Mohawk Industries Reports Q1 Results
Commenting on
"For the quarter, our operating income grew at a greater rate when adjusted for the loss of income from expired patents and higher start-up costs of new facilities and sales initiatives. In the first quarter, material and freight inflation increased more than we anticipated and impacted our costs. We are initiating selective pricing actions by product and region that, combined with improving mix and cost reductions, will offset expected inflation.
"For the quarter, our Global Ceramic Segment sales increased 12% as reported and 8% on a constant currency basis. Our sales in
"During the quarter, our
"For the quarter, our Flooring Rest of the World Segment's sales increased 18% as reported and 4% on a constant currency basis, as local economies improved and the Euro strengthened. As reported, our operating income increased 17% as a result of improved price and mix, productivity and the strengthening Euro, overcoming inflation, start-up costs and expired patents. On an adjusted basis, the operating margin was approximately 16%, a slight improvement even with higher start-up costs and lower patent income. We are starting new LVT and laminate production in
"Around the globe, we are starting up a number of large investments that will significantly enhance our long-term results by expanding existing sales, adding product categories and entering new markets. Many of these operations are currently initiating new production, including Mexican, Italian and Russian ceramic; U.S. and European premium laminate; U.S. and European LVT; Italian porcelain slabs; and European carpet tile. In addition, by the end of this year, we anticipate commencing production of quartz countertops in the U.S. and sheet vinyl in
"As anticipated this year, we will have a non-recurring reduction of operating income of
"During the balance of 2018, our sales growth should improve as we increase the use of our new production, introduce additional products and complete the acquisition of Godfrey Hirst. This year, the Godfrey Hirst acquisition is estimated to increase revenue by
ABOUT
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; taxes and tax reform, product and other claims; litigation; and other risks identified in Mohawk's
Conference call
The telephone number is 1-800-603-9255 for US/
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
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(Unaudited) |
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Consolidated Statement of Operations Data |
Quarter Ended |
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(Amounts in thousands, except per share data) |
March 31, 2018 |
April 1, 2017 |
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Net sales |
$ 2,412,202 |
2,220,645 |
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Cost of sales |
1,707,510 |
1,540,292 |
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Gross profit |
704,692 |
680,353 |
||
Selling, general and administrative expenses |
436,293 |
405,569 |
||
Operating income |
268,399 |
274,784 |
||
Interest expense |
7,528 |
8,202 |
||
Other expense (income), net |
3,998 |
(2,832) |
||
Earnings before income taxes |
256,873 |
269,414 |
||
Income tax expense |
47,632 |
68,358 |
||
Net earnings including noncontrolling interest |
209,241 |
201,056 |
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Net income attributable to noncontrolling interest |
475 |
502 |
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Net earnings attributable to Mohawk Industries, Inc. |
$ 208,766 |
200,554 |
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Basic earnings per share attributable to Mohawk Industries, Inc. |
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Basic earnings per share attributable to Mohawk Industries, Inc. |
$ 2.80 |
2.70 |
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Weighted-average common shares outstanding - basic |
74,453 |
74,212 |
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Diluted earnings per share attributable to Mohawk Industries, Inc. |
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Diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 2.78 |
2.68 |
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Weighted-average common shares outstanding - diluted |
74,929 |
74,754 |
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Other Financial Information |
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(Amounts in thousands) |
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Depreciation and amortization |
$ 122,654 |
105,024 |
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Capital expenditures |
$ 250,936 |
201,270 |
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Consolidated Balance Sheet Data |
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(Amounts in thousands) |
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March 31, 2018 |
April 1, 2017 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ 114,843 |
188,436 |
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Receivables, net |
1,689,912 |
1,497,908 |
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Inventories |
2,044,962 |
1,740,880 |
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Prepaid expenses and other current assets |
447,322 |
307,758 |
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Total current assets |
4,297,039 |
3,734,982 |
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Property, plant and equipment, net |
4,460,793 |
3,506,154 |
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Goodwill |
2,512,615 |
2,293,107 |
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Intangible assets, net |
899,989 |
835,761 |
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Deferred income taxes and other non-current assets |
389,936 |
357,513 |
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Total assets |
$ 12,560,372 |
10,727,517 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current portion of long-term debt and commercial paper |
$ 1,331,917 |
1,497,986 |
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Accounts payable and accrued expenses |
1,463,993 |
1,330,341 |
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Total current liabilities |
2,795,910 |
2,828,327 |
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Long-term debt, less current portion |
1,585,651 |
1,132,268 |
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Deferred income taxes and other long-term liabilities |
801,878 |
677,897 |
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Total liabilities |
5,183,439 |
4,638,492 |
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Redeemable noncontrolling interest |
30,924 |
24,201 |
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Total stockholders' equity |
7,346,009 |
6,064,824 |
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Total liabilities and stockholders' equity |
$ 12,560,372 |
10,727,517 |
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Segment Information |
As of or for the Quarter Ended |
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(Amounts in thousands) |
