Mohawk Industries Reports Q4 Results
For the twelve months ending
Commenting on Mohawk Industries’ fourth quarter performance,
“Through the fourth quarter we have achieved about
“For the quarter, our Flooring Rest of the World Segment’s sales increased 20% as reported and 13% on a constant currency and days basis. The segment’s operating income grew over 60% with a margin of 17.5% as reported and 18.2%, excluding restructuring costs due to higher volumes and better productivity as well as favorable material costs. Sales and margins were strong in most categories and geographies with most of our plants operating near capacity. Raw material costs began to rise in many of our product categories, and we are taking pricing actions to respond to the increases. Laminate, the segment’s largest flooring category, delivered significant growth across most of our markets. Our margins increased as higher volumes drove greater absorption, while increased productivity and better throughputs enhanced our results. Our LVT sales increased substantially, led by accelerated growth of our rigid collections. Both our LVT margins and profitability improved due to increased volume, lower production costs and SG&A absorption. We are introducing new collections with enhanced visuals and exclusive water-tight joints that better prevent water damage. Our sheet vinyl business rebounded as our retailers re-opened their shops and our export markets picked up. Our greenfield Russian sheet vinyl plant’s volume has grown to a level that its margins are in line with our other businesses. Our wood panels business performed well in the period, with sales limited by our capacity and low inventories. We are expanding our capacity and increasing efficiency in melamine products to further improve our margins. In insulation, volume was good, with margins impacted by significant material inflation due to supply constraints. Our sales in
“For the quarter, our Global Ceramic Segment’s sales increased 7% as reported and 6% on a constant currency and days basis. The segment had an operating margin of 8.7% as reported and 9.5%, excluding restructuring cost. Operating income increased by over 50% as reported versus prior year and by 65%, excluding restructuring charges, primarily due to improved productivity, increased volume and lower shutdown cost, partially offset by unfavorable price and mix. Our
“During the quarter, our Flooring North America Segment’s sales increased 3% as reported and were flat on a constant days basis. The segment had an operating margin of 8.6% as reported and 9.5%, excluding restructuring cost. Operating income increased by over 25% excluding restructuring charges, primarily due to productivity, increased volume and lower material costs, partially offset by unfavorable price and mix. The segment had strong growth in the residential channel, offset by lower commercial which improved from its low base in the prior periods. Our service levels improved as we increased production, though high demand required allocating shipments of some products. Due to higher demand and Covid disruptions in our plants, our inventories did not grow as we anticipated. We are taking pricing actions in most products due to rising material, labor and transportation costs. We have executed a large part of our restructuring initiatives, which is benefiting our results with some of the savings flowing through inventory in future periods. Demand for our residential carpet grew as comfort and noise reduction have become more important to consumers. Our laminate business is growing substantially in all channels as our unique visuals and waterproof technology have become desirable alternatives to natural wood and LVT. Our laminate plants are running at capacity to meet the exceptional demand, and by the end of the year a new line should be operational with additional capabilities. We have repurposed a plant to manufacture a waterproof wood flooring with dramatically improved scratch, dent and wear resistance. Sales of our LVT and sheet vinyl increased substantially, and we are introducing updated residential and commercial LVT collections with our water tight technology that will improve our mix and margins. Engineers from our European business are working in our
“Our fourth quarter sales and operating performance were much stronger than we anticipated. We ran our plants around the world at high levels during the period, but fell short of the inventory build we anticipated. Our operations are taking actions to optimize throughput and reach our desired service levels. Given present trends, the momentum of our residential businesses should remain strong, while the commercial channel should slowly improve from its trough. We will benefit from structural improvements in our costs and innovative new products that will enhance our mix. Most of the Covid restrictions around the world have not directly impacted the sales or installation of our products. Continued government subsidies and low interest rates should support economic recoveries, new home construction and residential remodeling. We are seeing increasing inflation in most of our product categories and are raising prices in response. Assuming current conditions continue, we anticipate our first quarter adjusted EPS to be
“The strength of our organization was demonstrated by our management of last year’s historic decline in sales and the subsequent spike in demand while protecting our employees and customers. Our strategies and initiatives remain flexible to adapt to economic changes. With improving sales and cash flows and a strong balance sheet, we are well positioned to take advantage of future opportunities.
