PR Newswire: news distribution, targeting and monitoring
Home Page > News Releases > APAC > Mohawk Industries Reports Record Q2 Results

Mohawk Industries Reports Record Q2 Results

2017-07-28 04:20
Share with Twitter

CALHOUN, Georgia, July 28, 2017 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2017 second quarter record operating income of $356 million, net earnings of $261 million and diluted earnings per share (EPS) of $3.48. Excluding restructuring, acquisition and other charges, net earnings were $278 million and EPS was $3.72, a 7% increase over last year's second quarter adjusted EPS. Net sales for the second quarter of 2017 were $2.5 billion, up 6% versus the prior year's second quarter or an increase of approximately 8% on a constant days and currency basis. For the second quarter of 2016, net sales were $2.3 billion, operating income was $351 million, net earnings were $255 million and EPS was $3.42; excluding restructuring, acquisition and other charges, net earnings were $259 million and EPS was $3.47.

For the six months ending July 1, 2017, net earnings and EPS were $461 million and $6.17, respectively. Net earnings excluding restructuring, acquisition and other charges were $482 million and EPS was $6.44, an increase of 10% over the 2016 six-month period adjusted EPS. For the six-month period, net sales were $4.7 billion, an increase of 4% versus prior year as reported or 6% on a constant days and currency basis. For the six-month period ending July 2, 2016, net sales were $4.5 billion, net earnings were $427 million and EPS was $5.73; excluding restructuring, acquisition and other charges, net earnings and EPS were $436 million and $5.85.

Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "During the period, Mohawk delivered record results, generating the highest sales, adjusted operating income and adjusted EPS in the company's history. Adjusted operating income increased to $381 million, up 7%, overcoming higher material and start-up costs and a reduction of IP income. Across the business, we are increasing prices to offset inflation, introducing innovative products and improving our productivity.

"During the period, we completed the acquisition of two small ceramic manufacturers to expand our European platform and two U.S. material manufacturing operations to enhance the vertical integration of our businesses. This year, we are increasing our internal investments to over $850 million to capitalize on innovative new products, increased automation and greater efficiencies, as well as to enhance the four acquisitions. As detailed last quarter, we are expanding our sales capacity by approximately $1.4 billion. This production will come online over the next twelve months, and our start-up costs will be higher until we have optimized all our new manufacturing operations later in 2018. These initiatives will increase our sales and profitability, maximizing the long-term value of our business.

"For the quarter, our Global Ceramic Segment sales increased approximately 9% as reported and on a constant days and currency basis. Operating margin was 17% as reported and 18% on an adjusted basis, with adjusted operating income rising approximately 16% for the quarter. We completed two European ceramic acquisitions that increased our segment sales by 6% during the period. Our legacy business improved from the prior quarter but was limited in North America by capacity constraints in red body ceramic and in Europe by a temporary plant shutdown to upgrade our technical production. In Europe, half of our new technical equipment has begun production and is operating at expected levels, and we are importing product to satisfy U.S. demand until our Mexican expansion becomes operational later this year. We are introducing higher value products from our new Tennessee plant, including longer, more-realistic wood visuals; surface textures in registration with our designs; and proprietary slip resistant surfaces. During the quarter, we completed the acquisition of a talc mine in Texas that will ensure our material supply and enhance our competitive position. Even with our capacity restraints, our sales in Mexico outpaced the strong local market. Our European ceramic business grew substantially as a result of our new acquisitions and new products we have introduced. Our Russian ceramic business is significantly outperforming the market, with sales and margins improving as a result of our unique styling, strong brand and robust distribution. Russia's economy has expanded the last two quarters, and we are increasing our capacity to support future growth.

