile 82,911 77,432
Unilin 105,507 93,434
Corporate and eliminations (18,357) (16,437)
Consolidated operating income 249,248 228,529
Assets:
Mohawk $ 1,810,191 1,652,737
Dal-Tile 1,735,718 1,677,957
Unilin 2,569,103 2,542,233
Corporate and eliminations 162,556 318,983
Consolidated assets $ 6,277,568 6,191,910
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 Nine Months Ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Net earnings
attributable to
Mohawk Industries, Inc. $ 46,646 51,094 130,991 139,713
Unusual items:
Unrealized foreign
currency losses (1) 9,085 - 9,085 -
Business
restructurings 2,186 3,330 15,513 12,263
Debt
extinguishment
costs 1,116 - 1,116 7,514
Acquisitions
purchase
accounting - 1,713 - 1,713
U.S. customs
refund - (5,765) - (5,765)
Discrete tax
items, net - - - (24,407)
Income taxes (1,761) 760 (4,597) (2,999)
Adjusted net earnings
attributable to
Mohawk Industries, Inc. $ 57,272 51,132 152,108 128,032
Adjusted diluted
earnings per share
attributable to
Mohawk Industries, Inc. (2) 0.83 0.74 2.21 1.86
Weighted-average
common shares
outstanding -
diluted 68,954 68,773 68,946 68,764
(1) Unrealized foreign currency losses for certain of the
Company's consolidated foreign subsidiaries that measure
financial conditions and results using the U.S. dollar rather
than the local currency.
(2) Diluted earnings per share attributable to Mohawk
Industries, Inc. for the nine months ended October 2, 2010,
excludes approximately $0.04 related to the change in fair
value for a redeemable noncontrolling interest in a
consolidated subsidiary of the Company.
Reconciliation of Total Debt
to Net Debt
(Amounts in thousands)
October 1, 2011
Current portion of long-term
debt $ 438,300
Long-term debt, less current
portion 1,173,038
Less: Cash and cash
equivalents 276,156
Net Debt $ 1,335,182
Reconciliation of Operating Income
to Adjusted EBITDA
(Amounts in Trailing
thousands) Twelve
Months
Three Months Ended Ended
December April July 2, October October
31, 2010 2, 2011 2011 1, 2011 1, 2011
Operating
income $ 85,640 56,084 101,700 91,464 334,888
Other (expense)
income 1,037 (15) 396 (13,413) (11,995)
Unrealized foreign
currency losses(1) - - - 9,085 9,085
U.S. customs refund 1,965 - - - 1,965
Net earnings
attributable to
noncontrolling
interest (1,678) (1,096) (1,191) (1,050) (5,015)
Depreciation
and
amortization 74,522 74,253 74,344 74,207 297,326
EBITDA 161,486 129,226 175,249 160,293 626,254
Business
restructurings - 6,813 6,514 2,186 15,513
Adjusted
EBITDA $ 161,486 136,039 181,763 162,479 641,767
Net Debt to
Adjusted EBITDA 2.1
(1) Unrealized foreign currency losses for certain of the
Company's consolidated foreign subsidiaries that measure
financial conditions and results using the U.S. dollar rather
than the local currency.
Reconciliation of
Net Sales to
Adjusted Net Sales
(Amounts in
thousands)
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
Net sales $ 1,442,512 1,309,552 4,263,961 4,056,874
Adjustments to
net sales:
Exchange rate (22,724) - (57,554) -
Adjusted net
sales $ 1,419,788 1,309,552 4,206,407 4,056,874
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
(Amounts in thousands)
Three Months Ended
October 1, October 2,
Unilin 2011 2010
Net sales $ 329,514 276,594
Adjustment to net sales:
Exchange rate (21,205) -
Adjusted net sales $ 308,309 276,594 Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands)
Three Months Ended
October 1, October 2,
2011 2010
Operating income $ 91,464 85,182
Adjustments to operating income:
Business restructurings 2,186 3,330
Adjusted operating income $ 93,650 88,512
Adjusted operating
margin as a percent of
net sales 6.5% 6.8%
Reconciliation of Segment Operating Income to Adjusted
Segment Operating Income
(Amounts in thousands)
Three Months Ended
October 1, October 2,
Mohawk 2011 2010
Operating income $ 30,946 31,127
Adjustments to operating income:
Business restructurings 2,186 1,292
Adjusted operating income $ 33,132 32,419
Adjusted operating
margin as a percent of
net sales 4.4% 4.5%
Dal-Tile
Operating income $ 33,073 33,913
Adjustments to operating income:
Business restructurings - 1,223
Adjusted operating income $ 33,073 35,136
Adjusted operating
margin as a percent of
net sales 8.7% 10.2%
Unilin
Operating income $ 33,048 24,640
Adjustments to operating income:
Business restructurings - 815
Adjusted operating income $ 33,048 25,455
Adjusted operating
margin as a percent of
net sales 10.0% 9.2%
Reconciliation of Earnings Before Income Taxes to
Adjusted Earnings Before Income Taxes
(Amounts in thousands)
Three Months Ended
October 1, October 2,
2011 2010
Earnings before income taxes $ 52,919 59,777
Unusual items:
Unrealized foreign
currency losses (1) 9,085 -
Business restructurings 2,186 3,330
Debt extinguishment costs 1,116 -
Acquisitions purchase accounting - 1,713
U.S. customs refund - (5,765)
Adjusted earnings
before income taxes $ 65,306 59,055
(1) Unrealized foreign currency losses for certain of the
Company's consolidated foreign subsidiaries that measure
financial conditions and results using the U.S. dollar
rather than the local currency.
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense
(Amounts in thousands)
Three Months Ended
October 1, October 2,
2011 2010
Income tax expense $ 5,223 7,513
Unusual items:
Income taxes 1,761 (760)
Adjusted income tax expense $ 6,984 6,753
Adjusted income tax rate 11% 11%
Reconciliation of Selling, General and Administrative
Expenses to Adjusted Selling, General and Administrative
Expenses
(Amounts in thousands)
Three Months Ended
October 1, October 2,
2011 2010
Selling, general and
administrative expenses $ 266,159 259,750
Adjustments to selling,
general and administrative
expenses:
Exchange rate (3,920) -
Adjusted selling,
general and
administrative expenses $ 262,239 259,750
Adjusted selling, general
and administrative expenses
as a percent of net sales 18.2% 19.8%
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.