UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 24, 2019
Commission File Number 01-13697
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code: (706 ) 629-7721
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Item 2.02 Results of Operations and Financial Condition.
The following information, including the Exhibit attached hereto, is being furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
On October 24, 2019, Mohawk Industries Inc., issued a press release to report the Company’s earnings for the fiscal quarter September 28, 2019, which is attached to this report as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Mohawk Industries, Inc. | ||||||||||||||||||||
Date: | October 24, 2019 | By: | /s/ James F. Brunk | |||||||||||||||||
James F. Brunk | ||||||||||||||||||||
Senior V.P. & Corporate Controller | ||||||||||||||||||||
INDEX TO EXHIBITS
Exhibit | |||||||||||
99.1 | |||||||||||
Exhibit 99.1
| NEWS RELEASE | ||||||||||||||
For Release: Immediately
Contact: Glenn Landau, Chief Financial Officer (706) 624-2025
MOHAWK INDUSTRIES REPORTS Q3 RESULTS
Calhoun, Georgia, October 24, 2019 - Mohawk Industries, Inc. (NYSE: MHK) today announced 2019 third quarter net earnings of $156 million and diluted earnings per share (EPS) of $2.15. Adjusted net earnings were $199 million, and EPS was $2.75, excluding restructuring, acquisition and other charges. Net sales for the third quarter of 2019 were $2.5 billion, down 1.0% as reported but flat on a constant currency and days basis. For the third quarter of 2018, net sales were $2.5 billion, net earnings were $227 million and EPS was $3.02, adjusted net earnings were $246 million, and EPS was $3.29, excluding restructuring, acquisition and other charges.
For the nine months ending September 28, 2019, net earnings and EPS were $480 million and $6.61, respectively. Net earnings excluding restructuring, acquisition and other charges were $564 million and EPS was $7.77. For the 2019 nine-month period, net sales were $7.5 billion, flat versus prior year as reported or an increase of 3% on a constant currency and days basis. For the nine-month period ending September 29, 2018, net sales were $7.5 billion, net earnings were $632 million and EPS was $8.42; excluding restructuring, acquisition and other charges, net earnings and EPS were $735 million and $9.80.
Commenting on Mohawk Industries’ third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “Our third quarter operating results were in line with our expectations, though we are not satisfied with our performance. As anticipated, our U.S. businesses presented the greatest challenges during the period given soft retail demand, the impact of LVT, a stronger dollar and excess ceramic industry inventories. Trends in our other major markets weakened, creating a more competitive environment. We expect the present conditions to persist and will further adjust our strategies as needed.
“We are progressing on many initiatives to improve our business, with the most significant of these being aligning ceramic production with demand in the U.S., realigning our North American carpet operations, optimizing our LVT manufacturing and ramping up our new plants. In addition, we are
entering new product categories, introducing innovative product extensions and optimizing our recent acquisitions in Australia, New Zealand and Brazil. We are investing more in sales personnel and marketing to increase our penetration in new and existing products. We continue to streamline our operations to enhance efficiencies, and we are leveraging automation and process enhancements to lower costs.
“Our free cash flow for the quarter is up year over year, and our balance sheet remains strong. Since the beginning of the third quarter, we purchased over 740,000 shares for approximately $91 million under our stock purchase program.
“For the quarter, our Global Ceramic Segment sales increased 3.5% as reported and 4% on a constant currency and days basis. The segment’s operating margin was 9% as reported, declining year over year primarily due to inflation and lower production rates partially offset by productivity. Our ceramic businesses around the world are facing slowing economies, and excess industry capacities are increasing competition. The U.S. ceramic market has been impacted by a decline in product mix, consumers shifting to LVT and excess inventories in the channel. Recently, the U.S. imposed 104% tariffs on Chinese imports, and further anti-dumping duties are anticipated. We expect the U.S. ceramic market to remain soft, and we are taking actions to improve our sales and costs. We are expanding our offering of stone looks and polished tiles and introducing additional value-oriented collections. We are initiating a limited launch of our new easy installation ceramic tile, and we will expand more broadly in the beginning of the year. We are developing new markets for our porcelain roofing and thick landscape tiles. Our new countertop plant in Tennessee is ramping up, processes and formulations are being refined and new products are being created. Although the Mexican economy has slowed, we have outperformed the industry by expanding our product offering and growing our customer base. We have outpaced the Brazilian ceramic market with our premium brand and leading offering, and we are installing a new porcelain line. In Europe, lower demand is impacting pricing and compressing margins as we increased sales of lower value tile. We are strengthening our higher value offerings by expanding our commercial technical tile, porcelain slabs and outdoor products. Our Russian ceramic business is the market leader and is gaining share due to our national distribution system, owned and franchised stores and project specification teams.