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; the risks and uncertainty related to the COVID-19 pandemic; and other risks identified in Mohawk’s
Conference call
The telephone number is 1-800-603-9255 for US/
Contact:
(Unaudited) | ||||||||||||||
Condensed Consolidated Statement of Operations Data | Three Months Ended | Twelve Months Ended | ||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||
Net sales | $ | 2,641,764 | 2,424,512 | 9,552,197 | 9,970,672 | |||||||||
Cost of sales | 1,903,680 | 1,801,705 | 7,121,507 | 7,294,629 | ||||||||||
Gross profit | 738,084 | 622,807 | 2,430,690 | 2,676,043 | ||||||||||
Selling, general and administrative expenses | 455,351 | 467,993 | 1,794,688 | 1,848,819 | ||||||||||
Operating income | 282,733 | 154,814 | 636,002 | 827,224 | ||||||||||
Interest expense | 15,897 | 10,962 | 52,379 | 41,272 | ||||||||||
Other (income) expense, net | (6,742 | ) | (9,522 | ) | (751 | ) | 36,407 | |||||||
Earnings before income taxes | 273,578 | 153,374 | 584,374 | 749,545 | ||||||||||
Income tax expense | 25,180 | (111,299 | ) | 68,647 | 4,974 | |||||||||
Net earnings including noncontrolling interests | 248,398 | 264,673 | 515,727 | 744,571 | ||||||||||
Net earnings attributable to noncontrolling interests | 176 | 6 | 132 | 360 | ||||||||||
Net earnings attributable to |
$ | 248,222 | 264,667 | 515,595 | 744,211 | |||||||||
Basic earnings per share attributable to |
||||||||||||||
Basic earnings per share attributable to |
$ | 3.50 | 3.69 | 7.24 | 10.34 | |||||||||
Weighted-average common shares outstanding - basic | 70,951 | 71,640 | 71,214 | 71,986 | ||||||||||
Diluted earnings per share attributable to |
||||||||||||||
Diluted earnings per share attributable to |
$ | 3.49 | 3.68 | 7.22 | 10.30 | |||||||||
Weighted-average common shares outstanding - diluted | 71,209 | 71,954 | 71,401 | 72,264 | ||||||||||
Other Financial Information | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 407,844 | 440,675 | 1,769,839 | 1,418,761 | |||||||||
Less: Capital expenditures | 160,142 | 139,849 | 425,557 | 545,462 | ||||||||||
Free cash flow | $ | 247,702 | 300,826 | 1,344,282 | 873,299 | |||||||||
Depreciation and amortization | $ | 156,555 | 153,759 | 607,507 | 576,452 | |||||||||
Condensed Consolidated Balance Sheet Data | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 768,625 | 134,785 | |||||||||||
Short-term investments | 571,741 | 42,500 | ||||||||||||
Receivables, net | 1,709,493 | 1,526,619 | ||||||||||||
Inventories | 1,913,020 | 2,282,328 | ||||||||||||
Prepaid expenses and other current assets | 400,775 | 443,225 | ||||||||||||
Total current assets | 5,363,654 | 4,429,457 | ||||||||||||
Property, plant and equipment, net | 4,591,229 | 4,698,917 | ||||||||||||
Right of use operating lease assets | 323,138 | 323,003 | ||||||||||||
2,650,831 | 2,570,027 | |||||||||||||
Intangible assets, net | 951,607 | 928,879 | ||||||||||||
Deferred income taxes and other non-current assets | 447,292 | 436,397 | ||||||||||||
Total assets | $ | 14,327,751 | 13,386,680 | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Short-term debt and current portion of long-term debt | $ | 377,255 | 1,051,498 | |||||||||||
Accounts payable and accrued expenses | 1,895,951 | 1,559,140 | ||||||||||||
Current operating lease liabilities | 98,042 | 101,945 | ||||||||||||
