CALHOUN, GA - Mohawk Industries, Inc. (NYSE:MHK) today announced 2013 second quarter net earnings of $85 million and diluted earnings per share (EPS) of $1.16. Excluding unusual charges, net earnings were $134 million and EPS was $1.84, a 61% increase over last year's second quarter adjusted EPS. Net sales for the second quarter of 2013 were $2.0 billion, an increase of approximately 35% versus the prior year's second quarter. For the second quarter of 2012, net sales were $1.5 billion, net earnings were $73 million and EPS was $1.06; excluding unusual charges, net earnings were $79 million and EPS was $1.14.

For the six months ending June 29, 2013, net sales were $3.5 billion, an increase of 20% versus the prior year. Net earnings and EPS for the six-month period were $135 million and $1.89, respectively. Net earnings excluding unusual charges were $195 million and adjusted EPS was $2.73, an increase of 58% over the six-month adjusted EPS results in 2012. For the six months ending June 30, 2012, net sales were $2.9 billion, net earnings were $114 million and EPS was $1.64. Excluding unusual charges, net earnings and EPS were $120 million and $1.73, respectively.

Commenting on Mohawk Industries' second quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Mohawk, the world's largest flooring manufacturer, today reported our most successful second quarter on record with strong revenue and profit growth, as both our legacy business and recent acquisitions delivered solid performances that exceeded our expectations. For the quarter, our legacy net sales increased 6% as reported, with the balance of our growth stemming from our recent acquisitions of Pergo, Marazzi and Spano. Our adjusted SG&A improved by 110 basis points due to continuing control of our costs, and our adjusted operating income rose to 10% of sales, an improvement of 190 basis points."

Carpet segment net sales for the quarter were $771 million, up 5% over last year, rising to their highest levels in more than four years due to improvements in residential new construction and remodeling and continued strength in the commercial sector. Operating income, excluding unusual charges, for the segment was 7% of sales, up 100 basis points due to volume leverage, improved sales mix from new products and lower SG&A. Residential sales in the specialty channel showed substantial growth, and home center business increased during the period. Rugs improved with a greater focus on new distribution channels and product categories. Operating margins continued to expand due to sales from higher volume, super soft products and greater manufacturing and logistics efficiencies. During the period, carpet price increases were implemented and will align to cover the earlier raw material increases in the third quarter.

Ceramic segment net sales were $760 million, up 88% over last year, with strong growth in the legacy Dal-Tile business as well as the Marazzi acquisition. Operating income, excluding unusual charges, was 12% of sales, up 260 basis points over the prior year due to increased volume, the Marazzi acquisition, sales mix and manufacturing efficiencies. North American sales rose in the low teens with strength in commercial specialty retail, home center channels and continued expansion in Mexico. Our Russian ceramic sales are performing well, with double digit growth as a result of our integrated distribution model and increased participation in the stronger construction market. European ceramic sales rose slightly with expansion in Northern Europe and exports to other markets offsetting soft conditions in Southern Europe.

Laminate and wood segment net sales were $471 million, up 33% over last year, primarily due to our acquisitions of Pergo and Spano with stronger sales in legacy North America offsetting our slower legacy European business. Operating income, excluding unusual charges, was 13% of sales, an improvement of 90 basis points over the prior year due to lower amortization and increased North American sales. We have integrated our management of Unilin and Pergo into a single entity, reducing SG&A expenses, consolidating administrative functions, increasing manufacturing productivity and eliminating redundancies. Europe continues to face headwinds with the legacy sales down slightly and margins under pressure. The Pergo integration in Europe is well underway and will create significant synergies in sales, products and production. Our wood manufacturing in Malaysia, distribution in Australia and laminate manufacturing in Russia continue to show improvement. During the period, we completed the acquisition of Spano and have identified many opportunities for improvement including expanding the product offering and distribution, optimizing our manufacturing assets and reducing manufacturing complexity.

"Our performance during the second quarter underscored the value of our recent acquisitions and our ability to integrate them into our business. We have a talented management team that is focused on driving our historical businesses while optimizing our new acquisitions. We have quickly identified and executed many significant changes including cost and efficiency improvements, asset consolidation, realignment of sales and brand strategies and the enhancement of our product offering. We are committed to bringing innovation to the market in all our products, and our new acquisitions have enhanced our ability to realize this. We are increasingly confident in the continued strengthening of the U.S. market, and we believe that continued job growth, expanded new home construction and greater remodeling investments along with our new acquisitions will improve our future results. With these factors, our guidance for third quarter earnings is $1.81 to $1.91 per share, excluding any restructuring or acquisition costs. With business improvement and acquisitions in 2013, we anticipate the fourth quarter seasonality impact to be slightly more than 2010 and 2011."

