Mohawk Industries, Inc. Announces Fourth Quarter Earnings

CALHOUN, Ga., Feb. 21, 2013 /CNW/ - Mohawk Industries, Inc. (NYSE: MHK) today announced 2012 fourth quarter net earnings of $66 million and diluted earnings per share (EPS) of $0.95. Excluding restructuring charges, net earnings were $70 million and EPS was $1.01, a 40% increase over last year's fourth quarter adjusted EPS. Net sales for the fourth quarter of 2012 were $1.44 billion, an increase of 4% versus the prior year's fourth quarter and an increase of 5% on a constant exchange rate basis. For the fourth quarter of 2011, net sales were $1.38 billion, net earnings were $43 million and EPS was $0.62. Excluding unusual items, adjusted net earnings for the fourth quarter of 2011 were $50 million and adjusted EPS was $0.72.

For the year ended December 31, 2012, net sales were $5.79 billion, an increase of 3% versus the prior year and 4% on a constant exchange rate basis. Net earnings and EPS for the year were $250 million and $3.61, respectively. Excluding restructuring charges, net earnings were $262 million and EPS was $3.78, an increase of 29% over adjusted EPS in 2011. For the year ended December 31, 2011, net sales were $5.64 billion, net earnings were $174 million and EPS was $2.52. Excluding unusual items, adjusted 2011 net earnings and adjusted EPS were $202 million and $2.92, respectively.

Commenting on Mohawk Industries' fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Price increases, productivity improvements, mix and lower interest all contributed to solid results for the period. During the quarter, we generated adjusted EBITDA of $165 million and cash flow from operations of $289 million and for the year adjusted EBITDA of $677 million and cash flow from operations of $588 million. In the U.S., we improved our mix as our higher value products gained greater traction with consumers. Our recent expansion into new international markets has generated additional growth in Mexico, Russia and Australia. In 2012, we kept SG&A dollars in line with 2011, while investing in innovative marketing and products. We are continuing to strategically invest in growing our core businesses and since October, we have announced the agreement to acquire three businesses – Pergo, Marazzi and Spano. All of these transactions in combination with our existing businesses will position Mohawk for significant growth in the future. In January, we successfully issued $600 million of ten year bonds at a coupon rate of 3.85% and plan to use the proceeds to finance a portion of our Marazzi acquisition."

Mohawk segment sales were flat during the fourth quarter, with carpet sales performing better than rug sales. Our rug sales improved from last quarter, though they remain below the prior year as lower product mix and retail sales continued to decrease our results. Our new premium carpets have improved our overall selling prices and margins however sales levels were impacted by home center product transitions that we expect to be completed during the first quarter. We recently announced a carpet price increase of 4-6% to cover rising material costs. By applying the innovative processes used to develop SmartStrand Silk, we introduced our Wear-Dated Embrace nylon collection in the fourth quarter. This extends our leadership position in the ultra-soft premium category. In the commercial category, we grew sales of our new carpet tile introductions made from our premium Duracolor fiber as designers embraced the styling with high performance stain and soil resistance. We executed manufacturing productivity improvements across the business through waste reduction, enhanced recycled content and improved efficiencies.

Dal-Tile segment sales grew 15% during the quarter, with gains in the U.S. and Mexico supported by new product introductions with enhanced textures, sophisticated designs and larger formats in both residential and commercial categories. Margin expansion came from higher volumes, enhanced productivity and improved yields partially offset by plant shutdowns to reduce inventory as our new capacity ramped up faster than anticipated. Sales grew in all residential channels with successful launches of new Reveal Imaging designs, coordinated wall, floor and mosaics collections, larger format tiles from our Chinese joint venture and new decorative assortments in the home center channel. Commercial sales continued strong with the hospitality sector leading the category. In Mexico, we increased production at our Salamanca facility and we are optimizing the plant's efficiencies and yields. During the quarter, Dal-Tile lowered overall manufacturing costs with higher efficiencies, improved material formulations, increased recycled content and effective quality initiatives.

