In the News – Mohawk Industries Reports Q3 Results

In the News – Mohawk Industries Reports Q3 Results

CALHOUN, Ga., Oct. 26, 2017 /PRNewswire/ — Mohawk Industries, Inc. (NYSE: MHK) today announced 2017 third quarter, net earnings of $270 million and diluted earnings per share (EPS) of $3.61. Adjusted net earnings were $281 million and EPS was $3.75, excluding restructuring, acquisition and other charges, a 7% increase over last year. Net sales for the third quarter of 2017 were $2.4 billion, up 7% in the quarter and 5% on a constant days and currency basis. For the third quarter of 2016, net sales were $2.3 billion, net earnings were $270 million and EPS was $3.62; adjusted net earnings were $261 million and EPS was $3.50, excluding restructuring, acquisition and other charges.

For the nine months ending September 30, 2017, net earnings and EPS were $731 million and $9.77, respectively. Adjusted net earnings and EPS were $763 million and $10.19, excluding restructuring, acquisition and other charges, a 9% increase over last year. For the nine-month period, net sales were $7.1 billion, an increase of 5% and 5.5% on a constant days and currency basis. For the nine-month period ending October 1, 2016, net sales were $6.8 billion, net earnings were $697 million and EPS was $9.34; adjusted net earnings and EPS were $697 million and $9.35, excluding restructuring, acquisition and other charges.

Commenting on Mohawk Industries’ third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “During the period, Mohawk delivered record adjusted earnings and EPS, with sales growing approximately 7%. Our businesses outside the U.S. had stronger revenue growth, as the economies of those countries expanded. In the period, we overcame rising material costs, disruptions from hurricanes and reduced patent revenue. Our price and mix improved as we enhanced our product offering and implemented pricing actions to recover inflation. Our many operational and process improvements resulted in productivity gains of approximately $49 million and we incurred $8 million of start-up costs.

“For the full year, we are investing about $900 million to optimize long-term results by entering new product categories, extending our reach into new geographies and facilitating growth in our existing businesses. These projects include ceramic expansions in Mexico, Russia, Italy and Poland; additional premium laminate, engineered wood, rug and polyester carpet capacity in the U.S.; and increased premium laminate capacity in Europe and Russia. These investments will satisfy increasing demand for our products as well as introduce state-of-the-art manufacturing technology to further our position as the industry’s innovation leader. During 2018, in the U.S., we will launch production of rigid LVT as well as quartz countertops. In Europe, we will enter the rigid LVT, carpet tile and porcelain countertop businesses, and in Russia we will open a manufacturing plant to participate in the country’s large sheet vinyl market.

“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 Russia and Mexico as well as our acquisitions in Italy and Poland, which have been integrated with our existing European ceramic business. New capacity came online during the period with new production in Mexico and our modernized commercial tile plant in Italy. We also started up idled assets at our Polish plant, and we are installing additional equipment to broaden our position in the Northern and Central European markets. Our U.S. ceramic business was softer than we anticipated due to the impact of hurricanes in two of the country’s largest ceramic markets. In the third and fourth quarters of this year, we are opening about 15 service centers and stone centers in key U.S. markets. Our North American manufacturing plants are operating at record levels for volume, quality and cost. Our sales and margins in Mexicoincreased as we broadened our product offering and enlarged our customer base. During the period, our European ceramic business increased dramatically, with growth in our local markets and the addition of our Italian and Polish acquisitions. Our Russian ceramic business is meaningfully outperforming the industry, and we are adding capacity to increase our share as the market expands.

“During the quarter, our Flooring North America Segment’s sales increased 2% as reported. The segment’s price, mix and productivity improved significantly during the period, covering increases in raw materials and other inflation. Our new product introductions improved our average selling prices and margins, and our process innovations and investments in manufacturing technology improved our costs. The hurricanes in Texas and Florida interrupted normal purchasing patterns and impacted our sales during the period. For the quarter, our soft surfaces sales growth exceeded hard surfaces, which were constrained by production limitations that will be addressed in the fourth quarter. Growth in our residential carpet outpaced our commercial sales. We have recently announced a 5 to 6% price increase on all of our carpet products effective the end of this year to cover our increasing costs. We have enhanced the productivity of our U.S. LVT operations, and we are expanding our product offering in both the residential and commercial categories. We have introduced a proprietary rigid LVT collection designed for exceptional stability and durability as we prepare for our new U.S. LVT production in the second quarter of next year. Our new laminate production will be operational this quarter and will allow us to expand our successful water proof laminate that improves on Mother Nature in both performance and visuals.

