Mohawk Industries Reports Record 1st Quarter Earnings

-- Q1 Adjusted EPS Up 40%

-- Record Net Sales



CALHOUN, Georgia, May 5, 2016 /PRNewswire/ -- Mohawk Industries, Inc. today announced 2016 first quarter net earnings of $172 million and diluted earnings per share (EPS) of $2.30. Excluding restructuring, acquisition and other charges, net earnings were $177 million and EPS was $2.38, a 40% increase over last year's first quarter adjusted EPS. Net sales for the first quarter of 2016 were $2.2 billion, up 15.5% versus the prior year's first quarter or approximately 19% increase on a constant days and currency exchange rate basis. For the first quarter of 2015, net sales were $1.9 billion, net earnings were $22 million and EPS was $0.30; excluding restructuring, acquisition and other charges, net earnings were $125 million and EPS was $1.70.

Commenting on Mohawk Industries' first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "We entered 2016 with an optimistic outlook, and our results exceeded our projections with revenue growing across all segments. We delivered our eighth consecutive quarter with record year over year adjusted EPS, as well as the highest net sales for any quarter in the company's history. For the period, our adjusted operating income margin rose to a first quarter record of 11.6%, an increase of 200 basis points over the prior year due to acquisitions, volume, productivity and input costs. All of these results were achieved with one less day in the period than last year.

"Our major capital projects initiated last year are progressing as expected, with the first production line in our Tennessee ceramic plant now operational, our U.S. LVT production accelerating and the second phase of our European ceramic upgrade now complete. Each of our capital expansion projects creates significant long-term value, adding new revenues by increasing our product offerings and customer base. Typically, these projects take one to three years to achieve their full benefit. All of these investments should provide higher returns than our acquisitions, though start-up costs impact our immediate results.

"In 2016, we have identified more opportunities to grow our business and have already approved additional LVT production lines in the U.S. and Europe, the doubling of our central Mexico ceramic plant, the final phase of our European ceramic equipment upgrades and the expansion of our U.S. and European premium laminate production with new technology. We anticipate investing more than $600 million in capital projects this year, and we are assessing further internal opportunities.

"For the quarter, our Global Ceramic Segment sales were up approximately 8% as reported. On a constant days and currency basis, the segment grew 11% with the legacy business up approximately 9%. Adjusted operating income for the segment rose 18% on a constant currency basis over last year to an operating margin of 13%. In our North American ceramic business, which constitutes the majority of the segment, our service centers grew the fastest of all our channels during the period as we invested more in sales personnel, marketing and new product introductions. Our new floor and wall tile products are gaining additional placements in the home center channel as those retailers place greater emphasis on the category. To support our growth, our new plant in Tennessee initiated production on schedule, and the first line is running well. The plant's remaining two lines will be operational between now and August. Our Mexican ceramic business is outpacing the market and is the fastest growing part of the segment. We continue to increase our customer base in the Mexican market, adding new distributors, expanding home center placements and increasing our participation in new construction projects. Our European ceramic sales grew during the period, and we are increasing our investments in sales personnel, merchandising, retail training and brand advertising. Our KAI acquisition continues to progress as we enhance the product offering, organization and reporting systems while expanding sales to Western Europe and the U.S. Our Russian ceramic business continues to outperform the market, which remains challenging as the economy contracts and investments in real estate decline.

"During the quarter, our Flooring North America Segment's sales were up 7% as reported. On constant days basis the segment grew approximately 9% with the legacy sales up 4%. Adjusted operating income for the segment rose 42% over last year to an operating margin of 9%. Last year, we began expanding our investments in sales personnel and marketing to broaden our distribution in carpet and hard surface products. Our profit margins have improved as a result of more differentiated products and more efficient operations. We continue to build on our strengths in premium residential carpet with innovative products that should enhance our mix as homeowners seek luxurious softness and improved performance. Our commercial margins improved with the success of our fashionable new product introductions and streamlined manufacturing processes. Our U.S. hard surface sales increased across all channels as we leverage our relationships with independent retailers, home centers and commercial customers. Our LVT sales are growing dramatically in both residential and commercial sectors as we ramp up production at our new U.S. plant. We have announced a hardwood price increase of 6% - 10% effective on May 15th. Our manufacturing plants are improving process efficiencies and quality as well as implementing equipment upgrades to extend our competitive advantages.

