CALHOUN, Ga., Aug. 1, 2014 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2014 second quarter net earnings of $153 million and diluted earnings per share (EPS) of $2.08. Excluding unusual charges, net earnings were $162 million and EPS was $2.21, a 20% increase over last year's second quarter adjusted EPS and the highest quarterly adjusted EPS in the company's history. Net sales for the second quarter of 2014 were $2.05 billion, an increase of approximately 4% versus the prior year's second quarter or 3% on a constant exchange basis. For the second quarter of 2013, net sales were $1.98 billion, net earnings were $85 million and EPS was $1.16; excluding unusual charges, net earnings were $134 million and EPS was $1.84.
For the six months ending June 28, 2014, net sales were $3.9 billion, an increase of 12% versus the prior year. Net earnings and EPS for the six-month period were $234 million and $3.19, respectively. Net earnings excluding unusual charges were $252 million and adjusted EPS was $3.44, an increase of 26% over the six-month adjusted EPS results in 2013. For the six months ending June 29, 2013, net sales were $3.5 billion, net earnings were $135 million and EPS was $1.89. Excluding unusual charges, net earnings and EPS were $195 million and $2.73, respectively.
Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Our adjusted operating income increased 160 basis points as productivity initiatives, cost reductions, price increases and manufacturing consolidation drove higher earnings across the business. Top line growth was less than we anticipated due to slower improvement in U.S. housing and remodeling; however, profits were in line with expectations as a result of successful product introductions, productivity improvements and better cost controls. We reduced SG&A compared to last year across the enterprise, even as we reinvested into the business to promote new product collections and enhance our sales strategies. We are continuing to invest in our acquisitions to improve profitability, increase mix and streamline the business; and we anticipate that these actions will result in even higher earnings as the European and Russian economies improve."
Carpet segment net sales for the quarter were $780 million, up 1% over last year. Adjusted operating income for the segment rose 15% as a result of increased productivity, improved quality and cost reductions in operations and administration. Mohawk's patented Continuum technology is stimulating growth in our new polyester collections, and our state-of-the-art yarn project to support it is 75% complete. We are also expanding the distribution of our premium Karastan carpets by providing a broader offering and increasing the number of retailers selling our high-end brand. Commercial orders are growing now that we have substantially completed the product transition to our own fibers, and we have reorganized our commercial sales organization into smaller regions segmented by customer type with a complete portfolio for each channel. The carpet price increase announced in April was fully implemented at the end of the quarter to cover raw material inflation.
Ceramic segment net sales were $797 million, up 5% over last year as reported and with a constant exchange rate. The segment's adjusted operating income rose 21% due to productivity, volume, pricing and mix. In the U.S., the business benefited from innovative new collections that are leading the market shift to larger sizes, planks and rectangles. The new ceramic production line in Dallas has begun operation, and the additional capacity will satisfy the increasing demand for ceramic wood planks and larger sizes. Sales in Mexico are growing significantly with expanded distribution of new products from our Salamanca plant that provide market-leading style and value with superior availability. In Russia, sales and profitability increased on a local basis, but the decline of the ruble reduced our sales and income when translated to U.S. dollars. In the region, specialized products tailored for the new construction and DIY channels drove growth, offsetting slower retail sales. In Europe, sales and margins continue to progress due to increased sales outside of Southern Europe, as well as growth in Spain and improved mix from larger sizes with unique styling.
Laminate and Wood segment sales were $501 million, up 6% over last year, or 3% on a constant exchange rate. Adjusted operating income for the segment increased 21% from acquisition synergies, productivity improvements and cost reductions. In the U.S., greater participation in new construction increased sales of wood flooring. The second wood flooring price increase this year was implemented in July to cover higher wood and transportation costs. In Europe, stronger sales in the Nordic countries and the U.K. outpaced the softer Western European markets, with growth in the wood and luxury vinyl tile categories offsetting slower laminate sales. At the recently acquired plant in the Czech Republic, new equipment has been installed to produce higher value wood flooring under the Pergo and Quick-Step brands for the European and Russian markets. The segment's insulation business continued to expand, supported by additional production in our new French facility. The integration of the Unilin and Spano businesses progressed with a single sales force providing a comprehensive product offering for all customers.
