Mohawk Industries, Inc. Announces Third Quarter Earnings
For the nine months ending
Commenting on
Carpet segment net sales for the quarter were
Ceramic segment net sales for the quarter were
Laminate and Wood segment net sales for the quarter were
Lorberbaum said, "We anticipate that growth in the U.S. economy and the flooring category will remain unchanged during the fourth quarter with residential remaining slow as commercial grows. Overall we expect improvement in our sales and operating margins compared to last year. However, due to the strengthening U.S. dollar, we anticipate foreign currency translation will reduce sales and profits as reported. Our performance will benefit from new products, productivity improvements, synergies from our acquisitions and cost containment initiatives. We remain confident in our ability to execute our business strategy within the prevailing economic conditions. With these factors, our guidance for fourth quarter earnings 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 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
Conference call
The telephone number is 1-800-603-9255 for US/
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
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Consolidated Statement of Operations |
Three Months Ended |
Nine Months Ended |
||||||
(Amounts in thousands, except per share data) |
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
||||
Net sales |
$ 1,990,658 |
1,961,536 |
5,852,000 |
5,424,650 |
||||
Cost of sales |
1,434,236 |
1,444,646 |
4,239,411 |
4,016,638 |
||||
Gross profit |
556,422 |
516,890 |
1,612,589 |
1,408,012 |
||||
Selling, general and administrative expenses |
342,729 |
340,987 |
1,045,913 |
1,012,069 |
||||
Operating income |
213,693 |
175,903 |
566,676 |
395,943 |
||||
Interest expense |
34,786 |
25,630 |
77,584 |
70,098 |
||||
Other expense (income), net |
(2,374) |
1,168 |
961 |
6,458 |
||||
Earnings from continuing operations before income taxes |
181,281 |
149,105 |
488,131 |
319,387 |
||||
Income tax expense |
30,021 |
28,993 |
102,957 |
62,965 |
||||
Earnings from continuing operations |
151,260 |
120,112 |
385,174 |
256,422 |
||||
Loss from discontinued operations, net of income tax benefit of $297 and $782, respectively |
- |
(553) |
- |
(1,914) |
||||
Net earnings including noncontrolling interest |
151,260 |
119,559 |
385,174 |
254,508 |
||||
Net earnings (loss) attributable to noncontrolling interest |
(6) |
491 |
77 |
373 |
||||
Net earnings attributable to Mohawk Industries, Inc. |
$ 151,266 |
119,068 |
385,097 |
254,135 |
||||
Basic earnings per share attributable to Mohawk Industries, Inc. |
||||||||
Income from continuing operations |
$ 2.08 |
1.65 |
5.29 |
3.59 |
||||
Loss from discontinued operations, net of income taxes |
- |
(0.01) |
- |
(0.03) |
||||
Basic earnings per share attributable to Mohawk Industries, Inc. |
$ 2.08 |
1.64 |
5.29 |
3.56 |
||||
Weighted-average common shares outstanding - basic |
72,864 |
72,575 |
72,814 |
71,467 |
||||
Diluted earnings per share attributable to Mohawk Industries, Inc. |
||||||||
Income from continuing operations |
$ 2.06 |
1.64 |
5.25 |
3.56 |
||||
Loss from discontinued operations, net of income taxes |
- |
(0.01) |
- |
(0.03) |
||||
Diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 2.06 |
1.63 |
5.25 |
3.53 |
||||
Weighted-average common shares outstanding - diluted |
73,376 |
73,087 |
73,332 |
71,975 |
||||
Other Financial Information |
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(Amounts in thousands) |
||||||||
Net cash provided by (used in) operating activities |
$ 225,549 |
213,059 |
323,423 |
326,973 |
||||
Depreciation and amortization |
