Mohawk Industries, Inc. Announces First Quarter Earnings

The following excerpt is from the company's SEC filing.

(Calhoun, Ga.) - May 1, 2014 - Mohawk Industries, Inc. (NYSE:MHK) today announced 2014 first quarter net earnings of $81 million and diluted earnings per share (EPS) of $1.11. Excluding unusual charges, net earnings for the quarter were $90 million; EPS was $1.23, a 41% increase over last year’s first quarter adjusted EPS. Net sales for the first quarter of 2014 were approximately $1.8 billion, an increase of 22% as reported and 21% on a constant exchange basis versus the prior year’s first quarter. In addition, the first quarter had one less shipping day when compared to prior year, which equates to approximately 1.5% of net sales. For the first quarter of 2013, net sales were approximately $1.5 billion, net earnings were $50 million and EPS was $0.72; excluding unusual charges, net earnings were $61 million and EPS was $0.87.

Commenting on Mohawk Industries’ first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “First quarter earnings were higher than expected due to our 2013 acquisitions, improved productivity across our business and stronger results outside North America, although severe winter weather in the U.S. impacted sales. During the period, we continued making progress with our acquisitions, including enhancing our organizational structures, sales strategies, product offerings and productivity. Our adjusted operating income for the quarter increased 47% to approximately 8% of net sales as initiatives drove higher earnings across all divisions and operational improvements gained traction in our acquisitions.”

For the quarter, the Carpet segment’s adjusted operating margins rose 60 basis points to 5.1% of net sales as a result of productivity improvements, cost reductions and improved pricing. Net sales for the segment were $675 million, down 3% as reported with one less day in the period. The period was negatively impacted by the harsh weather conditions in the U.S., with residential outperforming the other categories. In residential, the company’s ultra-soft products continue to capture a greater share of the premium carpet category. New Continuum products, made from up to 100% recycled polyester, are gaining momentum at both the value added and promotional price points. Last year’s DuraColor commercial carpet collections, that provide greater value and improved styling, are now among our best-selling products, with higher efficiencies and margins for the company. Numerous productivity projects across the segment including operational enhancements, re-engineered materials and capital investments are generating significant savings. A price increase for carpet and freight was announced to offset material, energy and transportation costs.

For the quarter, the Ceramic segment’s adjusted operating margins grew 160 basis points to 9.0% of net sales as a result of higher volumes, efficiency gains and improved mix. Net sales for the segment were $695 million, up 69% compared to the prior year, primarily due to the Marazzi acquisition and legacy sales growth in North America. The company’s ceramic business in North American expanded its design offerings and enhanced its market position with new larger sizes, rectangles and longer planks. The company announced the construction of a new U.S. ceramic plant to manufacture premium products, with production scheduled to start up by the end of 2015. The company’s ceramic business in Europe increased its profitability through new sales and manufacturing strategies that reduced cost and improved product mix. On a local basis, the company’s ceramic business in Russia significantly grew its revenues and operating income with higher volumes and improved mix, despite a slowing economy. We continue to improve productivity and conversion costs across our worldwide ceramic operations.

For the quarter, the Laminate and Wood segment’s adjusted operating margins rose 110 basis points over the prior year to 11.5% of net sales, with productivity initiatives, acquisition synergies and price

increases partially offset by higher wood costs. Net sales in the segment were $468 million, an increase of 16% over the prior year as reported or 13% on a constant exchange rate, with most of the increase from the Spano acquisition, higher volume in wood flooring and growth in insulation boards. In the U.S., price and freight increases on wood flooring were implemented in March to offset rising wood costs and transportation expenses, with further price increases announced in April. In Europe, the roll out of our new updated Pergo laminate collections with improved design, performance and installation systems should be complete in the second quarter and should enhance our sales and market position. Our new wood plant in the Czech Republic will increase capacity so we can grow our business in Europe, Russia and Asia. Our new insulation board plant is allowing us to significantly expand sales in the Benelux region and France. The integration of the Unilin and Spano board businesses has improved our position through the consolidation of production lines and sales organizations and lower material and energy costs.

“Across the enterprise, our management team is executing strategic initiatives to maximize our acquisitions and is implementing best practices and process improvements to enhance our legacy business,” said Lorberbaum. “Although the pace of economic improvement varies across our markets, we are driving innovation, operational excellence and sales growth to optimize our results. In each of our businesses, we have many local advantages, including leading market positions, highly recognized brands, diverse distribution and efficient manufacturing that position our businesses for growth as each market improves.

“Although the weather in the first quarter impacted our U.S. business, orders and shipments began improving as the period ended. Our growth outside the U.S. was higher in the first period due to warmer weather in Europe than last year and better performance of our Russian ceramic introductions. Across the business, we are implementing product and freight increases as required to offset inflation. With these factors, our guidance for second quarter earnings is $2.14 to $2.23 per share and for the full year $8.00 to $8.30 per share, excluding any unusual charges.