“During the quarter, our Flooring North America Segment’s sales decreased 4% with an operating margin of 8% as reported. Operating income for the segment declined primarily due to lower volume and inflation. The segment has been reorganized by product category to enhance our sales, product and operational strategies and execution. Polyester carpets continue to gain share in a soft market, which has reduced our overall product mix. We have completed the expansion of recycled polyester fiber to support continued growth in the category. The realignment of our residential carpet manufacturing will be largely complete in the fourth quarter and will improve our cost, quality and service. We are closing higher cost extrusion and dyeing assets and consolidating yarn and tufting operations. We have increased automation and upgraded assets to reduce our backing and yarn costs. Our commercial business continues to outperform residential with carpet tile and LVT growing fastest. We are expanding our sales organization and increasing our carpet tile manufacturing. During the period, LVT sales outperformed the other categories, and our operations improved production volume, speeds and cost. In September, we set a record for rigid LVT production, and our flexible LVT line is running at speeds comparable to our European operations. Our manufactured sheet vinyl sales continue to grow as we broaden our position in the apartment and home center channels. We expanded our waterproof laminate offering, and our RevWood collection is growing with its superior scratch and dent resistance, state-of-the art visuals and greater value.
“For the quarter, our Flooring Rest of the World Segment’s sales decreased 2% as reported and increased 2.5% on a constant basis. The segment’s operating margin was 14% as reported, due to volume growth and lower inflation offset by price and mix. In a slower environment, the segment delivered solid results, driven by product innovation, cost improvements, new businesses and acquisitions. Our new LVT, sheet vinyl, laminate and carpet tile operations are making progress in reaching our expected levels. In laminate, we outperformed the market as our new premium products gained momentum and improved our mix. We have introduced the Signature collection, which sets the standard for the most realistic visuals and textures, and we are adding our water-proof technology to most of our laminate products. Our Russian laminate expansion is operating at expected levels, and our sales are growing. As our LVT production increases, we are expanding our sales organization, and we are introducing new rigid collections that are embossed in registration. We continue to enhance our line speeds, yields and formulations, reducing our costs. Our sheet vinyl business improved as our new Russian plant expanded sales and volume increased.
Our insulation business is performing well, with volumes at historically high levels with selling prices and material costs declining. Our panels business has slowed, reducing our pricing and volume partially offset by mix and material cost. In Australia and New Zealand, the integration of our acquisition is largely complete. To increase our position, we are upgrading hard and soft surface offerings, investing in our retail and commercial sales and we have closed high cost assets in Australia.
“We see the present market conditions continuing, and we are taking actions to better position our business for the future. We are investing more in sales and marketing to expand placement of our products and increase the utilization of our new plants. Our new greenfield projects will progress as sales and costs improve. Our LVT production is improving, and increased distribution will follow. Our U.S. and European ceramic businesses are being impacted by lower market demand, and we are reducing inventory levels, expanding product offerings and entering new categories. The restructuring of our U.S. carpet operations will be substantially complete this year and will benefit our costs next year. Taking all of this into account, our EPS guidance for the fourth quarter of 2019 is $2.13 to $2.23, excluding any one-time charges.
“Next year, our business will benefit from our new products, higher utilization of our start-ups and cost reductions we have taken during 2019. Our results and balance sheet should improve with strong cash generation to take advantage of future opportunities. We have a strong global management team, and they are focused on enhancing our results and optimizing our long-term profitability. We will adapt our business strategies to future circumstances as required.”
