MOHAWK INDUSTRIES INC - FORM 8-K - EX-99.1 - 3Q2013 EARNINGS PRESS RELEASE

Attached files

file	filename
8-K - 8-K - MOHAWK INDUSTRIES INC	a3q20138-kearningscoverpage.htm

Exhibit 99.1

NEWS RELEASE ______________________________________________________________________________________________________

For Release: Immediately

Contact: Frank H. Boykin, Chief Financial Officer (706) 624-2695

MOHAWK INDUSTRIES, INC. ANNOUNCES THIRD QUARTER EARNINGS


•	Net sales up 33% over PY


•	Adjusted EPS increased 94%

(Calhoun, Ga.) - October 31, 2013 - Mohawk Industries, Inc. (NYSE:MHK) today announced 2013 third quarter net earnings of $119 million and diluted earnings per share (EPS) of $1.63. Excluding unusual charges, net earnings were $147 million and EPS was $2.02, a 94% increase over last year’s third quarter adjusted EPS. Net sales for the third quarter of 2013 were approximately $2.0 billion, an increase of 33% versus the prior year’s third quarter. For the third quarter of 2012, net sales were approximately $1.5 billion, net earnings were $70 million and EPS was $1.01; excluding unusual charges, net earnings were $72 million and EPS was $1.04.

For the nine months ending September 28, 2013, net sales were approximately $5.4 billion, an increase of approximately 25% versus the prior year. Net earnings and EPS for the nine-month period were $254 million and $3.53, respectively. Net earnings excluding unusual charges were $342 million and EPS was $4.76, an increase of 72% over the nine-month adjusted EPS results in 2012. For the nine months ending September 29, 2012, net sales were approximately $4.4 billion, net earnings were $184 million and EPS was $2.66. Excluding unusual charges, net earnings and EPS were $191 million and $2.76, respectively.

Commenting on Mohawk Industries’ third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “This quarter we are reporting the highest adjusted EPS in Company history. During the period, higher U.S. volumes, efficiency improvements and the performance of our Pergo, Marazzi and Spano acquisitions supported our strong growth. Our legacy net sales increased approximately 5% as reported, with the balance of our revenue growth derived from our recent acquisitions. Our adjusted operating income improved 350 basis points over the prior year to approximately 11% of sales as a result of enhanced product mix from innovative new collections, improved manufacturing and distribution efficiencies and the implementation of new systems and processes. Ongoing cost containment measures improved our adjusted SG&A by 130 basis points even with significant investments in samples and marketing for new product launches.”

Carpet segment net sales for the quarter were $773 million, up 3% over last year, rising with stronger demand from residential new construction and remodeling. The segment’s operating margin, excluding unusual charges, for the quarter was 9% of sales, an increase of 290 basis points and the strongest in more than six years due to improved product mix, realignment of assets, productivity, cost controls and volume leverage. Residential mix continued to improve with the expansion of the company’s industry-leading position in premium soft carpets and the introduction of the Soft Appeal™ luxury polyester collection. Price increases previously executed offset raw material inflation.

Ceramic segment net sales were $767 million, up 84% over last year, with strong results from both the legacy Dal-Tile business and the Marazzi acquisition. Operating margins, excluding unusual charges, were approximately 12% of sales, an increase of 290 basis points over the prior year as a result of higher

volumes, efficiency gains and improved product mix. North American sales rose in the low teens with strong performances in the specialty retail, home center, builder and commercial channels and Mexican sales that outpaced the market. A 2-4% North American price increase was implemented in August to offset higher energy and transportation costs. The Company’s Russian ceramic sales outperformed the overall market and gained share due to the success of new product introductions as well as strength in the new construction and franchised retail channels. The Company’s European ceramic sales increased in Eastern Europe, the Middle East and the Far East offsetting soft conditions in Western Europe.

