Mohawk Industries Reports Q3 Results
For the nine months ending
Commenting on
"For the full year, we are investing about
"For the quarter, our Flooring Rest of the World Segment's sales increased 13% as reported and 8% on a constant days and currency basis. The segment had an exceptional quarter with the majority of our manufactured product sales and earnings growing dramatically. Our patent revenue is running at a higher rate than we anticipated due to broader use of our patents and the increase in worldwide sales of LVT. During the period, our price and mix improvements offset inflation and currency changes. Our laminate innovation in proprietary structures and water-proof technologies is increasing the selection of our products by customers who would ordinarily purchase wood flooring. Our present European LVT manufacturing is nearing capacity, and our new plant will begin operating by the end of the year. The new plant will expand our capacity of flexible LVT as well as produce rigid LVT. We are expanding the segment's commercial sales force to increase the specifications of sheet vinyl, LVT and our upcoming carpet tile collections. Our new commercial carpet tile plant should initiate limited production in the fourth quarter.
"For the quarter, our Global Ceramic Segment sales increased 9% as reported and 7% on a constant days and currency basis. In the quarter, the strongest growth in our ceramic business was in
"During the quarter, our
"In the fourth quarter, we anticipate that the business will improve as we benefit from innovative new products, increased volume and the performance of our recent acquisitions. We expect higher sales with the relief of some of our capacity constraints, enabling us to expand our market position. During the upcoming period, we will absorb higher start-up costs estimated at
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 |
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(Unaudited) |
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Consolidated Statement of Operations Data |
Three Months Ended |
Nine Months Ended |
||||||
(Amounts in thousands, except per share data) |
September 30, 2017 |
October 1, 2016 |
September 30, 2017 |
October 1, 2016 |
||||
Net sales |
$ 2,448,510 |
2,294,139 |
7,122,193 |
6,776,521 |
||||
Cost of sales |
1,665,209 |
1,567,580 |
4,879,403 |
4,654,695 |
||||
Gross profit |
783,301 |
726,559 |
2,242,790 |
2,121,826 |
||||
Selling, general and administrative expenses |
403,203 |
348,252 |
1,232,083 |
1,147,155 |
||||
Operating income |
380,098 |
378,307 |
1,010,707 |
974,671 |
||||
Interest expense |
7,259 |
9,410 |
23,854 |
32,062 |
||||
Other expense (income), net |
1,285 |
3,839 |
1,455 |
1,461 |
||||
Earnings before income taxes |
371,554 |
365,058 |
985,398 |
941,148 |
||||
Income tax expense |
100,532 |
94,231 |
251,572 |
242,090 |
||||
Net earnings including noncontrolling interest |
271,022 |
270,827 |
733,826 |
699,058 |
||||
Net income attributable to noncontrolling interest |
997 |
949 |
2,566 |
2,444 |
||||
Net earnings attributable to Mohawk Industries, Inc. |
$ 270,025 |
269,878 |
731,260 |
696,614 |
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Basic earnings per share attributable to Mohawk Industries, Inc. |
||||||||
Basic earnings per share attributable to Mohawk Industries, Inc. |
$ 3.63 |
3.64 |
9.84 |
9.40 |
||||
Weighted-average common shares outstanding - basic |
74,338 |
74,154 |
74,330 |
74,084 |
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Diluted earnings per share attributable to Mohawk Industries, Inc. |
||||||||
Diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 3.61 |
3.62 |
9.77 |
9.34 |
||||
Weighted-average common shares outstanding - diluted |
74,841 |
74,613 |
74,830 |
74,551 |
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Other Financial Information |
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(Amounts in thousands) |
||||||||
Depreciation and amortization |
$ 113,515 |
103,680 |
328,300 |
305,088 |
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Capital expenditures |
$ 229,207 |
183,846 |
654,630 |
460,760 |
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Consolidated Balance Sheet Data |
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(Amounts in thousands) |
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September 30, 2017 |
October 1, 2016 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ 84,502 |
112,108 |
||||||
Receivables, net |
1,656,064 |
1,506,316 |
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Inventories |
1,911,029 |
1,673,242 |
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Prepaid expenses and other current assets |
345,515 |
