Mohawk Industries Reports Q4 Results
For the twelve months ending
Commenting on Mohawk Industries’ fourth quarter performance,
“As we anticipated, our businesses remained challenged by soft demand, greater competition and reduced production volume. In the U.S., markets continued to be influenced by the strong dollar, the impact of LVT on other products and positive trends in housing that should be a tailwind. Competition has increased in our global markets, impacting our pricing and mix as we leverage investments in sales and marketing to drive growth. Many countries where we operate are stimulating their economies with lower interest rates to encourage greater consumer spending and economic growth this year. In the near term we still anticipate that most of our markets will have continued pressure in our product categories.
“Throughout the period, we implemented changes to increase sales and reduce costs. We have enhanced our LVT manufacturing in the U.S. and
“For the quarter, our Global Ceramic Segment sales were flat as reported and decreased 1.5% on a constant currency and days basis. The segment’s operating margin was 6% as reported, declining year over year primarily due to inflation and lower production rates partially offset by productivity. Most of the segment’s markets faced soft demand and excess industry capacity, that is compressing market prices and margins. Our U.S. ceramic business remained under pressure from LVT taking share and high industry inventories from ceramic purchases ahead of tariffs. To align our own inventory levels, we meaningfully reduced production in our North American ceramic plants, which increased our costs. To improve sales, we are rolling out multiple new products and adding sales representatives and design consultants in major markets. We have begun manufacturing our proprietary new click tile in multiple sizes and designs, and we have already received commitments from major customers. Our quartz countertop sales increased as we ramped up productivity at our new plant. In
“During the quarter, our Flooring North America Segment’s sales decreased 4% as reported and 5% on a constant days basis with an operating margin of 3% as reported and 7% excluding restructuring and other charges. Operating income for the segment declined primarily due to lower volume, price and mix. We have executed many initiatives to align the business with the present conditions, including closing three plants, consolidating high cost operations and reducing wood manufacturing. The effects of these actions will increase and flow through inventory with full cost benefit in the third quarter of 2020. In the quarter, our residential carpet sales performed best in the new home construction and multi-family channels. We are leveraging our strengths in design and fiber technology to deliver differentiated new collections in both premium and value carpet categories. To create greater value for our commercial customers and improve our cost, we invested in new design capabilities, proprietary carpet tile backings and material manufacturing. We have increased the production and speeds of our LVT operations, and ongoing initiatives will further improve formulations and throughput. During the period, U.S. tariffs on click LVT were removed, and the market has adjusted pricing to reflect this change. To expand our price points and highlight our unique visuals and features, we are introducing new rigid and flexible LVT collections for both residential and commercial markets. The virus in
“For the quarter, our Flooring Rest of the World Segment’s sales increased 3% as reported and 4% on a constant currency and days basis. The segment’s operating margin was 13% as reported and 14% excluding restructuring and other charges, due to volume growth, reduced start-up cost and lower inflation partially offset by price and mix. Across the segment, our investments in product innovation, cost improvements, acquisitions and new businesses strengthened our results. We are outperforming the European laminate market, and sales of our new Signature collection are ramping up quickly due to an enhanced level of sophistication. We announced the consolidation of wood manufacturing to our facility in
“Market conditions remain challenging across most of our businesses and geographies. In response, we are adjusting our business strategies, enhancing our product offering and restructuring operations. We are increasing our investments in sales and marketing, expanding our commercial participation and enhancing both our premium and value collections. To broaden our distribution into new channels and geographies, we are bringing many new product innovations and categories to market. Our new LVT, countertop, sheet vinyl and carpet tile plants are improving their productivity as we invest to expand our customer base and sales volume. As our LVT manufacturing capacity grows with higher speeds and efficiencies, we are enhancing design and features and increasing sales of our rigid and flexible offerings. We are limiting the traditional inventory build that we typically do in the first quarter, as we manage our production with market demand. Taking all of this into account, our EPS guidance for the first quarter of 2020 is
“LVT growth in the U.S., exchange rates and excess global capacity continue as headwinds for our businesses. We are executing specific initiatives to adapt to shifting consumer preferences, changing markets and competitive pressures. For the full year of 2020, we expect that our actions to increase sales and distribution, reduce costs and enhance utilization of our new plants will deliver improved year-over-year results, with our performance accelerating during the second half of the year. Our balance sheet should continue to improve with ongoing strong cash generation, and we remain focused on delivering long-term value to our shareholders.”
