Mohawk Industries Reports Record Third Quarter
For the nine months ending
Commenting on
"Our organization continues to create new products with greater value for the consumer, to introduce unique ideas that enhance our processes and to invest in technology and equipment that improve our cost, quality and service. The four acquisitions we completed in 2015 contributed to our results as we enhanced their performance by upgrading their offerings, expanding their distribution and improving their productivity. As expected, our SG&A costs, excluding restructuring, integration and other charges, as a percentage of sales improved by 60 basis points as our investments in sales personnel, marketing and merchandising increased our sales and mix.
"In many of our product categories and geographies, our operations are running at or near capacity. These include all of our global ceramic, laminate and sheet vinyl assets. Additionally, we are currently selling all of the LVT we are manufacturing even as we continue to increase our production capacity in the U.S. and
"For the quarter, our Global Ceramic Segment sales were up 4% as reported; on a constant days and currency basis sales were up 6%. Operating income for the segment rose approximately 13% to an operating margin of 16.5%. Our North American ceramic sales trends improved from the second to the third quarter, and operating margins expanded over last year. New home construction and the commercial sector outperformed residential remodeling, and sales growth through our service centers exceeded other channels. Our new
"During the quarter, our
"For the quarter, our Flooring Rest of the World Segment's sales were up 15% as reported; on a constant days and currency basis, legacy sales were up 8%. Operating income grew 47% as reported to a margin of 18% and increased 41% on a constant currency basis, excluding restructuring and integration charges, to a margin of approximately 19%. Our laminate business continues to grow on the strength of our premium Quick-Step and Pergo brands. We are leveraging the strong performance of our 2016 laminate introductions by expanding the designs and sizes we offer across all brands. Our European and Russian laminate facilities are operating near capacity with expansions planned for
"Today, Mohawk is in the best position in the company's history. This year, we are investing at our highest level ever to meet increasing demand around the globe. We are preparing for future growth by expanding our differentiated product offerings and increasing the capacity and efficiency of our operations. With our continued investments in manufacturing technology, we are introducing distinctive collections to improve our sales and enhance our mix. We are aggressively implementing productivity improvements across the enterprise in all facets of our business, and we are bringing new capacity online to support our growth. This year, our strong operating results have expanded our cash flow and reduced our leverage to historically low levels. We are currently exploring numerous investment options to further our expansion, including green field opportunities and acquisitions to broaden our geographic presence and product portfolio. Taking these factors into account, our EPS guidance for the fourth quarter is
ABOUT
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 and deflation in raw material prices and other input costs; inflation and deflation in consumer markets; 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
Conference call
The telephone number is 1-800-603-9255 for US/
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
||||||||
(Unaudited) |
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Consolidated Statement of Operations |
Three Months Ended |
Nine Months Ended |
||||||
(Amounts in thousands, except per share data) |
October 1, 2016 |
October 3, 2015 |
October 1, 2016 |
October 3, 2015 |
||||
Net sales |
$ 2,294,139 |
2,150,656 |
6,776,521 |
6,073,566 |
||||
Cost of sales |
1,567,580 |
1,489,252 |
4,654,695 |
4,285,090 |
||||
Gross profit |
726,559 |
661,404 |
2,121,826 |
1,788,476 |
||||
Selling, general and administrative expenses |
348,252 |
372,670 |
1,147,155 |
1,200,152 |
||||
Operating income |
378,307 |
288,734 |
974,671 |
588,324 |
||||
Interest expense |
9,410 |
19,319 |
32,062 |
52,606 |
||||
Other expense (income), net |
3,839 |
4,249 |
1,461 |
6,094 |
||||
Earnings before income taxes |
365,058 |
265,166 |
941,148 |
529,624 |
||||
Income tax expense |
94,231 |
49,463 |
242,090 |
104,643 |
||||
Net earnings including noncontrolling interest |
270,827 |
215,703 |
699,058 |
424,981 |
||||
Net earnings attributable to noncontrolling interest |
949 |
798 |
2,444 |
1,238 |
||||