Mohawk Industries is the leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawk's vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Our industry-leading innovation has yielded products and technologies that differentiate our brands in the marketplace and satisfy all remodeling and new construction requirements. Our brands are among the most recognized in the industry and include American Olean, Bigelow, Dal-Tile, Durkan, Karastan, Lees, Marazzi, Kerama Marazzi, Mohawk, Pergo, Unilin and Quick-Step. During the past decade, Mohawk has transformed its business from an American carpet manufacturer into the world's largest flooring company with operations in Australia, Brazil, Canada, China, Europe, India, Malaysia, Mexico, Russia and the United States.

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.

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations Three Months Ended

------------------

(Amounts in thousands, except per share

data) June 29, June 30,

2013 2012

---- ----

Net sales $1,976,299 1,469,793

Cost of sales 1,462,243 1,081,329

------------- --------- ---------

Gross profit 514,056 388,464

Selling, general and administrative

expenses 380,858 280,746

----------------------------------- ------- -------

Operating income 133,198 107,718

Interest expense 25,312 18,844

Other (income) expense, net (1,097) 440

--------------------------- ------ ---

Earnings from continuing operations before 108,983 88,434

income taxes

Income tax expense 23,240 15,246

------------------ ------ ------

Earnings from continuing operations 85,743 73,188

Loss from discontinued operations, net of

income (1,361) -

tax benefit of $485 ------ ---

------------------

Net Earnings including noncontrolling

interest 84,382 73,188

Net (loss) earnings attributable to

noncontrolling (190) -

interest ---- ---

--------

Net earnings attributable to Mohawk

Industries, Inc. $84,572 73,188

----------------------------------- ------- ------

Basic earnings per share attributable to

Mohawk Industries, Inc.

Income from continuing operations $1.19 1.06

Loss from discontinued operations, net of

income (0.02) -

taxes ----- ---

-----

Basic earnings per share attributable to

Mohawk $1.17 1.06

Industries, Inc. ----- ----

----------------

Weighted-average common shares

outstanding - 72,406 68,984

basic ------ ----------

Diluted earnings per share attributable to

Mohawk Industries, Inc.

Income from continuing operations $1.18 1.06

Loss from discontinued operations, net of

income (0.02) -

taxes ----- --------

Diluted earnings per share attributable to

Mohawk $1.16 1.06

Industries, Inc. ----- ----

----------------

Weighted-average common shares

outstanding - 72,867 69,259

diluted ------ ------

-------

Other Financial Information

(Amounts in thousands)

----------------------

Depreciation and amortization $80,643 71,831

----------------------------- ------- ------

Capital expenditures $82,815 44,436

-------------------- ------- ------

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statement of Operations Six Months Ended

----------------

(Amounts in thousands, except per share

data) June 29, June 30,

2013 2012

---- ----

Net sales 3,463,114 2,878,828

Cost of sales 2,571,992 2,130,938

------------- --------- ---------

Gross profit 891,122 747,890

Selling, general and administrative

expenses 671,082 568,196

----------------------------------- ------- -------

Operating income 220,040 179,694

Interest expense 44,468 41,342

Other (income) expense, net 5,290 (1,385)

--------------------------- ----- ------

Earnings from continuing operations before 170,282 139,737

income taxes

Income tax expense 33,972 25,537

------------------ ------ ------

Earnings from continuing operations 136,310 114,200

Loss from discontinued operations, net of

income (1,361) -

tax benefit of $485 ------ ---

-------------------

Net Earnings including noncontrolling

interest 134,949 114,200

Net (loss) earnings attributable to

noncontrolling (118) 635

interest ---- ---

--------

Net earnings attributable to Mohawk

Industries, Inc. 135,067 113,565

----------------------------------- ------- -------

Basic earnings per share attributable to

Mohawk Industries, Inc.

Income from continuing operations 1.92 1.65

Loss from discontinued operations, net of

income (0.02) -

taxes ----- ---

-----

Basic earnings per share attributable to

Mohawk 1.90 1.65

Industries, Inc. ---- ----

----------------

Weighted-average common shares

outstanding - 70,907 68,923

basic ------ ------

-----

Diluted earnings per share attributable to

Mohawk Industries, Inc.