ABOUT
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
Conference call
The telephone number is 1-800-603-9255 for US/
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||||
(Unaudited) | ||||||||||||||
Condensed Consolidated Statement of Operations Data | Three Months Ended | Twelve Months Ended | ||||||||||||
(Amounts in thousands, except per share data) | December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | ||||||||||
Net sales | $ | 2,424,512 | 2,448,618 | 9,970,672 | 9,983,634 | |||||||||
Cost of sales | 1,801,705 | 1,802,228 | 7,294,629 | 7,145,564 | ||||||||||
Gross profit | 622,807 | 646,390 | 2,676,043 | 2,838,070 | ||||||||||
Selling, general and administrative expenses | 467,993 | 433,014 | 1,848,819 | 1,742,744 | ||||||||||
Operating income | 154,814 | 213,376 | 827,224 | 1,095,326 | ||||||||||
Interest expense | 10,962 | 14,411 | 41,272 | 38,827 | ||||||||||
Other (income) expense, net | (9,522 | ) | 504 | 36,407 | 7,298 | |||||||||
Earnings before income taxes | 153,374 | 198,461 | 749,545 | 1,049,201 | ||||||||||
Income tax expense | (111,299 | ) | (31,582 | ) | 4,974 | 184,346 | ||||||||
Net earnings including noncontrolling interest | 264,673 | 230,043 | 744,571 | 864,855 | ||||||||||
Net income attributable to noncontrolling interest | 6 | 704 | 360 | 3,151 | ||||||||||
Net earnings attributable to Mohawk Industries, Inc. | $ | 264,667 | 229,339 | 744,211 | 861,704 | |||||||||
Basic earnings per share attributable to Mohawk Industries, Inc. | ||||||||||||||
Basic earnings per share attributable to Mohawk Industries, Inc. | $ | 3.69 | 3.07 | 10.34 | 11.53 | |||||||||
Weighted-average common shares outstanding - basic | 71,640 | 73,856 | 71,986 | 74,413 | ||||||||||
Diluted earnings per share attributable to Mohawk Industries, Inc. | ||||||||||||||
Diluted earnings per share attributable to Mohawk Industries, Inc. | $ | 3.68 | 3.05 | 10.30 | 11.47 | |||||||||
Weighted-average common shares outstanding - diluted | 71,954 | 74,183 | 72,264 | 74,773 | ||||||||||
Other Financial Information | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 440,675 | 286,859 | 1,418,761 | 1,181,344 | |||||||||
Depreciation and amortization | $ | 153,759 | 139,092 | 576,452 | 521,765 | |||||||||
Capital expenditures | $ | 139,849 | 151,161 | 545,462 | 794,110 | |||||||||
Condensed Consolidated Balance Sheet Data | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 134,785 | 119,050 | |||||||||||
Receivables, net | 1,526,619 | 1,606,159 | ||||||||||||
Inventories | 2,282,328 | 2,287,615 | ||||||||||||
Prepaid expenses and other current assets | 485,725 | 496,472 | ||||||||||||
Total current assets | 4,429,457 | 4,509,296 | ||||||||||||
Property, plant and equipment, net | 4,698,917 | 4,699,902 | ||||||||||||
Right of use operating lease assets | 323,003 | - | ||||||||||||
Goodwill | 2,570,027 | 2,520,966 | ||||||||||||
Intangible assets, net | 928,879 | 961,810 | ||||||||||||
Deferred income taxes and other non-current assets | 436,397 | 407,149 | ||||||||||||
Total assets | $ | 13,386,680 | 13,099,123 | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Current portion of long-term debt and commercial paper | $ | 1,051,498 | 1,742,373 | |||||||||||
Accounts payable and accrued expenses | 1,559,140 | 1,523,866 | ||||||||||||
Current operating lease liabilities | 101,945 | - | ||||||||||||
Total current liabilities | 2,712,583 | 3,266,239 | ||||||||||||
Long-term debt, less current portion | 1,518,388 | 1,515,601 | ||||||||||||
Non-current operating lease liabilities | 228,155 | - | ||||||||||||
Deferred income taxes and other long-term liabilities | 801,106 | 877,224 | ||||||||||||
Total liabilities | 5,260,232 | 5,659,064 | ||||||||||||
Total stockholders' equity | 8,126,448 | 7,440,059 | ||||||||||||
Total liabilities and stockholders' equity | $ | 13,386,680 | 13,099,123 | |||||||||||
Segment Information | Three Months Ended | As of or for the Twelve Months Ended | ||||||||||||
