omniture

Mohawk Industries, Inc. Announces Fourth Quarter Earnings

2012-02-24 06:57 3235

CALHOUN, Ga., Feb. 24, 2012 /PRNewswire-Asia/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 fourth quarter net earnings of $43 million and diluted earnings per share (EPS) of $0.62. Excluding unusual items, net earnings for the fourth quarter of 2011 were $50 million and EPS was $0.72, a 9% increase over last year. Net sales for the fourth quarter of 2011 were $1.4 billion, increasing 9% as reported and 10% with a constant exchange rate. For the fourth quarter of 2010, net earnings were $46 million and EPS was $0.66. Excluding unusual items for the fourth quarter of 2010, net earnings were $45 million and EPS was $0.66.

For the full year of 2011, our net earnings were $174 million and EPS was $2.52. Excluding unusual items, net earnings for the full year of 2011 were $202 million and EPS was $2.92, a 16% increase over last year. Net sales for the full year of 2011 were $5.6 billion, representing a 6% increase over 2010. For the full year of 2010, our net earnings were $185 million, and EPS was $2.65. Excluding unusual items for the full year of 2010, net earnings were $173 million and EPS was $2.52.

Commenting on Mohawk Industries' performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The Company's fourth quarter results reflect improvements in sales and adjusted net earnings over last year with all segments showing sales growth for the last three quarters. In the U.S., sales in both the residential and commercial categories expanded, with commercial growing at a faster pace. Increased prices across many product categories are being implemented in the first quarter to recover higher material costs. Each segment has reduced costs through process improvements, investments in technology and strategic realignment of assets. Our net debt to adjusted EBITDA ratio was 2.0 and we have available liquidity of more than $900 million to redeem the 2012 bonds and provide flexibility for future opportunities."

Mohawk segment net sales grew by more than 8% with both the residential and commercial channels showing improvement. Operating margins were compressed by higher material costs and the delay of our price increase until the first quarter of 2012. A price increase of 5-7% is presently being implemented to offset material inflation. We introduced the next generation of soft carpets, branded SmartStrand Silk, which have an unparalleled softness, performance and environmental position. We expanded our filament extrusion and carpet tile capacity to satisfy the growing demand. We reduced our costs with improved manufacturing productivity, re-engineered processes and a more streamlined infrastructure.

Dal-Tile segment net sales grew almost 10% during the quarter with commercial growth exceeding residential. Our residential sales continued their positive growth trends for the third consecutive period. In the first quarter, we are implementing price increases of 3-5% on certain products to recover higher material and transportation costs. We have increased our presence in the home center channel, broadened design alternatives for larger sizes, and introduced ceramic tiles replicating wood. In Mexico, we are significantly growing our sales anticipating the completion of our new facility in April of this year. Our investments in design technology, product expansion, marketing and distribution sustained the growth of our business.

Unilin net sales increased approximately 10% as reported and on a local currency basis. Our laminate and wood flooring products continued growing in Europe, supported by the success of our new product introductions, expansion of our DIY strategy and the addition of Australian distribution and Russian manufacturing. In Europe, we are implementing laminate price increases of 2-3% in the first quarter. In the U.S., wood sales grew, laminate sales were slightly softer, and we received new commitments from home centers for both laminate and wood which will begin shipping in the first quarter. Our Russian laminate plant is manufacturing products comparable to our European production and will expand as we broaden the styles produced locally. We continue the integration of our Australian distributor, re-configuration of our Malaysian wood manufacturing and investments in our DidIt click furniture.

Improving consumer confidence, a positive employment outlook and lower housing inventories are cause for future optimism. In the first quarter, we anticipate additional sales growth, but at a lower rate than the fourth quarter which had easier comparisons. Presently, we are raising the prices on many of our products to recover the inflation of our materials. These increases will not be fully implemented until the second quarter reducing our first quarter margins. The start-up expenses of our major projects will impact our short-term results and the additional costs will decline as they ramp up. We expect continued sales growth, higher pricing, and productivity improvements will impact favorably our full year 2012 results. With these factors, our first quarter guidance for earnings is $0.47 to $0.57 per share, excluding any restructuring costs.