Unilin segment sales grew 1% or 5% at a constant exchange rate. Increased laminate and hardwood sales in North America, growth in our insulation boards, expanded participation in the DIY channel and solid results from our Australian distribution business contributed to our sales improvement. Our margins were favorably impacted by lower amortization charges partially offset by material inflation and negative mix as European consumers purchased more value based alternatives. In North America, new product introductions, promotions and additional home center business enhanced our sales. To support continuing growth in our insulation board business, we have begun construction of a new manufacturing facility in France. As Western European housing contracted, our roof panel sales have declined and we reduced our workforce to balance accordingly. We have licensed patents for our click furniture to additional manufacturers who are introducing new products that will increase interest in the technology.

Through product innovation, expanded distribution and process improvements, Mohawk delivered solid fourth quarter results. We are seeing some inflation in our raw materials and are taking the appropriate actions in the marketplace to address. In the U.S., low mortgage rates, stabilizing home prices and improving employment should sustain the housing recovery. We believe that U.S. residential remodeling should see improvement in the future and that the European economic conditions are near a bottom. We anticipate revenue growth for 2013 as the U.S. market improves and we realize some benefits from recent acquisitions. The first quarter earnings are seasonally the lowest and represented a little less than one sixth of 2012's full year results. With this, our guidance for first quarter earnings is $0.77 to $0.86 per share, excluding any restructuring, acquisition costs and interest on the new bonds for Marazzi.

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, Mohawk Home, Daltile, American Olean, Unilin, Pergo and Quick-Step. Mohawk's unique merchandising and marketing assists consumers 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, Brazil, China, Europe, India, 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 22, 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 # 91220581. A replay will be available until March 8, 2013 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 91220581.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three Months Ended



Twelve Months Ended


(Amounts in thousands, except per share data)


December 31, 2012


December 31, 2011


December 31, 2012


December 31, 2011










Net sales


$

1,435,659



1,378,297



5,787,980



5,642,258


Cost of sales


1,066,329



1,042,880



4,297,922



4,225,379


Gross profit


369,330



335,417



1,490,058



1,416,879


Selling, general and administrative expenses


273,470



269,123



1,110,550



1,101,337


Operating income


95,860



66,294



379,508



315,542


Interest expense


15,402



24,130



74,713



101,617


Other expense, net


1,366



257



303



14,051


Earnings before income taxes


79,092



41,907



304,492



199,874


Income tax expense


12,703



(1,990)



53,599



21,649


Net earnings


66,389



43,897



250,893



178,225


Net earnings attributable to noncontrolling interest




(966)



(635)



(4,303)


Net earnings attributable to Mohawk Industries, Inc.


$

66,389



42,931



250,258



173,922


Basic earnings per share attributable to Mohawk Industries, Inc.


$

0.96



0.62



3.63



2.53


Weighted-average common shares outstanding - basic


69,095



68,768



68,988



68,736


Diluted earnings per share attributable to Mohawk Industries, Inc.


$

0.95



0.62



3.61



2.52


Weighted-average common shares outstanding - diluted


69,536



69,016



69,306



68,964











Other Financial Information









(Amounts in thousands)









Net cash provided by operating activities


$

289,043



162,805



587,590



300,993


Depreciation and amortization


$

63,878



74,930



280,293



297,734


Capital expenditures


$

73,296



93,313



208,294



275,573











Consolidated Balance Sheet Data









(Amounts in thousands)















December 31, 2012


December 31, 2011

ASSETS









Current assets:









Cash and cash equivalents






$

477,672



311,945


Receivables, net






679,473



686,165


Inventories






1,133,736



1,113,630


Prepaid expenses and other current assets






147,580



135,514


Deferred income taxes






111,585



150,910


Total current assets






2,550,046



2,398,164


Property, plant and equipment, net






1,692,852



1,712,154


Goodwill






1,385,771



1,375,175


Intangible assets, net






553,799



605,100


Deferred income taxes and other non-current assets






121,216



115,635


Total assets






$

6,303,684



6,206,228


LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Current portion of long-term debt