"For the quarter, our Flooring Rest of the World segment's sales were up 56% as reported. On a constant days and currency basis the segment increased 62% with legacy sales up 4%. Adjusted operating income for the segment rose 70% on a constant currency basis to an operating margin of 17%. Our laminate and wood business in Europe outpaced market trends due to our differentiated high-end products. Our deeply textured new laminate collections are driving growth in the category, and our engineered wood sales rose in both our Quick-Step brand and our direct distribution. We are planning to increase laminate capacity this year to support new product growth. Our sheet vinyl plants are fully utilized and our mix is improving. Our LVT sales are growing substantially as our new production expands, and we sourced products to grow even faster. Additional equipment will be installed in the third quarter to further increase our LVT capacity. Our insulation panel business grew significantly during the period, primarily through the acquisition of Xtratherm which was completed the end of last year. Our boards and roof panel businesses are delivering improved sales and margins as we upgrade the mix and equipment.

"Mohawk delivered another strong performance during the first period with all of our segments enhancing their position in the marketplace. In the U.S., increased investments in marketing, products and distribution should increase our sales and margins across all product categories. Although growth in Europe is limited and Russia remains in a recession, we anticipate improving our market share and positioning ourselves for the future. We are investing in our businesses at the highest rate in our history to expand our product offerings, improve efficiency and increase capacity. Our recent acquisitions have been significantly integrated, and our financial leverage has been reduced, so we can pursue additional opportunities as they become available. Taking all of these factors into account, our guidance for the second quarter is $3.29 to $3.38, which would represent a 22% to 26% increase over 2015, excluding any restructuring charges. Our first quarter performance reflects the positive impact of the investments we have made in the business over the past three years. Our unique products, marketing and manufacturing position will enhance our operating results going forward."

ABOUT MOHAWK INDUSTRIESMohawk 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, IVC, 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, 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, May 6, 2016, 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 # 88703650. A replay will be available until Monday, June 6, 2016, by dialing 855-859-2056 for US/local calls and 404-537-3406 for International/Local calls and entering Conference ID # 88703650.




MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

(Unaudited)

Consolidated Statement of Operations Three Months Ended
------------------

(Amounts in thousands, except per share data) April 2, 2016 April 4, 2015
------------- -------------


Net sales $2,172,046 1,881,177

Cost of sales 1,532,367 1,369,234
------------- --------- ---------

Gross profit 639,679 511,943

Selling, general and administrative expenses 394,007 468,169
-------------------------------------------- ------- -------

Operating income 245,672 43,774

Interest expense 12,301 16,449

Other expense (income), net 3,429 (1,083)
--------------------------- ----- ------

Earnings before income taxes 229,942 28,408

Income tax expense 57,825 5,904
------------------ ------ -----

Net earnings including noncontrolling interest 172,117 22,504

Net earnings (loss) attributable to noncontrolling interest 569 158
------------------------------------------------------------ --- ---

Net earnings attributable to Mohawk Industries, Inc. $171,548 22,346
---------------------------------------------------- -------- ------


Basic earnings per share attributable to Mohawk Industries, Inc.

Basic earnings per share attributable to Mohawk Industries, Inc. $2.32 0.31
---------------------------------------------------------------- ----- ----

Weighted-average common shares outstanding - basic 73,976 72,988
-------------------------------------------------- ------ ------


Diluted earnings per share attributable to Mohawk Industries, Inc.

