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News Releases

Mohawk Industries Reports Q1 Results

April 29, 2021 at 4:10 PM EDT

CALHOUN, Georgia, April 29, 2021 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2021 first quarter net earnings of $237 million and diluted earnings per share (EPS) of $3.36. Adjusted net earnings were $246 million, and EPS was $3.49, excluding restructuring, acquisition and other charges. Net sales for the first quarter of 2021 were $2.7 billion, up 16.8% as reported and 9.1% on a constant currency and days basis. For the first quarter of 2020, net sales were $2.3 billion, net earnings were $111 million and EPS was $1.54, adjusted net earnings were $119 million, and EPS was $1.66, excluding restructuring, acquisition and other charges.

Commenting on Mohawk Industries’ first quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “Our outstanding performance in the period included all-time record sales and our highest ever first quarter EPS. Our business continued to strengthen in the period and did not reflect our industry’s normal seasonality. Around the world, consumers are continuing to invest in their homes, and new flooring has a major role in most remodeling projects. We are also starting to see moderate improvement in commercial demand as global economies expand and businesses begin to invest in anticipation of a return to normal.

“Market demand strengthened as the period progressed, and our order backlog remains robust going into the second quarter. Most of our businesses are running at high production rates, though our inventories remain lower than we would like. Our production and operating costs were impacted in the period by supply limitations in most of our markets, as well as absenteeism, new employee training and severe weather in the U.S. Our margins have benefited from stronger consumer demand, our restructuring and productivity actions and leverage on SG&A costs. We have increased prices in most product categories and geographies, reflecting inflation in raw materials, labor, energy and transportation. Global transportation capacity has been limited, increasing our cost and delaying receipt of our imported products. We have seen similar constraints on local shipments and are increasing our freight rates to respond.”

“We continue to implement our restructuring plans and have achieved approximately $75 million of our anticipated $100 to $110 million in savings. In the first quarter, we purchased $123 million of our stock at an average price of approximately $179 for a total of $686 million since we initiated our purchasing program. Our balance sheet remains strong with net debt less short-term investments of $1.3 billion, reflecting leverage at a historically low level for the Company.

“For the quarter, our Flooring Rest of the World Segment’s sales increased 30.7% as reported and 14.6% on a constant currency and days basis. The segment’s operating margins increased 780 basis points to 20.7% as reported. The increase was due to higher volume, favorable price and product mix, increased productivity and favorable exchange rates, partially offset by inflation. Q1 benefited from lower marketing expenses, product mix and increased days which resulted in a greater margin in the period. During the period, most of our facilities ran at high levels, though some supply constraints limited our utilization. We anticipate some material shortages continuing at least in the second quarter. Our laminate business, the segment’s largest product category, continues to record significant growth as consumers embrace our more realistic visuals and superior performance. In the second quarter, we are installing additional laminate manufacturing assets to support further growth. Our LVT sales rose substantially, and our margins expanded due to enhanced formulations and increased production speeds. Our sheet vinyl sales were limited by Covid lockdowns of our retailers in Europe. Our Russian sheet vinyl business continues to expand rapidly as we broaden our customer base and product offering. Our insulation business continues to grow, though material supply and cost increases pressured our margin. Our wood panels business delivered improved performance and we are installing a new melamine press to increase higher value sales and efficiencies. Our sales and margins in both Australia and New Zealand expanded significantly by leveraging our comprehensive soft and hard surface collections, strong sales organization and industry-leading service.

“During the quarter, our Flooring North America Segment’s sales increased 14.3% as reported and approximately 9% on a constant basis and operating margin was 8.4% as reported, increasing 410 basis points. Operating income for the segment increased primarily due to higher volume and productivity, partially offset by inflation. Our order rates remain strong and our backlog is higher than normal. All of our operations are maximizing their output as we managed interference from labor shortages and supply constraints. Our residential carpet sales improved with retail remodeling improving sales of our premium products. Our commercial business continued to improve sequentially from its trough with growing investments in new projects. Our laminate sales are setting records as the appeal of our realistic visuals and water-proof performance expands across all channels. We have significantly increased our domestic laminate production and are supplementing with imports from our global operations. We are installing additional laminate production to further expand our sales by the end of this year. Our LVT sales continue to increase as we expand our offering and our local manufacturing has continued its improvement as we implemented processes similar to our European operations.   We are ramping up production of our premium Ultrawood, the first water-proof natural wood flooring that also features industry-leading scratch, dent and fade resistance.