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 Friday, October 25, 2019, 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 # 9847415. A replay will be available until November 24, 2019, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 9847415.
| MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Condensed Consolidated Statement of Operations Data | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| (Amounts in thousands, except per share data) | September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||||||||||||
| Net sales | $ | 2,519,185 | 2,545,800 | 7,546,160 | 7,535,016 | ||||||||||||||||||
| Cost of sales | 1,827,494 | 1,825,367 | 5,492,924 | 5,343,336 | |||||||||||||||||||
| Gross profit | 691,691 | 720,433 | 2,053,236 | 2,191,680 | |||||||||||||||||||
| Selling, general and administrative expenses | 451,471 | 433,189 | 1,380,826 | 1,309,730 | |||||||||||||||||||
| Operating income | 240,220 | 287,244 | 672,410 | 881,950 | |||||||||||||||||||
| Interest expense | 9,316 | 9,025 | 30,310 | 24,416 | |||||||||||||||||||
| Other (income) expense, net | 52,713 | 706 | 45,929 | 6,794 | |||||||||||||||||||
| Earnings before income taxes | 178,191 | 277,513 | 596,171 | 850,740 | |||||||||||||||||||
| Income tax expense | 22,522 | 49,487 | 116,273 | 215,928 | |||||||||||||||||||
| Net earnings including noncontrolling interest | 155,669 | 228,026 | 479,898 | 634,812 | |||||||||||||||||||
| Net income attributable to noncontrolling interest | 151 | 1,013 | 354 | 2,447 | |||||||||||||||||||
| Net earnings attributable to Mohawk Industries, Inc. | $ | 155,518 | 227,013 | 479,544 | 632,365 | ||||||||||||||||||
| Basic earnings per share attributable to Mohawk Industries, Inc. | |||||||||||||||||||||||
| Basic earnings per share attributable to Mohawk Industries, Inc. | $ | 2.16 | 3.03 | 6.63 | 8.46 | ||||||||||||||||||
| Weighted-average common shares outstanding - basic | 72,106 | 74,603 | 72,302 | 74,599 | |||||||||||||||||||
| Diluted earnings per share attributable to Mohawk Industries, Inc. | |||||||||||||||||||||||
| Diluted earnings per share attributable to Mohawk Industries, Inc. | $ | 2.15 | 3.02 | 6.61 | 8.42 | ||||||||||||||||||
| Weighted-average common shares outstanding - diluted | 72,392 | 74,945 | 72,578 | 74,977 | |||||||||||||||||||
| Other Financial Information | ||||||||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 411,761 | 273,498 | 978,086 | 894,485 | |||||||||||||||||||||
| Depreciation and amortization | $ | 144,920 | 132,972 | 422,693 | 382,673 | |||||||||||||||||||||
| Capital expenditures | $ | 124,555 | 144,594 | 405,614 | 642,949 | |||||||||||||||||||||
| Condensed Consolidated Balance Sheet Data | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 111,303 | 91,351 | |||||||||||
| Receivables, net | 1,787,158 | 1,755,710 | ||||||||||||
| Inventories | 2,337,952 | 2,214,295 | ||||||||||||
| Prepaid expenses and other current assets | 491,367 | 487,114 | ||||||||||||
| Total current assets | 4,727,780 | 4,548,470 | ||||||||||||
| Property, plant and equipment, net | 4,600,630 | 4,586,236 | ||||||||||||
| Right of use operating lease assets | 334,083 | — | ||||||||||||
| Goodwill | 2,519,214 | 2,522,139 | ||||||||||||
| Intangible assets, net | 916,953 | 944,661 | ||||||||||||
| Deferred income taxes and other non-current assets | 294,102 | 399,420 | ||||||||||||
| Total assets | $ | 13,392,762 | 13,000,926 | |||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Current portion of long-term debt and commercial paper | $ | 1,273,158 | 1,333,853 | |||||||||||
| Accounts payable and accrued expenses | 1,738,859 | 1,623,418 | ||||||||||||
