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8-K - FORM 8-K - MOHAWK INDUSTRIES INC | g27130e8vk.htm |
Exhibit 99.1
NEWS RELEASE
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For Release:
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Immediately | |
Contact:
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Frank H. Boykin, Chief Financial Officer (706) 624-2695 |
MOHAWK INDUSTRIES, INC. ANNOUNCES
FIRST QUARTER EARNINGS
Calhoun,
Georgia, May 5, 2011 Mohawk Industries, Inc. (NYSE:MHK) today announced 2011 first
quarter net earnings of $23 million and diluted earnings per share (EPS) of $0.34. Excluding
restructuring charges, 2011 first quarter net earnings were $29 million and EPS of $0.42. For the
first quarter of 2010, the net earnings were $21 million and EPS was $0.30. Excluding restructuring
charges, 2010 first quarter net earnings and EPS were $24 million and $0.35 per share. Net sales
for the first quarter of 2011 were $1.3 billion which was flat versus 2010. Our cash and net debt
to adjusted EBITDA ratio stand at $256 million and 2.2 respectively, providing flexibility to
pursue strategic opportunities.
Commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, We
grew our operating margin to 4.7% excluding restructuring charges, an improvement of approximately
40 basis points over the first quarter last year by continuing to drive cost reductions,
manufacturing improvements and efficiency gains throughout the enterprise. Sales reported during
the period were flat with last year with the outlook strengthening for the balance of the year. In
the U.S., both remodeling and home sales are expected to improve over last year, and
non-residential investment is estimated to increase over 8% in 2011.
Our Mohawk segment net sales declined 3.5% with commercial seeing improvement and the
residential category still lagging. The residential order trends turned positive at the end of the
first quarter and continued into April. The commercial business continues its
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recovery with modular
tile products growing significantly. The hospitality channel is rebounding after several years of
reduced capital spending. We expect continued improvement in our business from our new product introductions, additional customer
commitments, price increases to cover raw materials and operational improvements. We announced two
carpet price increases to offset the dramatic raw material inflation with the first increase in
February followed by the second increase in April. Operational enhancements to optimize
productivity, material and service are being executed and will improve our cost position this year.
We are completing the consolidation of a carpet facility in South Georgia and relocating the
production to our other manufacturing plants. Our many Greenworks initiatives continue to increase
the recycled content utilized in our products and processes furthering our sustainable
manufacturing commitments while lowering our costs.
Our Dal-Tile segment net sales increased approximately 1% versus last year. The sales trends
improved during the period with commercial outperforming residential. We continued the expansion of
our Reveal Imaging technology receiving multiple product awards and increased our position in the
home center channel. To recover the rising freight costs, we have increased prices on our products
and transportation. Cost reductions continue from new investments in technology, lean
manufacturing, material innovations and improvements in the supply chain. We are implementing our
ceramic strategy in Mexico where the market is growing 5%. We are expanding our sales organization,
product offering and customer base to support a new facility in Mexico which should be operational
in mid-2012. Our Chinese joint venture is investing to gain market share, increase product mix,
improve efficiencies and strengthen management systems. We are building a strong platform to be
positioned as a leader in the market.
Our Unilin net sales increased approximately 7% both as reported and on a constant exchange
rate. Sales of most of our European products were positive while U.S. markets remain difficult but
are showing improvement. Our margins were under pressure from escalating raw material costs which
are ahead of our price increases. Price increases were implemented in European flooring, roofing
and boards to offset material inflation and additional increases for some products have been
announced in the second quarter. We are continuing to expand sales in home centers across Europe
with Quick Step products
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positioned as a premium offering. The U.S. flooring business improved as
we proceeded through the first quarter and we strengthened our position in the home center and
specialized hard surface channels. We improved our U.S. wood manufacturing costs and enhanced
the sales mix with higher value products and additional performance features.
After the seasonally slow first quarter, we believe the industry recovery will continue the
balance of the year. Commercial renovation is improving as companies begin to reinvest. We
anticipate pent-up demand in the residential remodeling market and improving home sales will
positively impact results this year. Price and volume increases, along with cost reductions will
enhance profitability. With these factors, our second quarter guidance for earnings is $0.87 to
$0.97 per share, excluding any restructuring charges.
We have improved our organizations ability to drive innovation in product, processes and
costs. We have managed through a challenging period and significantly redesigned our businesses to
maximize our long term results. Our investments in new assets, geographic expansion and systems
will enhance our core businesses and create new growth opportunities.
Mohawk is a leading supplier of flooring for both residential and commercial applications.
Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, and rugs.
These products are marketed under the premier brands in the industry, which include Mohawk,
Karastan, Lees, Bigelow, Dal-Tile, American Olean, Unilin and Quick Step. Mohawks unique
merchandising and marketing assist our customers in creating the consumers dream. Mohawk provides
a premium level of service with its own trucking fleet and local distribution. Mohawks operational
international presence includes Mexico, Europe, China, Russia and Malaysia.