$ 85,167 |
81,550 |
249,905 |
222,542 |
||||
Capital expenditures |
$ 141,883 |
109,426 |
391,580 |
255,523 |
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Consolidated Balance Sheet Data |
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(Amounts in thousands) |
||||||||
September 27, 2014 |
September 28, 2013 |
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ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 105,569 |
63,580 |
||||||
Receivables, net |
1,209,557 |
1,154,368 |
||||||
Inventories |
1,640,487 |
1,612,696 |
||||||
Prepaid expenses and other current assets |
275,981 |
221,767 |
||||||
Deferred income taxes |
137,220 |
136,052 |
||||||
Total current assets |
3,368,814 |
3,188,463 |
||||||
Property, plant and equipment, net |
2,772,722 |
2,683,984 |
||||||
Goodwill |
1,668,520 |
1,713,883 |
||||||
Intangible assets, net |
746,304 |
811,116 |
||||||
Deferred income taxes and other non-current assets |
145,100 |
166,711 |
||||||
Total assets |
$ 8,701,460 |
8,564,157 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and commercial paper |
$ 583,495 |
89,031 |
||||||
Accounts payable and accrued expenses |
1,247,862 |
1,296,192 |
||||||
Total current liabilities |
1,831,357 |
1,385,223 |
||||||
Long-term debt, less current portion |
1,806,821 |
2,257,391 |
||||||
Deferred income taxes and other long-term liabilities |
486,764 |
587,910 |
||||||
Total liabilities |
4,124,942 |
4,230,524 |
||||||
Noncontrolling interest |
- |
- |
||||||
Total stockholders' equity |
4,576,518 |
4,333,633 |
||||||
Total liabilities and stockholders' equity |
$ 8,701,460 |
8,564,157 |
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Segment Information |
Three Months Ended |
As of or for the Nine Months Ended |
||||||
(Amounts in thousands) |
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
||||
Net sales: |
||||||||
Carpet |
$ 778,849 |
772,751 |
2,234,083 |
2,238,953 |
||||
Ceramic |
779,842 |
767,005 |
2,271,660 |
1,939,054 |
||||
Laminate and Wood |
462,574 |
450,723 |
1,431,839 |
1,326,178 |
||||
Intersegment sales |
(30,607) |
(28,943) |
(85,582) |
(79,535) |
||||
Consolidated net sales |
$ 1,990,658 |
1,961,536 |
5,852,000 |
5,424,650 |
||||
Operating income (loss): |
||||||||
Carpet |
$ 74,082 |
68,836 |
171,179 |
148,936 |
||||
Ceramic |
101,254 |
75,908 |
268,320 |
152,188 |
||||
Laminate and Wood |
44,768 |
39,020 |
149,730 |
119,075 |
||||
Corporate and eliminations |
(6,411) |
(7,861) |
(22,553) |
(24,256) |
||||
Consolidated operating income |
$ 213,693 |
175,903 |
566,676 |
395,943 |
||||
Assets: |
||||||||
Carpet |
$ 2,016,109 |
1,830,869 |
||||||
Ceramic |
3,788,164 |
3,820,002 |
||||||
Laminate and Wood |
2,672,599 |
2,721,707 |
||||||
Corporate and eliminations |
224,588 |
191,579 |
||||||
Consolidated assets |
$ 8,701,460 |
8,564,157 |
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) |
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Three Months Ended |
Nine Months Ended |
|||||||||||||
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
|||||||||||
Net earnings attributable to Mohawk Industries, Inc. |
$ 151,266 |
119,068 |
385,097 |
254,135 |
||||||||||
Adjustments to net earnings: |
||||||||||||||
Restructuring, acquisition and integration-related costs |
14,013 |
24,431 |
36,907 |
75,608 |
||||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
12,297 |
- |
31,041 |
||||||||||
Discontinued operations |
- |
851 |
- |
2,696 |
||||||||||
Legal reserve |
10,000 |
- |
10,000 |
- |
||||||||||
Bond redemption |
15,450 |
- |
15,450 |
- |
||||||||||
Deferred loan costs |
1,080 |
490 |
1,080 |
490 |
||||||||||
Interest on 3.85% senior notes |
- |
- |
- |
3,559 |
||||||||||
Income taxes |