Income from continuing operations 1.91 1.64

Loss from discontinued operations, net of

income (0.02) -

taxes ----- ---

-----

Diluted earnings per share attributable to

Mohawk 1.89 1.64

Industries, Inc. ---- ----

----------------

Weighted-average common shares

outstanding - 71,405 69,204

diluted ------ ------

-------

Other Financial Information

(Amounts in thousands)

----------------------

Depreciation and amortization 140,992 145,117

----------------------------- ------- -------

Capital expenditures 146,097 87,687

-------------------- ------- ------

Consolidated Balance Sheet Data

(Amounts in thousands)

June 29, June 30,

2013 2012

---- ---

ASSETS

Current assets:

Cash and cash equivalents $168,745 319,463

Receivables, net 1,145,550 782,122

Inventories 1,591,552 1,161,073

Prepaid expenses and other current assets 229,859 144,915

Deferred income taxes 134,489 126,613

---------------------

Total current assets 3,270,195 2,534,186

Property, plant and equipment, net 2,594,256 1,652,444

Goodwill 1,690,622 1,363,356

Intangible assets, net 800,529 564,948

Deferred income taxes and other non-current 153,362 149,843

assets

------

$8,508,964 6,264,777

---------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt $83,171 57,158

Accounts payable and accrued expenses 1,261,791 733,411

------------------------------------- --------- -------

Total current liabilities 1,344,962 790,569

Long-term debt, less current portion 2,450,584 1,570,530

Deferred income taxes and other long-term 609,125 427,360

liabilities ------- -------

-----------

Total liabilities 4,404,671 2,788,459

----------------- --------- ---------

Total stockholders' equity 4,104,293 3,476,318

-------------------------- --------- ---------

$8,508,964 6,264,777

---------- ---------

Segment Information Three Months Ended

------------------

(Amounts in thousands) June 29, June 30,

2013 2012

---- ----

Net sales:

Carpet $770,868 734,493

Ceramic 760,168 404,288

Laminate and Wood 470,980 354,374

Intersegment sales (25,717) (23,362)

------------------ ------- -------

Consolidated net sales $1,976,299 1,469,793

---------------------- ---------- ---------

Operating income (loss):

Carpet $54,862 37,136

Ceramic 46,304 36,432

Laminate and Wood 41,362 40,575

Corporate and eliminations (9,330) (6,425)

-------------------------- ------ ------

Consolidated operating income $133,198 107,718

----------------------------- -------- -------

Assets:

Carpet

Ceramic

Laminate and Wood

Corporate and eliminations

Consolidated assets

-------------------

As of or for the Six Months

Segment Information Ended

---------------------------

(Amounts in thousands) June 29, June 30,

2013 2012

---- ----

Net sales:

Carpet 1,466,202 1,434,373

Ceramic 1,172,049 797,213

Laminate and Wood 875,455 691,798

Intersegment sales (50,592) (44,556)

------------------ ------- -------

Consolidated net sales 3,463,114 2,878,828

---------------------- --------- ---------

Operating income (loss):

Carpet 80,100 62,418

Ceramic 76,280 62,460

Laminate and Wood 80,055 67,721

Corporate and eliminations (16,395) (12,905)

-------------------------- ------- -------

Consolidated operating income 220,040 179,694

----------------------------- ------- -------

Assets:

Carpet $1,803,212 1,791,376

Ceramic 3,832,888 1,742,563

Laminate and Wood 2,691,553 2,539,997

Corporate and eliminations 181,311 190,841

------- -------

Consolidated assets $8,508,964 6,264,777

------------------- ---------- ---------

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

------------------

June 29, June 30,

2013 2012

---- ----

Net earnings attributable to Mohawk

Industries, Inc. $84,572 73,188

Adjusting items:

Restructuring, acquisition and

integration-related costs 41,321 8,226

Acquisitions purchase accounting

(inventory step-up) 18,744 -

Discontinued operations 1,845 -

Interest on 3.85% senior notes - -

Income taxes (12,668) (2,201)

------------ ------- ------

Adjusted net earnings attributable to

Mohawk Industries, Inc. $133,814 79,213

------------------------------------- -------- ------

Adjusted diluted earnings per share

attributable to Mohawk Industries, Inc. $1.84 1.14

Weighted-average common shares

outstanding - diluted 72,867 69,259

Six Months Ended

----------------

June 29, June 30,

2013 2012

---- ----

Net earnings attributable to Mohawk

Industries, Inc. 135,067 113,565

Adjusting items:

Restructuring, acquisition and

integration-related costs 51,177 8,226

Acquisitions purchase accounting

(inventory step-up) 18,744 -

Discontinued operations 1,845 -

Interest on 3.85% senior notes 3,559 -

Income taxes (15,448) (2,201)