During the period, we once again demonstrated our ability to deliver earnings growth through sales improvement, productivity initiatives and leveraging acquisitions. In each of our segments, we are optimizing the efficiency of our operations, the advantages of our leading market positions, the breadth of our distribution and the strength of our brands to grow our business. We anticipate that our sales will strengthen as we move through the second half of the year supported by continued U.S. job creation and improved economic growth. In the third quarter, we anticipate further improvement in the U.S. market with limited growth in Europe and Russia. With these factors, our guidance for third quarter earnings is $2.38 to $2.47 per share and, for the full year, $8.09 to $8.25 per share, excluding any restructuring charges. We remain committed to enhancing Mohawk's results, and we are optimistic about the improvement of the floor covering industry and our participation in it.
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, Bigelow, Daltile, 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 1, 2014 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 # 65483474. A replay will be available until Friday August 15, 2014 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 65483474.
| MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
||||||||
| Consolidated Statement of Operations |
Three Months Ended |
Six Months Ended |
||||||
| (Amounts in thousands, except per share data) |
June 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
||||
| Net sales |
$ 2,048,247 |
1,976,299 |
3,861,342 |
3,463,114 |
||||
| Cost of sales |
1,473,435 |
1,462,243 |
2,805,175 |
2,571,992 |
||||
| Gross profit |
574,812 |
514,056 |
1,056,167 |
891,122 |
||||
| Selling, general and administrative expenses |
352,564 |
380,858 |
703,184 |
671,082 |
||||
| Operating income |
222,248 |
133,198 |
352,983 |
220,040 |
||||
| Interest expense |
20,702 |
25,312 |
42,798 |
44,468 |
||||
| Other (income) expense, net |
(1,555) |
(1,097) |
3,335 |
5,290 |
||||
| Earnings from continuing operations before income taxes |
203,101 |
108,983 |
306,850 |
170,282 |
||||
| Income tax expense |
50,240 |
23,240 |
72,936 |
33,972 |
||||
| Earnings from continuing operations |
152,861 |
85,743 |
233,914 |
136,310 |
||||
| Loss from discontinued operations, net of income tax benefit of $485 |
- |
(1,361) |
- |
(1,361) |
||||
| Net earnings including noncontrolling interest |
152,861 |
84,382 |
233,914 |
134,949 |
||||
| Net earnings (loss) attributable to noncontrolling interest |
111 |
(190) |
83 |
(118) |
||||
| Net earnings attributable to Mohawk Industries, Inc. |
$ 152,750 |
84,572 |
233,831 |
135,067 |
||||
| Basic earnings per share attributable to Mohawk Industries, Inc. |
||||||||
| Income from continuing operations |
$ 2.10 |
1.19 |
3.21 |
1.92 |
||||
| Loss from discontinued operations, net of income taxes |
- |
(0.02) |
- |
(0.02) |
||||
| Basic earnings per share attributable to Mohawk Industries, Inc. |
$ 2.10 |
1.17 |
3.21 |
1.90 |
||||
| Weighted-average common shares outstanding - basic |
72,832 |
72,406 |
72,788 |
70,907 |
||||
| Diluted earnings per share attributable to Mohawk Industries, Inc. |
||||||||
| Income from continuing operations |
$ 2.08 |
1.18 |
3.19 |
1.91 |
||||
| Loss from discontinued operations, net of income taxes |
- |
(0.02) |
- |
(0.02) |
||||
| Diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 2.08 |
1.16 |
3.19 |
1.89 |
||||
| Weighted-average common shares outstanding - diluted |