The flooring industry should continue its improvement throughout 2012. We have many initiatives to strengthen our product offering, expand our geographical reach, recover raw material inflation and reduce our costs. Our financial structure is strong and we can take advantage of new opportunities.

Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk provides a complete selection for all markets of carpet, ceramic tile, laminate, wood, stone, vinyl, and rugs. These products are marketed under the premier brands in the industry including Mohawk, Karastan, Lees, Bigelow, Durkan, Daltile, American Olean, Unilin and Quick-Step. Mohawk's unique merchandising and marketing assists the consumer in creating exquisite floors to fulfill their dreams. Mohawk provides a premium level of service with its own trucking fleet and local distribution in the U.S. Mohawk's international presence includes operations in Australia, China, Europe, Malaysia, Mexico and Russia.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words "could," "should," "believes," "anticipates," "expects," and "estimates," or similar expressions constitute "forward-looking statements." For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; inflation in raw material prices and other input costs; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company's products; impairment charges; integration of acquisitions; international operations; introduction of new products; rationalization of operations; tax, product and other claims; litigation; and other risks identified in Mohawk's SEC reports and public announcements.

Conference call Friday, February 24, 2012 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 # 45556735. A replay will also be available until March 9, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 45556735.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES   
                     
Consolidated Statement of Operations    Three Months Ended   Twelve Months Ended    
(Amounts in thousands, except per share data)    December 31,
2011
  December 31,
2010
  December 31,
2011
  December 31,
2010
   
                     
Net sales   $ 1,378,297   1,262,198   5,642,258   5,319,072    
Cost of sales   1,042,880   920,532   4,225,379   3,916,472    
Gross profit   335,417   341,666   1,416,879   1,402,600    
Selling, general and administrative expenses   269,123   256,026   1,101,337   1,088,431    
Operating income   66,294   85,640   315,542   314,169    
Interest expense   24,130   30,166   101,617   133,151    
Other (income) expense, net   257   (3,002)   14,051   (11,630)    
Earnings before income taxes   41,907   58,476   199,874   192,648    
Income tax expense (benefit)   (1,990)   11,040   21,649   2,713    
Net earnings   43,897   47,436   178,225   189,935    
Net earnings attributable to noncontrolling interest   (966)   (1,678)   (4,303)   (4,464)    
Net earnings attributable to Mohawk Industries, Inc.   $ 42,931   45,758   173,922   185,471    
Basic earnings per share attributable to Mohawk Industries, Inc. (1) $ 0.62   0.67   2.53   2.66    
Weighted-average common shares outstanding - basic   68,768   68,612   68,736   68,578    
Diluted earnings per share attributable to Mohawk Industries, Inc. (1) $ 0.62   0.66   2.52   2.65    
Weighted-average common shares outstanding - diluted   69,016   68,843   68,964   68,764    
                     
(1) Basic and diluted earnings per share attributable to Mohawk Industries, Inc. for the twelve months ended December 31, 2010, includes a decrease of approximately $0.04 and $0.05, respectively, related to the change in fair value for a redeemable noncontrolling interest in a consolidated subsidiary of the Company.  
                     
                     
Other Financial Information                     
(Amounts in thousands)                     
Net cash provided by operating activities   $ 162,805   109,318   300,993   319,712    
Depreciation and amortization   $ 74,930   74,522   297,734   296,773    
Capital expenditures   $ 93,313   69,940   275,573   156,180    
                     
Consolidated Balance Sheet Data   
(Amounts in thousands)                     
            December 31,
2011
  December 31,
2010
   