284,648 |
||||||
Total current assets |
3,997,110 |
3,576,314 |
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Property, plant and equipment, net |
4,090,099 |
3,340,893 |
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Goodwill |
2,454,360 |
2,331,821 |
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Intangible assets, net |
890,298 |
876,715 |
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Deferred income taxes and other non-current assets |
390,946 |
294,850 |
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Total assets |
$ 11,822,813 |
10,420,593 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current portion of long-term debt and commercial paper |
$ 1,172,781 |
1,548,251 |
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Accounts payable and accrued expenses |
1,524,237 |
1,435,069 |
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Total current liabilities |
2,697,018 |
2,983,320 |
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Long-term debt, less current portion |
1,544,665 |
1,165,577 |
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Deferred income taxes and other long-term liabilities |
755,020 |
574,267 |
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Total liabilities |
4,996,703 |
4,723,164 |
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Redeemable noncontrolling interest |
28,508 |
24,741 |
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Total stockholders' equity |
6,797,602 |
5,672,688 |
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Total liabilities and stockholders' equity |
$ 11,822,813 |
10,420,593 |
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Segment Information |
Three Months Ended |
As of or for the Nine Months Ended |
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(Amounts in thousands) |
September 30, 2017 |
October 1, 2016 |
September 30, 2017 |
October 1, 2016 |
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Net sales: |
||||||||
Global Ceramic |
$ 893,399 |
822,040 |
2,581,038 |
2,425,560 |
||||
Flooring NA |
1,031,773 |
1,008,553 |
3,011,568 |
2,895,610 |
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Flooring ROW |
523,338 |
463,546 |
1,529,587 |
1,455,351 |
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Intersegment sales |
- |
- |
- |
- |
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Consolidated net sales |
$ 2,448,510 |
2,294,139 |
7,122,193 |
6,776,521 |
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Operating income (loss): |
||||||||
Global Ceramic |
$ 143,368 |
135,985 |
411,961 |
376,368 |
||||
Flooring NA |
163,494 |
170,507 |
383,118 |
364,804 |
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Flooring ROW |
83,042 |
81,757 |
245,189 |
262,356 |
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Corporate and intersegment eliminations |
(9,806) |
(9,942) |
(29,561) |
(28,857) |
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Consolidated operating income |
$ 380,098 |
378,307 |
1,010,707 |
974,671 |
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Assets: |
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Global Ceramic |
$ 4,826,619 |
4,118,510 |
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Flooring NA |
3,699,633 |
3,354,286 |
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Flooring ROW |
3,128,213 |
2,851,227 |
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Corporate and intersegment eliminations |
168,348 |
96,570 |
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Consolidated assets |
$ 11,822,813 |
10,420,593 |
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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 |
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September 30, 2017 |
October 1, 2016 |
September 30, 2017 |
October 1, 2016 |
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Net earnings attributable to Mohawk Industries, Inc. |
$ 270,025 |
269,878 |
731,260 |
696,614 |
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Adjusting items: |
||||||||||
Restructuring, acquisition and integration-related and other costs |
13,853 |
30,572 |
33,709 |
44,309 |
||||||
Acquisitions purchase accounting , including inventory step-up |
3,551 |
- |
13,314 |
- |
||||||
Legal settlement and reserves |
- |
(90,000) |
- |
(90,000) |
||||||
Release of indemnification asset |
- |
2,368 |
- |
2,368 |
||||||
Tradename impairment |
- |
47,905 |
- |
47,905 |
||||||
Income taxes - reversal of uncertain tax position |
- |
(2,368) |
- |
(2,368) |
||||||
Income taxes |
(6,545) |
2,856 |
(15,637) |
(1,764) |
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Adjusted net earnings attributable to Mohawk Industries, Inc. |