Net earnings attributable to Mohawk Industries, Inc. |
$ 269,878 |
214,905 |
696,614 |
423,743 |
||||
Basic earnings per share attributable to Mohawk Industries, Inc. |
||||||||
Basic earnings per share attributable to Mohawk Industries, Inc. |
$ 3.64 |
2.91 |
9.40 |
5.77 |
||||
Weighted-average common shares outstanding - basic |
74,154 |
73,915 |
74,084 |
73,384 |
||||
Diluted earnings per share attributable to Mohawk Industries, Inc. |
||||||||
Diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 3.62 |
2.89 |
9.34 |
5.73 |
||||
Weighted-average common shares outstanding - diluted |
74,613 |
74,438 |
74,551 |
73,907 |
||||
Other Financial Information |
||||||||
(Amounts in thousands) |
||||||||
Depreciation and amortization |
$ 103,680 |
94,954 |
305,088 |
268,622 |
||||
Capital expenditures |
$ 183,846 |
123,648 |
460,760 |
352,070 |
||||
Consolidated Balance Sheet Data |
||||||||
(Amounts in thousands) |
||||||||
October 1, 2016 |
October 3, 2015 |
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ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 112,108 |
110,716 |
||||||
Receivables, net |
1,506,316 |
1,340,650 |
||||||
Inventories |
1,673,242 |
1,621,154 |
||||||
Prepaid expenses and other current assets |
284,648 |
273,775 |
||||||
Total current assets |
3,576,314 |
3,346,295 |
||||||
Property, plant and equipment, net |
3,340,893 |
3,046,491 |
||||||
Goodwill |
2,331,821 |
2,280,722 |
||||||
Intangible assets, net |
876,715 |
918,655 |
||||||
Deferred income taxes and other non-current assets |
294,850 |
464,047 |
||||||
Total assets |
$ 10,420,593 |
10,056,210 |
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and commercial paper |
$ 1,548,251 |
1,927,815 |
||||||
Accounts payable and accrued expenses |
1,435,069 |
1,353,512 |
||||||
Total current liabilities |
2,983,320 |
3,281,327 |
||||||
Long-term debt, less current portion |
1,165,577 |
1,254,904 |
||||||
Deferred income taxes and other long-term liabilities |
574,267 |
741,946 |
||||||
Total liabilities |
4,723,164 |
5,278,177 |
||||||
Redeemable noncontrolling interest |
24,741 |
22,150 |
||||||
Total stockholders' equity |
5,672,688 |
4,755,883 |
||||||
Total liabilities and stockholders' equity |
$ 10,420,593 |
10,056,210 |
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Segment Information |
Three Months Ended |
As of or for the Nine Months Ended |
||||||
(Amounts in thousands) |
October 1, 2016 |
October 3, 2015 |
October 1, 2016 |
October 3, 2015 |
||||
Net sales: |
||||||||
Global Ceramic |
$ 822,040 |
791,538 |
2,425,560 |
2,301,168 |
||||
Flooring NA |
1,008,553 |
955,099 |
2,895,610 |
2,722,347 |
||||
Flooring ROW |
463,546 |
404,026 |
1,455,351 |
1,050,390 |
||||
Intersegment sales |
- |
(7) |
- |
(339) |
||||
Consolidated net sales |
$ 2,294,139 |
2,150,656 |
6,776,521 |
6,073,566 |
||||
Operating income (loss): |
||||||||
Global Ceramic |
$ 135,985 |
120,055 |
376,368 |
326,571 |
||||
Flooring NA |
170,507 |
125,910 |
364,804 |
145,861 |
||||
Flooring ROW |
81,757 |
55,471 |
262,356 |
153,164 |
||||
Corporate and eliminations |
(9,942) |
(12,702) |
(28,857) |
(37,272) |
||||
Consolidated operating income |
$ 378,307 |
288,734 |
974,671 |
588,324 |
||||
Assets: |
||||||||
Global Ceramic |
$ 4,118,510 |
3,938,242 |
||||||
Flooring NA |
3,354,286 |
3,195,904 |
||||||
Flooring ROW |
2,851,227 |
2,699,255 |
||||||
Corporate and eliminations |
96,570 |
222,809 |
||||||
Consolidated assets |
$ 10,420,593 |
10,056,210 |
||||||
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. |
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(Amounts in thousands, except per share data) |
||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||
October 1, 2016 |
October 3, 2015 |
October 1, 2016 |
October 3, 2015 |
|||||||
Net earnings attributable to Mohawk Industries, Inc. |
$ 269,878 |
214,905 |
696,614 |
423,743 |
||||||
Adjusting items: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
30,572 |
12,770 |
44,309 |
43,784 |
||||||
Acquisitions purchase accounting (inventory step-up) |
- |
7,160 |
- |
13,316 |
||||||
Legal settlement and reserves |
(90,000) |
- |
(90,000) |
127,000 |
||||||
Release of indemnification asset |
2,368 |
- |
2,368 |
- |
||||||
Tradename impairment |
47,905 |
- |
47,905 |
- |
||||||
Deferred loan costs |
- |
- |
- |
651 |
||||||
Income taxes - reversal of uncertain tax position |
(2,368) |
- |
(2,368) |
- |
||||||
Income taxes |
2,856 |
(12,940) |
(1,764) |
(62,984) |
||||||
Adjusted net earnings attributable to Mohawk Industries, Inc. |
$ 261,211 |
221,895 |
697,064 |
545,510 |
||||||
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 3.50 |
2.98 |
9.35 |
7.38 |
||||||
Weighted-average common shares outstanding - diluted |
74,613 |
74,438 |
74,551 |
73,907 |
||||||
