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Mohawk Industries Announces First Quarter Earnings

May 05, 2014, 9:00 UTC+3
Net sales up 22 % over PY; adjusted EPS increased 41 %
1 pages in this article
© mohawkind.com

CALHOUN, Georgia, May 1, 2014 /PRNewswire/ -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2014 first quarter net earnings of $81 million and diluted earnings per share (EPS) of $1.11. Excluding unusual charges, net earnings for the quarter were $90 million; EPS was $1.23, a 41% increase over last year's first quarter adjusted EPS. Net sales for the first quarter of 2014 were approximately $1.8 billion, an increase of 22% as reported and 21% on a constant exchange basis versus the prior year's first quarter. In addition, the first quarter had one less shipping day when compared to prior year, which equates to approximately 1.5% of net sales. For the first quarter of 2013, net sales were approximately $1.5 billion, net earnings were $50 million and EPS was $0.72; excluding unusual charges, net earnings were $61 million and EPS was $0.87.

Commenting on Mohawk Industries' first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "First quarter earnings were higher than expected due to our 2013 acquisitions, improved productivity across our business and stronger results outside North America, although severe winter weather in the U.S. impacted sales. During the period, we continued making progress with our acquisitions, including enhancing our organizational structures, sales strategies, product offerings and productivity. Our adjusted operating income for the quarter increased 47% to approximately 8% of net sales as initiatives drove higher earnings across all divisions and operational improvements gained traction in our acquisitions."

For the quarter, the Carpet segment's adjusted operating margins rose 60 basis points to 5.1% of net sales as a result of productivity improvements, cost reductions and improved pricing. Net sales for the segment were $675 million, down 3% as reported with one less day in the period. The period was negatively impacted by the harsh weather conditions in the U.S., with residential outperforming the other categories. In residential, the company's ultra-soft products continue to capture a greater share of the premium carpet category. New Continuum products, made from up to 100% recycled polyester, are gaining momentum at both the value added and promotional price points. Last year's DuraColor commercial carpet collections, that provide greater value and improved styling, are now among our best-selling products, with higher efficiencies and margins for the company. Numerous productivity projects across the segment including operational enhancements, re-engineered materials and capital investments are generating significant savings. A price increase for carpet and freight was announced to offset material, energy and transportation costs.

For the quarter, the Ceramic segment's adjusted operating margins grew 160 basis points to 9.0% of net sales as a result of higher volumes, efficiency gains and improved mix. Net sales for the segment were $695 million, up 69% compared to the prior year, primarily due to the Marazzi acquisition and legacy sales growth in North America. The company's ceramic business in North American expanded its design offerings and enhanced its market position with new larger sizes, rectangles and longer planks. The company announced the construction of a new U.S. ceramic plant to manufacture premium products, with production scheduled to start up by the end of 2015. The company's ceramic business in Europe increased its profitability through new sales and manufacturing strategies that reduced cost and improved product mix. On a local basis, the company's ceramic business in Russia significantly grew its revenues and operating income with higher volumes and improved mix, despite a slowing economy. We continue to improve productivity and conversion costs across our worldwide ceramic operations.

For the quarter, the Laminate and Wood segment's adjusted operating margins rose 110 basis points over the prior year to 11.5% of net sales, with productivity initiatives, acquisition synergies and price increases partially offset by higher wood costs. Net sales in the segment were $468 million, an increase of 16% over the prior year as reported or 13% on a constant exchange rate, with most of the increase from the Spano acquisition, higher volume in wood flooring and growth in insulation boards. In the U.S., price and freight increases on wood flooring were implemented in March to offset rising wood costs and transportation expenses, with further price increases announced in April. In Europe, the roll out of our new updated Pergo laminate collections with improved design, performance and installation systems should be complete in the second quarter and should enhance our sales and market position. Our new wood plant in the Czech Republic will increase capacity so we can grow our business in Europe, Russia and Asia. Our new insulation board plant is allowing us to significantly expand sales in the Benelux region and France. The integration of the Unilin and Spano board businesses has improved our position through the consolidation of production lines and sales organizations and lower material and energy costs.

"Across the enterprise, our management team is executing strategic initiatives to maximize our acquisitions and is implementing best practices and process improvements to enhance our legacy business," said Lorberbaum. "Although the pace of economic improvement varies across our markets, we are driving innovation, operational excellence and sales growth to optimize our results. In each of our businesses, we have many local advantages, including leading market positions, highly recognized brands, diverse distribution and efficient manufacturing that position our businesses for growth as each market improves.

"Although the weather in the first quarter impacted our U.S. business, orders and shipments began improving as the period ended. Our growth outside the U.S. was higher in the first period due to warmer weather in Europe than last year and better performance of our Russian ceramic introductions. Across the business, we are implementing product and freight increases as required to offset inflation. With these factors, our guidance for second quarter earnings is $2.14 to $2.23 per share and for the full year $8.00 to $8.30 per share, excluding any unusual charges.

"We remain positive about both our strategies to enhance Mohawk's results and the overall outlook for the floor covering industry this year. We are planning to increase capital investments across the enterprise to an all-time high of $500 million to support the introduction of innovative products, to sustain our growth with increased manufacturing capacity and to drive productivity, efficiency and cost improvements. We remain focused on enhancing shareholder value by increasing our top line growth and improving our bottom line."

 

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, Bigelow, Daltile, Durkan, Karastan, Lees, 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.

 

Conference call Friday, May 2, 2014 at 11:00 AM Eastern Time

The telephone number is +1 800 603-92-55 for US/Canada and +1 706 634-22-94 for International/Local. Conference ID # 23642005.

A replay will be available until Thursday, May 15, 2014 by dialing +1 855 859-20-56 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 23642005.

 

Contact:

Frank H. Boykin, Chief Financial Officer

Tel.: +1-706-624-26-95

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