Mohawk Industries, Inc. recently announced 2016 fourth quarter record net earnings of $234 million and diluted earnings per share (EPS) of $3.13, a 22% increase vs. the prior year’s fourth quarter. Excluding restructuring, acquisition expenses, and other charges, net earnings were $243 million, and EPS was $3.26, a 16% increase over last year’s fourth quarter adjusted EPS. Net sales for the fourth quarter of 2016 were $2.2 billion, up 9% vs. the prior year’s fourth quarter and 7% on a legacy basis applying constant days and currency rates.

For the 12 months ending December 31, 2016, net earnings and EPS were $930 million and $12.48, respectively. Net earnings excluding restructuring, acquisition expenses, and other charges were $940 million, and EPS was $12.61, an increase of 24% over the 12-month period adjusted EPS result in 2015. For the 12-month period, net sales were $9 billion, an increase of 11% vs. the prior year and 5.5% on a legacy basis applying constant currency rates.

“In the fourth quarter, our sales and earnings per share set records for the period,” said Jeffrey S. Lorberbaum, chairman and CEO. “Our operating margin for the quarter rose to 14%, a 150 basis point improvement over the prior year and the highest fourth quarter result in the company’s history. Our revenues for the year rose to an all-time high, our earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to $1.7 billion and we generated adjusted operating income of $1.3 billion, up 24% over the prior year, the highest in our history. In 2016, our capital investments were our most ever at approximately $670 million. In 2016 alone, process improvements from new methods, product re-engineering, and equipment upgrades have increased our productivity by $140 million. To continue our growth, we will make even greater internal investments this year to expand capacity and enter new markets. We are also adding unique capabilities to introduce more differentiated products and anticipate even higher productivity improvements in the coming year.”

Global Ceramic Segment sales increased 5% as reported and on a constant days and currency basis in the 2016 fourth quarter. Operating income for the segment rose approximately 17% to an operating margin of 14%. North American ceramic business sales improved, with strong performances in new construction, commercial and home center channels. The greenfield plant in Tennesse became fully operational in the period and should reach planned efficiency levels in the first quarter of 2017. In Mexico, sales grew significantly, but it is expected sales will be constrained until the Salamanca expansion is completed later this year. Price increases on selected products were announced in the U.S. and Mexico to offset inflation in labor, energy, and materials. In January, the company entered into an agreement to acquire a ceramic company in Italy located near its existing facilities. It anticipates product, sales and manufacturing synergies will enhance its cost position and strengthen the combined brands and distribution. 

North America Flooring Segment’s sales increased 10%, or 8.5% on a constant days basis. Operating income grew 18.5% to a margin of 14.5%, or 15% excluding restructuring, integration, and other charges. Residential carpet sales improved despite decreased selling prices from channel mix and growth in polyester. Price increases of 3-5% to cover rising costs are being implemented in the first quarter of 2017. During the fourth quarter of 2016, commercial business grew faster than residential as a result of investments in products and sales last year. Hard surface sales, including LVT, laminate, wood and vinyl, continued to expand. The LVT plant made reportedly significant improvements during the period and is installing another production line that will double the company’s U.S. capacity by the end of this year.

Flooring sales in the Rest of the World increased 14%, and operating income grew 41%. Legacy sales rose 7% on a constant currency basis, and adjusted operating income increased 20% to a 17% margin. Sales growth was led by LVT, laminate and insulation products. Sheet vinyl and wood sales were hampered by prior manufacturing disruptions. Segment margins increased due to improved mix, the success of new introductions, and price increases, which offset cost inflation and currency changes. To maximize LVT production, Mohawk reportedly implemented operational improvements that increased throughput and reduced manufacturing costs. It will continue to invest in sales and marketing to expand the distribution of LVT products in anticipation of the capacity increase this year. In laminate, sales and margins continue to grow. Insulation products sales increased significantly as management and sales strategies of acquired and legacy businesses were realigned. The company is initiating the sale of carpet tile products in Europe to establish distribution that will support a new carpet tile plant being built in Belgium this year, and has approved a new sheet vinyl plant in Russia adjacent to its ceramic facility that will be operational next year. 

“Today, Mohawk is in the best position in the company’s history,” said Lorberbaum. “In 2016, we delivered record results as our investment strategy to enhance our product innovation, brands, and service continued to benefit our customers and provide the returns we expected. In 2017, we anticipate sales to grow similarly to last year on a local basis with operating margins improving slightly, excluding acquisitions and intellectual property. We believe there are potential acquisitions in our current markets and product categories, as well as opportunities in new geographies and complementary products. Our organization and balance sheet can support significant additional investments to increase our business and enhance shareholder value. Taking all of this into account, our EPS guidance for the first quarter of 2017 is $2.64-2.73, which represents an 11-15% increase over first quarter 2016.” 

For more information, visit www.mohawkind.com.