Diluted earnings per share attributable to Mohawk Industries, Inc. $2.30 0.30
------------------------------------------------------------------ ----- ----

Weighted-average common shares outstanding - diluted 74,490 73,530
---------------------------------------------------- ------ ------




Other Financial Information

(Amounts in thousands)

Depreciation and amortization $100,194 85,656
----------------------------- -------- ------

Capital expenditures $140,833 105,794
-------------------- -------- -------


Consolidated Balance Sheet Data

(Amounts in thousands)

April 2, 2016 April 4, 2015
------------- -------------

ASSETS

Current assets:

Cash and cash equivalents $98,305 107,041

Receivables, net 1,406,725 1,158,858

Inventories 1,652,030 1,505,632

Prepaid expenses and other current assets 313,491 285,261
------- -------

Total current assets 3,470,551 3,056,792

Property, plant and equipment, net 3,224,327 2,618,633

Goodwill 2,339,521 1,553,155

Intangible assets, net 950,975 661,846

Deferred income taxes and other non-current assets 306,941 389,635
-------------------------------------------------- ------- -------

Total assets $10,292,315 8,280,061
------------ ----------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt and commercial paper $2,076,179 1,806,176

Accounts payable and accrued expenses 1,247,489 1,074,456
------------------------------------- --------- ---------

Total current liabilities 3,323,668 2,880,632

Long-term debt, less current portion 1,173,600 601,519

Deferred income taxes and other long-term liabilities 615,037 574,115
----------------------------------------------------- ------- -------

Total liabilities 5,112,305 4,056,266
----------------- --------- ---------

Redeemable noncontrolling interest 23,432 -
---------------------------------- ------ ---

Total stockholders' equity 5,156,578 4,223,795
-------------------------- --------- ---------

Total liabilities and stockholders' equity $10,292,315 8,280,061
------------------------------------------ ----------- ---------


Segment Information (a) As of or for the Three Months Ended
-----------------------------------

(Amounts in thousands) April 2, 2016 April 4, 2015
------------- -------------


Net sales:

Global Ceramic $773,726 719,828

Flooring NA 906,364 846,911

Flooring ROW 491,956 314,742

Intersegment sales - (304)
------------------ --- ----

Consolidated net sales $2,172,046 1,881,177
---------------------- ---------- ---------


Operating income (loss):

Global Ceramic $99,777 85,327

Flooring NA 75,351 (75,192)

Flooring ROW 79,537 44,641

Corporate and eliminations (8,993) (11,002)
-------------------------- ------ -------

Consolidated operating income $245,672 43,774
----------------------------- -------- ------


Assets:

Global Ceramic $3,988,285 3,584,471

Flooring NA 3,267,529 2,631,310

Flooring ROW 2,926,959 1,753,404

Corporate and eliminations 109,542 310,876
-------------------------- ------- -------

Consolidated assets $10,292,315 8,280,061
------------------- ----------- ---------





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

April 2, 2016 April 4, 2015
------------- -------------

Net earnings attributable to Mohawk Industries, Inc. $171,548 22,346

Adjusting items:

Restructuring, acquisition and integration-related and other costs 7,718 12,529

Legal settlement and reserves - 125,000

Deferred loan costs - 651

Income taxes (2,277) (35,554)
------------ ------ -------

Adjusted net earnings attributable to Mohawk Industries, Inc. $176,989 124,972
------------------------------------------------------------- -------- -------


Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $2.38 1.70

Weighted-average common shares outstanding - diluted 74,490 73,530




Reconciliation of Total Debt to Net Debt

(Amounts in thousands)

April 2, 2016
-------------

Current portion of long-term debt and commercial paper $2,076,179

Long-term debt, less current portion 1,173,600

Less: Cash and cash equivalents 98,305
------------------------------- ------

Net Debt $3,151,474
-------- ----------


Reconciliation of Operating Income to Pro forma Adjusted EBITDA

(Amounts in thousands) Trailing Twelve

Three Months Ended Months Ended
------------------

July 4, 2015 October 3, 2015 December 31, 2015 April 2, 2016 April 2, 2016
------------ --------------- ----------------- ------------- -------------

Operating income $255,816 288,734 249,242 245,672 1,039,464

Other (expense) income (2,928) (4,249) (11,525) (3,429) (22,131)

Net (earnings) loss attributable to non-controlling interest (282) (798) (446) (569) (2,095)

Depreciation and amortization 88,011 94,955 94,025 100,194 377,185
----------------------------- ------ ------ ------ ------- -------

EBITDA 340,617 378,642 331,296 341,868 1,392,423

Restructuring, acquisition and integration-related and other costs 15,275 11,690 30,820 7,718 65,503