$

55,213



386,255


Accounts payable and accrued expenses






773,436



715,091


Total current liabilities






828,649



1,101,346


Long-term debt, less current portion






1,327,729



1,200,184


Deferred income taxes and other long-term liabilities






427,689



455,190


Total liabilities






2,584,067



2,756,720


Noncontrolling interest








33,723


Total stockholders' equity






3,719,617



3,415,785


Total liabilities and stockholders' equity






$

6,303,684



6,206,228











Segment Information


Three Months Ended



As of and for the Twelve Months Ended


(Amounts in thousands)


December 31, 2012


December 31, 2011


December 31,
2012


December 31, 2011










Net sales:









Mohawk


$

725,895



723,975



2,912,055



2,927,674


Dal-Tile


401,637



348,541



1,616,383



1,454,316


Unilin


329,969



326,321



1,350,349



1,344,764


Intersegment sales


(21,842)



(20,540)



(90,807)



(84,496)


Consolidated net sales


$

1,435,659



1,378,297



5,787,980



5,642,258











Operating income (loss):









Mohawk


$

51,968



30,687



158,196



109,874


Dal-Tile


21,039



18,387



120,951



101,298


Unilin


29,796



21,640



126,409



127,147


Corporate and eliminations


(6,943)



(4,420)



(26,048)



(22,777)


Consolidated operating income


$

95,860



66,294



379,508



315,542











Assets:









Mohawk






$

1,721,214



1,769,065


Dal-Tile






1,731,258



1,732,818


Unilin






2,672,389



2,533,070


Corporate and eliminations






178,823



171,275


Consolidated assets






$

6,303,684



6,206,228











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,
2012


December 31,
2011


December 31,
2012


December 31,
2011

Net earnings attributable to Mohawk Industries, Inc.


$

66,389



42,931



250,258



173,922


Adjusting items:









Unrealized foreign currency losses (1)








9,085


Operating lease correction (2)




6,035





6,035


Business restructurings


6,109



7,696



18,564



23,209


Debt extinguishment costs








1,116


Income taxes


(2,111)



(7,152)



(7,003)



(11,749)


Adjusted net earnings attributable to Mohawk Industries, Inc.


$

70,387



49,510



261,819



201,618














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


$

1.01



0.72



3.78



2.92


Weighted-average common shares outstanding - diluted


69,536



69,016



69,306



68,964


Reconciliation of Operating Cash Flow to Free Cash Flow




(Amounts in thousands)









Three Months Ended







December 31, 2012




Net cash provided by operating activities


$

289,043





Capital expenditures


73,296





Free cash flow


$

215,747












Reconciliation of Total Debt to Net Debt




(Amounts in thousands)









December 31,
2012


December 31, 2011


Current portion of long-term debt


$

55,213



386,255



Long-term debt, less current portion


1,327,729



1,200,184



Less: Cash and cash equivalents


477,672



311,945



Net Debt


$

905,270



1,274,494










Reconciliation of Operating Income to Adjusted EBITDA





(Amounts in thousands)












Three Months Ended



Trailing Twelve
Months Ended




March 31, 2012


June 30, 2012


September 29, 2012


December 31, 2012


December 31,
2012

Operating income


$

71,976



107,718



103,954



95,860



379,508


Other (expense) income


1,825



(440)



(322)



(1,366)



(303)


Net earnings attributable to noncontrolling interest


(635)









(635)


Depreciation and amortization


73,286



71,831



71,298



63,878



280,293


EBITDA


146,452



179,109



174,930



158,372



658,863


Business restructurings




8,226



4,229



6,109



18,564


Adjusted EBITDA


$

146,452



187,335



179,159



164,481



677,427














Net Debt to Adjusted EBITDA










1.3














Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate



(Amounts in thousands)