Laminate and Wood segment net sales were $451 million, up 37% over last year, with most of that increase from the acquisitions of Pergo and Spano and growth in North America across all product categories and customer channels. Operating income, excluding unusual charges, was approximately 13% of sales, an improvement of 380 basis points over the prior year due primarily to increased North American volume, overall improved productivity and decreased amortization expense. In North America, the integration of Unilin and Pergo is yielding improved productivity and efficiencies and new capacity is being added to satisfy increased demand for single planks. In Europe, the Pergo manufacturing assets have been closed and production was moved to the Company's more efficient Belgium operations to improve the product offering and manufacturing costs. In both Russia and Australia, price increases of 4 to 8% were implemented on laminate and wood to offset currency changes. The new insulation board plant in France has begun production and is expanding our reach into new territories in France and Germany.

“Mohawk today is in the strongest position in our company’s history,” said Lorberbaum. "We have substantially grown our profits and expect continued improvement next year. With our Pergo, Marazzi and Spano acquisitions, we are quickly moving to drive synergies, lower costs and increase top line growth. We have already executed many initiatives to improve the performance of these acquisitions, including implementing new strategies and organizational structures, upgrading marketing tactics and product lines, and reducing costs through best practices and closing high cost assets. In our legacy businesses, we have significant opportunities to deliver improved results as the U.S. business strengthens and we expand our investments in our people, products and capacities. With these factors, our guidance for fourth quarter earnings is $1.66 to $1.75 per share, excluding any restructuring or acquisition costs."

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, November 1, 2013 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 # 74423838. A replay will be available until Friday November 22, 2013 by dialing 855-859-2056

for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 74423838.



MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations	Three Months Ended				Nine Months Ended
(Amounts in thousands, except per share data)	September 28, 2013			September 29, 2012	September 28, 2013			September 29, 2012

Net sales	$	1,961,536		1,473,493	5,424,650			4,352,321
Cost of sales	1,444,646			1,100,656	4,016,638			3,231,594
Gross profit	516,890			372,837	1,408,012			1,120,727
Selling, general and administrative expenses	340,987			268,883	1,012,069			837,079
Operating income	175,903			103,954	395,943			283,648
Interest expense	25,630			17,969	70,098			59,311
Other expense (income), net	1,168			322	6,458			(1,063	)
Earnings from continuing operations before income taxes	149,105			85,663	319,387			225,400
Income tax expense	28,993			15,359	62,965			40,896
Earnings from continuing operations	120,112			70,304	256,422			184,504
Loss from discontinued operations, net of income tax benefit of $297 and $782, respectively	(553		)	—	(1,914		)	—
Net earnings including noncontrolling interest	119,559			70,304	254,508			184,504
Net earnings attributable to noncontrolling interest	491			—	373			635
Net earnings attributable to Mohawk Industries, Inc.	$	119,068		70,304	254,135			183,869

Basic earnings per share attributable to Mohawk Industries, Inc.
Income from continuing operations	$	1.65		1.02	3.59			2.67
Loss from discontinued operations, net of income taxes	(0.01		)	—	(0.03		)	—
Basic earnings per share attributable to Mohawk Industries, Inc.	$	1.64		1.02	3.56			2.67
Weighted-average common shares outstanding - basic	72,575			69,010	71,467			68,952

Diluted earnings per share attributable to Mohawk Industries, Inc.
Income from continuing operations	$	1.64		1.01	3.56			2.66
Loss from discontinued operations, net of income taxes	(0.01		)	—	(0.03		)	—
Diluted earnings per share attributable to Mohawk Industries, Inc.	$	1.63		1.01	3.53			2.66
Weighted-average common shares outstanding - diluted	73,087			69,337	71,975			69,247

Other Financial Information
(Amounts in thousands)
Depreciation and amortization	$	81,550		71,298	222,542			216,415
Capital expenditures	$	109,426		47,311	255,523			134,998

Consolidated Balance Sheet Data
(Amounts in thousands)
					September 28, 2013			September 29, 2012
ASSETS
Current assets:
Cash and cash equivalents					$	63,580		380,842
Receivables, net					1,154,368			817,214
Inventories					1,612,696			1,139,403
Prepaid expenses and other current assets					221,767			146,275