"During the quarter, our Flooring North America Segment's sales increased 6% as reported. Operating margin for the quarter was 12% as reported and 13% on an adjusted basis, with adjusted operating income rising 12%. For the period, our hard surface sales outpaced carpet, and residential sales were stronger than commercial. We have implemented price increases and improved our product mix, which together have offset material and other inflation. We are executing productivity initiatives across our operations, resulting in improved efficiencies and yields. Our premium residential carpet collections are growing faster than the market due to increasing consumer preference for the superior softness and performance of our exclusive SmartStrand franchise. We have begun shipping SmartStrand Silk Reserve, the fourth generation of our proprietary fiber, with an even greater level of softness. During the period, we completed the purchase of a nylon polymerization plant, which we are enhancing to improve our competitive position. Our Main Street commercial sales expanded faster than our specified channels, with carpet tile continuing to gain share. Our LVT and laminate sales outpaced our other hard surfaces, with our distribution expanding as a result of our leading design and performance attributes. Our LVT operations are improving, and construction is progressing on our new rigid LVT line, which will start up by the end of this year. Our propriety water resistant laminate with enhanced visuals is growing as an alternative to wood, and we are increasing our capacity later this year to support additional growth.

"For the quarter, our Flooring Rest of the World Segment's sales increased 2% as reported and 8.5% on a constant days and currency basis. Operating margin was 17% as reported and on an adjusted basis, with adjusted operating income decreasing approximately 12% for the quarter. The segment was impacted by increasing material costs and currency changes, which we are implementing price increases to recover, and the reduction in patent income. We anticipate that the majority of the price increases will be fully implemented by the fourth quarter, allowing us to recover our higher costs. Our LVT sales are growing significantly, although we are reaching the limits of our present capacity. Our new LVT production line in Belgium will produce both rigid and flexible products and should start-up in the fourth quarter. In Russia, we are finalizing the purchase of a building near our ceramic facilities to house our new sheet vinyl manufacturing operation. In Europe, our premium laminate collections grew substantially, and we have begun installation of a new laminate press line to further expand our business and improve our product mix with value-added introductions. Construction of our new carpet tile plant is underway, and we will begin limited operations in the fourth quarter.

"Mohawk's operating performance in the third quarter should continue to significantly improve, with sales and income strengthening further, even with higher material inflation and changes in patents. We are implementing price increases across most product categories and regions to recover material and currency changes in the third quarter. We will continue optimizing the acquisitions we completed in the second quarter by improving their strategies and enhancing their profitability. Taking all of this into account, our adjusted EPS guidance for the third quarter is $3.70 to $3.79.

"To enhance our long-term performance, we are investing at record levels this year to expand our product offering and capacity, improve our efficiencies and extend our geographic reach. In the fourth quarter, we will incur higher start-up costs as our production expansions ramp up and we elevate our marketing activities to increase our sales. The expansion of our LVT, ceramic, laminate, sheet vinyl and carpet tile capacity will increase our future growth and profitability, strengthening our position as the global leader in flooring."

ABOUT MOHAWK INDUSTRIES

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, Daltile, Durkan, IVC, Karastan, Marazzi, Mohawk, Mohawk Group, Pergo, Quick-Step and Unilin. 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, Europe, India, Malaysia, Mexico, New Zealand, 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 and deflation in raw material prices and other input costs; inflation and deflation in consumer markets; 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, July 28, 2017, 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 # 51858547. A replay will be available until Friday, August 25, 2017, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 51858547.

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES









(Unaudited)









Consolidated Statement of Operations Data


Three Months Ended


Six Months Ended

(Amounts in thousands, except per share data)


July 1, 2017


July 2, 2016


July 1, 2017


July 2, 2016

Net sales


$         2,453,038


2,310,336


4,673,683


4,482,382

Cost of sales


1,673,902


1,554,748


3,214,194


3,087,115

    Gross profit


779,136


755,588


1,459,489


1,395,267

Selling, general and administrative expenses


423,311


404,896


828,880


798,903

Operating income


355,825


350,692


630,609


596,364

Interest expense


8,393


10,351


16,595


22,652

Other expense (income), net


3,002


(5,807)


170


(2,378)

    Earnings before income taxes


344,430


346,148


613,844


576,090

Income tax expense


82,682


90,034


151,040


147,859

        Net earnings including noncontrolling interest


261,748


256,114


462,804


428,231

Net earnings attributable to noncontrolling interest


1,067


926


1,569


1,495

Net earnings attributable to Mohawk Industries, Inc.