Three Months Ended


Twelve Months Ended






December 31,
2012


December 31,
2011


December 31,
2012


December 31,
2011


Net sales


$

1,435,659



1,378,297



5,787,980



5,642,258



Adjustment to net sales on a constant exchange rate


9,423





92,300





Net sales on a constant exchange rate


$

1,445,082



1,378,297



5,880,280



5,642,258



Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate

(Amounts in thousands)








Three Months Ended

Dal-Tile


December 31,
2012


December 31,
2011

Net sales


$

401,637



348,541

Adjustment to segment net sales on a constant exchange rate


(1,635)



Segment net sales on a constant exchange rate


$

400,002



348,541







Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate

(Amounts in thousands)








Three Months Ended

Unilin



December 31,
2012


December 31,
2011

Net sales


$

329,969



326,321

Adjustment to segment net sales on a constant exchange rate


11,058



Segment net sales on a constant exchange rate


$

341,027



326,321







Reconciliation of Operating Income to Adjusted Operating Income





(Amounts in thousands)












Three Months Ended


Twelve Months Ended





December 31,
2012


December 31,
2011


December 31,
2012


December 31,
2011

Operating income


$

95,860



66,294



379,508



315,542


Operating lease correction (2)




6,035





6,035


Business restructurings


6,109



7,696



18,564



23,209


Adjusted operating income


$

101,969



80,025



398,072



344,786


Adjusted operating margin as a percent of net sales


7.1%



5.8%



6.9%



6.1%












Reconciliation of Segment Operating Income to Adjusted Segment Operating Income





(Amounts in thousands)












Three Months Ended


Twelve Months Ended


Mohawk


December 31,
2012


December 31,
2011


December 31,
2012


December 31,
2011

Operating income


$

51,968



30,687



158,196



109,874


Operating lease correction (2)




2,761





2,761


Business restructurings




7,696



10,504



23,209


Adjusted segment operating income


$

51,968



41,144



168,700



135,844


Adjusted operating margin as a percent of net sales


7.2%



5.7%



5.8%



4.6%












Reconciliation of Segment Operating Income to Adjusted Segment Operating Income





(Amounts in thousands)












Three Months Ended


Twelve Months Ended


Dal-Tile


December 31,
2012


December 31,
2011


December 31,
2012


December 31,
2011

Operating income


$

21,039



18,387



120,951



101,298


Operating lease correction (2)




3,274





3,274


Business restructurings


6,109





6,109




Adjusted segment operating income


$

27,148



21,661



127,060



104,572


Adjusted operating margin as a percent of net sales


6.8%



6.2%



7.9%



7.2%












Reconciliation of Segment Operating Income to Adjusted Segment Operating Income





(Amounts in thousands)












Three Months Ended


Twelve Months Ended


Unilin


December 31,
2012


December 31,
2011


December 31,
2012


December 31,
2011

Operating income


29,796



21,640



126,409



127,147


Business restructurings






1,951




Adjusted segment operating income


$

29,796



21,640



128,360



127,147


Adjusted operating margin as a percent of net sales


9.0%



6.6%



9.5%



9.5%












Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes

(Amounts in thousands)








Three Months Ended




December 31,
2012


December 31,
2011

Earnings before income taxes


$

79,092



41,907


Adjustments to earnings before income taxes:





Operating lease correction (2)




6,035


Business restructurings


6,109



7,696


Adjusted earnings before income taxes


$

85,201



55,638








Reconciliation of Income Tax Expense to Adjusted Income Tax Expense

(Amounts in thousands)








Three Months Ended




December 31,
2012


December 31,
2011

Income tax expense


$

12,703



(1,990)


Income tax effect of adjusting items


2,111



7,152


Adjusted income tax expense


$

14,814



5,162








Adjusted income tax rate


17%



9%








(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 the planning and forecasting in subsequent periods.

SOURCE: Mohawk Industries, Inc.

For further information:

Frank H. Boykin, Chief Financial Officer, +1-706-624-2695

http://www.mohawkind.com