ASSETS                     
Current assets:                    
Cash and cash equivalents           $ 311,945   354,217    
Restricted cash           -   27,954    
Receivables, net           686,165   614,473    
Inventories           1,113,630   1,007,503    
Prepaid expenses and other current assets           135,514   111,162    
Deferred income taxes           150,910   133,304    
Total current assets           2,398,164   2,248,613    
Property, plant and equipment, net           1,712,154   1,687,124    
Goodwill           1,375,175   1,369,394    
Intangible assets, net           605,100   677,127    
Deferred income taxes and other non-current assets           115,635   116,668    
            $ 6,206,228   6,098,926    
LIABILITIES AND STOCKHOLDERS' EQUITY                     
Current liabilities:                    
Current portion of long-term debt           $ 386,255   350,588    
Accounts payable and accrued expenses           715,091   698,326    
Total current liabilities           1,101,346   1,048,914    
Long-term debt, less current portion           1,200,184   1,302,994    
Deferred income taxes and other long-term liabilities           455,190   440,021    
Total liabilities           2,756,720   2,791,929    
Noncontrolling interest           33,723   35,441    
Total stockholders' equity           3,415,785   3,271,556    
            $ 6,206,228   6,098,926    
                     
Segment Information    Three Months Ended   As of or for the Twelve Months Ended    
(Amounts in thousands)    December 31,
2011
  December 31,
2010
  December 31,
2011
  December 31,
2010
   
                     
Net sales:                    
Mohawk   $ 723,975   667,230   2,927,674   2,844,876    
Dal-Tile   348,541   317,354   1,454,316   1,367,442    
Unilin   326,321   297,415   1,344,764   1,188,274    
Intersegment sales   (20,540)   (19,801)   (84,496)   (81,520)    
Consolidated net sales   $ 1,378,297   1,262,198   5,642,258   5,319,072    
                     
Operating income (loss):                    
Mohawk   $ 30,687   48,804   109,874   122,904    
Dal-Tile   18,387   19,902   101,298   97,334    
Unilin   21,640   20,864   127,147   114,298    
Corporate and eliminations   (4,420)   (3,930)   (22,777)   (20,367)    
Consolidated operating income   $ 66,294   85,640   315,542   314,169    
                     
Assets:                    
Mohawk           $ 1,769,065   1,637,319    
Dal-Tile           1,732,818   1,644,448    
Unilin           2,533,070   2,475,049    
Corporate and eliminations           171,275   342,110    
Consolidated assets           $ 6,206,228   6,098,926    
                     

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   Twelve Months Ended  
            December 31,
2011
  December 31,
2010
  December 31,
2011
  December 31,
2010
 
Net earnings attributable to Mohawk Industries, Inc.       $ 42,931   45,758   173,922   185,471  
Unusual items:                        
Unrealized foreign currency losses (1)       -   -   9,085   -  
Operating lease correction (2)       6,035   -   6,035   -  
Business restructurings       7,696   893   23,209   13,156  
Debt extinguishment costs       -   -   1,116   7,514  
Acquisitions purchase accounting       -   -   -   1,713  
U.S. customs refund         -   (1,965)   -   (7,730)  
Discrete tax items, net       -   -   -   (24,407)  
Income taxes         (7,152)   407   (11,749)   (2,592)  
Adjusted net earnings attributable to Mohawk Industries, Inc.   $ 49,510   45,093   201,618   173,125  
                           
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.   $ 0.72   0.66   2.92   2.52  
Weighted-average common shares outstanding - diluted       69,016   68,843   68,964   68,764  
                           
                           
Reconciliation of Total Debt to Net Debt   
(Amounts in thousands)                       
        December 31, 2011                  
Current portion of long-term debt   $ 386,255                  
Long-term debt, less current portion   1,200,184                  
Less: Cash and cash equivalents   311,945                  
Net Debt       $ 1,274,494                  
                           
Reconciliation of Operating Income to Adjusted EBITDA                   
(Amounts in thousands)                    Trailing Twelve  
        Three Months Ended   Months Ended  
        April 2, 2011   July 2, 2011   October 1, 2011   December 31, 2011   December 31,
2011
 
Operating income     $ 56,084   101,700   91,464   66,294   315,542  
Other (expense) income   15   (396)   (13,413)   (257)   (14,051)  
Net earnings attributable to noncontrolling interest   (1,096)   (1,191)   (1,050)   (966)   (4,303)  
Depreciation and amortization   74,253   74,344   74,207   74,930   297,734  
EBITDA     129,256   174,457   151,208   140,001   594,922  
Unrealized foreign currency losses (1)   -   -   9,085   -   9,085  
Operating lease correction (2)   -   -   -   6,035   6,035  
Business restructurings   6,813   6,514   2,186   7,696   23,209  
Adjusted EBITDA     $ 136,069   180,971   162,479   153,732   633,251  
                           