“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 $15 million in our results as new operations come online. The disruptions caused by hurricanes in the U.S. should diminish as those markets begin their recovery. Greater productivity, better product mix and price changes should improve our fourth quarter results, overcoming the reductions from our expired patents. Taking all of this into account, our EPS guidance for the fourth quarter is $3.25 to $3.34, excluding any one-time charges.”

ABOUT MOHAWK INDUSTRIES
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, Daltile, Durkan, IVC, Karastan, Marazzi, Mohawk, Mohawk Group, Pergo, Quick-Step and Unilin. 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, Europe, India, Malaysia, Mexico, New Zealand, 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 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 SEC reports and public announcements.

Conference call Friday, October 27, 2017, 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 # 95629983. A replay will be available until Friday, November 24, 2017, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 95629983.

 

 

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
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
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
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
Other Financial Information
(Amounts in thousands)
Depreciation and amortization $                       113,515 103,680 328,300 305,088
Capital expenditures $                       229,207 183,846 654,630 460,760
Consolidated Balance Sheet Data
(Amounts in thousands)
September 30, 2017 October 1, 2016
ASSETS
Current assets:
    Cash and cash equivalents $                          84,502 112,108
    Receivables, net 1,656,064 1,506,316
    Inventories 1,911,029 1,673,242
    Prepaid expenses and other current assets 345,515 284,648
        Total current assets 3,997,110 3,576,314
Property, plant and equipment, net 4,090,099 3,340,893
Goodwill 2,454,360 2,331,821
Intangible assets, net 890,298 876,715
Deferred income taxes and other non-current assets 390,946 294,850
    Total assets $                11,822,813 10,420,593
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
     Current portion of long-term debt and commercial paper $                   1,172,781 1,548,251
     Accounts payable and accrued expenses 1,524,237 1,435,069
        Total current liabilities 2,697,018 2,983,320
Long-term debt, less current portion 1,544,665 1,165,577
Deferred income taxes and other long-term liabilities 755,020 574,267
        Total liabilities 4,996,703 4,723,164
Redeemable noncontrolling interest 28,508 24,741
Total stockholders’ equity 6,797,602 5,672,688
    Total liabilities and stockholders’ equity $                11,822,813 10,420,593
Segment Information Three Months Ended As of or for the Nine Months Ended
(Amounts in thousands) September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
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
    Flooring ROW 523,338 463,546 1,529,587 1,455,351
    Intersegment sales
        Consolidated net sales $                   2,448,510 2,294,139 7,122,193 6,776,521
Operating income (loss):
    Global Ceramic $                       143,368 135,985 411,961 376,368
    Flooring NA 163,494 170,507 383,118 364,804
    Flooring ROW 83,042 81,757 245,189 262,356
    Corporate and intersegment eliminations (9,806) (9,942) (29,561) (28,857)
        Consolidated operating income $                       380,098 378,307 1,010,707 974,671
Assets:
    Global Ceramic $                   4,826,619 4,118,510
    Flooring NA 3,699,633 3,354,286
    Flooring ROW 3,128,213 2,851,227
    Corporate and intersegment eliminations 168,348 96,570
        Consolidated assets $                11,822,813 10,420,593

 

 

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 Nine Months Ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Net earnings attributable to Mohawk Industries, Inc. $                       270,025 269,878 731,260 696,614
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)
     Adjusted net earnings attributable to Mohawk Industries, Inc. $                       280,884 261,211 762,646 697,064
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $                              3.75 3.50 10.19 9.35
Weighted-average common shares outstanding – diluted 74,841 74,613 74,830 74,551

 

Reconciliation of Total Debt to Net Debt
(Amounts in thousands)
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
(Amounts in thousands) Trailing Twelve
Three Months Ended Months Ended
December 31, 2016 April 1, 2017 July 1, 2017 September 30, 2017 September 30, 2017
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
(Amounts in thousands)
Three Months Ended Nine Months Ended
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
acquisition volume
$                   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
(Amounts in thousands)
Three Months Ended
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
acquisition volume
$                       830,634 822,040
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate 
(Amounts in thousands)
Three Months Ended
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 Securities and Exchange Commission rules, the tables above present a reconciliation of the Company’s non-GAAP financial measures to the most directly comparable US GAAP measure. Each of the non-GAAP measures set forth above should be considered in addition to the comparable US GAAP measure, and may not be comparable to similarly titled measures reported by other companies. The Company believes these non-GAAP measures, when reconciled to the corresponding US GAAP measure, help its investors as follows: Non-GAAP revenue measures that assist in identifying growth trends and in comparisons of revenue with prior and future periods and non-GAAP profitability measures that assist in understanding the long-term profitability trends of the Company’s business and in comparisons of its profits with prior and future periods.

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.

 

View original content:http://www.prnewswire.com/news-releases/mohawk-industries-reports-q3-results-300544312.html

Get more information here Mohawk

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s