(Amounts in thousands) | December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | ||||||||||
Net sales: | ||||||||||||||
Global Ceramic | $ | 858,337 | 861,238 | 3,631,142 | 3,552,856 | |||||||||
Flooring NA | 936,387 | 973,680 | 3,843,714 | 4,029,148 | ||||||||||
Flooring ROW | 629,788 | 613,700 | 2,495,816 | 2,401,630 | ||||||||||
Intersegment sales | - | - | - | - | ||||||||||
Consolidated net sales | $ | 2,424,512 | 2,448,618 | 9,970,672 | 9,983,634 | |||||||||
Operating income (loss): | ||||||||||||||
Global Ceramic | $ | 53,172 | 76,005 | 340,058 | 442,898 | |||||||||
Flooring NA | 27,011 | 79,158 | 167,385 | 347,937 | ||||||||||
Flooring ROW | 83,036 | 72,467 | 359,428 | 345,801 | ||||||||||
Corporate and intersegment eliminations | (8,405 | ) | (14,254 | ) | (39,647 | ) | (41,310 | ) | ||||||
Consolidated operating income | $ | 154,814 | 213,376 | 827,224 | 1,095,326 | |||||||||
Assets: | ||||||||||||||
Global Ceramic | $ | 5,419,896 | 5,194,030 | |||||||||||
Flooring NA | 3,823,654 | 3,938,639 | ||||||||||||
Flooring ROW | 3,925,246 | 3,666,617 | ||||||||||||
Corporate and intersegment eliminations | 217,884 | 299,837 | ||||||||||||
Consolidated assets | $ | 13,386,680 | 13,099,123 |
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 | Twelve Months Ended | |||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||
Net earnings attributable to Mohawk Industries, Inc. | $ | 264,667 | 229,339 | 744,211 | 861,704 | |||||||||||||
Adjusting items: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 49,802 | 20,412 | 99,679 | 78,449 | ||||||||||||||
Acquisitions purchase accounting , including inventory step-up | 222 | 6,721 | 3,938 | 15,359 | ||||||||||||||
Acquisition interest expense | - | 4,322 | - | 4,322 | ||||||||||||||
Deferred loan cost write off | 601 | - | 601 | - | ||||||||||||||
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China(1) | (5,226 | ) | - | 59,946 | - | |||||||||||||
Release of indemnification asset | 603 | 2,857 | (57 | ) | 4,606 | |||||||||||||
Income taxes - reversal of uncertain tax position | (603 | ) | (2,857 | ) | 56 | (4,606 | ) | |||||||||||
European tax restructuring(2) | (136,194 | ) | - | (136,194 | ) | - | ||||||||||||
Income taxes | (12,183 | ) | (73,282 | ) | (46,842 | ) | (37,817 | ) | ||||||||||
Adjusted net earnings attributable to Mohawk Industries, Inc. | $ | 161,689 | 187,512 | 725,338 | 922,017 | |||||||||||||
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. | $ | 2.25 | 2.53 | 10.04 | 12.33 | |||||||||||||
Weighted-average common shares outstanding - diluted | 71,954 | 74,183 | 72,264 | 74,773 | ||||||||||||||
(1) In September, the US commerce department imposed a 104% countervailing duty on top of the 25% general tariffs on all ceramic produced in China. As a consequence, ceramic purchases from China will dramatically decline and Mohawk took a $60 million write off to our investment in a Chinese manufacturer and distributor, of which $5 million was recovered in Q4 2019. | ||||||||||||||||||
(2) The Company implemented select operational, administrative and financial restructurings that centralized certain business processes and intangible assets in various European jurisdictions into a new entity. The restructurings resulted in a current tax liability of $136 million, calculated by measuring the fair value of intangible assets transferred. The Company offset the tax liability with the utilization of $136 million of deferred tax assets from accumulated net operating loss carry forwards. The restructurings also resulted in the Company recording a $136 million deferred tax asset, and a corresponding deferred tax benefit, related to the tax basis of the intangible assets transferred. | ||||||||||||||||||
Reconciliation of Total Debt to Net Debt | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||
Current portion of long-term debt and commercial paper | $ | 1,051,498 | ||||||||||||||||
Long-term debt, less current portion | 1,518,388 | |||||||||||||||||