Reconciliation of Total Debt to Net Debt |
||||||||||
(Amounts in thousands) |
||||||||||
October 1, 2016 |
||||||||||
Current portion of long-term debt and commercial paper |
$ 1,548,251 |
|||||||||
Long-term debt, less current portion |
1,165,577 |
|||||||||
Less: Cash and cash equivalents |
112,108 |
|||||||||
Net Debt |
$ 2,601,720 |
|||||||||
Reconciliation of Operating Income to Pro forma Adjusted EBITDA |
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(Amounts in thousands) |
Trailing Twelve |
|||||||||
Three Months Ended |
Months Ended |
|||||||||
December 31, 2015 |
April 2, 2016 |
July 2, 2016 |
October 1, 2016 |
October 1, 2016 |
||||||
Operating income |
$ 249,242 |
245,672 |
350,692 |
378,307 |
1,223,913 |
|||||
Other (expense) income |
(11,525) |
(3,429) |
5,807 |
(3,839) |
(12,986) |
|||||
Net (earnings) loss attributable to non-controlling interest |
(446) |
(569) |
(926) |
(949) |
(2,890) |
|||||
Depreciation and amortization |
94,025 |
100,194 |
101,215 |
103,680 |
399,114 |
|||||
EBITDA |
331,296 |
341,868 |
456,788 |
477,199 |
1,607,151 |
|||||
Restructuring, acquisition and integration-related and other costs |
30,820 |
7,718 |
6,020 |
30,572 |
75,130 |
|||||
Acquisitions purchase accounting (inventory step-up) |
21 |
- |
- |
- |
21 |
|||||
Legal settlement and reserves |
(2,520) |
- |
- |
(90,000) |
(92,520) |
|||||
Release of indemnification asset |
11,180 |
- |
- |
2,368 |
13,548 |
|||||
Tradename impairment |
- |
- |
- |
47,905 |
47,905 |
|||||
Acquisitions EBITDA |
7,337 |
- |
- |
- |
7,337 |
|||||
Pro forma Adjusted EBITDA |
$ 378,134 |
349,586 |
462,808 |
468,044 |
1,658,572 |
|||||
Net Debt to Pro forma Adjusted EBITDA |
1.6 |
|||||||||
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding Acquisition Volume |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||
October 1, 2016 |
October 3, 2015 |
October 1, 2016 |
October 3, 2015 |
|||||||
Net sales |
$ 2,294,139 |
2,150,656 |
6,776,521 |
6,073,566 |
||||||
Adjustment to net sales on constant shipping days |
35,775 |
- |
- |
- |
||||||
Adjustment to net sales on a constant exchange rate |
10,139 |
- |
52,001 |
- |
||||||
Net sales on a constant exchange rate and constant shipping days |
2,340,053 |
2,150,656 |
6,828,522 |
6,073,566 |
||||||
Less: impact of acquisition volume |
(40,440) |
- |
(525,772) |
(55,672) |
||||||
Net sales on a constant exchange rate and constant shipping days excluding acquisition volume |
$ 2,299,613 |
2,150,656 |
6,302,750 |
6,017,894 |
||||||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
Global Ceramic |
October 1, 2016 |
October 3, 2015 |
||||||||
Net sales |
$ 822,040 |
791,538 |
||||||||
Adjustment to net sales on constant shipping days |
13,066 |
- |
||||||||
Adjustment to segment net sales on a constant exchange rate |
5,284 |
- |
||||||||
Segment net sales on a constant exchange rate and constant shipping days |
$ 840,390 |
791,538 |
||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on Constant Shipping Days |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
Flooring NA |
October 1, 2016 |
October 3, 2015 |
||||||||
Net sales |
$ 1,008,553 |
955,099 |
||||||||
Adjustment to net sales on constant shipping days |
16,009 |
- |
||||||||
Segment net sales on constant shipping days |
$ 1,024,562 |
955,099 |
||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding Acquisition Volume |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
Flooring ROW |
October 1, 2016 |
October 3, 2015 |
||||||||
Net sales |
$ 463,546 |
404,026 |
||||||||
Adjustment to net sales on constant shipping days |
6,700 |
- |
||||||||
Adjustment to segment net sales on a constant exchange rate |
4,856 |
- |
||||||||
Segment net sales on a constant exchange rate and constant shipping days |
475,102 |
404,026 |
||||||||
Less: impact of acquisition volume |
(40,440) |
- |
||||||||
Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume |
$ 434,662 |
404,026 |
||||||||
Reconciliation of Gross Profit to Adjusted Gross Profit |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
October 1, 2016 |
October 3, 2015 |
|||||||||
Gross Profit |
$ 726,559 |
661,404 |
||||||||
Adjustments to gross profit: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
17,459 |
7,291 |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
7,160 |
||||||||
Adjusted gross profit |
$ 744,018 |
675,855 |
||||||||
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
October 1, 2016 |
October 3, 2015 |
|||||||||
Selling, general and administrative expenses |
$ 348,252 |
372,670 |
||||||||
Adjustments to selling, general and administrative expenses: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
(13,112) |
(5,479) |
||||||||
Legal settlement and reserves |
90,000 |
- |
||||||||
Tradename impairment |
(47,905) |
