Close

Form 8-K MOHAWK INDUSTRIES INC For: Apr 28

April 28, 2022 4:42 PM EDT

Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.

Exhibit 99.1
NEWS RELEASE


For Release:               Immediately

Contact:                     James Brunk, Chief Financial Officer (706) 624-2239


MOHAWK INDUSTRIES REPORTS Q1 RESULTS

Calhoun, Georgia, April 28, 2022 - Mohawk Industries, Inc. (NYSE: MHK) today announced 2022 first quarter net earnings of $245 million and diluted earnings per share (EPS) of $3.78. Adjusted net earnings were $246 million, and adjusted EPS was $3.78, excluding restructuring, acquisition, and other charges. Net sales for the first quarter of 2022 were $3.0 billion, an increase of 13.0% as reported and 17.3% on a constant currency and days basis. For the first quarter of 2021, net sales were $2.7 billion, net earnings were $237 million and EPS was $3.36. Adjusted net earnings were $246 million, and adjusted EPS was $3.49, excluding restructuring, acquisition, and other charges.
Commenting on Mohawk Industries’ first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “Mohawk’s results exceeded our expectations as first quarter sales rose to an all-time record, reflecting higher pricing, growth in our ceramic businesses, an improving commercial sector and benefit from our small acquisitions. Operating income exceeded our forecast as strength in our global ceramic businesses offset rising European energy costs, improved operational strategies enhanced Flooring North America’s results and our management of European market pressures benefited Flooring Rest of the World.”




During the quarter, we ran our operations at high levels in most markets to address order backlogs and replenish our inventory. During the past year, rapid cost escalations have required multiple pricing actions to pass through inflation. We have implemented these unprecedented increases across our markets and have announced additional increases across the business as inflation continues to rise. We are also controlling SG&A spending, enhancing operational efficiencies, and introducing innovative new product features. In some markets, our growth in the quarter was limited by inventory and production constraints. We are executing multiple expansion projects so that we can satisfy demand for our higher growth products, create new innovation and improve operational efficiencies. The categories that we are expanding include U.S. laminate, LVT and quartz countertops; European laminate, high-end porcelain slabs and specialty ceramic products; and ceramic tile in Brazil and Mexico. Our recent, bolt-on acquisitions in Europe are enhancing our growing insulation and panels businesses. Sales of our products remain strong, and the design and features we are bringing to market give us competitive advantages in all price points.
Market conditions for flooring remain favorable, even as governments raise interest rates to combat inflation. Employment is at high levels and wages are increasing in most of our markets. Millions of millennials in their late 20s and early 30s are forming households and desire home ownership. Unlike past cycles, U.S. housing inventory is historically low, more single-family homes are under construction and the U.S. home deficit will require years to align supply with demand. Remodeling should remain strong with rising home equity and buyers of existing homes still completing long-term projects that they initiated over the past few years. Commercial new construction and remodeling continue to strengthen as business conditions improve and projects that were delayed due to the pandemic are initiated.




Against a background of geopolitical tensions and rising inflation, Mohawk has continued to deliver sales growth, generate strong cash flow, and maintain historically low leverage. Given the undervaluation of our stock relative to our earnings, our board approved an additional $500 million share repurchase program in February. We acquired 2.1 million shares during the first quarter for a total of $307 million. Since the start of 2020, we have acquired 8.5 million shares representing 12% of the outstanding balance reflecting our confidence in Mohawk’s long-term growth and profitability.
In the first quarter, our Global Ceramic Segment sales increased 14.5% as reported and 18.5% on a constant days and currency basis. The Segment’s operating margin was 9.4%, as a result of pricing and mix improvements, productivity and higher volumes, offset by rising inflation, including the European gas crisis and more normal seasonality. Our U.S. ceramic business continues to improve its sales and margins by enhancing its product mix and implementing multiple price increases to cover inflation. Our U.S. sales should be positively impacted by providing alternatives to tile imports, which are increasing in price and experiencing shipping delays. Our quartz countertop sales are growing rapidly, and to satisfy demand we have initiated construction to expand capacity at our Tennessee countertop facility. The results of our ceramic businesses in Mexico and Brazil continued to be strong, even with our sales in the quarter being limited by low inventory levels. To relieve constraints, we have increased capacity in Mexico, and we are negotiating with government agencies for permits and incentives to construct a new porcelain tile facility in Brazil. In our European ceramic business, sales in the first quarter grew as consumer demand strengthened, and our customers increased inventory levels in anticipation of inflation. Ceramic industry production in Europe was interrupted when Ukrainian clay supplies to Western Europe ceased. We anticipated the supply problems and increased inventory levels before the invasion to avoid interrupting our production. Natural gas prices for the balance of the year have escalated from prior estimates, raising our future costs. We improved our results by increasing prices more than expected, as well as enhancing our product mix.