“We remain positive about both our strategies to enhance Mohawk’s results and the overall outlook for the floor covering industry this year. We are planning to increase capital investments across the enterprise to an all-time high of $500 million to support the introduction of innovative products, to sustain our growth with increased manufacturing capacity and to drive productivity, efficiency and cost improvements. We remain focused on enhancing shareholder value by increasing our top line growth and improving our bottom line.”

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, Daltile, Durkan, Karastan, Lees, 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.

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.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES        Consolidated Statement of Operations Three Months Ended(Amounts in thousands, except per share data) March 29, 2014 March 30, 2013     Net sales $1,813,095 1,486,815Cost of sales 1,331,740 1,109,749    Gross profit 481,355 377,066Selling, general and administrative expenses 350,620 290,224Operating income 130,735 86,842Interest expense 22,096 19,156Other expense, net 4,890 6,387    Earnings from continuing operations before income taxes 103,749 61,299Income tax expense 22,696 10,732    Net earnings including noncontrolling interest 81,053 50,567Net earnings (loss) attributable to noncontrolling interest (28) 72    Net earnings attributable to Mohawk Industries, Inc. $81,081 50,495     Basic earnings per share attributable to Mohawk Industries, Inc.    Basic earnings per share attributable to Mohawk Industries, Inc. $1.11 0.73Weighted-average common shares outstanding - basic 72,742 69,375     Diluted earnings per share attributable to Mohawk Industries, Inc.    Diluted earnings per share attributable to Mohawk Industries, Inc. $1.11 0.72Weighted-average common shares outstanding - diluted $73,282 69,897     Other Financial Information    (Amounts in thousands)    Depreciation and amortization $80,984 60,349Capital expenditures $122,081 63,282     Consolidated Balance Sheet Data    (Amounts in thousands)      March 29, 2014 March 30, 2013ASSETS    Current assets:        Cash and cash equivalents $72,645 1,120,167    Receivables, net 1,174,895 825,659    Inventories 1,632,236 1,230,250    Prepaid expenses and other current assets 249,690 157,011    Deferred income taxes 133,808 113,519        Total current assets 3,263,274 3,446,606Property, plant and equipment, net 2,745,057 1,729,916Goodwill 1,721,792 1,394,062Intangible assets, net 796,896 569,356Deferred income taxes and other non-current assets 154,469 121,905

Total assets $8,681,488 7,261,845LIABILITIES AND STOCKHOLDERS' EQUITY    Current liabilities:    Current portion of long-term debt and commercial paper $654,871 53,496Accounts payable and accrued expenses 1,188,644 824,135        Total current liabilities 1,843,515 877,631Long-term debt, less current portion 1,811,789 2,253,020Deferred income taxes and other long-term liabilities 532,740 406,610        Total liabilities 4,188,044 3,537,261Total stockholders' equity 4,493,444 3,724,584Total liabilities and stockholders' equity $8,681,488 7,261,845     Segment Information As of and for the Three Months Ended(Amounts in thousands) March 29, 2014 March 30, 2013     Net sales:        Carpet $674,926 695,334    Ceramic 695,094 411,881    Laminate and Wood 468,008 404,475    Intersegment sales (24,933) (24,875)        Consolidated net sales $1,813,095 1,486,815     Operating income (loss):        Carpet $34,271 25,238    Ceramic 60,659 29,976    Laminate and Wood 44,119 38,693    Corporate and eliminations (8,314) (7,065)        Consolidated operating income $130,735 86,842     Assets:        Carpet $1,920,937 1,802,241    Ceramic 3,782,006 1,795,828    Laminate and Wood 2,788,839 2,469,264    Corporate and eliminations 189,706 1,194,512        Consolidated assets $8,681,488 7,261,845     

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 29, 2014 March 30, 2013    Net earnings attributable to Mohawk Industries, Inc. $81,081 50,495    Adjusting items:        Restructuring, acquisition and integration-related costs 11,725 9,856    Interest on 3.85% senior notes — 3,559    Income taxes (2,391) (2,780)       Adjusted net earnings attributable to Mohawk Industries, Inc. $90,415 61,130                Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $1.23 0.87    Weighted-average common shares outstanding - diluted 73,282 69,897                Reconciliation of Total Debt to Net Debt        (Amounts in thousands)             March 29, 2014        Current portion of long-term debt and commercial paper $654,871        Long-term debt, less current portion 1,811,789        Less: Cash and cash equivalents 72,645            Net Debt $2,394,015                    Reconciliation of Operating Income to Proforma Adjusted EBITDA    (Amounts in thousands)             Three Months Ended Trailing Twelve Months Ended   June 29, 2013 September 28, 2013 December 31, 2013 March 29, 2014 March 29, 2014Operating income $133,198 175,903 150,988 130,735 590,824Other (expense) income 1,097 (1,168) (2,656) (4,890) (7,617)Net (earnings) loss attributable to noncontrolling interest 190 (491) (132) 28 (405)Depreciation and amortization 80,643 81,550 86,329 80,984 329,506    EBITDA 215,128 255,794 234,529 206,857 912,308Restructuring, acquisition and integration-related costs 41,321 24,431 37,812 11,725 115,289Acquisition purchase accounting (inventory step-up) 18,744 12,297 — — 31,041    Adjusted EBITDA $275,193 292,522 272,341 218,582 1,058,638            Net Debt to Adjusted EBITDA        2.3            Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate     (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Net sales $1,813,095 1,486,815      Adjustment to net sales on a constant exchange rate (10,446) —          Net sales on a constant exchange rate $1,802,649 1,486,815                                                      