| Current operating lease liabilities | 102,682 | — | ||||||||||||
| Total current liabilities | 3,114,699 | 2,957,271 | ||||||||||||
| Long-term debt, less current portion | 1,483,581 | 1,528,551 | ||||||||||||
| Non-current operating lease liabilities | 238,560 | — | ||||||||||||
| Deferred income taxes and other long-term liabilities | 790,643 | 912,100 | ||||||||||||
| Total liabilities | 5,627,483 | 5,397,922 | ||||||||||||
| Redeemable noncontrolling interest | — | 31,227 | ||||||||||||
| Total stockholders' equity | 7,765,279 | 7,571,777 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 13,392,762 | 13,000,926 | |||||||||||
| Segment Information | Three Months Ended | As of or for the Nine Months Ended | ||||||||||||||||||||||||
| (Amounts in thousands) | September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | ||||||||||||||||||||||
| Net sales: | ||||||||||||||||||||||||||
| Global Ceramic | $ | 916,422 | 885,773 | 2,772,805 | 2,691,618 | |||||||||||||||||||||
| Flooring NA | 1,001,908 | 1,047,540 | 2,907,327 | 3,055,468 | ||||||||||||||||||||||
| Flooring ROW | 600,855 | 612,487 | 1,866,028 | 1,787,930 | ||||||||||||||||||||||
| Intersegment sales | — | — | — | — | ||||||||||||||||||||||
| Consolidated net sales | $ | 2,519,185 | 2,545,800 | 7,546,160 | 7,535,016 | |||||||||||||||||||||
| Operating income (loss): | ||||||||||||||||||||||||||
| Global Ceramic | $ | 84,410 | 118,716 | 286,886 | 366,893 | |||||||||||||||||||||
| Flooring NA | 80,223 | 93,369 | 140,374 | 268,779 | ||||||||||||||||||||||
| Flooring ROW | 84,428 | 84,108 | 276,392 | 273,334 | ||||||||||||||||||||||
| Corporate and intersegment eliminations | (8,841) | (8,949) | (31,242) | (27,056) | ||||||||||||||||||||||
| Consolidated operating income | $ | 240,220 | 287,244 | 672,410 | 881,950 | |||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Global Ceramic | $ | 5,385,279 | 4,999,334 | |||||||||||||||||||||||
| Flooring NA | 4,020,205 | 3,989,784 | ||||||||||||||||||||||||
| Flooring ROW | 3,736,296 | 3,709,623 | ||||||||||||||||||||||||
| Corporate and intersegment eliminations | 250,982 | 302,185 | ||||||||||||||||||||||||
| Consolidated assets | $ | 13,392,762 | 13,000,926 | |||||||||||||||||||||||
| 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 | Nine Months Ended | ||||||||||||||||||||||
| September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | ||||||||||||||||||||
| Net earnings attributable to Mohawk Industries, Inc. | $ | 155,518 | 227,013 | 479,544 | 632,365 | ||||||||||||||||||
| Adjusting items: | |||||||||||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 1,542 | 19,890 | 49,877 | 58,036 | |||||||||||||||||||
| Acquisitions purchase accounting, including inventory step-up | — | 7,090 | 3,716 | 8,638 | |||||||||||||||||||
Impairment of investment in a manufacturer and distributor of Ceramic tile in China (1) | 65,172 | — | 65,172 | — | |||||||||||||||||||
| Release of indemnification asset | (659) | — | (659) | 1,749 | |||||||||||||||||||
| Income taxes - reversal of uncertain tax position | 659 | — | 659 | (1749) | |||||||||||||||||||
Income taxes | (22,807) | (7,701) | (34,660) | 35,465 | |||||||||||||||||||
| Adjusted net earnings attributable to Mohawk Industries, Inc. | 199,425 | 246,292 | 563,649 | 734,504 | |||||||||||||||||||
| Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. | $ | 2.75 | 3.29 | 7.77 | 9.80 | ||||||||||||||||||
| Weighted-average common shares outstanding - diluted | 72,392 | 74,945 | 72,578 | 74,977 | |||||||||||||||||||
(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 is taking a $65 million write off to our investment in a Chinese manufacturer and distributor.
