Mohawk Industries reports Q1 2011 net earnings of US$23M compared with net earnings of US$21M a year ago, led by cost reductions, manufacturing improvements, efficiency gains throughout the enterprise
May 5, 2011
– Mohawk Industries, Inc. (NYSE: MHK) today announced 2011 first quarter net earnings of $23 million and diluted earnings per share (EPS) of $0.34. Excluding restructuring charges, 2011 first quarter net earnings were $29 million and EPS of $0.42. For the first quarter of 2010, the net earnings were $21 million and EPS was $0.30. Excluding restructuring charges, 2010 first quarter net earnings and EPS were $24 million and $0.35 per share. Net sales for the first quarter of 2011 were $1.3 billion which was flat versus 2010. Our cash and net debt to adjusted EBITDA ratio stand at $256 million and 2.2 respectively, providing flexibility to pursue strategic opportunities.
Commenting on the first quarter results, Jeffrey S. Lorberbaum, Chairman and CEO stated, "We grew our operating margin to 4.7% excluding restructuring charges, an improvement of approximately 40 basis points over the first quarter last year by continuing to drive cost reductions, manufacturing improvements and efficiency gains throughout the enterprise. Sales reported during the period were flat with last year with the outlook strengthening for the balance of the year. In the U.S., both remodeling and home sales are expected to improve over last year, and non-residential investment is estimated to increase over 8% in 2011."
Our Mohawk segment net sales declined 3.5% with commercial seeing improvement and the residential category still lagging. The residential order trends turned positive at the end of the first quarter and continued into April. The commercial business continues its recovery with modular tile products growing significantly. The hospitality channel is rebounding after several years of reduced capital spending. We expect continued improvement in our business from our new product introductions, additional customer commitments, price increases to cover raw materials and operational improvements. We announced two carpet price increases to offset the dramatic raw material inflation with the first increase in February followed by the second increase in April. Operational enhancements to optimize productivity, material and service are being executed and will improve our cost position this year. We are completing the consolidation of a carpet facility in South Georgia and relocating the production to our other manufacturing plants. Our many Greenworks initiatives continue to increase the recycled content utilized in our products and processes furthering our sustainable manufacturing commitments while lowering our costs.
Our Dal-Tile segment net sales increased approximately 1% versus last year. The sales trends improved during the period with commercial outperforming residential. We continued the expansion of our Reveal Imaging technology receiving multiple product awards and increased our position in the home center channel. To recover the rising freight costs, we have increased prices on our products and transportation. Cost reductions continue from new investments in technology, lean manufacturing, material innovations and improvements in the supply chain. We are implementing our ceramic strategy in Mexico where the market is growing 5%. We are expanding our sales organization, product offering and customer base to support a new facility in Mexico which should be operational in mid-2012. Our Chinese joint venture is investing to gain market share, increase product mix, improve efficiencies and strengthen management systems. We are building a strong platform to be positioned as a leader in the market.
Our Unilin net sales increased approximately 7% both as reported and on a constant exchange rate. Sales of most of our European products were positive while U.S. markets remain difficult but are showing improvement. Our margins were under pressure from escalating raw material costs which are ahead of our price increases. Price increases were implemented in European flooring, roofing and boards to offset material inflation and additional increases for some products have been announced in the second quarter. We are continuing to expand sales in home centers across Europe with Quick Step products positioned as a premium offering. The U.S. flooring business improved as we proceeded through the first quarter and we strengthened our position in the home center and specialized hard surface channels. We improved our U.S. wood manufacturing costs and enhanced the sales mix with higher value products and additional performance features.
After the seasonally slow first quarter, we believe the industry recovery will continue the balance of the year. Commercial renovation is improving as companies begin to reinvest. We anticipate pent-up demand in the residential remodeling market and improving home sales will positively impact results this year. Price and volume increases, along with cost reductions will enhance profitability. With these factors, our second quarter guidance for earnings is $0.87 to $0.97 per share, excluding any restructuring charges.
We have improved our organization's ability to drive innovation in product, processes and costs. We have managed through a challenging period and significantly redesigned our businesses to maximize our long term results. Our investments in new assets, geographic expansion and systems will enhance our core businesses and create new growth opportunities.
Mohawk is a leading supplier of flooring for both residential and commercial applications. Mohawk offers a complete selection of carpet, ceramic tile, laminate, wood, stone, vinyl, and rugs. These products are marketed under the premier brands in the industry, which include Mohawk, Karastan, Lees, Bigelow, Dal-Tile, American Olean, Unilin and Quick Step. Mohawk's unique merchandising and marketing assist our customers in creating the consumers' dream. Mohawk provides a premium level of service with its own trucking fleet and local distribution. Mohawk's operational international presence includes Mexico, Europe, China, Russia and Malaysia.