$          260,681


255,188


461,235


426,736

Basic earnings per share attributable to Mohawk Industries, Inc.









Basic earnings per share attributable to Mohawk Industries, Inc.


$                3.51


3.44


6.21


5.76

Weighted-average common shares outstanding - basic


74,327


74,123


74,269


74,049

Diluted earnings per share attributable to Mohawk Industries, Inc.









Diluted earnings per share attributable to Mohawk Industries, Inc.


$                3.48


3.42


6.17


5.73

Weighted-average common shares outstanding - diluted


74,801


74,574


74,773


74,526

Other Financial Information









(Amounts in thousands)









Depreciation and amortization


$          109,761


101,215


214,785


201,408

Capital expenditures


$          224,153


136,081


425,423


276,914

Consolidated Balance Sheet Data









(Amounts in thousands)















July 1, 2017


July 2, 2016

ASSETS









Current assets:









    Cash and cash equivalents






$          130,238


112,049

    Receivables, net






1,639,614


1,448,898

    Inventories






1,865,941


1,660,131

    Prepaid expenses and other current assets






374,930


298,125

        Total current assets






4,010,723


3,519,203

Property, plant and equipment, net






3,892,251


3,243,838

Goodwill






2,417,058


2,322,735

Intangible assets, net






878,301


930,323

Deferred income taxes and other non-current assets






391,158


296,732

    Total assets






$          11,589,491


10,312,831

LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt and commercial paper






$            1,754,077


1,795,584

Accounts payable and accrued expenses






1,466,658


1,334,150

        Total current liabilities






3,220,735


3,129,734

Long-term debt, less current portion






1,174,440


1,160,700

Deferred income taxes and other long-term liabilities






713,110


613,131

        Total liabilities






5,108,285


4,903,565

Redeemable noncontrolling interest






26,713


23,683

Total stockholders' equity






6,454,493


5,385,583

    Total liabilities and stockholders' equity






$          11,589,491


10,312,831










Segment Information


As of or for the Three Months Ended


As of or for the Six Months Ended

(Amounts in thousands)


July 1, 2017


July 2, 2016


July 1, 2017


July 2, 2016










Net sales:









    Global Ceramic


$          902,670


829,794


1,687,639


1,603,520

    Flooring NA


1,040,299


980,693


1,979,795


1,887,057

    Flooring ROW


510,069


499,849


1,006,249


991,805

    Intersegment sales


-


-


-


-

        Consolidated net sales


$        2,453,038


2,310,336


4,673,683


4,482,382










Operating income (loss):









    Global Ceramic


$          152,557


140,606


268,593


240,383

    Flooring NA


127,482


118,946


219,624


194,297

    Flooring ROW


86,052


101,062


162,147


180,599

    Corporate and eliminations


(10,266)


(9,922)


(19,755)


(18,915)

        Consolidated operating income


$          355,825


350,692


630,609


596,364










Assets:









    Global Ceramic






$          4,736,068


4,054,351

    Flooring NA






3,625,350


3,316,048

    Flooring ROW






2,984,716


2,835,497

    Corporate and eliminations






243,357


106,935

        Consolidated assets






$          11,589,491


10,312,831

 

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







July 1, 2017


July 2, 2016


July 1, 2017


July 2, 2016

Net earnings attributable to Mohawk Industries, Inc.




$               260,681


255,188


461,235


426,736

Adjusting items:













Restructuring, acquisition and integration-related and other costs 


15,878


6,020


19,856


13,738

Acquisitions purchase accounting (inventory step-up)




9,571


-


9,763


-

Income taxes 






(7,677)


(2,342)


(9,091)


(4,620)

   Adjusted net earnings attributable to Mohawk Industries, Inc.




$               278,453


258,866


481,763


435,854

Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. 