$ 280,884 |
261,211 |
762,646 |
697,064 |
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Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 3.75 |
3.50 |
10.19 |
9.35 |
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Weighted-average common shares outstanding - diluted |
74,841 |
74,613 |
74,830 |
74,551 |
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Reconciliation of Total Debt to Net Debt |
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(Amounts in thousands) |
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September 30, 2017 |
||
Current portion of long-term debt and commercial paper |
$ 1,172,781 |
|
Long-term debt, less current portion |
1,544,665 |
|
Less: Cash and cash equivalents |
84,502 |
|
Net Debt |
$ 2,632,944 |
|
Reconciliation of Operating Income to Adjusted EBITDA |
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(Amounts in thousands) |
Trailing Twelve |
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Three Months Ended |
Months Ended |
|||||||||
December 31, 2016 |
April 1, 2017 |
July 1, 2017 |
September 30, 2017 |
September 30, 2017 |
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Operating income |
$ 305,272 |
274,784 |
355,825 |
380,098 |
1,315,979 |
|||||
Other (expense) income |
3,190 |
2,832 |
(3,002) |
(1,285) |
1,735 |
|||||
Net (income) loss attributable to noncontrolling interest |
(760) |
(502) |
(1,067) |
(997) |
(3,326) |
|||||
Depreciation and amortization |
104,379 |
105,024 |
109,761 |
113,515 |
432,679 |
|||||
EBITDA |
412,081 |
382,138 |
461,517 |
491,331 |
1,747,067 |
|||||
Restructuring, acquisition and integration-related and other costs |
16,214 |
3,978 |
15,878 |
13,853 |
49,923 |
|||||
Acquisitions purchase accounting, including inventory step-up |
- |
192 |
9,571 |
3,551 |
13,314 |
|||||
Release of indemnification asset |
3,004 |
- |
- |
- |
3,004 |
|||||
Adjusted EBITDA |
$ 431,299 |
386,308 |
486,966 |
508,735 |
1,813,308 |
|||||
Net Debt to Adjusted EBITDA |
1.5 |
|||||||||
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding Acquisition Volume |
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(Amounts in thousands) |
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Three Months Ended |
Nine Months Ended |
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September 30, 2017 |
October 1, 2016 |
September 30, 2017 |
October 1, 2016 |
|||||
Net sales |
$ 2,448,510 |
2,294,139 |
7,122,193 |
6,776,521 |
||||
Adjustment to net sales on constant shipping days |
1,111 |
- |
36,358 |
- |
||||
Adjustment to net sales on a constant exchange rate |
(39,769) |
- |
(9,234) |
- |
||||
Net sales on a constant exchange rate and constant shipping days |
2,409,852 |
2,294,139 |
7,149,317 |
6,776,521 |
||||
Less: impact of acquisition volume |
(47,118) |
- |
(95,342) |
- |
||||
Net sales on a constant exchange rate and constant shipping days excluding |
$ 2,362,734 |
2,294,139 |
7,053,975 |
6,776,521 |
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding Acquisition Volume |
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(Amounts in thousands) |
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Three Months Ended |
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Global Ceramic |
September 30, 2017 |
October 1, 2016 |
||
Net sales |
$ 893,399 |
822,040 |
||
Adjustment to net sales on constant shipping days |
1,111 |
- |
||
Adjustment to segment net sales on a constant exchange rate |
(16,758) |
- |
||
Segment net sales on a constant exchange rate and constant shipping days |
877,752 |
822,040 |
||
Less: impact of acquisition volume |
(47,118) |
- |
||
Segment net sales on a constant exchange rate and constant shipping days excluding |
$ 830,634 |
822,040 |
||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate |
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(Amounts in thousands) |
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Three Months Ended |
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Flooring ROW |
September 30, 2017 |
October 1, 2016 |
||
Net sales |
$ 523,338 |
463,546 |
||
Adjustment to segment net sales on a constant exchange rate |
(23,012) |
- |
||
Segment net sales on a constant exchange rate |
$ 500,326 |
463,546 |
||
Reconciliation of Gross Profit to Adjusted Gross Profit |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
September 30, 2017 |
October 1, 2016 |
|||
Gross Profit |
$ 783,301 |
726,559 |
||
Adjustments to gross profit: |
||||
Restructuring, acquisition and integration-related and other costs |
8,845 |
17,459 |
||
Acquisitions purchase accounting, including inventory step-up |
3,551 |
- |
||
Adjusted gross profit |
$ 795,697 |
744,018 |
||