Acquisitions purchase accounting (inventory step-up) 6,156 7,160 21 - 13,337

Legal settlement and reserves 2,000 - (2,520) - (520)

Release of indemnification asset - - 11,180 - 11,180

Acquisitions EBITDA 40,648 3,639 7,337 - 51,624
------------------- ------ ----- ----- --- ------

Pro forma Adjusted EBITDA $404,696 401,131 378,134 349,586 1,533,547
------------------------- -------- ------- ------- ------- ---------


Net Debt to Pro forma Adjusted EBITDA 2.1
------------------------------------- ---





Reconciliation of 2016 Net Sales to Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding 2016 Q1 Acquisition Volume

(Amounts in thousands)

Three Months Ended
------------------

April 2, 2016 April 4, 2015
------------- -------------

Net sales $2,172,046 1,881,177

Adjustment to net sales on constant shipping days 31,734 -

Adjustment to net sales on a constant exchange rate 26,043 -
--------------------------------------------------- ------ ---

Net sales on a constant exchange rate and constant shipping days 2,229,823 1,881,177

Less: 2016 Q1 impact of acquisition volume (242,956) - -
------------------------------------------- -------- ---

2016 net sales on a constant exchange rate and constant shipping days excluding acquisition volume $1,986,867 1,881,177 -
-------------------------------------------------------------------------------------------------- ---------- ---------




Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding 2016 Q1 Acquisition Volume

(Amounts in thousands)

Three Months Ended
------------------

Global Ceramic April 2, 2016 April 4, 2015
-------------- ------------- -------------

Net sales $773,726 719,828

Adjustment to net sales on constant shipping days 10,189 -

Adjustment to segment net sales on a constant exchange rate 16,610 -
----------------------------------------------------------- ------ ---

2016 segment net sales on a constant exchange rate and constant shipping days 800,525 719,828

Less: 2016 Q1 impact of acquisition volume (19,782) - -
------------------------------------------- ------- ---

2016 segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume $780,743 719,828
---------------------------------------------------------------------------------------------------------- -------- -------




Reconciliation of 2016 Segment Net Sales to Segment Net Sales on Constant Shipping Days Excluding 2016 Q1 Acquisition Volume

(Amounts in thousands)

Three Months Ended
------------------

Flooring NA (a) April 2, 2016 April 4, 2015
-------------- ------------- -------------

Net sales $906,364 846,911

Adjustment to net sales on constant shipping days 12,400 -
-------------------------------------------------- ------ ---

2016 segment net sales on constant shipping days 918,764 846,911

Less: 2016 Q1 impact of acquisition volume (40,400) -
------------------------------------------ ------- ---

2016 segment net sales on constant shipping days excluding acquisition volume $878,364 846,911
----------------------------------------------------------------------------- -------- -------




Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and Constant Shipping Days Excluding 2016 Q1 Acquisition Volume

(Amounts in thousands)

Three Months Ended
------------------

Flooring ROW (a) April 2, 2016 April 4, 2015
--------------- ------------- -------------

Net sales $491,956 314,742

Adjustment to net sales on constant shipping days 9,145 -

Adjustment to segment net sales on a constant exchange rate 9,433 -
----------------------------------------------------------- ----- ---

2016 segment net sales on a constant exchange rate and constant shipping days 510,534 314,742

Less: 2016 Q1 impact of acquisition volume (182,773) -
------------------------------------------ -------- ---

2016 segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume $327,761 314,742
---------------------------------------------------------------------------------------------------------- -------- -------




Reconciliation of Gross Profit to Adjusted Gross Profit

(Amounts in thousands)

Three Months Ended
------------------

April 2, 2016 April 4, 2015
------------- -------------

Gross Profit $639,679 511,943

Adjustments to gross profit:

Restructuring, acquisition and integration-related and other costs 5,848 9,976
------------------------------------------------------------------ ----- -----

Adjusted gross profit $645,527 521,919
--------------------- -------- -------



Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses

(Amounts in thousands)

Three Months Ended
------------------

April 2, 2016 April 4, 2015
------------- -------------

Selling, general and administrative expenses $394,007 468,169

Adjustments to selling, general and administrative expenses:

Restructuring, acquisition and integration-related and other costs (1,194) (2,553)