March 31, 2018 |
April 1, 2017 |
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Net sales: |
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Global Ceramic |
$ 876,548 |
784,969 |
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Flooring NA |
950,358 |
939,496 |
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Flooring ROW |
585,296 |
496,180 |
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Intersegment sales |
- |
- |
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Consolidated net sales |
$ 2,412,202 |
2,220,645 |
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Operating income (loss): |
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Global Ceramic |
$ 113,417 |
116,036 |
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Flooring NA |
74,748 |
92,142 |
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Flooring ROW |
89,060 |
76,095 |
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Corporate and intersegment eliminations |
(8,826) |
(9,489) |
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Consolidated operating income |
$ 268,399 |
274,784 |
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Assets: |
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Global Ceramic |
$ 5,029,225 |
4,229,183 |
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Flooring NA |
3,847,555 |
3,528,062 |
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Flooring ROW |
3,410,958 |
2,801,782 |
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Corporate and intersegment eliminations |
272,634 |
168,490 |
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Consolidated assets |
$ 12,560,372 |
10,727,517 |
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. |
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(Amounts in thousands, except per share data) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Net earnings attributable to Mohawk Industries, Inc. |
$ 208,766 |
200,554 |
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Adjusting items: |
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Restructuring, acquisition and integration-related and other costs |
22,104 |
3,978 |
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Acquisitions purchase accounting , including inventory step-up |
1,354 |
192 |
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Release of indemnification asset |
1,749 |
- |
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Income taxes - reversal of uncertain tax position |
(1,749) |
- |
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Income taxes |
(6,940) |
(1,415) |
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Adjusted net earnings attributable to Mohawk Industries, Inc. |
$ 225,284 |
203,309 |
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Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. |
$ 3.01 |
2.72 |
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Weighted-average common shares outstanding - diluted |
74,929 |
74,754 |
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Reconciliation of Total Debt to Net Debt |
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(Amounts in thousands) |
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March 31, 2018 |
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Current portion of long-term debt and commercial paper |
$ 1,331,917 |
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Long-term debt, less current portion |
1,585,651 |
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Less: Cash and cash equivalents |
114,843 |
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Net Debt |
$ 2,802,725 |
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Reconciliation of Operating Income to Adjusted EBITDA |
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(Amounts in thousands) |
Trailing Twelve |
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Quarters Ended |
Months Ended |
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July 1, 2017 |
September 30, 2017 |
December 31, 2017 |
March 31, 2018 |
March 31, 2018 |
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Operating income |
$ 355,825 |
380,098 |
343,466 |
268,399 |
1,347,788 |
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Other (expense) income |
(3,002) |
(1,285) |
(3,750) |
(3,998) |
(12,035) |
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Net (income) loss attributable to noncontrolling interest |
(1,067) |
(997) |
(488) |
(475) |
(3,027) |
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Depreciation and amortization |
109,761 |
113,515 |
118,372 |
122,654 |
464,302 |
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EBITDA |
461,517 |
491,331 |
457,600 |
386,580 |
1,797,028 |
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Restructuring, acquisition and integration-related and other costs |
15,878 |
13,853 |
15,231 |
22,104 |
67,066 |
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Acquisitions purchase accounting, including inventory step-up |
9,571 |
3,551 |
- |
1,354 |
14,476 |
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Release of indemnification asset |
- |
- |
4,459 |
1,749 |
6,208 |
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Adjusted EBITDA |
$ 486,966 |
508,735 |
477,290 |
411,787 |
1,884,778 |
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Net Debt to Adjusted EBITDA |
1.5 |
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Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate Excluding Acquisition Volume |
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(Amounts in thousands) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Net sales |
$ 2,412,202 |
2,220,645 |
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Adjustment to net sales on a constant exchange rate |
(98,832) |
- |
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Net sales on a constant exchange rate |
2,313,370 |
2,220,645 |
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Less: impact of acquisition volume |
(45,276) |
- |
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Net sales on a constant exchange rate excluding acquisition volume |
$ 2,268,094 |
2,220,645 |
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Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate Excluding Acquisition Volume |
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(Amounts in thousands) |
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Quarter Ended |
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Global Ceramic |
March 31, 2018 |
April 1, 2017 |
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Net sales |
$ 876,548 |
784,969 |
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Adjustment to segment net sales on a constant exchange rate |
(28,623) |
- |
||||||||||
Segment net sales on a constant exchange rate |
847,925 |
784,969 |
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Less: impact of acquisition volume |
(45,276) |
- |
||||||||||
Segment net sales on a constant exchange rate excluding acquisition volume |
$ 802,649 |
784,969 |
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Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate |
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(Amounts in thousands) |
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Quarter Ended |
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Flooring ROW |
March 31, 2018 |
April 1, 2017 |
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Net sales |
$ 585,296 |
496,180 |
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Adjustment to segment net sales on a constant exchange rate |
(70,209) |
- |
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Segment net sales on a constant exchange rate |
$ 515,087 |
496,180 |
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Reconciliation of Gross Profit to Adjusted Gross Profit |
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(Amounts in thousands) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Gross Profit |
$ 704,692 |
680,353 |
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Adjustments to gross profit: |
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Restructuring, acquisition and integration-related and other costs |
14,498 |
2,813 |
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Acquisitions purchase accounting, including inventory step-up |
1,354 |
192 |
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Adjusted gross profit |
$ 720,544 |
683,358 |
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Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses |
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(Amounts in thousands) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Selling, general and administrative expenses |
$ 436,293 |
405,569 |
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Adjustments to selling, general and administrative expenses: |
||||||||||||
Restructuring, acquisition and integration-related and other costs |
(7,606) |
(1,165) |
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Adjusted selling, general and administrative expenses |
$ 428,687 |
404,404 |
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Reconciliation of Operating Income to Adjusted Operating Income |
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(Amounts in thousands) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Operating income |
$ 268,399 |
274,784 |
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Adjustments to operating income: |
||||||||||||
Restructuring, acquisition and integration-related and other costs |
22,104 |
3,978 |
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Acquisitions purchase accounting, including inventory step-up |
1,354 |
192 |
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Adjusted operating income |
$ 291,857 |
278,954 |
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Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
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(Amounts in thousands) |
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Quarter Ended |
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Global Ceramic |
March 31, 2018 |
April 1, 2017 |
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Operating income |
$ 113,417 |
116,036 |
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Adjustments to segment operating income: |
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Restructuring, acquisition and integration-related and other costs |
3,561 |
204 |
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Adjusted segment operating income |
$ 116,978 |
116,240 |
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Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
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(Amounts in thousands) |
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Quarter Ended |
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Flooring NA |
March 31, 2018 |
April 1, 2017 |
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Operating income |
$ 74,748 |
92,142 |
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Adjustments to segment operating income: |
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Restructuring, acquisition and integration-related and other costs |
16,204 |
2,313 |
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Adjusted segment operating income |
$ 90,952 |
94,455 |
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Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
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(Amounts in thousands) |
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Quarter Ended |
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Flooring ROW |
March 31, 2018 |
April 1, 2017 |
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Operating income |
$ 89,060 |
76,095 |
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Adjustments to segment operating income: |
||||||||||||
Restructuring, acquisition and integration-related and other costs |
2,094 |
1,460 |
||||||||||
Acquisitions purchase accounting , including inventory step-up |
1,354 |
192 |
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Adjusted segment operating income |
$ 92,508 |
77,747 |
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Reconciliation of Earnings including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes |
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(Amounts in thousands) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Earnings before income taxes |
$ 256,873 |
269,414 |
||||||||||
Noncontrolling interests |
(475) |
(502) |
||||||||||
Adjustments to earnings including noncontrolling interests before income taxes: |
||||||||||||
Restructuring, acquisition and integration-related & other costs |
22,104 |
3,978 |
||||||||||
Acquisitions purchase accounting, including inventory step-up |
1,354 |
192 |
||||||||||
Release of indemnification asset |
1,749 |
- |
||||||||||
Adjusted earnings including noncontrolling interests before income taxes |
$ 281,605 |
273,082 |
||||||||||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense |
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(Amounts in thousands) |
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Quarter Ended |
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March 31, 2018 |
April 1, 2017 |
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Income tax expense |
$ 47,632 |
68,358 |
||||||||||
Income taxes - reversal of uncertain tax position |
1,749 |
- |
||||||||||
Income tax effect of adjusting items |
6,940 |
1,415 |
||||||||||
Adjusted income tax expense |
$ 56,321 |
69,773 |
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Adjusted income tax rate |
20.0% |
25.6% |
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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. |
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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 and the impact of acquisitions. |
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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, acquisition purchase accounting, including inventory step-up, release of indemnification assets and the reversal of uncertain tax positions. |
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