For the quarter, our Flooring Rest of World Segment net sales increased 14.2% as reported or approximately 22.1% on a constant currency basis. The Segment’s operating margin was 15.3% as reported and 15.5% on an adjusted basis, impacted by inflation, supply chain disruptions and the impact of foreign exchange, partially offset by pricing and mix gains during the quarter. In challenging conditions, the segment’s leadership team took actions to manage escalating energy costs, rising inflation and unstable supply chains. Despite multiple price increases, we are lagging rapidly rising costs in Europe and have announced additional price increases in response to continuing inflationary pressures. Though material supply limited production, laminate sales increased in the quarter, and we expect continued long-term growth as we expand the premium laminate category. To support higher future sales, our laminate expansion in Belgium should be operational by the end of 2023. Sales in our LVT and sheet vinyl businesses were negatively impacted by material disruptions and low inventory levels. Raw material supply for both categories was especially challenging but improved as we progressed through the quarter. Our purchase of an insulation manufacturer with plants in Ireland and the U.K. increased our market share of polyurethane insulation products. In one of the insulation plants we acquired, a new production line with state-of-the-art technology is presently starting up. Our panel sales grew significantly in the quarter, and our new high-pressure laminate line is extending our manufacturing into a new product category that coordinates with our other wood panels. The integration of our recently acquired MDF facility is progressing as we improve efficiencies and expand its capacity. Our Australian business had robust demand in the quarter following the loosening of pandemic restrictions while New Zealand remains difficult due to continued restrictions.




In the quarter, our Flooring North America Segment sales increased 10.6% as reported or 12.3% on a constant days basis, and our operating margin was 8.9% as a result of pricing and mix improvements and productivity, partially offset by inflation and a return to more normal seasonality. The Segment is managing the greatest inflation we have ever experienced and is implementing further price increases. The strategies we have been implementing during the past two years have improved our sales execution, cost structure, service levels, and enabled us to manage this difficult environment. Across the Segment, we have initiated many projects to increase productivity, improve efficiencies and upgrade our assets to enhance our results. Mohawk holds a leading share of the laminate market, and sales of our premium collections continued to grow in the quarter as our new production line ramped up. Escalating market demand in North America is absorbing our additional production as it comes online, and we are further expanding our U.S. capacity next year to support continued growth. Our LVT sales continued to grow substantially in the first quarter as we benefited from an improved offering across all channels. Our LVT margins were impacted by supply disruptions that interrupted manufacturing, delays in sourced products and higher ocean freight costs. Our new West Coast LVT facility is initiating production and fine-tuning processes. Residential carpet service improved substantially, and customers are lowering inventory, impacting sales. We are raising prices to further offset escalating material and energy cost. By reducing complexity, simplifying operations and increasing efficiencies we are improving cost. Our commercial flooring sales continue to rebound, led by strength in the government, workplace, and health care channels. Sales in both our carpet tile and commercial LVT collections are growing, as new and deferred projects are being initiated. We have introduced a new carpet tile that provides superior acoustics and comfort, while achieving the highest level of sustainability certifications with half the carbon footprint. We continue to find innovative solutions to strengthen our environmental performance to maintain our leadership in eco-friendly products.