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
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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; raw material and energy costs; timing and
level of capital expenditures; integration of acquisitions; rationalization of operations; claims;
litigation and other risks identified in Mohawks SEC reports and public announcements.
There will be a conference call Friday, May 6, 2011 at 11:00 AM Eastern Time.
The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local.
Conference ID # 57677152. A conference call replay will also be available until May 20, 2011 by dialing
800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 57677152.
Conference ID # 57677152. A conference call replay will also be available until May 20, 2011 by dialing
800-642-1687 for US/local calls and 706-645-9291 for International/Local calls and entering Conference ID # 57677152.
4
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations | Three Months Ended | |||||||
(Amounts in thousands, except per share data) | April 2, 2011 | April 3, 2010 | ||||||
Net sales |
$ | 1,343,595 | 1,347,236 | |||||
Cost of sales |
1,002,003 | 1,005,990 | ||||||
Gross profit |
341,592 | 341,246 | ||||||
Selling, general and administrative expenses |
285,508 | 287,625 | ||||||
Operating income |
56,084 | 53,621 | ||||||
Interest expense |
26,595 | 33,908 | ||||||
Other expense (income), net |
(15 | ) | (4,531 | ) | ||||
Earnings before income taxes |
29,504 | 24,244 | ||||||
Income tax expense |
4,966 | 2,974 | ||||||
Net earnings |
24,538 | 21,270 | ||||||
Net earnings attributable to noncontrolling interest |
(1,096 | ) | (732 | ) | ||||
Net earnings attributable to Mohawk Industries, Inc. |
$ | 23,442 | 20,538 | |||||
Basic earnings per share attributable to Mohawk Industries, Inc. |
$ | 0.34 | 0.30 | |||||
Weighted-average common shares outstanding basic |
68,674 | 68,523 | ||||||
Diluted earnings per share attributable to Mohawk Industries Inc. |
$ | 0.34 | 0.30 | |||||
Weighted-average common shares outstanding diluted |
68,904 | 68,730 | ||||||
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Other Financial Information |
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(Amounts in thousands) |
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Net cash used in operating activities |
$ | 67,413 | 46,192 | |||||
Depreciation and amortization |
$ | 74,253 | 76,798 | |||||
Capital expenditures |
$ | 52,811 | 23,309 | |||||
Consolidated Balance Sheet Data | ||||||||
(Amounts in thousands) | April 2, 2011 | April 3, 2010 | ||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 256,231 | 452,335 | |||||
Receivables, net |
754,826 | 788,124 | ||||||
Inventories |
1,075,613 | 932,785 | ||||||
Prepaid expenses |
97,846 | 109,968 | ||||||
Deferred income taxes and other current assets |
155,159 | 160,246 | ||||||
Total current assets |
2,339,675 | 2,443,458 | ||||||
Property, plant and equipment, net |
1,715,895 | 1,719,051 | ||||||
Goodwill |
1,406,731 | 1,377,518 | ||||||
Intangible assets, net |
689,703 | 736,353 | ||||||
Deferred income taxes and other non-current assets |
114,229 | 42,520 | ||||||
$ | 6,266,233 | 6,318,900 | ||||||
LIABILITIES AND EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
$ | 52,706 | 551,426 | |||||
Accounts payable and accrued expenses |
739,768 | 859,690 | ||||||
Total current liabilities |
792,474 | 1,411,116 | ||||||
Long-term debt, less current portion |
1,577,188 | 1,303,437 | ||||||
Deferred income taxes and other long-term liabilities |
449,984 | 452,858 | ||||||
Total liabilities |
2,819,646 | 3,167,411 | ||||||
Noncontrolling interest |
33,255 | 29,866 | ||||||
Total stockholders equity |
3,413,332 | 3,121,623 | ||||||
$ | 6,266,233 | 6,318,900 | ||||||
Segment Information | As of or for the Three Months Ended | |||||||
(Amounts in thousands) | April 2, 2011 | April 3, 2010 | ||||||
Net sales: |
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Mohawk |
$ | 691,165 | 716,583 | |||||
Dal-Tile |
344,415 | 341,396 | ||||||
Unilin |
325,832 | 305,880 | ||||||
Intersegment sales |
(17,817 | ) | (16,623 | ) | ||||
Consolidated net sales |
$ | 1,343,595 | 1,347,236 | |||||
Operating income: |
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Mohawk |
$ | 17,040 | 16,628 | |||||
Dal-Tile |
17,700 | 15,395 | ||||||
Unilin |
26,250 | 26,458 | ||||||
Corporate and eliminations |
(4,906 | ) | (4,860 | ) | ||||
Consolidated operating income |
$ | 56,084 | 53,621 | |||||
Assets: |
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Mohawk |