------------ ------- ------

Adjusted net earnings attributable to

Mohawk Industries, Inc. 194,944 119,590

------------------------------------- ------- -------

Adjusted diluted earnings per share

attributable to Mohawk Industries, Inc. 2.73 1.73

Weighted-average common shares

outstanding - diluted 71,405 69,204

Reconciliation of Total Debt to Net Debt

(Amounts in thousands)

June 29,

2013

---

Current portion of long-term debt $83,171

Long-term debt, less current portion 2,450,584

Less: Cash and cash equivalents 168,745

Net Debt $2,365,010

-------- ----------

Reconciliation of Operating Income to Proforma Adjusted EBITDA

(Amounts in thousands)

Three Months Ended

------------------

September December March June

29, 31, 30, 29,

2012 2012 2013 2013

---- ---- ---- ----

Operating income $103,954 95,860 86,842 133,198

Other (expense) income (322) (1,366) (6,387) 1,097

Net (earnings) loss attributable to

noncontrolling interest - - (72) 190

Depreciation and amortization 71,298 63,878 60,349 80,643

----------------------------- ------ ------ ------ ------

EBITDA 174,930 158,372 140,732 215,128

Restructuring, acquisition and

integration-related costs 4,229 6,109 9,856 41,321

Acquisitions purchase accounting

(inventory step-up) - - - 18,744

Acquisitions EBITDA 60,077 55,046 40,542 -

-------------------

Proforma Adjusted EBITDA $239,236 219,527 191,130 275,193

------------------------ -------- ------- ------- -------

Net Debt to Proforma Adjusted EBITDA

------------------------------------

Trailing

Twelve

Months

Ended

June 29,

2013

----

Operating income 419,854

Other (expense) income (6,978)

Net (earnings) loss attributable to

noncontrolling interest 118

Depreciation and amortization 276,168

---------------------------- -------

EBITDA689,162

Restructuring, acquisition and

integration-related costs 61,515

Acquisitions purchase accounting

(inventory step-up) 18,744

Acquisitions EBITDA 155,665

-------------------

Proforma Adjusted EBITDA 925,086

------------------------ -------

Net Debt to Proforma Adjusted EBITDA 2.6

------------------------------------ ---

Reconciliation of Proforma Total Debt to Proforma Net Debt

(Amounts in thousands)

March 30,

2013

----

Current portion of proforma long-term debt $205,575

Proforma long-term debt, less current portion 2,306,925

Less: Cash and cash equivalents -

Proforma Net Debt $2,512,500

Reconciliation of Operating Income to Proforma Adjusted EBITDA

(Amounts in thousands)

Three Months Ended

------------------

September December March

June 30, 29, 31, 30,

2012 2012 2012 2013

---- ---- ---- ----

Operating income $107,718 103,954 95,860 86,842

Other (expense) income (440) (322) (1,366) (6,387)

Net (earnings) loss attributable to

noncontrolling interest - - - (72)

Depreciation and amortization 71,831 71,298 63,878 60,349

----------------------------- ------ ------ ------ ------

EBITDA 179,109 174,930 158,372 140,732

Restructuring, acquisition and

integration-related costs 8,226 4,229 6,109 9,856

Acquisitions EBITDA 66,400 60,077 55,046 40,542

-------------------

Proforma Adjusted EBITDA $253,735 239,236 219,527 191,130

------------------------ -------- ------- ------- -------

Proforma Net Debt to Proforma

Adjusted EBITDA

-----------------------------

Trailing

Twelve

Months

Ended

March 30,

2013

----

Operating income 394,374

Other (expense) income (8,515)

Net (earnings) loss attributable to

noncontrolling interest (72)

Depreciation and amortization 267,356

---------------------------- -------

EBITDA 653,143

Restructuring, acquisition and

integration-related costs 28,420

Acquisitions EBITDA 222,065

-------------------

Proforma Adjusted EBITDA 903,628

------------------------ -------

Proforma Net Debt to Proforma

Adjusted EBITDA 2.8

----------------------------- ---

Reconciliation of Net Sales to Net Sales on a Constant Exchange

Rate

(Amounts in thousands)

Three Months Ended

------------------

June 29, 2013 June 30, 2012

------------- -------------

Net sales $1,976,299 1,469,793

Adjustment to net sales on a constant exchange

rate (6,588) -

------ ---

Net sales on a constant exchange rate $1,969,711 1,469,793

------------------------------------- ---------- ---------

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant

Exchange Rate

(Amounts in thousands)

Three Months Ended

------------------

Ceramic June 29, 2013 June 30, 2012

------------- -------------

Net sales $760,168 404,288

Adjustment to segment net sales on a constant

exchange rate (1,555) -

Segment net sales on a constant exchange rate $758,613 404,288

--------------------------------------------- -------- -------

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant

Exchange Rate

(Amounts in thousands)