| Reconciliation of Total Debt to Net Debt | |||||
| (Amounts in thousands) | |||||
| September 28, 2019 | |||||
| Current portion of long-term debt and commercial paper | $ | 1,273,158 | |||
| Long-term debt, less current portion | 1,483,581 | ||||
| Less: Cash and cash equivalents | 111,303 | ||||
| Net Debt | $ | 2,645,436 | |||
| Reconciliation of Operating Income to Adjusted EBITDA | ||||||||||||||||||||||||||||||||
| (Amounts in thousands) | Trailing Twelve | |||||||||||||||||||||||||||||||
| Three Months Ended | Months Ended | |||||||||||||||||||||||||||||||
| December 31, 2018 | March 30, 2019 | June 29, 2019 | September 28, 2019 | September 28, 2019 | ||||||||||||||||||||||||||||
| Operating income | $ | 213,376 | 165,330 | 266,860 | 240,220 | 885,786 | ||||||||||||||||||||||||||
| Other (expense) income | (504) | 3,736 | 3,048 | (52,713) | (46,433) | |||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interest | (704) | 10 | (213) | (151) | (1,058) | |||||||||||||||||||||||||||
| Depreciation and amortization | 139,092 | 137,291 | 140,482 | 144,920 | 561,785 | |||||||||||||||||||||||||||
| EBITDA | 351,260 | 306,367 | 410,177 | 332,276 | 1,400,080 | |||||||||||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 20,412 | 39,495 | 8,840 | 1,542 | 70,289 | |||||||||||||||||||||||||||
| Impairment of investment in a manufacturer and distributor of Ceramic tile in China | — | — | — | 65,172 | 65,172 | |||||||||||||||||||||||||||
Acquisitions purchase accounting, including inventory step-up | 6,721 | 2,552 | 1,164 | — | 10,437 | |||||||||||||||||||||||||||
| Release of indemnification asset | 2,857 | — | — | (659) | 2,198 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 381,250 | 348,414 | 420,181 | 398,331 | 1,548,176 | ||||||||||||||||||||||||||
| Net Debt to Adjusted EBITDA | 1.7 | |||||||||||||||||||||||||||||||
| 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 | Nine Months Ended | |||||||||||||||||||||||||
| September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||||||||||||||||
| Net sales | $ | 2,519,185 | 2,545,800 | 7,546,160 | 7,535,016 | |||||||||||||||||||||
| Adjustment to net sales on constant shipping days | (1,332) | — | 37,182 | — | ||||||||||||||||||||||
| Adjustment to net sales on a constant exchange rate | 35,215 | — | 159,570 | — | ||||||||||||||||||||||
| Net sales on a constant exchange rate and constant shipping days | 2,553,068 | 2,545,800 | 7,742,912 | 7,535,016 | ||||||||||||||||||||||
| Less: impact of acquisition volume | (70,357) | — | (325,352) | — | ||||||||||||||||||||||
| Net sales on a constant exchange rate and constant shipping days excluding acquisition volume | $ | 2,482,711 | 2,545,800 | 7,417,560 | 7,535,016 | |||||||||||||||||||||
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 | Nine Months Ended | |||||||||||||||||||||||||
| Global Ceramic | September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | ||||||||||||||||||||||
| Net sales | $ | 916,422 | 885,773 | 2,772,805 | 2,691,618 | |||||||||||||||||||||
| Adjustment to net sales on constant shipping days | (1,332) | — | 13,050 | — | ||||||||||||||||||||||
| Adjustment to segment net sales on a constant exchange rate | 8,364 | — | 52,478 | — | ||||||||||||||||||||||
| Segment net sales on a constant exchange rate and constant shipping days | 923,454 | 885,773 | 2,838,333 | 2,691,618 | ||||||||||||||||||||||
| Less: impact of acquisition volume | (57,369) | — | (162,087) | — | ||||||||||||||||||||||
| Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume | $ | 866,085 | 885,773 | 2,676,246 | 2,691,618 | |||||||||||||||||||||
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate Excluding Acquisition Volume | ||||||||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| Flooring ROW | September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | ||||||||||||||||||||||
| Net sales | $ | 600,855 | 612,487 | 1,866,028 | 1,787,930 | |||||||||||||||||||||
| Adjustment to segment net sales on a constant exchange rate | 26,852 | — | 107,092 | — | ||||||||||||||||||||||
| Segment net sales on a constant exchange rate | 627,707 | 612,487 | 1,982,617 | 1,787,930 | ||||||||||||||||||||||