$ | 1,749,625 | 1,673,264 | |||||
Dal-Tile |
1,674,408 | 1,568,605 | ||||||
Unilin |
2,654,268 | 2,525,731 | ||||||
Corporate and eliminations |
187,932 | 551,300 | ||||||
Consolidated assets |
$ | 6,266,233 | 6,318,900 | |||||
Reconciliation of Net Earnings to Adjusted Net Earnings and Adjusted Diluted Earnings Per Share
(Amounts in thousands, except per share data)
(Amounts in thousands, except per share data)
Three Months Ended | ||||||||
April 2, 2011 | April 3, 2010 | |||||||
Net earnings attributable to Mohawk Industries,
Inc. |
$ | 23,442 | 20,538 | |||||
Unusual items: |
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Business restructurings |
6,813 | 4,004 | ||||||
Income taxes |
(1,018 | ) | (469 | ) | ||||
Adjusted net earnings |
$ | 29,237 | 24,073 | |||||
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Adjusted diluted earnings per share |
$ | 0.42 | 0.35 | |||||
Weighted-average common shares outstanding -
diluted |
68,904 | 68,730 |
Reconciliation of Total Debt to Net Debt
As of | ||||
(Amounts in thousands) | April 2, 2011 | |||
Current portion of long-term debt |
$ | 52,706 | ||
Long-term debt, less current portion |
1,577,188 | |||
Less: Cash and cash equivalents |
256,231 | |||
Net Debt |
$ | 1,373,663 | ||
Reconciliation of Operating Income to Adjusted EBITDA
(Amounts in thousands)
(Amounts in thousands)
Three Months Ended | Trailing Twelve | |||||||||||||||||||
Months Ended | ||||||||||||||||||||
July 3, 2010 | October 2, 2010 | December 31, 2010 | April 2, 2011 | April 2, 2011 | ||||||||||||||||
Operating income |
$ | 89,726 | 85,182 | 85,640 | 56,084 | 316,632 | ||||||||||||||
Other income (expense) |
(544 | ) | (1,124 | ) | 1,037 | (15 | ) | (646 | ) | |||||||||||
U.S. customs refund |
| 5,765 | 1,965 | | 7,730 | |||||||||||||||
Net earnings attributable to noncontrolling
interest |
(884 | ) | (1,170 | ) | (1,678 | ) | (1,096 | ) | (4,828 | ) | ||||||||||
Depreciation and amortization |
72,497 | 72,956 | 74,522 | 74,253 | 294,228 | |||||||||||||||
EBITDA |
160,795 | 161,609 | 161,486 | 129,226 | 613,116 | |||||||||||||||
Business restructurings |
4,929 | 3,330 | | 6,813 | 15,072 | |||||||||||||||
Adjusted EBITDA |
$ | 165,724 | 164,939 | 161,486 | 136,039 | 628,188 | ||||||||||||||
Net Debt to Adjusted EBITDA |
2.2 | |||||||||||||||||||
Reconciliation of Segment Net Sales to Adjusted Segment Net Sales
(Amounts in thousands)
(Amounts in thousands)
Three Months Ended | ||||||||
Unilin segment | April 2, 2011 | April 3, 2010 | ||||||
Net sales |
$ | 325,832 | 305,880 | |||||
Adjustments to net sales: |
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Exchange rate |
2,319 | | ||||||
Adjusted net sales |
$ | 328,151 | 305,880 | |||||
Reconciliation of Gross Profit to Adjusted Gross Profit
(Amounts in thousands)
(Amounts in thousands)
Three Months Ended | ||||||||
April 2, 2011 | April 3, 2010 | |||||||
Gross profit |
$ | 341,592 | 341,246 | |||||
Adjustments to gross profit: |
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Business restructurings |
6,347 | 3,857 | ||||||
Adjusted gross profit |
$ | 347,939 | 345,103 | |||||
Adjusted gross profit as a percent of net sales |
25.9 | % | 25.6 | % |
Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands)
(Amounts in thousands)
Three Months Ended | ||||||||
April 2, 2011 | April 3, 2010 | |||||||
Operating income |
$ | 56,084 | 53,621 | |||||
Adjustments to operating income: |
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Business restructurings |
6,813 | 4,004 | ||||||
Adjusted operating income |
$ | 62,897 | 57,625 | |||||
Adjusted operating income as a percent of net
sales |
4.7 | % | 4.3 | % | ||||
Three Months Ended | ||||||||
Mohawk segment | April 2, 2011 | April 3, 2010 | ||||||
Operating income |
$ | 17,040 | 16,628 | |||||
Adjustments to operating income: |
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Business restructurings |
6,813 | 3,229 | ||||||
Adjusted operating income |
$ | 23,853 | 19,857 | |||||
Adjusted operating income as a percent of net
sales |
3.5 | % | 2.8 | % | ||||
Three Months Ended | ||||||||
Unilin segment | April 2, 2011 | April 3, 2010 | ||||||
Operating income |
$ | 26,250 | 26,458 | |||||
Adjustments to operating income: |
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Business restructurings |
| 775 | ||||||
Adjusted operating income |
$ | 26,250 | 27,233 | |||||
Adjusted operating income as a percent of net
sales |
8.1 | % | 8.9 | % |
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 Companys business for
planning and forecasting in subsequent periods.