Mohawk Industries has reported second quarter net earnings of $186 million and diluted earnings per share (EPS) of $2.53.
Excluding unusual charges, net earnings were $199 million and EPS was $2.69, a 22% increase over last year's second quarter adjusted EPS and the highest adjusted quarterly EPS in the company's history.
According to the company, net sales for the second quarter were $2 billion, flat versus the prior year's second quarter or a 7% increase on a constant currency exchange rate basis. For the second quarter of 2014, net sales were $2 billion, net earnings were $153 million and EPS was $2.08; excluding unusual charges, net earnings were $162 million and EPS was $2.21.
"For the period, our adjusted operating margin was approximately 14%, an increase of 21% or 240 basis points compared to the prior year due to the performance of our differentiated new products, higher volume and improved productivity and costs across the enterprise,” said Jeffrey Lorberbaum, Mohawk's chairman and CEO. “In May, we completed the purchase of KAI, giving us the leading position in the Bulgarian and Romanian ceramic markets positioned as the low-cost producer; and in mid-June we completed our acquisition of IVC, providing us with leading positions in luxury vinyl tile (LVT) and sheet vinyl on both sides of the Atlantic. The IVC and KAI acquisitions have compelling long-term potential and expand our business into new product categories and new markets. To maximize our growth, we have invested more into the business including developing differentiated products, hiring more sales personnel, and increasing our product sampling and merchandising. Our capital investments increased capacity to meet growing demand and improved manufacturing efficiencies and costs.
“During the second quarter, [Mohawk] realigned its reportable segments, organizing its carpet, wood, laminate and newly acquired vinyl operations by geography into the flooring North America segment and the flooring rest of the world segment,” he added. “Our global ceramic segment remains the same with the addition of KAI in Eastern Europe. Our management of the business has been aligned with this change, which will allow us to optimize our operations and sales by region while coordinating our technology, manufacturing and product development across the enterprise. We expect to gain synergies through enhanced customer relationships, better utilization of our assets and distribution systems and the implementation of best practices.”
According to Lorberbaum, the residential and commercial flooring markets will strengthen as the U.S. economy continues to improve.
“During the third quarter, we anticipate that U.S. sales and margins in all of our product categories will improve over last year,” he said. “Though foreign currency is creating significant headwinds, most of our markets are improving and we are growing on a local basis. In Mexico, we expect our sales and margin expansion to continue in a ceramic market that is strongly growing. Our European business should continue to improve with the economy, as we benefit from our new ceramic manufacturing assets and other significant investments we have made. Even though Russia should be more difficult going forward, we expect to gain market share by expanding our position in all channels. In the third quarter, we will continue to absorb the start-up costs related to our capital investments, including two new luxury vinyl tile (LVT) plants, a new ceramic plant and major upgrades across the enterprise. Our new acquisitions of vinyl in the U.S. and Europe and ceramic in Eastern Europe and western Mexico will improve our results and long-term value. Taking all of these factors into account, our guidance for third quarter earnings is $2.91 to $2.99 per share, excluding any restructuring charges. Our third quarter earnings guidance would have been approximately $.24 per share higher on a constant exchange rate relative to last year."
For more information, visit mohawkind.com.
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