| Less: impact of acquisition volume | (12,988) | — | (163,265) | — | ||||||||||||||||||||||
| Segment net sales on a constant exchange rate excluding acquisition volume | $ | 614,719 | 612,487 | 1,819,352 | 1,787,930 | |||||||||||||||||||||
| Reconciliation of Gross Profit to Adjusted Gross Profit | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||
| Gross Profit | $ | 691,691 | 720,433 | |||||||||||
| Adjustments to gross profit: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 7,464 | 10,202 | ||||||||||||
| Acquisitions purchase accounting, including inventory step-up | — | 7,090 | ||||||||||||
| Adjusted gross profit | $ | 699,155 | 737,725 | |||||||||||
| Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||
| Selling, general and administrative expenses | $ | 451,471 | 433,189 | |||||||||||
| Adjustments to selling, general and administrative expenses: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | (2,051) | (9,688) | ||||||||||||
| Release of indemnification asset | (246) | — | ||||||||||||
| Adjusted selling, general and administrative expenses | $ | 449,174 | 423,501 | |||||||||||
| Reconciliation of Operating Income to Adjusted Operating Income | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||
| Operating income | $ | 240,220 | 287,244 | |||||||||||
| Adjustments to operating income: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 9,515 | 19,890 | ||||||||||||
| Release of indemnification asset | 246 | — | ||||||||||||
| Acquisitions purchase accounting, including inventory step-up | — | 7,090 | ||||||||||||
| Adjusted operating income | $ | 249,981 | 314,224 | |||||||||||
| Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| Global Ceramic | September 28, 2019 | September 29, 2018 | ||||||||||||
| Operating income | $ | 84,410 | 118,716 | |||||||||||
| Adjustments to segment operating income: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 1,167 | 181 | ||||||||||||
| Adjusted segment operating income | $ | 85,577 | 118,897 | |||||||||||
| Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| Flooring NA | September 28, 2019 | September 29, 2018 | ||||||||||||
| Operating income | $ | 80,223 | 93,369 | |||||||||||
| Adjustments to segment operating income: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 4,095 | 10,603 | ||||||||||||
| Adjusted segment operating income | $ | 84,318 | 103,972 | |||||||||||
| Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| Flooring ROW | September 28, 2019 | September 29, 2018 | ||||||||||||
| Operating income | $ | 84,428 | 84,108 | |||||||||||
| Adjustments to segment operating income: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 4,435 | 5,596 | ||||||||||||
| Acquisitions purchase accounting, including inventory step-up | — | 7,090 | ||||||||||||
| Adjusted segment operating income | $ | 88,863 | 96,794 | |||||||||||
| Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||
| Earnings before income taxes | $ | 178,191 | 277,513 | |||||||||||
| Noncontrolling interests | (151) | (1013) | ||||||||||||
| Adjustments to earnings including noncontrolling interests before income taxes: | ||||||||||||||
| Restructuring, acquisition and integration-related and other costs | 1,542 | 19,890 | ||||||||||||
| Acquisitions purchase accounting, including inventory step-up | — | 7,090 | ||||||||||||
| Impairment of investment in a manufacturer and distributor of Ceramic tile in China | 65,172 | — | ||||||||||||
| Release of indemnification asset | (659) | — | ||||||||||||
| Adjusted earnings including noncontrolling interests before income taxes | $ | 244,095 | 303,480 | |||||||||||
| Reconciliation of Income Tax Expense to Adjusted Income Tax Expense | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| September 28, 2019 | September 29, 2018 | |||||||||||||
| Income tax expense | $ | 22,522 | 49,487 | |||||||||||
| Income taxes - reversal of uncertain tax position | (659) | — | ||||||||||||
| Income tax effect of adjusting items | 22,807 | 7,701 | ||||||||||||
| Adjusted income tax expense | $ | 44,670 | 57,188 | |||||||||||
| Adjusted income tax rate | 18.3 | % | 18.8 | % | ||||||||||
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.