MHK Mohawk Industries Inc

CALHOUN, Ga., May 3, 2012 /CNW/ - Mohawk Industries, Inc. today announced 2012 first quarter net earnings of $40 million and diluted earnings per share (EPS) of $0.58, a 38% increase over last year's first quarter adjusted EPS. Net sales for the first quarter of 2012 were $1.4 billion, increasing 5% as reported and 6% with a constant exchange rate. For the first quarter of 2011, net earnings were $23 million and EPS was $0.34. Excluding restructuring charges for the first quarter of 2011, adjusted net earnings were $29 million and EPS was $0.42. Commenting on Mohawk Industries' performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Volume increases, price increases, cost reductions and lower interest expense contributed to our earnings growth in the quarter. In March, Standard & Poor's upgraded our credit rating and Moody's elevated our outlook to positive, reducing the interest rate on our notes. In April, we paid our 2012 maturing notes using our bank revolver which has lower interest rates. Our balance sheet remains strong with net debt to adjusted EBITDA at 2.2 times and approximately $500 million available for strategic opportunities, after the payment of the 2012 notes." Mohawk segment sales grew 1% as we executed price increases that should cover our material cost in the second period. Higher carpet sales in the segment were offset by lower rug sales from deferred customer promotions, inventory reductions in the channel and lower product mix. In residential, we launched our revolutionary SmartStrand Silk collection, the next generation of soft carpet, with the inherent performance, ease of care and unique environmental features that have made SmartStrand successful. In the commercial business, our hospitality and core business improved, but we experienced weakness in our premium products. To provide greater value in commercial, we have introduced new high-end products, extended our SmartStrand brand into commercial applications and utilized new technology for improved pattern definition in hospitality. Productivity increases, improved yields, product re-engineering, process simplification and reduced complexity improved our cost position and service levels. Dal-Tile segment net sales grew 14% during the quarter through increased residential remodeling and commercial renovation, successful product launches and growth in the Mexican market. Price increases along with energy surcharges are being implemented to recover material and freight costs. Sales grew in all channels, driven by new products featuring Reveal Imaging, larger sizes, realistic wood designs and a premium commercial collection. In Mexico, we opened our Salamanca plant ahead of schedule. Sales in Mexico are growing dramatically due to our expanded offering of product designs, sizes and price points. We lowered manufacturing costs through higher productivity, reduced waste, and improved formulations that increase production speeds and recycled content. Unilin segment net sales grew 4% as reported and 7% on a local basis supported by growth of laminate flooring and panels. The impact of the European debt situation on our business has been limited by our lower exposure to Southern European markets. We continue to gain share through new products, channels and regions, offsetting the impact of slowing national economies. We have implemented price increases in European laminate, roofing and most panels to recover higher material costs. We are increasing product placements in the home center and DIY channels with both laminate and wood. Our insulation panels business grew significantly and we are preparing to expand in France. Our strategies to expand internationally are progressing with our new Russian plant increasing production and our Australian distribution being integrated with Unilin. Low mortgage rates, increasing home sales, and higher employment should sustain industry growth. Our emphasis on product and process innovation, cost management and flexibility has resulted in a stronger company. In the second quarter, we anticipate continued sales growth and improving margins as selling prices align with material inflation. We believe that our new product launches will improve profitability and sales growth. Improvements in productivity, inventory management, and interest expenses will favorably impact our results. With these factors, our guidance for second quarter earnings is $1.07 to $1.16 per share, excluding any restructuring costs. Our recent investments in new markets, technology, production capacity and R&D will improve our results. We have a strong financial position to pursue new strategic 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, Brazil, 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, May 4, 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 # 69432176. A replay will also be available until May 18, 2012 by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 69432176. MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statement of Three Months Ended Operations (Amounts in thousands, except March 31, 2012 April 2, 2011 per share data) Net sales $ 1,409,035 1,343,595 Cost of sales 1,049,609 1,002,003 Gross profit 359,426 341,592 Selling, general and 287,450 285,508 administrative expenses Operating income 71,976 56,084 Interest expense 22,498 26,595 Other (income) expense, net (1,825) (15) Earnings before income taxes 51,303 29,504 Income tax expense 10,291 4,966 Net earnings 41,012 24,538 Net earnings attributable to (635) (1,096) noncontrolling interest Net earnings attributable to $ 40,377 23,442 Mohawk Industries, Inc. Basic earnings per share attributable to Mohawk $ 0.59 0.34 Industries, Inc. Weighted-average common 68,862 68,674 shares outstanding - basic Diluted earnings per share attributable to Mohawk $ 0.58 0.34 Industries, Inc. Weighted-average common 69,141 68,904 shares outstanding - diluted Other Financial Information (Amounts in thousands) Net cash used in operating $ 44,470 67,413 activities Depreciation and amortization $ 73,286 74,253 Capital expenditures $ 43,251 52,811 Consolidated Balance Sheet Data (Amounts in thousands) March 31, 2012 April 2, 2011 ASSETS Current assets: Cash and cash equivalents $ 304,775 256,231 Receivables, net 782,000 754,826 Inventories 1,164,991 1,075,613 Prepaid expenses and other 136,752 97,846 current assets Deferred income taxes 156,110 155,159 Total current assets 2,544,628 2,339,675 Property, plant and 1,718,396 1,715,895 equipment, net Goodwill 1,390,712 1,406,731 Intangible assets, net 599,625 689,703 Deferred income taxes and 145,833 114,229 other non-current assets $ 6,399,194 6,266,233 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term $ 57,309 52,706 debt Accounts payable and accrued 721,383 739,768 expenses Total current liabilities 778,692 792,474 Long-term debt, less current 1,642,419 1,577,188 portion Deferred income taxes and 458,786 449,984 other long-term liabilities Total liabilities 2,879,897 2,819,646 Noncontrolling interest - 33,255 Total stockholders' equity 3,519,297 3,413,332 $ 6,399,194 6,266,233 Segment Information As of or for the Three Months Ended (Amounts in thousands) March 31, 2012 April 2, 2011 Net sales: Mohawk $ 699,880 691,165 Dal-Tile 392,925 344,415 Unilin 337,424 325,832 Intersegment sales (21,194) (17,817) Consolidated net sales $ 1,409,035 1,343,595 Operating income (loss): Mohawk $ 25,282 17,040 Dal-Tile 26,028 17,700 Unilin 27,146 26,250 Corporate and eliminations (6,480) (4,906) Consolidated operating income $ 71,976 56,084 Assets: Mohawk $ 1,820,785 1,749,625 Dal-Tile 1,759,934 1,674,408 Unilin 2,620,013 2,654,268 Corporate and eliminations 198,462 187,932 Consolidated assets $ 6,399,194 6,266,233 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 March April 2, 31, 2012 2011 Net earnings attributable to $ 40,377 23,442 Mohawk Industries, Inc. Unusual items: Business - 6,813 restructurings Income taxes - (1,018) Adjusted net earnings attributable to $ 40,377 29,237 Mohawk Industries, Inc. Adjusted diluted earnings per share $ 0.58 0.42 attributable to Mohawk Industries, Inc. Weighted-average common shares 69,141 68,904 outstanding - diluted Reconciliation of Total Debt to Net Debt (Amounts in thousands) March 31, 2012 Current portion of long-term $ 57,309 debt Long-term debt, less current 1,642,419 portion Less: Cash and 304,775 cash equivalents Net Debt $ 1,394,953 Reconciliation of Operating Income to Adjusted EBITDA (Amounts in Trailing thousands) Twelve Three Months Ended Months Ended July 2, October December March March 31, 2011 1, 2011 31, 2011 31, 2012 2012 Operating income $ 101,700 91,464 66,294 71,976 331,434 Other (expense) (396) (13,413) (257) 1,825 (12,241) income Net earnings attributable to (1,191) (1,050) (966) (635) (3,842) noncontrolling interest Depreciation and 74,344 74,207 74,930 73,286 296,767 amortization EBITDA 174,457 151,208 140,001 146,452 612,118 Unrealized foreign currency - 9,085 - - 9,085 losses (1) Operating lease - - 6,035 - 6,035 correction (2) Business 6,514 2,186 7,696 - 16,396 restructurings Adjusted EBITDA $ 180,971 162,479 153,732 146,452 643,634 Net Debt to 2.2 Adjusted EBITDA Reconciliation of Net Sales to Adjusted Net Sales (Amounts in thousands) Three Months Ended March 31, 2012 April 2, 2011 Net sales $ 1,409,035 1,343,595 Adjustments to net sales: Exchange rate 13,636 - Adjusted net sales $ 1,422,671 1,343,595 Reconciliation of Segment Net Sales to Adjusted Segment Net Sales (Amounts in thousands) Three Months Ended Unilin March 31, 2012 April 2, 2011 Net sales $ 337,424 325,832 Adjustment to net sales: Exchange rate 11,851 - Adjusted net sales $ 349,275 325,832 Reconciliation of Operating Income to Adjusted Operating Income (Amounts in thousands) Three Months Ended March 31, 2012 April 2, 2011 Operating income $ 71,976 56,084 Adjustments to operating income: Business restructurings - 6,813 Adjusted operating income $ 71,976 62,897 Adjusted operating margin as a 5.1% 4.7% percent of net sales Reconciliation of Segment Operating Income to Adjusted Segment Operating Income (Amounts in thousands) Three Months Ended Mohawk March 31, 2012 April 2, 2011 Operating income $ 25,282 17,040 Adjustments to operating income: Business restructurings - 6,813 Adjusted operating income $ 25,282 23,853 Adjusted operating margin as a 3.6% 3.5% percent of net sales Reconciliation of Earnings Before Income Taxes to Adjusted Earnings Before Income Taxes (Amounts in thousands) Three Months Ended March 31, 2012 April 2, 2011 Earnings before income taxes $ 51,303 29,504 Unusual items: Business restructurings - 6,813 Adjusted earnings before income $ 51,303 36,317 taxes Reconciliation of Income Tax Expense to Adjusted Income Tax Expense (Amounts in thousands) Three Months Ended March 31, 2012 April 2, 2011 Income tax expense $ 10,291 4,966 Unusual items: Income taxes - 1,018 Adjusted income tax expense $ 10,291 5,984 Adjusted income tax rate 20% 16% Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses (Amounts in thousands) Three Months Ended March 31, 2012 April 2, 2011 Selling, general and $ 287,450 285,508 administrative expenses Adjustments to selling, general and administrative expenses: Business restructurings - 466 Exchange rate 2,378 - Adjusted selling, general and $ 289,828 285,974 administrative expenses Adjusted selling, general and administrative expenses as a 20.6% 21.3% percent of net sales (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. Mohawk Industries, Inc. CONTACT: Frank H. Boykin, Chief Financial Officer, +1-706-624-2695http://www.mohawkind.com

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