Mohawk Industries, Inc. Announces Fourth Quarter Earnings

CALHOUN, Ga., Feb. 23, 2012 /CNW/ - 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.

For further information:

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

http://www.mohawkind.com


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