(12,792) |
(9,772) |
(17,412) |
(25,220) |
||||||||||
Adjusted net earnings attributable to Mohawk Industries, Inc. |
$ 179,017 |
147,365 |
431,122 |
342,309 |
||||||||||
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 2.44 |
2.02 |
5.88 |
4.76 |
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Weighted-average common shares outstanding - diluted |
73,376 |
73,087 |
73,332 |
71,975 |
||||||||||
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
|||||||||||
Net sales |
$ 1,990,658 |
1,961,536 |
5,852,000 |
5,424,650 |
||||||||||
Adjustment to net sales on a constant exchange rate |
8,517 |
- |
(16,100) |
- |
||||||||||
Net sales on a constant exchange rate |
$ 1,999,175 |
1,961,536 |
5,835,900 |
5,424,650 |
||||||||||
Reconciliation of Net Sales to Pro Forma Net Sales on a Constant Exchange Rate |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
Nine Months Ended |
||||||||||||||
September 27, 2014 |
September 28, 2013 |
|||||||||||||
Net sales |
$ 5,852,000 |
5,424,650 |
||||||||||||
2013 Acquisitions |
333,994 |
|||||||||||||
Adjustment to net sales on a constant exchange rate |
(16,100) |
- |
||||||||||||
Pro forma net sales on a constant exchange rate |
$ 5,835,900 |
5,758,644 |
||||||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate |
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(Amounts in thousands) |
||||||||||||||
Ceramic |
Laminate and Wood |
|||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
|||||||||||
Net sales |
$ 779,842 |
767,005 |
462,574 |
450,723 |
||||||||||
Adjustment to segment net sales on a constant exchange rate |
9,098 |
- |
(581) |
- |
||||||||||
Segment net sales on a constant exchange rate |
$ 788,940 |
767,005 |
461,993 |
450,723 |
||||||||||
Reconciliation of Gross Profit to Adjusted Gross Profit |
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(Amounts in thousands) |
||||||||||||||
Three Months Ended |
||||||||||||||
September 27, 2014 |
September 28, 2013 |
|||||||||||||
Gross Profit |
$ 556,422 |
516,890 |
||||||||||||
Adjustments to gross profit: |
||||||||||||||
Restructuring and integration-related costs |
7,261 |
14,699 |
||||||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
12,297 |
||||||||||||
Adjusted gross profit |
$ 563,683 |
543,886 |
||||||||||||
Adjusted gross profit as a percent of net sales |
28.3% |
27.7% |
||||||||||||
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
Three Months Ended |
||||||||||||||
September 27, 2014 |
September 28, 2013 |
|||||||||||||
Selling, general and administrative expenses |
$ 342,729 |
340,987 |
||||||||||||
Adjustments to selling, general and administrative expenses: |
||||||||||||||
Restructuring, acquisition and integration-related costs |
(6,752) |
(9,712) |
||||||||||||
Legal reserve |
(10,000) |
- |
||||||||||||
Adjusted selling, general and administrative expenses |
$ 325,977 |
331,275 |
||||||||||||
Adjusted selling, general and administrative expenses as a percent of net sales |
16.4% |
16.9% |
||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
|||||||||||
Operating income |
$ 213,693 |
175,903 |
566,676 |
395,943 |
||||||||||
Adjustments to operating income: |
||||||||||||||
Restructuring, acquisition and integration-related costs |
14,013 |
24,411 |
36,907 |
75,588 |
||||||||||
Legal reserve |
10,000 |
- |
10,000 |
- |
||||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
12,297 |
- |
31,041 |
||||||||||
Adjusted operating income |
$ 237,706 |
212,611 |
613,583 |
502,572 |
||||||||||
Adjusted operating margin as a percent of net sales |
11.9% |
10.8% |
10.5% |
9.3% |
||||||||||
Reconciliation of Segment Operating Income to Adjusted Operating Income |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