73,297 |
72,867 |
73,302 |
71,405 |
||||
| Other Financial Information |
||||||||
| (Amounts in thousands) |
||||||||
| Depreciation and amortization |
$ 83,754 |
80,643 |
164,738 |
140,992 |
||||
| Capital expenditures |
$ 127,616 |
82,815 |
249,697 |
146,097 |
||||
| Consolidated Balance Sheet Data |
||||||||
| (Amounts in thousands) |
||||||||
| June 28, 2014 |
June 29, 2013 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ 70,044 |
168,745 |
||||||
| Receivables, net |
1,261,808 |
1,145,550 |
||||||
| Inventories |
1,644,768 |
1,591,552 |
||||||
| Prepaid expenses and other current assets |
267,210 |
229,859 |
||||||
| Deferred income taxes |
135,259 |
134,489 |
||||||
| Total current assets |
3,379,089 |
3,270,195 |
||||||
| Property, plant and equipment, net |
2,830,202 |
2,594,256 |
||||||
| Goodwill |
1,730,713 |
1,690,622 |
||||||
| Intangible assets, net |
792,260 |
800,529 |
||||||
| Deferred income taxes and other non-current assets |
149,417 |
153,362 |
||||||
| Total assets |
$ 8,881,681 |
8,508,964 |
||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt and commercial paper |
$ 619,229 |
83,171 |
||||||
| Accounts payable and accrued expenses |
1,253,291 |
1,261,791 |
||||||
| Total current liabilities |
1,872,520 |
1,344,962 |
||||||
| Long-term debt, less current portion |
1,807,609 |
2,450,584 |
||||||
| Deferred income taxes and other long-term liabilities |
528,252 |
609,125 |
||||||
| Total liabilities |
4,208,381 |
4,404,671 |
||||||
| Total stockholders' equity |
4,673,300 |
4,104,293 |
||||||
| Total liabilities and stockholders' equity |
$ 8,881,681 |
8,508,964 |
||||||
| Segment Information |
Three Months Ended |
As of or for the Six Months Ended |
||||||
| (Amounts in thousands) |
June 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
||||
| Net sales: |
||||||||
| Carpet |
$ 780,308 |
770,868 |
1,455,234 |
1,466,202 |
||||
| Ceramic |
796,724 |
760,168 |
1,491,818 |
1,172,049 |
||||
| Laminate and Wood |
501,257 |
470,980 |
969,265 |
875,455 |
||||
| Intersegment sales |
(30,042) |
(25,717) |
(54,975) |
(50,592) |
||||
| Consolidated net sales |
$ 2,048,247 |
1,976,299 |
3,861,342 |
3,463,114 |
||||
| Operating income (loss): |
||||||||
| Carpet |
$ 62,826 |
54,862 |
97,097 |
80,100 |
||||
| Ceramic |
106,407 |
46,304 |
167,066 |
76,280 |
||||
| Laminate and Wood |
60,843 |
41,362 |
104,962 |
80,055 |
||||
| Corporate and eliminations |
(7,828) |
(9,330) |
(16,142) |
(16,395) |
||||
| Consolidated operating income |
$ 222,248 |
133,198 |
352,983 |
220,040 |
||||
| Assets: |
||||||||
| Carpet |
$ 1,960,106 |
1,803,212 |
||||||
| Ceramic |
3,900,387 |
3,832,888 |
||||||
| Laminate and Wood |
2,818,129 |
2,691,553 |
||||||
| Corporate and eliminations |
203,059 |
181,311 |
||||||
| Consolidated assets |
$ 8,881,681 |
8,508,964 |
||||||
| 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 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
||||||
| Net earnings attributable to Mohawk Industries, Inc. |
$ 152,750 |
84,572 |
233,831 |
135,067 |
|||||
| Adjusting items: |
|||||||||
| Restructuring, acquisition and integration-related costs |
11,169 |
41,321 |
22,894 |
51,177 |
|||||
| 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 |
(2,229) |
(12,668) |
(4,620) |
(15,448) |
|||||
| Adjusted net earnings attributable to Mohawk Industries, Inc. |
$ 161,690 |
133,814 |
252,105 |
194,944 |
|||||
| Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. |
2.21 |
1.84 |
3.44 |
2.73 |
|||||