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate      (Amounts in thousands)             Three Months Ended      Laminate and Wood March 29, 2014 March 30, 2013      Segment net sales $468,008 404,475      Adjustment to segment net sales on a constant exchange rate (12,446) —          Segment net sales on a constant exchange rate $455,562 404,475                  Reconciliation of Net Sales to Proforma Adjusted Net Sales     (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Net sales $1,813,095 1,486,815      Acquisition net sales — 310,000      Proforma adjusted net sales $1,813,095 1,796,815                  Reconciliation of Segment Net Sales to Proforma Adjusted Segment Net Sales     (Amounts in thousands)             Three Months Ended      Ceramic March 29, 2014 March 30, 2013      Segment net sales $695,094 411,881      Acquisition net sales — 268,000      Proforma adjusted segment net sales $695,094 679,881                  Reconciliation of Segment Net Sales to Proforma Adjusted Segment Net Sales     (Amounts in thousands)             Three Months Ended      Laminate and Wood March 29, 2014 March 30, 2013      Segment net sales $468,008 404,475      Acquisition net sales — 42,000      Proforma adjusted segment net sales $468,008 446,475                  Reconciliation of Gross Profit to Adjusted Gross Profit      (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Gross profit $481,355 377,066      Adjustments to gross profit:          Restructuring, acquisition and integration-related costs 5,637 3,411          Adjusted gross profit $486,992 380,477      Adjusted gross profit as a percent of net sales 26.9% 25.6%                                                                  

Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses    (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Selling, general and administrative expenses $350,620 290,224      Adjustments to selling, general and administrative expenses:          Restructuring, acquisition and integration-related costs (6,088) (6,445)          Adjusted selling, general and administrative expenses $344,532 283,779      Adjusted selling, general and administrative expenses as a percent of net sales 19.0% 19.1%                  Reconciliation of Operating Income to Adjusted Operating Income      (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Operating income $130,735 86,842      Adjustments to operating income:          Restructuring, acquisition and integration-related costs 11,725 9,856          Adjusted operating income $142,460 96,698      Adjusted operating margin as a percent of net sales 7.9% 6.5%                  Reconciliation of Segment Operating Income to Adjusted Segment Operating Income     (Amounts in thousands)             Three Months Ended      Carpet March 29, 2014 March 30, 2013      Operating income $34,271 25,238      Adjustments to segment operating income:          Restructuring, acquisition and integration-related costs — 6,217          Adjusted segment operating income $34,271 31,455      Adjusted operating margin as a percent of net sales 5.1% 4.5%                  Reconciliation of Segment Operating Income to Adjusted Segment Operating Income     (Amounts in thousands)             Three Months Ended      Ceramic March 29, 2014 March 30, 2013      Operating income $60,659 29,976      Adjustments to segment operating income:          Restructuring, acquisition and integration-related costs 1,981 463          Adjusted segment operating income $62,640 30,439      Adjusted operating margin as a percent of net sales 9.0% 7.4%                  Reconciliation of Segment Operating Income to Adjusted Segment Operating Income     (Amounts in thousands)             Three Months Ended      Laminate and Wood March 29, 2014 March 30, 2013      Operating income $44,119 38,693      Adjustments to segment operating income:          Restructuring, acquisition and integration-related costs 9,576 3,176          Adjusted segment operating income $53,695 41,869      Adjusted operating margin as a percent of net sales 11.5% 10.4%      

Reconciliation of Earnings from Continuing Operations Before Income Taxes to Adjusted Earnings from Continuing Operations Before Income Taxes    (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Earnings from continuing operations before income taxes $103,749 61,299      Adjustments to earnings from continuing operations before income taxes:          Restructuring, acquisition and integration-related costs 11,725 9,856      Interest on 3.85% senior notes — 3,559          Adjusted earnings from continuing operations before income taxes $115,474 74,714                  Reconciliation of Income Tax Expense to Adjusted Income Tax Expense      (Amounts in thousands)             Three Months Ended         March 29, 2014 March 30, 2013      Income tax expense $22,696 10,732      Income tax effect of adjusting items 2,391 2,780          Adjusted income tax expense $25,087 13,512                  Adjusted income tax rate 22% 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 the 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.       

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.

To receive a free e-mail notification whenever Mohawk Industries makes a similar move, sign up!

Other recent filings from the company include the following:

Mohawk Industries, Inc. Announces Second Quarter Earnings - July 31, 2014
Mohawk Industries director just declared ownership of no shares of Mohawk Industries - July 28, 2014
Mohawk: (D) Departure Of Directors Or Certain Officers; Election Of Directors; Appointment Of Certain Officers; Compensatory Arrangements Of Certain Officers - July 25, 2014

   Auto Refresh

Feedback