Total current liabilities | 2,371,248 | 2,712,583 | ||||||||||||
Long-term debt, less current portion | 2,356,887 | 1,518,388 | ||||||||||||
Non-current operating lease liabilities | 234,726 | 228,155 | ||||||||||||
Deferred income taxes and other long-term liabilities | 823,732 | 801,106 | ||||||||||||
Total liabilities | 5,786,593 | 5,260,232 | ||||||||||||
Total stockholders' equity | 8,541,158 | 8,126,448 | ||||||||||||
Total liabilities and stockholders' equity | $ | 14,327,751 | 13,386,680 | |||||||||||
Segment Information | Three Months Ended | As of or for the Twelve Months Ended | ||||||||||||
(Amounts in thousands) | ||||||||||||||
Net sales: | ||||||||||||||
Global Ceramic | $ | 919,668 | 858,337 | 3,432,756 | 3,631,142 | |||||||||
Flooring NA | 963,365 | 936,387 | 3,594,075 | 3,843,714 | ||||||||||
Flooring ROW | 758,731 | 629,788 | 2,525,366 | 2,495,816 | ||||||||||
Consolidated net sales | $ | 2,641,764 | 2,424,512 | 9,552,197 | 9,970,672 | |||||||||
Operating income (loss): | ||||||||||||||
Global Ceramic | $ | 79,565 | 52,068 | 167,731 | 335,639 | |||||||||
Flooring NA | 82,407 | 29,556 | 147,442 | 177,566 | ||||||||||
Flooring ROW | 132,505 | 81,595 | 366,934 | 353,666 | ||||||||||
Corporate and intersegment eliminations | (11,744 | ) | (8,405 | ) | (46,105 | ) | (39,647 | ) | ||||||
Consolidated operating income (a) | $ | 282,733 | 154,814 | 636,002 | 827,224 | |||||||||
Assets: | ||||||||||||||
Global Ceramic | $ | 5,250,069 | 5,419,896 | |||||||||||
Flooring NA | 3,594,976 | 3,823,654 | ||||||||||||
Flooring ROW | 4,194,447 | 3,925,246 | ||||||||||||
Corporate and intersegment eliminations | 1,288,259 | 217,884 | ||||||||||||
Consolidated assets | $ | 14,327,751 | 13,386,680 | |||||||||||
(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 |
||||||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
Net earnings attributable to |
$ | 248,222 | 264,667 | 515,595 | 744,211 | |||||||||||||
Adjusting items: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 22,395 | 49,802 | 167,079 | 99,679 | ||||||||||||||
Acquisitions purchase accounting, including inventory step-up | - | 222 | - | 3,938 | ||||||||||||||
Deferred loan cost write off | - | 601 | - | 601 | ||||||||||||||
Impairment of net investment in a manufacturer and distributor of Ceramic tile in |
- | (5,226 | ) | - | 59,946 | |||||||||||||
European tax restructuring(2) | - | (136,194 | ) | - | (136,194 | ) | ||||||||||||
Release of indemnification asset | (13 | ) | 603 | (262 | ) | (57 | ) | |||||||||||
Income taxes - reversal of uncertain tax position | 13 | (603 | ) | 262 | 56 | |||||||||||||
Income taxes | (18,609 | ) | (12,183 | ) | (52,002 | ) | (46,842 | ) | ||||||||||
Adjusted net earnings attributable to |
$ | 252,008 | 161,689 | 630,672 | 725,338 | |||||||||||||
Adjusted diluted earnings per share attributable to |
$ | 3.54 | 2.25 | 8.83 | 10.04 | |||||||||||||
Weighted-average common shares outstanding - diluted | 71,209 | 71,954 | 71,401 | 72,264 | ||||||||||||||
[1] In |
||||||||||||||||||
[2] In 2019, 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 |
||||||||||||||||||
Reconciliation of Total Debt to Net Debt Less Short-Term Investments | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Short-term debt and current portion of long-term debt | $ | 377,255 | ||||||||||||||||
Long-term debt, less current portion | 2,356,887 | |||||||||||||||||