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
September 30, 2017 |
October 1, 2016 |
|||
Selling, general and administrative expenses |
$ 403,203 |
348,252 |
||
Adjustments to selling, general and administrative expenses: |
||||
Restructuring, acquisition and integration-related and other costs |
(5,008) |
(13,112) |
||
Legal settlement and reserves |
- |
90,000 |
||
Tradename impairment |
- |
(47,905) |
||
Adjusted selling, general and administrative expenses |
$ 398,195 |
377,235 |
||
Reconciliation of Operating Income to Adjusted Operating Income |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
September 30, 2017 |
October 1, 2016 |
|||
Operating income |
$ 380,098 |
378,307 |
||
Adjustments to operating income: |
||||
Restructuring, acquisition and integration-related and other costs |
13,853 |
30,572 |
||
Legal settlement and reserves |
- |
(90,000) |
||
Tradename impairment |
- |
47,905 |
||
Acquisitions purchase accounting, including inventory step-up |
3,551 |
- |
||
Adjusted operating income |
$ 397,502 |
366,784 |
||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
Global Ceramic |
September 30, 2017 |
October 1, 2016 |
||
Operating income |
$ 143,368 |
135,985 |
||
Adjustments to segment operating income: |
||||
Restructuring, acquisition and integration-related and other costs |
2,800 |
456 |
||
Acquisitions purchase accounting, including inventory step-up |
3,551 |
- |
||
Adjusted segment operating income |
$ 149,719 |
136,441 |
||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
Flooring NA |
September 30, 2017 |
October 1, 2016 |
||
Operating income |
$ 163,494 |
170,507 |
||
Adjustments to segment operating income: |
||||
Legal settlement and reserves |
- |
(90,000) |
||
Restructuring, acquisition and integration-related and other costs |
8,682 |
26,193 |
||
Tradename impairment |
- |
47,905 |
||
Adjusted segment operating income |
$ 172,176 |
154,605 |
||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
Flooring ROW |
September 30, 2017 |
October 1, 2016 |
||
Operating income |
$ 83,042 |
81,757 |
||
Adjustments to segment operating income: |
||||
Restructuring, acquisition and integration-related and other costs |
1,620 |
3,596 |
||
Adjusted segment operating income |
$ 84,662 |
85,353 |
||
Reconciliation of Earnings including Noncontrolling Interests Before Income Taxes to Adjusted Earnings including Noncontrolling Interests Before Income Taxes |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
September 30, 2017 |
October 1, 2016 |
|||
Earnings before income taxes |
$ 371,554 |
365,058 |
||
Noncontrolling interests |
(997) |
(949) |
||
Adjustments to earnings including noncontrolling interests before income taxes: |
||||
Restructuring, acquisition and integration-related & other costs |
13,853 |
30,572 |
||
Acquisitions purchase accounting, including inventory step-up |
3,551 |
- |
||
Legal settlement and reserves |
- |
(90,000) |
||
Release of indemnification asset |
- |
2,368 |
||
Tradename impairment |
- |
47,905 |
||
Adjusted earnings including noncontrolling interests before income taxes |
$ 387,961 |
354,954 |
||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense |
||||
(Amounts in thousands) |
||||
Three Months Ended |
||||
September 30, 2017 |
October 1, 2016 |
|||
Income tax expense |
$ 100,532 |
94,231 |
||
Income taxes - reversal of uncertain tax position |
- |
2,368 |
||
Income tax effect of adjusting items |
6,545 |
(2,856) |
||
Adjusted income tax expense |
$ 107,077 |
93,743 |
||
Adjusted income tax rate |
27.6% |
26.4% |
||
The Company supplements its consolidated financial statements, which are prepared and presented in accordance with US GAAP, with certain non-GAAP financial measures. As required by the
The Company excludes certain items from its non-GAAP revenue measures because these items can vary dramatically between periods and can obscure underlying business trends. Items excluded from the Company's non-GAAP revenue measures include: foreign currency transactions and translation, more or fewer shipping days in a period and the impact of acquisitions.
The Company excludes certain items from its non-GAAP profitability measures because these items may not be indicative of, or are unrelated to, the Company's core operating performance. Items excluded from the Company's non-GAAP profitability measures include: restructuring, acquisition and integration-related and other costs, legal settlements and reserves, tradename impairments, acquisition purchase accounting, including inventory step-up, release of indemnification assets and the reversal of uncertain tax positions.
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SOURCE
Frank H. Boykin, Chief Financial Officer (706) 624-2695