Deferred income taxes						136,052			112,995
Total current assets						3,188,463			2,596,729
Property, plant and equipment, net						2,683,984			1,657,226
Goodwill						1,713,883			1,371,494
Intangible assets, net						811,116			554,257
Deferred income taxes and other non-current assets						166,711			122,906
Total assets						$	8,564,157		6,302,612
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt						$	89,031		57,673
Accounts payable and accrued expenses						1,296,192			761,186
Total current liabilities						1,385,223			818,859
Long-term debt, less current portion						2,257,391			1,467,269
Deferred income taxes and other long-term liabilities						587,910			421,549
Total liabilities						4,230,524			2,707,677
Total stockholders' equity						4,333,633			3,594,935
Total liabilities and stockholders' equity						$	8,564,157		6,302,612

Segment Information	Three Months Ended					As of and for the Nine Months Ended
(Amounts in thousands)	September 28, 2013			September 29, 2012		September 28, 2013			September 29, 2012

Net sales:
Carpet	$	772,751		751,787		2,238,953			2,186,160
Ceramic	767,005			417,533		1,939,054			1,214,746
Laminate and Wood	450,723			328,582		1,326,178			1,020,380
Intersegment sales	(28,943		)	(24,409	)	(79,535		)	(68,965	)
Consolidated net sales	$	1,961,536		1,473,493		5,424,650			4,352,321

Operating income (loss):
Carpet	$	68,836		43,810		148,936			106,228
Ceramic	75,908			37,452		152,188			99,912
Laminate and Wood	39,020			28,892		119,075			96,613
Corporate and eliminations	(7,861		)	(6,200	)	(24,256		)	(19,105	)
Consolidated operating income	$	175,903		103,954		395,943			283,648

Assets:
Carpet						$	1,830,869		1,760,828
Ceramic						3,820,002			1,783,147
Laminate and Wood						2,721,707			2,586,084
Corporate and eliminations						191,579			172,553
Consolidated assets						$	8,564,157		6,302,612



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					Nine Months Ended
				September 28, 2013			September 29, 2012		September 28, 2013		September 29, 2012
Net earnings attributable to Mohawk Industries, Inc.				$	119,068		70,304		254,135		183,869
Adjusting items:
Restructuring, acquisition and integration-related costs				24,431			4,229		75,608		12,455
Acquisition purchase accounting (inventory step-up)				12,297			—		31,041		—
Discontinued operations				851			—		2,696		—
Deferred loan cost				490			—		490		—
Interest on 3.85% senior notes				—			—		3,559		—
Income taxes				(9,772		)	(2,691	)	(25,220	)	(4,892	)
Adjusted net earnings attributable to Mohawk Industries, Inc.				$	147,365		71,842		342,309		191,432

Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.				$	2.02		1.04		4.76		2.76
Weighted-average common shares outstanding - diluted				73,087			69,337		71,975		69,247

Reconciliation of Total Debt to Net Debt
(Amounts in thousands)
	September 28, 2013
Current portion of long-term debt	$	89,031
Long-term debt, less current portion	2,257,391
Less: Cash and cash equivalents	63,580
Net Debt	$	2,282,842


Reconciliation of Operating Income to Proforma Adjusted EBITDA
(Amounts in thousands)
	Three Months Ended										Trailing Twelve Months Ended
	December 31, 2012			March 30, 2013			June 29, 2013		September 28, 2013		September 28, 2013
Operating income	$	95,860		86,842			133,198		175,903		491,803
Other (expense) income	(1,366		)	(6,387		)	1,097		(1,168	)	(7,824	)
Net (earnings) loss attributable to noncontrolling interest	—			(72		)	190		(491	)	(373	)
Depreciation and amortization	63,878			60,349			80,643		81,550		286,420
EBITDA	158,372			140,732			215,128		255,794		770,026
Restructuring, acquisition and integration-related costs	6,109			9,856			41,321		24,431		81,717
Acquisition purchase accounting (inventory step-up)	—			—			18,744		12,297		31,041
Acquisitions EBITDA	55,046			40,542			—		—		95,588
Proforma Adjusted EBITDA	$	219,527		191,130			275,193		292,522		978,372

Net Debt to Proforma Adjusted EBITDA											2.3




Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate
(Amounts in thousands)
	Three Months Ended
	September 28, 2013			September 29, 2012
Net sales	$	1,961,536		1,473,493
Adjustment to net sales on a constant exchange rate	(13,621		)	—
Net sales on a constant exchange rate	$	1,947,915		1,473,493