- |
||||||||
Adjusted selling, general and administrative expenses |
$ 377,235 |
367,191 |
||||||||
Reconciliation of Operating Income to Adjusted Operating Income on a Constant Exchange Rate |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
October 1, 2016 |
October 3, 2015 |
|||||||||
Operating income |
$ 378,307 |
288,734 |
||||||||
Adjustments to operating income: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
30,572 |
12,770 |
||||||||
Legal settlement and reserves |
(90,000) |
- |
||||||||
Tradename impairment |
47,905 |
- |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
7,160 |
||||||||
Adjusted operating income |
366,784 |
308,664 |
||||||||
Adjustment to operating income on a constant exchange rate |
6,832 |
- |
||||||||
Adjusted operating income on constant exchange rate |
$ 373,616 |
308,664 |
||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income on a Constant Exchange Rate |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
Global Ceramic |
October 1, 2016 |
October 3, 2015 |
||||||||
Operating income |
$ 135,985 |
120,055 |
||||||||
Adjustments to segment operating income: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
456 |
118 |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
949 |
||||||||
Adjusted segment operating income |
136,441 |
121,122 |
||||||||
Adjustment to operating income on a constant exchange rate |
1,684 |
- |
||||||||
Adjusted segment operating income on constant exchange rate |
$ 138,125 |
121,122 |
||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
Flooring NA |
October 1, 2016 |
October 3, 2015 |
||||||||
Operating income |
$ 170,507 |
125,910 |
||||||||
Adjustments to segment operating income: |
||||||||||
Legal settlement and reserves |
(90,000) |
- |
||||||||
Restructuring, acquisition and integration-related and other costs |
26,193 |
5,148 |
||||||||
Tradename impairment |
47,905 |
- |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
1,527 |
||||||||
Adjusted segment operating income |
$ 154,605 |
132,585 |
||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income on a Constant Exchange Rate |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
Flooring ROW |
October 1, 2016 |
October 3, 2015 |
||||||||
Operating income |
$ 81,757 |
55,471 |
||||||||
Adjustments to segment operating income: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
3,596 |
4,030 |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
4,683 |
||||||||
Adjusted segment operating income |
85,353 |
64,184 |
||||||||
Adjustment to operating income on a constant exchange rate |
5,147 |
- |
||||||||
Adjusted segment operating income on constant exchange rate |
$ 90,500 |
64,184 |
||||||||
Reconciliation of Earnings incl Noncontrolling Interests Before Income Taxes to Adjusted Earnings incl Noncontrolling Interests Before Income Taxes |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
October 1, 2016 |
October 3, 2015 |
|||||||||
Earnings before income taxes |
$ 365,058 |
265,166 |
||||||||
Noncontrolling interests |
(949) |
(798) |
||||||||
Adjustments to earnings including noncontrolling interests before income taxes: |
||||||||||
Restructuring, acquisition and integration-related & other costs |
30,572 |
12,770 |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
7,160 |
||||||||
Legal settlement and reserves |
(90,000) |
- |
||||||||
Release of indemnification asset |
2,368 |
- |
||||||||
Tradename impairment |
47,905 |
- |
||||||||
Adjusted earnings including noncontrolling interests before income taxes |
$ 354,954 |
284,298 |
||||||||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense |
||||||||||
(Amounts in thousands) |
||||||||||
Three Months Ended |
||||||||||
October 1, 2016 |
October 3, 2015 |
|||||||||
Income tax expense |
$ 94,231 |
49,463 |
||||||||
Income taxes - reversal of uncertain tax position |
2,368 |
- |
||||||||
Income tax effect of adjusting items |
(2,856) |
12,940 |
||||||||
Adjusted income tax expense |
$ 93,743 |
62,403 |
||||||||
Adjusted income tax rate |
26.4% |
21.9% |
||||||||
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 Company's business for planning and forecasting in subsequent periods. In particular, the Company believes excluding the impact of restructuring, acquisition, integration-related and other costs, legal settlement and reserves, tradename impairment and acquisitions purchase accounting (inventory step-up) is useful because it allows investors to evaluate our performance for different periods on a more comparable basis. |
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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mohawk-industries-reports-record-third-quarter-300357115.html
SOURCE
Frank H. Boykin, Chief Financial Officer (706) 624-2695