“For the quarter, our Global Ceramic Segment’s sales increased 9.6% as reported and 5.4% on a constant currency and days basis. The segment’s operating margin increased 370 basis points to 9.4% as reported, primarily due to favorable price and mix, higher volumes and increased productivity, partially offset by inflation. Our U.S. plants are running at higher levels, and we have increased our productivity with our restructuring actions. Our quartz plant is improving its productivity and we are introducing more sophisticated veined collections which are increasing our mix and should enhance our margins. In the period, the ice storm that hit the southwest temporarily stopped production at most of our manufacturing facilities by interrupting our electricity and natural gas supply. The facilities have all recovered and are operating as expected, improving our service. Our European ceramic business delivered a strong performance, driven by productivity, improving mix and greater consumer demand. Our Russian, Brazilian and Mexican ceramic businesses delivered strong results, though they were limited by their capacities. In all three businesses, we are maximizing output and allocating production as necessary. In Brazil and Mexico, we are increasing capacity this year to improve our sales and mix. In Russia, we are optimizing our tile production and ramping up our new premium sanitary ware plant to meet growing demand.

“As we progress through the year, we anticipate that historically low interest rates, government actions and fewer pandemic restrictions should improve our markets around the world. Vaccination programs should keep people safer and reduce the risk of further Covid-related disruption. We foresee the present robust residential trends continuing with commercial sales slowly improving in the second period. Across the enterprise, we will increase product introductions that provide additional features and benefits to strengthen our offering and margins. We are enhancing our manufacturing operations to increase our volume and efficiencies, while executing our ongoing cost savings programs. Our suppliers indicate that material availability should improve from the first quarter, though some operations could still face future supply constraints. We are managing challenging labor markets in some of our U.S. communities, and supplemental federal unemployment programs could interfere with staffing to maximize those operations. If raw material, energy and transportation costs continue to rise, further price increases could be required around the world. Given these factors, we anticipate our second quarter adjusted EPS to be $3.57 to $3.67, excluding any restructuring charges.

“Currently, our strong order backlog reflects the escalated levels of residential demand across the globe. We are introducing new product innovations to enhance our offering and customers sales and optimizing our production to improve our service. We are preparing for an improvement in commercial projects, anticipating an economic expansion and a return to normal business investments. With strong liquidity and historically low leverage, we will increase our capital investments and take advantage of additional opportunities to expand.”

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 in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States.

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 SEC reports and public announcements.

Conference call April 30, 2021, at 11:00 AM Eastern Time

The telephone number is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 6084517. A replay will be available until May 30, 2021, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 6084517.

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

 
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
(Unaudited)
Condensed Consolidated Statement of Operations Data Three Months Ended
(Amounts in thousands, except per share data) April 3, 2021   March 28, 2020
       
Net sales $ 2,669,026     2,285,763  
Cost of sales   1,877,257     1,669,323  
Gross profit   791,769     616,440  
Selling, general and administrative expenses   474,254     464,957  
Operating income   317,515     151,483  
Interest expense   15,241     8,671  
Other (income) expense, net   (2,227 )   5,679  
Earnings before income taxes   304,501     137,133  
Income tax expense   67,690     26,668  
Net earnings including noncontrolling interests   236,811     110,465  
Net earnings (loss) attributable to noncontrolling interests   4     (49 )
Net earnings attributable to Mohawk Industries, Inc. $ 236,807     110,514  
       
Basic earnings per share attributable to Mohawk Industries, Inc.      
Basic earnings per share attributable to Mohawk Industries, Inc. $ 3.37     1.54  
Weighted-average common shares outstanding - basic   70,179     71,547  
       
Diluted earnings per share attributable to Mohawk Industries, Inc.      
Diluted earnings per share attributable to Mohawk Industries, Inc. $ 3.36     1.54  
Weighted-average common shares outstanding - diluted   70,474     71,777  
       
       
Other Financial Information      
(Amounts in thousands)      
Net cash provided by operating activities $ 259,605     194,974  
Less: Capital expenditures   114,735     115,632  
Free cash flow $ 144,870     79,342  
       