Net Debt to Adjusted EBITDA                   2.0  
                           
                           
Reconciliation of Net Sales to Adjusted Net Sales   
(Amounts in thousands)                       
        Three Months Ended   Twelve Months Ended      
        December 31,
2011
  December 31,
2010
  December 31,
2011
  December 31,
2010
     
Net sales       $ 1,378,297   1,262,198   5,642,258   5,319,072      
Adjustments to net sales:                      
Exchange rate     4,193   -   (53,337)   -      
Adjusted net sales     $ 1,382,490   1,262,198   5,588,921   5,319,072      
                           
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales   
(Amounts in thousands)                       
        Three Months Ended              
Unilin        December 31, 2011   December 31, 2010              
Net sales       $ 326,321   297,415              
Adjustment to net sales:                      
Exchange rate     1,996   -              
Adjusted net sales     $ 328,317   297,415              
                           
Reconciliation of Operating Income to Adjusted Operating Income    
(Amounts in thousands)                       
        Three Months Ended              
        December 31, 2011   December 31, 2010              
Operating income     $ 66,294   85,640              
Adjustments to operating income:                      
Operating lease correction (2)   6,035   -              
Business restructurings   7,696   893              
Adjusted operating income   $ 80,025   86,533              
Adjusted operating margin as a percent of net sales   5.8%   6.9%              
                           
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income    
(Amounts in thousands)                       
        Three Months Ended              
Mohawk         December 31, 2011   December 31, 2010              
Operating income     $ 30,687   48,804              
Adjustments to operating income:                      
Operating lease correction (2)   2,761   -              
Business restructurings   7,696   893              
Adjusted operating income   $ 41,144   49,697              
Adjusted operating margin as a percent of net sales   5.7%   7.4%              
                           
Dal-Tile                           
Operating income     $ 18,387   19,902              
Adjustments to operating income:                      
Operating lease correction (2)   3,274   -              
Adjusted operating income   $ 21,661   19,902              
Adjusted operating margin as a percent of net sales   6.2%   6.3%              
                           
Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes   
(Amounts in thousands)                       
        Three Months Ended              
        December 31, 2011   December 31, 2010              
Earnings before income taxes   $ 41,907   58,476              
Unusual items:                        
Operating lease correction (2)   6,035   -              
Business restructurings   7,696   893              
U.S. customs refund     -   (1,965)              
Adjusted earnings before income taxes   $ 55,638   57,404              
                           
                           
Reconciliation of Income Tax Expense (Benefit) to Adjusted Income Tax Expense    
(Amounts in thousands)                       
        Three Months Ended              
        December 31, 2011   December 31, 2010              
Income tax expense (benefit)   $ (1,990)   11,040              
Unusual items:                        
Income taxes     7,152   (407)              
Adjusted income tax expense   $ 5,162   10,633              
                           
Adjusted income tax rate   9%   19%              
                           
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses   
(Amounts in thousands)                       
        Three Months Ended          
        December 31, 2011   December 31, 2010              
Selling, general and administrative expenses   $ 269,123   256,026              
Adjustments to selling, general and administrative expenses:                  
Operating lease correction (2)   (6,035)   -              
Business restructurings   (3,214)   403              
Exchange rate     765   -              
Adjusted selling, general and administrative expenses   $ 260,639   256,429              
Adjusted selling, general and administrative expenses as a percent of net sales 18.9%   20.3%              
           
                           
(1) Unrealized foreign currency losses in Q3 2011 for certain of the Company's consolidated foreign subsidiaries that measure financial position and results using the U.S. dollar rather than the local currency.  
(2) Correction of an immaterial error related to accounting for operating leases  
   
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.  
                           
Source: Mohawk Industries, Inc.
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