$                     3.72


3.47


6.44


5.85

Weighted-average common shares outstanding - diluted




74,801


74,574


74,773


74,526


































Reconciliation of Total Debt to Net Debt




(Amounts in thousands)










July 1, 2017


Current portion of long-term debt and commercial paper


$                1,754,077


Long-term debt, less current portion



1,174,440


Less: Cash and cash equivalents



130,238


Net Debt




$                2,798,279



Reconciliation of Operating Income to Adjusted EBITDA











(Amounts in thousands)












Trailing Twelve





Three Months Ended


Months Ended





October 1, 2016


December 31, 2016


April 1, 2017


July 1, 2017


July 1, 2017

Operating income




$                 378,307


305,272


274,784


355,825


1,314,188

Other (expense) income



(3,839)


3,190


2,832


(3,002)


(819)

Net (earnings) loss attributable to non-controlling interest


(949)


(760)


(502)


(1,067)


(3,278)

Depreciation and amortization



103,680


104,379


105,024


109,761


422,844

EBITDA




477,199


412,081


382,138


461,517


1,732,935

Restructuring, acquisition and integration-related and other costs 


30,572


16,214


3,978


15,878


66,642

Acquisitions purchase accounting (inventory step-up)


-


-


192


9,571


9,763

Legal settlement and reserves



(90,000)


-


-


-


(90,000)

Release of indemnification asset



2,368


3,004


-


-


5,372

Tradename impairment 




47,905


-


-


-


47,905

  Adjusted EBITDA 




$                 468,044


431,299


386,308


486,966


1,772,617














Net Debt to  Adjusted EBITDA











1.6






















































Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding Acquisition Volume








(Amounts in thousands)

















Three Months Ended


Six Months Ended







July 1, 2017


July 2, 2016


July 1, 2017


July 2, 2016



Net sales




$         2,453,038


2,310,336


4,673,683


4,482,382



Adjustment to net sales on constant shipping days


23,317


-


35,247


-



Adjustment to net sales on a constant exchange rate


12,356


-


30,535


-



Net sales on a constant exchange rate and constant shipping days


2,488,711


2,310,336


4,739,465


4,482,382



Less: impact of acquisition volume


(48,224)


-


(48,224)


-



Net sales on a constant exchange rate and constant shipping days excluding acquisition volume

$         2,440,487


2,310,336


4,691,241


4,482,382

























Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days  Excluding Acquisition Volume


(Amounts in thousands)












   Three Months Ended


Global Ceramic




July 1, 2017


July 2, 2016


Net sales




$         902,670


829,794


Adjustment to net sales on constant shipping days


6,163


-


Adjustment to segment net sales on a constant exchange rate


(2,542)


-


Segment net sales on a constant exchange rate and constant shipping days 


906,291


829,794


Less: impact of acquisition volume



(48,224)


-


Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume

$         858,067


829,794


Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days




(Amounts in thousands)












    Three Months Ended


Flooring ROW




July 1, 2017


July 2, 2016


Net sales




$          510,069


499,849


Adjustment to net sales on constant shipping days


17,154


-


Adjustment to segment net sales on a constant exchange rate


14,897


-


Segment net sales on a constant exchange rate and constant shipping days 


$          542,120


499,849


Reconciliation of Gross Profit to Adjusted Gross Profit






(Amounts in thousands)












    Three Months Ended






July 1, 2017


July 2, 2016


Gross Profit




$          779,136


755,588


Adjustments to gross profit:







Restructuring, acquisition and integration-related and other costs 


13,028


2,778


Acquisitions purchase accounting (inventory step-up)


9,571


-


  Adjusted gross profit




$          801,735


758,366


Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses




(Amounts in thousands)












     Three Months Ended






July 1, 2017


July 2, 2016


Selling, general and administrative expenses


$          423,311


404,896


Adjustments to selling, general and administrative expenses:






Restructuring, acquisition and integration-related and other costs 


(2,850)


(3,241)


  Adjusted selling, general and administrative expenses


$          420,461


401,655


Reconciliation of Operating Income to Adjusted Operating Income






(Amounts in thousands)












    Three Months Ended






July 1, 2017


July 2, 2016


Operating income




$          355,825


350,692


Adjustments to operating income:







Restructuring, acquisition and integration-related and other costs 


15,878


6,020


Acquisitions purchase accounting (inventory step-up)


