Mohawk Industries, Inc. Announces Second Quarter Earnings
-- Adjusted EPS increased 61% over PY
-- Net sales up approximately 35% over PY
CALHOUN, Georgia, 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 |
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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
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Consolidated Statement of Operations |
Three Months Ended |
Six Months Ended |
||||||
(Amounts in thousands, except per share data) |
June 29, |
June 30, |
June 29, |
June 30, |
||||
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 |
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 |
(1,361) |
- |
(1,361) |
- |
||||
Net Earnings including noncontrolling interest |
84,382 |
73,188 |
134,949 |
114,200 |
||||
Net (loss) earnings attributable to noncontrolling |
(190) |
- |
(118) |
635 |
||||
Net earnings attributable to Mohawk Industries, Inc. |
$ 84,572 |
73,188 |
135,067 |
113,565 |
||||
Basic earnings per share attributable to |
||||||||
Income from continuing operations |
$ 1.19 |
1.06 |
1.92 |
1.65 |
||||
Loss from discontinued operations, net of income |
(0.02) |
- |
(0.02) |
- |
||||
Basic earnings per share attributable to Mohawk |
$ 1.17 |
1.06 |
1.90 |
1.65 |
||||
Weighted-average common shares outstanding - |
72,406 |
68,984 |
70,907 |
68,923 |
||||
Diluted earnings per share attributable to |
||||||||
Income from continuing operations |
$ 1.18 |
1.06 |
1.91 |
1.64 |
||||
Loss from discontinued operations, net of income |
(0.02) |
- |
(0.02) |
- |
||||
Diluted earnings per share attributable to Mohawk |
$ 1.16 |
1.06 |
1.89 |
1.64 |
||||
Weighted-average common shares outstanding - |
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, |
June 30, |
|||||||
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 |
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 |
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, |
June 30, |
June 29, |
June 30, |
||||
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, |
June 30, |
June 29, |
June 30, |
|||||||
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, |
||||||||||
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, |
December 31, |
March 30, |
June 29, |
June 29, |
||||||
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, |
||||||||||
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, |
September 29, |
December 31, |
March 30, |
March 30, |
||||||
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, |
||||
(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 |
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 |
||||
(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 |
||||
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. |
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