Four months into 2022, we remain cautiously optimistic about industry growth this year despite inflation and interest rate pressures. We have announced additional price increases in most of our products and markets as inflation continues to rise. Housing supply is historically low, and rising mortgage rates are spurring families to purchase homes sooner. Remodeling should be supported by continued existing home sales, higher home equity and the upgrading of homes purchased over the past two to three years. We expect that the commercial sector will continue its rebound with people returning to pre-pandemic routines. We expect improvements in the supply of constrained materials which should increase our production levels. Even though we are increasing prices, the historic rise in European energy costs continues to impact our business. Our capital investments, when completed, will relieve our specific capacity constraints and increase our offering. This year, we are focused on optimizing our mix and margins, controlling our spending and initiating additional productivity actions. Given these factors, we anticipate our second quarter adjusted EPS to be $4.25 to $4.35, excluding any restructuring charges.
“We have confidence in the long-term future of our business despite near-term uncertainties. Globally, there is a structural deficit for housing that will take years to satisfy, and we should benefit from strong long-term trends in new home construction, residential remodeling, and commercial projects. Our brands are the most recognized in flooring and provide a comprehensive product portfolio that includes the industry’s strongest collection of sustainable products. We are making it easier for our customers to grow their businesses through leading digital tools that generate customer leads, simplify ordering and expedite deliveries. Through the innovation of our talented team, we continue to lead the industry in design, performance and value. The strength of our balance sheet allows us to pursue both transformational and bolt-on acquisitions that complement our business. Over the next three to five years, these advantages should enhance Mohawk’s sales and margin expansion.”





ABOUT MOHAWK INDUSTRIES
Mohawk 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, Daltile, Durkan, Eliane, Feltex, Godfrey Hirst, IVC, Karastan, Marazzi, Mohawk, Mohawk Group, Pergo, Quick-Step and Unilin. During the past decade, Mohawk has transformed its business from an American carpet manufacturer into the world’s largest flooring company with operations around the globe.
Certain of the statements in the immediately preceding paragraphs, particularly those 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 freight, raw material prices and other input costs; inflation and deflation in consumer markets; currency fluctuations; 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; the risks and uncertainty related to the COVID-19 pandemic and Russian military actions in Ukraine or other geopolitical events; regulatory and political changes in the jurisdictions in which the Company does business and other risks identified in Mohawk’s SEC reports and public announcements.




Conference call Friday, April 29, 2022, at 11:00 AM Eastern Time
The telephone number is 1-800-603-9255 for U.S./Canada and 1-706-634-2294 for International/Local. Conference ID # 2649466. A replay will be available until May 29, 2022, by dialing 1-855-859-2056 for U.S./local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 2649466.



















MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
Condensed Consolidated Statement of Operations DataThree Months Ended
(Amounts in thousands, except per share data)April 2, 2022April 3, 2021
Net sales$3,015,663 2,669,026 
Cost of sales2,213,535 1,877,257 
    Gross profit802,128 791,769 
Selling, general and administrative expenses481,327 474,254 
Operating income 320,801 317,515 
Interest expense11,481 15,241 
Other (income) expense, net2,438 (2,227)
    Earnings before income taxes306,882 304,501 
Income tax expense61,448 67,690 
    Net earnings including noncontrolling interests245,434 236,811 
Net earnings attributable to noncontrolling interests105 
Net earnings attributable to Mohawk Industries, Inc.$245,329 236,807 
Basic earnings per share attributable to Mohawk Industries, Inc.
Basic earnings per share attributable to Mohawk Industries, Inc.$3.79 3.37 
Weighted-average common shares outstanding - basic64,686 70,179 
Diluted earnings per share attributable to Mohawk Industries, Inc.
Diluted earnings per share attributable to Mohawk Industries, Inc.$3.78 3.36 
Weighted-average common shares outstanding - diluted64,970 70,474 
Other Financial Information
(Amounts in thousands)
Net cash provided by operating activities$54,954 259,605 
Less: Capital expenditures129,470 114,735 
Free cash flow$(74,516)144,870 
Depreciation and amortization$141,415 151,216 