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate
(Amounts in thousands)
	Three Months Ended
Ceramic	September 28, 2013			September 29, 2012
Net sales	$	767,005		417,533
Adjustment to segment net sales on a constant exchange rate	91			—
Segment net sales on a constant exchange rate	$	767,096		417,533

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate
(Amounts in thousands)
	Three Months Ended
Wood and Laminate	September 28, 2013			September 29, 2012
Net sales	$	450,723		328,582
Adjustment to segment net sales on a constant exchange rate	(13,712		)	—
Segment net sales on a constant exchange rate	$	437,011		328,582

Reconciliation of Gross Profit to Adjusted Gross Profit
(Amounts in thousands)
	Three Months Ended
	September 28, 2013			September 29, 2012
Gross profit	$	516,890		372,837
Adjustments to gross profit:
Restructuring, acquisition and integration-related costs	14,699			2,984
Acquisition purchase accounting (inventory step-up)	12,297			—
Adjusted gross profit	$	543,886		375,821
Adjusted gross profit as a percent of net sales	27.7		%	25.5	%




Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses
(Amounts in thousands)
	Three Months Ended
	September 28, 2013			September 29, 2012
Selling, general and administrative expenses	$	340,987		268,883
Adjustments to selling, general and administrative expenses:
Restructuring, acquisition and integration-related costs	(9,712		)	(1,245	)
Adjusted selling, general and administrative expenses	$	331,275		267,638
Adjusted selling, general and administrative expenses as a percent of net sales	16.9		%	18.2	%

Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands)
	Three Months Ended
	September 28, 2013			September 29, 2012
Operating income	$	175,903		103,954
Adjustments to operating income:
Restructuring, acquisition and integration-related costs	24,411			4,229
Acquisition purchase accounting (inventory step-up)	12,297			—
Adjusted operating income	$	212,611		108,183
Adjusted operating margin as a percent of net sales	10.8		%	7.3	%

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
(Amounts in thousands)
	Three Months Ended
Carpet	September 28, 2013			September 29, 2012
Operating income	$	68,836		43,810
Adjustment to segment operating income:
Restructuring, acquisition and integration-related costs	1,570			3,122
Adjusted segment operating income	$	70,406		46,932
Adjusted operating margin as a percent of net sales	9.1		%	6.2	%

	Three Months Ended
Ceramic	September 28, 2013			September 29, 2012
Operating income	$	75,908		37,452
Adjustments to segment operating income:
Restructuring, acquisition and integration-related costs	3,070			—
Acquisition purchase accounting (inventory step-up)	12,297			—
Adjusted segment operating income	$	91,275		37,452
Adjusted operating margin as a percent of net sales	11.9		%	9.0	%




	Three Months Ended
Laminate and Wood	September 28, 2013			September 29, 2012
Operating income	$	39,020		28,892
Adjustment to segment operating income:
Restructuring, acquisition and integration-related costs	19,246			1,107
Adjusted segment operating income	$	58,266		29,999
Adjusted operating margin as a percent of net sales	12.9		%	9.1	%

Reconciliation of Earnings from Continuing Operations Before Income Taxes to Adjusted Earnings from Continuing Operations Before Income Taxes
(Amounts in thousands)
	Three Months Ended
	September 28, 2013			September 29, 2012
Earnings from continuing operations before income taxes	$	149,105		85,663
Adjustments to earnings from continuing operations before income taxes:
Restructuring, acquisition and integration-related costs	24,431			4,229
Acquisition purchase accounting (inventory step-up)	12,297			—
Deferred loan cost	490			—
Adjusted earnings from continuing operations before income taxes	$	186,323		89,892


Reconciliation of Income Tax Expense to Adjusted Income Tax Expense
(Amounts in thousands)
	Three Months Ended
	September 28, 2013			September 29, 2012
Income tax expense	$	28,993		15,359
Income tax effect of adjusting items	9,475			2,691
Adjusted income tax expense	$	38,468		18,050

Adjusted income tax rate	21		%	20	%



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.

Attached files

Stock widget

Investing forum

MOHAWK INDUSTRIES INC Reports