| Weighted-average common shares outstanding - diluted |
73,297 |
72,867 |
73,302 |
71,405 |
|||||
| Reconciliation of Total Debt to Net Debt |
|||||||||
| (Amounts in thousands) |
|||||||||
| June 28, 2014 |
|||||||||
| Current portion of long-term debt and commercial paper |
$ 619,229 |
||||||||
| Long-term debt, less current portion |
1,807,609 |
||||||||
| Less: Cash and cash equivalents |
70,044 |
||||||||
| Net Debt |
$ 2,356,794 |
||||||||
| Reconciliation of Operating Income to Adjusted EBITDA |
|||||||||
| (Amounts in thousands) |
Three Months Ended |
Trailing Twelve Months Ended |
|||||||
| September 28, 2013 |
December 31, 2013 |
March 29, 2014 |
June 28, 2014 |
June 28, 2014 |
|||||
| Operating income |
$ 175,903 |
150,988 |
130,735 |
222,248 |
679,874 |
||||
| Other (expense) income |
(1,168) |
(2,656) |
(4,890) |
1,555 |
(7,159) |
||||
| Net (earnings) loss attributable to noncontrolling interest |
(491) |
(132) |
28 |
(111) |
(706) |
||||
| Depreciation and amortization |
81,550 |
86,329 |
80,984 |
83,754 |
332,617 |
||||
| EBITDA |
255,794 |
234,529 |
206,857 |
307,446 |
1,004,626 |
||||
| Restructuring, acquisition and integration-related costs |
24,431 |
37,812 |
11,725 |
11,169 |
85,137 |
||||
| Acquisitions purchase accounting (inventory step-up) |
12,297 |
- |
- |
- |
12,297 |
||||
| Adjusted EBITDA |
$ 292,522 |
272,341 |
218,582 |
318,615 |
1,102,060 |
||||
| Net Debt to Adjusted EBITDA |
2.1 |
||||||||
| Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| June 28, 2014 |
June 29, 2013 |
||||||||
| Net sales |
$ 2,048,247 |
1,976,299 |
|||||||
| Adjustment to net sales on a constant exchange rate |
(14,171) |
- |
|||||||
| Net sales on a constant exchange rate |
$ 2,034,076 |
1,976,299 |
|||||||
| Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| Ceramic |
June 28, 2014 |
June 29, 2013 |
|||||||
| Net sales |
$ 796,724 |
760,168 |
|||||||
| Adjustment to segment net sales on a constant exchange rate |
2,144 |
- |
|||||||
| Segment net sales on a constant exchange rate |
$ 798,868 |
760,168 |
|||||||
| Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| Laminate and Wood |
June 28, 2014 |
June 29, 2013 |
|||||||
| Net sales |
$ 501,257 |
470,980 |
|||||||
| Adjustment to segment net sales on a constant exchange rate |
(16,315) |
- |
|||||||
| Segment net sales on a constant exchange rate |
$ 484,942 |
470,980 |
|||||||
| Reconciliation of Gross Profit to Adjusted Gross Profit |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| June 28, 2014 |
June 29, 2013 |
||||||||
| Gross Profit |
$ 574,812 |
514,056 |
|||||||
| Adjustments to gross profit: |
|||||||||
| Restructuring and integration-related costs |
6,755 |
14,334 |
|||||||
| Acquisitions purchase accounting (inventory step-up) |
- |
18,744 |
|||||||
| Adjusted gross profit |
$ 581,567 |
547,134 |
|||||||
| Adjusted gross profit as a percent of net sales |
28.4% |
27.7% |
|||||||
| Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| June 28, 2014 |
June 29, 2013 |
||||||||
| Selling, general and administrative expenses |
$ 352,564 |
380,858 |
|||||||
| Adjustments to selling, general and administrative expenses: |
|||||||||
| Restructuring, acquisition and integration-related costs |
(4,414) |
(26,987) |
|||||||
| Adjusted selling, general and administrative expenses |
$ 348,150 |
353,871 |
|||||||
| Adjusted selling, general and administrative expenses as a percent of net sales |
17.0% |
17.9% |
|||||||
| Reconciliation of Operating Income to Adjusted Operating Income |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