Carpet |
Ceramic |
Laminate and Wood |
||||||||||||
Three Months Ended |
Three Months Ended |
Three Months Ended |
||||||||||||
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
September 27, 2014 |
September 28, 2013 |
|||||||||
Operating income |
$ 74,082 |
68,836 |
101,254 |
75,908 |
44,768 |
39,020 |
||||||||
Adjustments to operating income: |
||||||||||||||
Restructuring, acquisition and integration-related costs |
- |
1,570 |
4,248 |
3,070 |
9,015 |
19,246 |
||||||||
Legal reserve |
10,000 |
- |
- |
- |
- |
- |
||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
- |
- |
12,297 |
- |
- |
||||||||
Adjusted operating income |
$ 84,082 |
70,406 |
105,502 |
91,275 |
53,783 |
58,266 |
||||||||
Adjusted operating margin as a percent of net sales |
10.8% |
9.1% |
13.5% |
11.9% |
11.6% |
12.9% |
||||||||
Reconciliation of Total Debt to Net Debt |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
September 27, 2014 |
||||||||||||||
Current portion of long-term debt and commercial paper |
$ 583,495 |
|||||||||||||
Long-term debt, less current portion |
1,806,821 |
|||||||||||||
Less: Cash and cash equivalents |
105,569 |
|||||||||||||
Net Debt |
$ 2,284,747 |
|||||||||||||
Reconciliation of Operating Income to Adjusted EBITDA |
||||||||||||||
(Amounts in thousands) |
Trailing Twelve |
|||||||||||||
Three Months Ended |
Months Ended |
|||||||||||||
December 31, 2013 |
March 29, 2014 |
June 28, 2014 |
September 27, 2014 |
September 27, 2014 |
||||||||||
Operating income |
$ 150,988 |
130,735 |
222,248 |
213,693 |
717,664 |
|||||||||
Other (expense) income |
(2,656) |
(4,890) |
1,555 |
2,374 |
(3,617) |
|||||||||
Net (earnings) loss attributable to noncontrolling interest |
(132) |
28 |
(111) |
6 |
(209) |
|||||||||
Depreciation and amortization |
86,329 |
80,984 |
83,754 |
85,167 |
336,234 |
|||||||||
EBITDA |
234,529 |
206,857 |
307,446 |
301,240 |
1,050,072 |
|||||||||
Restructuring, acquisition and integration-related costs |
37,812 |
11,725 |
11,169 |
14,013 |
74,719 |
|||||||||
Legal reserve |
- |
- |
- |
10,000 |
10,000 |
|||||||||
Adjusted EBITDA |
$ 272,341 |
218,582 |
318,615 |
325,253 |
1,134,791 |
|||||||||
Net Debt to Adjusted EBITDA |
2.0 |
|||||||||||||
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 27, 2014 |
September 28, 2013 |
|||||||||||||
Earnings from continuing operations before income taxes |
$ 181,281 |
149,105 |
||||||||||||
Adjustments to earnings from continuing operations before income taxes: |
||||||||||||||
Restructuring, acquisition and integration-related costs |
14,013 |
24,431 |
||||||||||||
Acquisitions purchase accounting (inventory step-up) |
- |
12,297 |
||||||||||||
Legal reserve |
10,000 |
- |
||||||||||||
Bond redemption |
15,450 |
- |
||||||||||||
Deferred loan costs |
1,080 |
490 |
||||||||||||
Interest on 3.85% senior notes |
- |
- |
||||||||||||
Adjusted earnings before income taxes |
$ 221,824 |
186,323 |
||||||||||||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense |
||||||||||||||
(Amounts in thousands) |
||||||||||||||
Three Months Ended |
||||||||||||||
September 27, 2014 |
September 28, 2013 |
|||||||||||||
Income tax expense |
$ 30,021 |
28,993 |
||||||||||||
Income tax effect of adjusting items |
12,792 |
9,475 |
||||||||||||
Adjusted income tax expense |
$ 42,813 |
38,468 |
||||||||||||
Adjusted income tax rate |
19% |
21% |
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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 and integration-related costs is useful because it allows investors to evaluate our performance for different periods on a more comparable basis. |
SOURCE
Frank H. Boykin, Chief Financial Officer (706) 624-2695