Less: Cash and cash equivalents | 134,785 | |||||||||||||||||
Net Debt | $ | 2,435,101 | ||||||||||||||||
Reconciliation of Operating Income to Adjusted EBITDA | ||||||||||||||||||
(Amounts in thousands) | Trailing Twelve | |||||||||||||||||
Three Months Ended | Months Ended | |||||||||||||||||
March 30, 2019 | June 29, 2019 | September 28, 2019 | December 31, 2019 | December 31, 2019 | ||||||||||||||
Operating income | $ | 165,330 | 266,860 | 240,220 | 154,814 | 827,224 | ||||||||||||
Other (expense)/income | 3,736 | 3,048 | (52,713 | ) | 9,522 | (36,407 | ) | |||||||||||
Net (income) loss attributable to noncontrolling interest | 10 | (213 | ) | (151 | ) | (6 | ) | (360 | ) | |||||||||
Depreciation and amortization | 137,291 | 140,482 | 144,920 | 153,759 | 576,452 | |||||||||||||
EBITDA | 306,367 | 410,177 | 332,276 | 318,089 | 1,366,909 | |||||||||||||
Restructuring, acquisition and integration-related and other costs | 39,495 | 8,840 | 1,542 | 49,802 | 99,679 | |||||||||||||
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China | - | - | 65,172 | (5,226 | ) | 59,946 | ||||||||||||
Acquisitions purchase accounting, including inventory step-up | 2,552 | 1,164 | - | 222 | 3,938 | |||||||||||||
Release of indemnification asset | - | - | (659 | ) | 603 | (56 | ) | |||||||||||
Adjusted EBITDA | $ | 348,414 | 420,181 | 398,331 | 363,490 | 1,530,416 | ||||||||||||
Net Debt to Adjusted EBITDA | 1.6 | |||||||||||||||||
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and on Constant Shipping Days Excluding Acquisition Volume | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||
Net sales | $ | 2,424,512 | 2,448,618 | 9,970,672 | 9,983,634 | |||||||||||||
Adjustment to net sales on constant shipping days | (36,469 | ) | - | 713 | - | |||||||||||||
Adjustment to net sales on a constant exchange rate | 18,721 | - | 178,290 | - | ||||||||||||||
Net sales on a constant exchange rate and constant shipping days | 2,406,764 | 2,448,618 | 10,149,675 | 9,983,634 | ||||||||||||||
Less: impact of acquisition volume | (34,597 | ) | - | (359,949 | ) | - | ||||||||||||
Net sales on a constant exchange rate and constant shipping days excluding acquisition volume | $ | 2,372,167 | 2,448,618 | 9,789,726 | 9,983,634 | |||||||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days Excluding Acquisition Volume | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Global Ceramic | December 31, 2019 | December 31, 2018 | ||||||||||||||||
Net sales | $ | 858,337 | 861,238 | |||||||||||||||
Adjustment to net sales on constant shipping days | (11,889 | ) | - | |||||||||||||||
Adjustment to segment net sales on a constant exchange rate | 1,969 | - | ||||||||||||||||
Segment net sales on a constant exchange rate and constant shipping days | 848,417 | 861,238 | ||||||||||||||||
Less: impact of acquisition volume | (20,728 | ) | - | |||||||||||||||
Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume | $ | 827,689 | 861,238 | |||||||||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on Constant shipping Days | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring NA | December 31, 2019 | December 31, 2018 | ||||||||||||||||
Net sales | $ | 936,387 | - | 973,680 | ||||||||||||||
Adjustment to net sales on constant shipping days | (14,631 | ) | - | - | ||||||||||||||
Segment net sales on constant shipping days | $ | 921,756 | - | 973,680 | ||||||||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days Excluding Acquisition Volume | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring ROW | December 31, 2019 | December 31, 2018 | ||||||||||||||||
Net sales | $ | 629,788 | 613,700 | |||||||||||||||
Adjustment to net sales on constant shipping days | (9,948 | ) | - | |||||||||||||||
Adjustment to segment net sales on a constant exchange rate | 16,752 | - | ||||||||||||||||
Segment net sales on a constant exchange rate and constant shipping days | 636,592 | 613,700 | ||||||||||||||||