Six Months Ended |
||||||||
| June 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
||||||
| Operating income |
$ 222,248 |
133,198 |
352,983 |
220,040 |
|||||
| Adjustments to operating income: |
|||||||||
| Restructuring, acquisition and integration-related costs |
11,169 |
41,321 |
22,895 |
51,177 |
|||||
| Acquisitions purchase accounting (inventory step-up) |
- |
18,744 |
- |
18,744 |
|||||
| Adjusted operating income |
$ 233,417 |
193,263 |
375,878 |
289,961 |
|||||
| Adjusted operating margin as a percent of net sales |
11.4% |
9.8% |
9.7% |
8.4% |
|||||
| Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
Six Months Ended |
||||||||
| Carpet |
June 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
|||||
| Operating income |
$ 62,826 |
54,862 |
97,097 |
80,100 |
|||||
| Adjustment to segment operating income: |
|||||||||
| Restructuring, acquisition and integration-related costs |
- |
- |
- |
6,217 |
|||||
| Adjusted segment operating income |
$ 62,826 |
54,862 |
97,097 |
86,317 |
|||||
| Adjusted operating margin as a percent of net sales |
8.1% |
7.1% |
6.7% |
5.9% |
|||||
| Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
Six Months Ended |
||||||||
| Ceramic |
June 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
|||||
| Operating income |
$ 106,407 |
46,304 |
167,066 |
76,280 |
|||||
| Adjustments to segment operating income: |
|||||||||
| Restructuring, acquisition and integration-related costs |
196 |
23,361 |
2,177 |
23,823 |
|||||
| Acquisitions purchase accounting (inventory step-up) |
- |
18,744 |
- |
18,744 |
|||||
| Adjusted segment operating income |
$ 106,603 |
88,409 |
169,243 |
118,847 |
|||||
| Adjusted operating margin as a percent of net sales |
13.4% |
11.6% |
11.3% |
10.1% |
|||||
| Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
Six Months Ended |
||||||||
| Laminate and Wood |
June 28, 2014 |
June 29, 2013 |
June 28, 2014 |
June 29, 2013 |
|||||
| Operating income |
$ 60,843 |
41,362 |
104,962 |
80,055 |
|||||
| Adjustment to segment operating income: |
|||||||||
| Restructuring, acquisition and integration-related costs |
10,773 |
17,960 |
20,348 |
21,137 |
|||||
| Adjusted segment operating income |
$ 71,616 |
59,322 |
125,310 |
101,192 |
|||||
| Adjusted operating margin as a percent of net sales |
14.3% |
12.6% |
12.9% |
11.6% |
|||||
| Reconciliation of Earnings from Continuing Operations Before Income Taxes to Adjusted Earnings from Continuing Operations Before Income Taxes |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| June 28, 2014 |
June 29, 2013 |
||||||||
| Earnings from continuing operations before income taxes |
$ 203,101 |
108,983 |
|||||||
| Adjustments to earnings from continuing operations before income taxes: |
|||||||||
| Restructuring, acquisition and integration-related costs |
11,169 |
41,321 |
|||||||
| Acquisitions purchase accounting (inventory step-up) |
- |
18,744 |
|||||||
| Adjusted earnings before income taxes |
$ 214,270 |
169,048 |
|||||||
| Reconciliation of Income Tax Expense to Adjusted Income Tax Expense |
|||||||||
| (Amounts in thousands) |
|||||||||
| Three Months Ended |
|||||||||
| June 28, 2014 |
June 29, 2013 |
||||||||
| Income tax expense |
$ 50,240 |
23,240 |
|||||||
| Income tax effect of adjusting items |
2,229 |
12,183 |
|||||||
| Adjusted income tax expense |
$ 52,469 |
35,423 |
|||||||
| Adjusted income tax rate |
24% |
21% |
|||||||
| 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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