Depreciation and amortization $ 151,216     145,516  
       
       
Condensed Consolidated Balance Sheet Data      
(Amounts in thousands)      
  April 3, 2021   March 28, 2020
ASSETS      
Current assets:      
Cash and cash equivalents $ 557,262     263,086  
Short-term investments   782,267     60,300  
Receivables, net   1,813,858     1,644,750  
Inventories   1,996,628     2,195,434  
Prepaid expenses and other current assets   415,997     449,461  
Total current assets   5,566,012     4,613,031  
Property, plant and equipment, net   4,432,110     4,472,913  
Right of use operating lease assets
  337,767     331,329  
Goodwill   2,594,727     2,519,979  
Intangible assets, net   921,846     904,023  
Deferred income taxes and other non-current assets   437,611     415,667  
Total assets $ 14,290,073     13,256,942  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Short-term debt and current portion of long-term debt $ 953,913     1,210,525  
Accounts payable and accrued expenses   1,954,396     1,554,085  
Current operating lease liabilities   98,982     106,673  
Total current liabilities   3,007,291     2,871,283  
Long-term debt, less current portion   1,719,115     1,514,000  
Non-current operating lease liabilities   248,022     238,830  
Deferred income taxes and other long-term liabilities   816,613     785,186  
Total liabilities   5,791,041     5,409,299  
Total stockholders' equity   8,499,032     7,847,643  
Total liabilities and stockholders' equity $ 14,290,073     13,256,942  
       
   
Segment Information As of or for the Three Months Ended
(Amounts in thousands) April 3, 2021   March 28, 2020
       
Net sales:      
Global Ceramic $ 929,871     848,450  
Flooring NA   969,250     848,330  
Flooring ROW   769,905     588,983  
Consolidated net sales $ 2,669,026     2,285,763  
       
Operating income (loss):      
Global Ceramic $ 87,804     47,976  
Flooring NA   81,298     36,206  
Flooring ROW   159,306     75,816  
Corporate and intersegment eliminations   (10,893 )   (8,515 )
Consolidated operating income (a) $ 317,515     151,483  
       
Assets:      
Global Ceramic $ 5,161,660     5,237,631  
Flooring NA   3,731,032     3,841,815  
Flooring ROW   4,120,381     3,810,348  
Corporate and intersegment eliminations   1,277,000     367,148  
Consolidated assets $ 14,290,073     13,256,942  
       
(a)During the second quarter of 2020, the Company revised the methodology it uses to estimate and allocate corporate general and administrative expenses to its operating segments to better align usage of corporate resources allocated to the Company segments.  The updated allocation methodology had no impact on the Company’s consolidated statements of operations.  This change was applied retrospectively, and segment operating income for all comparative periods has been updated to reflect this change.
 


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 3, 2021   March 28, 2020    
Net earnings attributable to Mohawk Industries, Inc.         $ 236,807     110,514      
Adjusting items:                  
Restructuring, acquisition and integration-related and other costs           11,877     11,930      
Income taxes           (2,735 )   (3,080 )    
Adjusted net earnings attributable to Mohawk Industries, Inc.         $ 245,949     119,364      
                   
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.         $ 3.49     1.66      
Weighted-average common shares outstanding - diluted           70,474     71,777      
                   
 
Reconciliation of Total Debt to Net Debt Less Short-Term Investments
(Amounts in thousands)                  
  April 3, 2021                
Short-term debt and current portion of long-term debt $ 953,913                  
Long-term debt, less current portion   1,719,115                  
Total debt   2,673,028                  
Less: Cash and cash equivalents   557,262                  
Net Debt   2,115,766                  
Less: Short-term investments   782,267                  
Net debt less short-term investments $ 1,333,499                  
                   
                   
Reconciliation of Operating Income (Loss) to Adjusted EBITDA
(Amounts in thousands)                 Trailing Twelve
  Three Months Ended   Months Ended
  June 27, 2020   September 26, 2020   December 31, 2020   April 3, 2021   April 3, 2021
Operating income (loss) $ (60,958 )   262,744       282,733     317,515     802,034  
Other (expense) income   (1,037 )   726       6,742     2,227     8,658  
Net (income) loss attributable to noncontrolling interests   331     (336 )     (176 )   (4 )   (185 )
Depreciation and amortization (1)   154,094     151,342       156,555     151,216     613,207  
EBITDA   92,430     414,476       445,854     470,954     1,423,714  
Restructuring, acquisition and integration-related and other costs   91,940     26,925       15,947     6,059     140,871  
Adjusted EBITDA $ 184,370     441,401       461,801     477,013     1,564,585  
                   
Net Debt less short-term investments to Adjusted EBITDA                 0.9  
(1) Includes $5,818 of accelerated depreciation in Q1 2021 with $8,395 in Q2 2020, $5,243 in Q3 2020 and $6,435 in Q4 2020.
                   