Less: impact of acquisition volume | (13,869 | ) | - | |||||||||||||||
Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume | $ | 622,723 | 613,700 | |||||||||||||||
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||||||
Selling, general and administrative expenses | $ | 467,993 | 433,014 | |||||||||||||||
Adjustments to selling, general and administrative expenses: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | (4,651 | ) | (10,268 | ) | ||||||||||||||
Release of indemnification asset | (2 | ) | - | |||||||||||||||
Adjusted selling, general and administrative expenses | $ | 463,340 | 422,746 | |||||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||
Operating income | $ | 154,814 | 213,376 | 827,224 | 1,095,326 | |||||||||||||
Adjustments to operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 49,802 | 20,613 | 106,954 | 78,650 | ||||||||||||||
Release of indemnification asset | 2 | - | 247 | - | ||||||||||||||
Acquisitions purchase accounting, including inventory step-up | 222 | 6,721 | 3,938 | 15,359 | ||||||||||||||
Adjusted operating income | $ | 204,840 | 240,710 | 938,363 | 1,189,335 | |||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Global Ceramic | December 31, 2019 | December 31, 2018 | ||||||||||||||||
Operating income | $ | 53,172 | 76,005 | |||||||||||||||
Adjustments to segment operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 1,204 | 4,162 | ||||||||||||||||
Acquisitions purchase accounting, including inventory step-up | - | 6,721 | ||||||||||||||||
Adjusted segment operating income | $ | 54,376 | 86,888 | |||||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring NA | December 31, 2019 | December 31, 2018 | ||||||||||||||||
Operating income | $ | 27,011 | 79,158 | |||||||||||||||
Adjustments to segment operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 42,149 | 7,159 | ||||||||||||||||
Adjusted segment operating income | $ | 69,160 | 86,317 | |||||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring ROW | December 31, 2019 | December 31, 2018 | ||||||||||||||||
Operating income | $ | 83,036 | 72,467 | |||||||||||||||
Adjustments to segment operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 6,235 | 5,949 | ||||||||||||||||
Acquisitions purchase accounting, including inventory step-up | 222 | - | ||||||||||||||||
Adjusted segment operating income | $ | 89,493 | 78,416 | |||||||||||||||
Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||
Earnings before income taxes | $ | 153,374 | 198,461 | 749,545 | 1,049,201 | |||||||||||||
Noncontrolling interests | (6 | ) | (704 | ) | (360 | ) | (3,151 | ) | ||||||||||
Adjustments to earnings including noncontrolling interests before income taxes: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 49,802 | 20,412 | 99,679 | 78,449 | ||||||||||||||
Acquisitions purchase accounting, including inventory step-up | 222 | 6,721 | 3,938 | 15,359 | ||||||||||||||
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China | (5,226 | ) | - | 59,946 | - | |||||||||||||
Release of indemnification asset | 603 | 2,857 | (57 | ) | 4,606 | |||||||||||||
Acquisition interest expense | - | 4,322 | - | 4,322 | ||||||||||||||
Deferred loan cost write off | 601 | - | 601 | - | ||||||||||||||
Adjusted earnings including noncontrolling interests before income taxes | $ | 199,370 | 232,069 | 913,292 | 1,148,786 | |||||||||||||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||
Income tax expense | $ | (111,299 | ) | (31,582 | ) | 4,974 | 184,346 | |||||||||||
European tax restructuring | 136,194 | - | 136,194 | - | ||||||||||||||
Income taxes - reversal of uncertain tax position | 603 | 2,857 | (56 | ) | 4,606 | |||||||||||||
Income tax effect of adjusting items | 12,183 | 73,282 | 46,842 | 37,817 | ||||||||||||||
Adjusted income tax expense | $ | 37,681 | 44,557 | 187,954 | 226,769 | |||||||||||||
Adjusted income tax rate | 18.9 | % | 19.2 | % | 20.6 | % | 19.7 | % | ||||||||||
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.