Legal settlement and reserves - (125,000)
----------------------------- --- --------

Adjusted selling, general and administrative expenses $392,813 340,616
----------------------------------------------------- -------- -------



Reconciliation of Operating Income to Adjusted Operating Income on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended
------------------

April 2, 2016 April 4, 2015
------------- -------------

Operating income $245,672 43,774

Adjustments to operating income:

Restructuring, acquisition and integration-related and other costs 7,042 12,529

Legal settlement and reserves - 125,000
----------------------------- --- -------

Adjusted operating income 252,714 181,303

Adjustment to operating income on a constant exchange rate 2,965 -
---------------------------------------------------------- ----- ---

Adjusted operating income on constant exchange rate $255,679 181,303
--------------------------------------------------- -------- -------



Reconciliation of Segment Operating Income to Adjusted Segment Operating Income on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended
------------------

Global Ceramic April 2, 2016 April 4, 2015
-------------- ------------- -------------

Operating income $99,777 85,327

Adjustments to segment operating income:

Restructuring, acquisition and integration-related and other costs 766 362
------------------------------------------------------------------ --- ---

Adjusted segment operating income 100,543 85,689

Adjustment to operating income on a constant exchange rate 337 -
---------------------------------------------------------- --- ---

Adjusted segment operating income on constant exchange rate $100,880 85,689
------------------------------------------------------------ -------- ------


Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Three Months Ended
------------------

Flooring NA (a) April 2, 2016 April 4, 2015
-------------- ------------- -------------

Operating income $75,351 (75,192)

Adjustments to segment operating income:

Legal settlement and reserves - 125,000

Restructuring, acquisition and integration-related and other costs 3,676 5,825
------------------------------------------------------------------ ----- -----

Adjusted segment operating income $79,027 55,633
--------------------------------- ------- ------





Reconciliation of Segment Operating Income to Adjusted Segment Operating Income on a Constant Exchange Rate

(Amounts in thousands)

Three Months Ended
------------------

Flooring ROW (a) April 2, 2016 April 4, 2015
--------------- ------------- -------------

Operating income $79,537 44,641

Adjustments to segment operating income:

Restructuring, acquisition and integration-related and other costs 2,600 5,155
------------------------------------------------------------------ ----- -----

Adjusted segment operating income 82,137 49,796

Adjustment to operating income on a constant exchange rate 2,627 -
---------------------------------------------------------- ----- ---

Adjusted segment operating income on constant exchange rate $84,764 49,796
----------------------------------------------------------- ------- ------



Reconciliation of Earnings incl Noncontrolling Interests Before Income Taxes to Adjusted Earnings incl Noncontrolling Interests Before Income Taxes

(Amounts in thousands)

Three Months Ended
------------------

April 2, 2016 April 4, 2015
------------- -------------

Earnings before income taxes $229,942 28,408

Noncontrolling interests (569) (158)

Adjustments to earnings incl noncontrolling interests before income taxes:

Restructuring, acquisition and integration-related and other costs 7,718 12,529

Legal settlement and reserves - 125,000

Deferred loan costs - 651
------------------- --- ---

Adjusted earnings incl noncontrolling interests before income taxes $237,091 166,430
------------------------------------------------------------------- -------- -------



Reconciliation of Income Tax Expense to Adjusted Income Tax Expense

(Amounts in thousands)

Three Months Ended
------------------

April 2, 2016 April 4, 2015
------------- -------------

Income tax expense $57,825 5,904

Income tax effect of adjusting items 2,277 35,554
------------------------------------ ----- ------

Adjusted income tax expense $60,102 41,458
--------------------------- ------- ------


Adjusted income tax rate 25.4% 24.9%
------------------------ ---- ----



(a) Prior year segment data adjusted to reflect the second quarter 2015 segment realignment



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, integration-related and other costs, legal settlement and reserves and
acquisitions purchase accounting (inventory step-up) is useful because it allows investors to evaluate our performance for different periods on a more comparable basis.





Mohawk Industries, Inc.


CONTACT: Frank H. Boykin, Chief Financial Officer (706) 624-2695


Web site: http://www.mohawkind.com/

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