Condensed Consolidated Balance Sheet Data
(Amounts in thousands)
April 2, 2022April 3, 2021
ASSETS
Current assets:
    Cash and cash equivalents$230,559 557,262 
    Short-term investments310,000 782,267 
    Receivables, net2,044,698 1,813,858 
    Inventories2,513,244 1,996,628 
    Prepaid expenses and other current assets466,238 415,997 
        Total current assets5,564,739 5,566,012 
Property, plant and equipment, net4,552,612 4,432,110 
Right of use operating lease assets384,740 337,767 
Goodwill2,579,385 2,594,727 
Intangible assets, net883,527 921,846 
Deferred income taxes and other non-current assets421,716 437,611 
    Total assets$14,386,719 14,290,073 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt$1,546,463 953,913 
Accounts payable and accrued expenses2,220,347 1,954,396 
Current operating lease liabilities104,823 98,982 
        Total current liabilities3,871,633 3,007,291 
Long-term debt, less current portion1,088,401 1,719,115 
Non-current operating lease liabilities293,239 248,022 
Deferred income taxes and other long-term liabilities845,843 816,613 
        Total liabilities6,099,116 5,791,041 
Total stockholders' equity8,287,603 8,499,032 
    Total liabilities and stockholders' equity$14,386,719 14,290,073 
Segment InformationAs of or for the Three Months Ended
(Amounts in thousands)April 2, 2022April 3, 2021
Net sales:
    Global Ceramic$1,064,757 929,871 
    Flooring NA1,071,910 969,250 
    Flooring ROW878,996 769,905 
        Consolidated net sales$3,015,663 2,669,026 
Operating income (loss):
    Global Ceramic$100,338 87,804 
    Flooring NA95,324 81,298 
    Flooring ROW134,650 159,306 
    Corporate and intersegment eliminations(9,511)(10,893)
        Consolidated operating income$320,801 317,515 
Assets:
    Global Ceramic$5,240,214 5,161,660 
    Flooring NA4,220,757 3,731,032 
    Flooring ROW4,413,013 4,120,381 
    Corporate and intersegment eliminations512,735 1,277,000 
        Consolidated assets$14,386,719 14,290,073 




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, 2022April 3, 2021
Net earnings attributable to Mohawk Industries, Inc.$245,329 236,807 
Adjusting items:
Restructuring, acquisition and integration-related and other costs1,918 11,574 
Acquisitions purchase accounting, including inventory step-up— 303 
Release of indemnification asset7,263 — 
Income taxes - reversal of uncertain tax position(7,263)— 
Income taxes
(1,684)(2,735)
 Adjusted net earnings attributable to Mohawk Industries, Inc.$245,563 245,949 
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $3.78 3.49 
Weighted-average common shares outstanding - diluted64,970 70,474 

Reconciliation of Total Debt to Net Debt Less Short-Term Investments
(Amounts in thousands)
April 2, 2022
Short-term debt and current portion of long-term debt$1,546,463 
Long-term debt, less current portion1,088,401 
Total debt2,634,864 
Less: Cash and cash equivalents230,559 
  Net Debt2,404,305 
Less: Short-term investments310,000 
Net debt less short-term investments$2,094,305 

Reconciliation of Operating Income to Adjusted EBITDA
(Amounts in thousands)Trailing Twelve
Three Months EndedMonths Ended
July 3,
2021
October 2,
2021
December 31,
2021
April 2,
2022
April 2,
2022
Operating income$404,424 359,974 253,098 320,801 1,338,297 
Other income (expense)11,168 (21)(1,140)(2,438)7,569 
Net income attributable to noncontrolling interests(168)(206)(11)(105)(490)
Depreciation and amortization(1)
148,466 148,618 143,411 141,415 581,910 
  EBITDA563,890 508,365 395,358 459,673 1,927,286 
Restructuring, acquisition and integration-related and other costs3,321 982 4,641 1,918 10,862 
Acquisitions purchase accounting, including inventory step-up153 226 1,067 — 1,446 
Resolution of foreign non-income tax contingencies(6,211)— — — (6,211)
Release of indemnification asset— — — 7,263 7,263 
Adjusted EBITDA$561,153 509,573 401,066 468,854 1,940,646 
  Net Debt less short-term investments to adjusted EBITDA1.1 
(1) Includes $8,417 of accelerated depreciation recorded for the trailing twelve months ended April 2, 2022.




Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and on Constant Shipping Days
(Amounts in thousands)
Three Months Ended
April 2, 2022April 3, 2021
Net sales$3,015,663 2,669,026 
Adjustment to net sales on constant shipping days21,018 — 
Adjustment to net sales on a constant exchange rate93,781 — 
Net sales on a constant exchange rate and constant shipping days$3,130,462 2,669,026 
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days
(Amounts in thousands)
Three Months Ended
Global CeramicApril 2, 2022April 3, 2021
Net sales$1,064,757 929,871 
Adjustment to segment net sales on constant shipping days4,269 — 
Adjustment to segment net sales on a constant exchange rate32,423 — 
Segment net sales on a constant exchange rate and constant shipping days$1,101,449 929,871 
Reconciliation of Segment Net Sales to Segment Net Sales on Constant Shipping Days
(Amounts in thousands)
Three Months Ended
Flooring NAApril 2, 2022April 3, 2021
Net sales$1,071,910 969,250 
Adjustment to segment net sales on constant shipping days16,749 — 
Segment net sales on constant shipping days$1,088,659 969,250 

Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate
(Amounts in thousands)
Three Months Ended
Flooring ROWApril 2, 2022April 3, 2021
Net sales$878,996 769,905 
Adjustment to segment net sales on a constant exchange rate61,358 — 
Segment net sales on a constant exchange rate$940,354 769,905 

Reconciliation of Gross Profit to Adjusted Gross Profit
(Amounts in thousands)
Three Months Ended
April 2, 2022April 3, 2021
Gross Profit$802,128 791,769 
Adjustments to gross profit:
Restructuring, acquisition and integration-related and other costs938 10,182 
Acquisitions purchase accounting, including inventory step-up— 303 
Adjusted gross profit$803,066 802,254 




Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses
(Amounts in thousands)
Three Months Ended
April 2, 2022April 3, 2021
Selling, general and administrative expenses$481,327 474,254 
Adjustments to selling, general and administrative expenses:
Restructuring, acquisition and integration-related and other costs(980)(1,002)
Adjusted selling, general and administrative expenses$480,347 473,252 

Reconciliation of Operating Income to Adjusted Operating Income on a Constant Exchange Rate
(Amounts in thousands)
Three Months Ended
April 2, 2022April 3, 2021
Operating income$320,801 317,515 
Adjustments to operating income:
Restructuring, acquisition and integration-related and other costs1,918 11,184 
Acquisitions purchase accounting, including inventory step-up— 303 
Adjustment to operating income on a constant exchange rate11,210 — 
Adjusted operating income on a constant exchange rate$333,929 329,002 

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income on a Constant Exchange Rate
(Amounts in thousands)
Three Months Ended
Global CeramicApril 2, 2022April 3, 2021
Operating income$100,338 87,804 
Adjustments to segment operating income:
Restructuring, acquisition and integration-related and other costs— 1,273 
Adjustment to segment operating income on a constant exchange rate2,989 — 
Adjusted segment operating income on a constant exchange rate$103,327 89,077 

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
(Amounts in thousands)
Three Months Ended
Flooring NAApril 2, 2022April 3, 2021
Operating income$95,324 81,298 
Adjustments to segment operating income:
Restructuring, acquisition and integration-related and other costs105 8,859 
Adjusted segment operating income$95,429 90,157 

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income on a Constant Exchange Rate
(Amounts in thousands)
Three Months Ended
Flooring ROWApril 2, 2022April 3, 2021
Operating income$134,650 159,306 
Adjustments to segment operating income:
Restructuring, acquisition and integration-related and other costs1,813 1,054 
Acquisitions purchase accounting, including inventory step-up— 303 
Adjustment to segment operating income on a constant exchange rate8,221 — 
Adjusted segment operating income on a constant exchange rate$144,684 160,663 






Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes
(Amounts in thousands)
Three Months Ended
April 2, 2022April 3, 2021
Earnings before income taxes$306,882 304,501 
Net earnings attributable to noncontrolling interests(105)(4)
Adjustments to earnings including noncontrolling interests before income taxes:
Restructuring, acquisition and integration-related and other costs1,918 11,574 
Acquisitions purchase accounting, including inventory step-up— 303 
Release of indemnification asset7,263 — 
Adjusted earnings including noncontrolling interests before income taxes$315,958 316,374 

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense
(Amounts in thousands)
Three Months Ended
April 2, 2022April 3, 2021
Income tax expense$61,448 67,690 
Income taxes - reversal of uncertain tax position7,263 — 
Income tax effect of adjusting items1,684 2,735 
Adjusted income tax expense$70,395 70,425 
Adjusted income tax rate22.3%22.3%

The Company supplements its condensed 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.

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.
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.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

SEC Filings