Three Months Ended

------------------

Laminate and Wood June 29, 2013 June 30, 2012

------------- -------------

Net sales $470,980 354,374

Adjustment to segment net sales on a constant

exchange rate (5,033) -

Segment net sales on a constant exchange rate $465,947 354,374

--------------------------------------------- -------- -------

Reconciliation of Gross Profit to Adjusted Gross Profit

(Amounts in thousands)

Three Months Ended

------------------

June 29, 2013 June 30, 2012

------------- -------------

Gross Profit $514,056 388,464

Adjustments to gross profit:

Restructuring and integration-related costs 14,334 6,636

Acquisitions purchase accounting (inventory

step-up) 18,744 -

Adjusted gross profit $547,134 395,100

--------------------- -------- -------

Adjusted gross profit as a percent of net sales 27.7% 26.9%

Reconciliation of Selling, General and Administrative Expenses to Adjusted

Selling,

General and Administrative Expenses

(Amounts in thousands)

Three Months Ended

------------------

June 29, 2013 June 30, 2012

------------- -------------

Selling, general and administrative expenses $380,858 280,746

Adjustments to selling, general and administrative expenses:

Restructuring, acquisition and integration-

related costs (26,987) (1,590)

Adjusted selling, general and administrative

expenses $353,871 279,156

-------------------------------------------- -------- -------

Adjusted selling, general and administrative

expenses as a 17.9% 19.0%

percent of net sales

Reconciliation of Operating Income to Adjusted Operating Income

(Amounts in thousands)

Three Months Ended

------------------

June 29, 2013 June 30, 2012

------------- -------------

Operating income $133,198 107,718

Adjustments to operating income:

Restructuring, acquisition and integration-

related costs 41,321 8,226

Acquisitions purchase accounting (inventory

step-up) 18,744 -

Adjusted operating income $193,263 115,944

------------------------- -------- -------

Adjusted operating margin as a percent of net

sales 9.8% 7.9%

Reconciliation of Segment Operating Income to Adjusted Segment Operating

Income

(Amounts in thousands)

Three Months Ended

------------------

Carpet June 29, 2013 June 30, 2012

------ ------------- -------------

Operating income $54,862 37,136

Adjustment to segment operating income:

Restructuring, acquisition and integration-

related costs - 7,383

Adjusted segment operating income $54,862 44,519

--------------------------------- ------- ------

Adjusted operating margin as a percent of net

sales 7.1% 6.1%

Reconciliation of Segment Operating Income to Adjusted Segment Operating

Income

(Amounts in thousands)

Three Months Ended

------------------

Ceramic June 29, 2013 June 30, 2012

------- ------------- -------------

Operating income $46,304 36,432

Adjustment to segment operating income:

Restructuring, acquisition and integration-

related costs 23,361 -

Acquisitions purchase accounting (inventory

step-up) 18,744 -

Adjusted segment operating income $88,409 36,432

--------------------------------- ------- ------

Adjusted operating margin as a percent of net

sales 11.6% 9.0%

Reconciliation of Segment Operating Income to Adjusted Segment Operating

Income

(Amounts in thousands)

Three Months Ended

------------------

Laminate and Wood June 29, 2013 June 30, 2012

----------------- ------------- -------------

Operating income $41,362 40,575

Adjustment to segment operating income:

Restructuring, acquisition and integration-

related costs 17,960 843

Adjusted segment operating income $59,322 41,418

--------------------------------- ------- ------

Adjusted operating margin as a percent of net

sales 12.6% 11.7%

Reconciliation of Earnings from Continuing Operations Before Income Taxes to

Adjusted

Earnings from Continuing Operations Before Income Taxes

(Amounts in thousands)

Three Months Ended

------------------

June 29, 2013 June 30, 2012

------------- -------------

Earnings from continuing operations before income taxes $108,983 88,434

Adjustment to earnings from continuing operations before income taxes:

Restructuring, acquisition and integration-

related costs 41,321 8,226

Acquisitions purchase accounting (inventory

step-up) 18,744 -

Adjusted earnings before income taxes $169,048 96,660

------------------------------------- -------- ------

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense

(Amounts in thousands)

Three Months Ended

------------------

June 29, 2013 June 30, 2012

------------- -------------

Income tax expense $23,240 15,246

Income tax effect of adjusting items 12,183 2,201

------ -----

Adjusted income tax expense $35,423 17,447

--------------------------- ------- ------

Adjusted income tax rate 21% 18%

------------------------ --- ---

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: Mohawk Industries, Inc.