9,571


-


Adjusted operating income




$          381,274


356,712


Reconciliation of Segment Operating Income to Adjusted Segment Operating Income






(Amounts in thousands)












    Three Months Ended


Global Ceramic




July 1, 2017


July 2, 2016


Operating income




$          152,557


140,606


Adjustments to segment operating income:






Restructuring, acquisition and integration-related and other costs 


1,305


381


Acquisitions purchase accounting (inventory step-up)


9,571


-


Adjusted segment operating income



$         163,433


140,987


Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 






(Amounts in thousands)












Three Months Ended


Flooring NA 




July 1, 2017


July 2, 2016


Operating income




$          127,482


118,946


Adjustments to segment operating income:






Restructuring, acquisition and integration-related and other costs 


12,196


6,146


  Adjusted segment operating income



$         139,678


125,092


Reconciliation of Segment Operating Income to Adjusted Segment Operating Income






(Amounts in thousands)












Three Months Ended


Flooring ROW 




July 1, 2017


July 2, 2016


Operating income




$          86,052


101,062


Adjustments to segment operating income:






Restructuring, acquisition and integration-related and other costs 


2,170


(507)


Adjusted segment operating income



$         88,222


100,555


Reconciliation of Earnings including Noncontrolling Interests Before Income Taxes to Adjusted Earnings including Noncontrolling Interests Before Income Taxes


(Amounts in thousands)












Three Months Ended






July 1, 2017


July 2, 2016


Earnings before income taxes



$      344,430


346,148


Noncontrolling interests




(1,067)


(926)


Adjustments to earnings including noncontrolling interests before income taxes:






Restructuring, acquisition and integration-related & other costs 


15,878


6,020


Acquisitions purchase accounting (inventory step-up)


9,571


-


 Adjusted earnings including noncontrolling interests before income taxes


$     368,812


351,242


















Reconciliation of Income Tax Expense to Adjusted Income Tax Expense 






(Amounts in thousands)












Three Months Ended






July 1, 2017


July 2, 2016


Income tax expense 




$        82,682


90,034


Income tax effect of adjusting items




7,677


2,342


  Adjusted income tax expense



$        90,359


92,376










Adjusted income tax rate




24.5%


26.3%










 

The Company supplements its consolidated financial statements, which are prepared and presented in accordance with US GAAP, with certain non-GAAP financial measures. As required by the Securities and Exchange Commission rules, the tables above present a reconciliation of the Company's non-GAAP financial measures to the most directly comparable US GAAP measure. Each of the non-GAAP measures set forth above should be considered in addition to the comparable US GAAP measure, and may not be comparable to similarly titled measures reported by other companies. The Company believes these non-GAAP measures, when reconciled to the corresponding US GAAP measure, help its investors as follows: Non-GAAP revenue measures that assist in identifying growth trends and in comparisons of revenue with prior and future periods and non-GAAP profitability measures that assist in understanding the long-term profitability trends of the Company's business and in comparisons of its profits with prior and future periods.


The Company excludes certain items from its non-GAAP revenue measures because these items can vary dramatically between periods and can obscure underlying business trends. Items excluded from the Company's non-GAAP revenue measures include: foreign currency transactions and translation, more or fewer shipping days in a period and the impact of acquisitions.


The Company excludes certain items from its non-GAAP profitability measures because these items may not be indicative of, or are unrelated to, the Company's core operating performance. Items excluded from the Company's non-GAAP profitability measures include: restructuring, acquisition and integration-related and other costs, legal settlements and reserves, tradename impairments, acquisition purchase accounting (inventory step-up), release of indemnification assets and the reversal of uncertain tax positions.

 

Source: Mohawk Industries, Inc.

Related stocks: NYSE:MHK

Related Links:

Featured Video

Recent Releases

Construction/Building Recent Releases

Home Improvement Recent Releases

Household/Consumer/Cosmetics Recent Releases

Advanced Search
Search
  
  1. Products & Services
  2. News Releases
  3. Knowledge Center
  4. For Journalists & Media
  5. Multimedia Theater
  6. Contact Us