                   
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and on Constant Shipping Days 
(Amounts in thousands)                  
  Three Months Ended        
  April 3, 2021   March 28, 2020        
Net sales $ 2,669,026     2,285,763          
Adjustment to net sales on constant shipping days   (110,948 )   -          
Adjustment to net sales on a constant exchange rate   (63,899 )   -          
Net sales on a constant exchange rate and constant shipping days $ 2,494,179     2,285,763          
                   
                   
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 Ceramic April 3, 2021   March 28, 2020            
Net sales $ 929,871     848,450              
Adjustment to segment net sales on constant shipping days   (33,930 )   -              
Adjustment to segment net sales on a constant exchange rate   (1,421 )   -              
Segment net sales on a constant exchange rate and constant shipping days $ 894,520     848,450              
                   
                   
Reconciliation of Segment Net Sales to Segment Net Sales on Constant Shipping Days 
(Amounts in thousands)                  
  Three Months Ended            
Flooring NA April 3, 2021   March 28, 2020            
Net sales $ 969,250     848,330              
Adjustment to segment net sales on constant shipping days   (44,735 )   -              
Segment net sales on constant shipping days $ 924,515     848,330              
                   
                   
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            
Flooring ROW April 3, 2021   March 28, 2020            
Net sales $ 769,905     588,983              
Adjustment to segment net sales on constant shipping days   (32,283 )   -              
Adjustment to segment net sales on a constant exchange rate   (62,479 )   -              
Segment net sales on a constant exchange rate and constant shipping days $ 675,143     588,983              
                   
                   
Reconciliation of Gross Profit to Adjusted Gross Profit
(Amounts in thousands)                  
  Three Months Ended            
  April 3, 2021   March 28, 2020            
Gross Profit $ 791,769     616,440              
Adjustments to gross profit:                  
Restructuring, acquisition and integration-related and other costs   10,485     11,080              
Adjusted gross profit $ 802,254     627,520              
                   
                   
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses
(Amounts in thousands)                  
  Three Months Ended            
  April 3, 2021   March 28, 2020            
Selling, general and administrative expenses $ 474,254     464,957              
Adjustments to selling, general and administrative expenses:                  
Restructuring, acquisition and integration-related and other costs   (1,002 )   (895 )            
Adjusted selling, general and administrative expenses $ 473,252     464,062              
                   
                   
Reconciliation of Operating Income to Adjusted Operating Income
(Amounts in thousands)                  
  Three Months Ended            
  April 3, 2021   March 28, 2020            
Operating income $ 317,515     151,483              
Adjustments to operating income:                  
Restructuring, acquisition and integration-related and other costs   11,487     11,975              
Adjusted operating income $ 329,002     163,458              
                   
                   
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
(Amounts in thousands)                  
  Three Months Ended            
Global Ceramic April 3, 2021   March 28, 2020            
Operating income $ 87,804     47,976              
Adjustments to segment operating income:                  
Restructuring, acquisition and integration-related and other costs   1,273     (122 )            
Adjusted segment operating income $ 89,077     47,854              
                   
                   
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
(Amounts in thousands)                  
  Three Months Ended            
Flooring NA  April 3, 2021   March 28, 2020            
Operating income $ 81,298     36,206              
Adjustments to segment operating income:                  
Restructuring, acquisition and integration-related and other costs   8,859     8,067              
Adjusted segment operating income $ 90,157     44,273              
                   
                   
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income 
(Amounts in thousands)                  
  Three Months Ended            
Flooring ROW  April 3, 2021   March 28, 2020            
Operating income $ 159,306     75,816              
Adjustments to segment operating income:                  
Restructuring, acquisition and integration-related and other costs   1,357     3,969              
Adjusted segment operating income $ 160,663     79,785              
                   
                   
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 3, 2021   March 28, 2020            
Earnings before income taxes $ 304,501     137,133              
Net (earnings) loss attributable to noncontrolling interests   (4 )   49              
Adjustments to earnings including noncontrolling interests before income taxes:                  
Restructuring, acquisition and integration-related and other costs   11,877     11,930              
Adjusted earnings including noncontrolling interests before income taxes $ 316,374     149,112              
                   
                   
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense
(Amounts in thousands)                  
  Three Months Ended            
  April 3, 2021   March 28, 2020            
Income tax expense $ 67,690     26,668              
Income tax effect of adjusting items   2,735     3,080              
Adjusted income tax expense $ 70,425     29,748              
                   
Adjusted income tax rate   22.3 %   20.0 %            
                   
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.

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Source: Mohawk Industries, Inc.