Total debt | 2,734,142 | |||||||||||||||||
Less: Cash and cash equivalents | 768,625 | |||||||||||||||||
Net Debt | 1,965,517 | |||||||||||||||||
Less: Short-term investments | 571,741 | |||||||||||||||||
Net debt less short-term investments | $ | 1,393,776 | ||||||||||||||||
Reconciliation of Operating Income (Loss) to Adjusted EBITDA | ||||||||||||||||||
(Amounts in thousands) | Trailing Twelve | |||||||||||||||||
Three Months Ended | Months Ended | |||||||||||||||||
Operating income (loss) | $ | 151,483 | (60,958 | ) | 262,744 | 282,733 | 636,002 | |||||||||||
Other (expense) income | (5,679 | ) | (1,037 | ) | 726 | 6,742 | 752 | |||||||||||
Net (income) loss attributable to noncontrolling interests | 49 | 331 | (336 | ) | (176 | ) | (132 | ) | ||||||||||
Depreciation and amortization (1) | 145,516 | 154,094 | 151,342 | 156,555 | 607,507 | |||||||||||||
EBITDA | 291,369 | 92,430 | 414,476 | 445,854 | 1,244,129 | |||||||||||||
Restructuring, acquisition and integration-related and other costs | 10,376 | 91,963 | 27,116 | 15,960 | 145,415 | |||||||||||||
Release of indemnification asset | (35 | ) | (23 | ) | (191 | ) | (13 | ) | (262 | ) | ||||||||
Adjusted EBITDA | $ | 301,710 | 184,370 | 441,401 | 461,801 | 1,389,282 | ||||||||||||
Net Debt less short-term investments to Adjusted EBITDA | 1.0 | |||||||||||||||||
(1) Includes |
||||||||||||||||||
Reconciliation of |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
Net sales | $ | 2,641,764 | 2,424,512 | 9,552,197 | 9,970,672 | |||||||||||||
Adjustment to net sales on constant shipping days | (65,438 | ) | - | (30,192 | ) | - | ||||||||||||
Adjustment to net sales on a constant exchange rate | (17,445 | ) | - | 58,799 | - | |||||||||||||
Net sales on a constant exchange rate and constant shipping days | $ | 2,558,881 | 2,424,512 | 9,580,804 | 9,970,672 | |||||||||||||
Reconciliation of Segment |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Global Ceramic | ||||||||||||||||||
Net sales | $ | 919,668 | 858,337 | |||||||||||||||
Adjustment to segment net sales on constant shipping days | (25,205 | ) | - | |||||||||||||||
Adjustment to segment net sales on a constant exchange rate | 17,465 | - | ||||||||||||||||
Segment net sales on a constant exchange rate and constant shipping days | $ | 911,928 | 858,337 | |||||||||||||||
Reconciliation of Segment |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring NA | ||||||||||||||||||
Net sales | $ | 963,365 | 936,387 | |||||||||||||||
Adjustment to segment net sales on constant shipping days | (29,193 | ) | - | |||||||||||||||
Segment net sales on constant shipping days | $ | 934,172 | 936,387 | |||||||||||||||
Reconciliation of Segment |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring ROW | ||||||||||||||||||
Net sales | $ | 758,731 | 629,788 | |||||||||||||||
Adjustment to segment net sales on constant shipping days | (11,041 | ) | - | |||||||||||||||
Adjustment to segment net sales on a constant exchange rate | (34,911 | ) | - | |||||||||||||||
Segment net sales on a constant exchange rate and constant shipping days | $ | 712,779 | 629,788 | |||||||||||||||
Reconciliation of Gross Profit to Adjusted Gross Profit | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Gross Profit | $ | 738,084 | 622,807 | |||||||||||||||
Adjustments to gross profit: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 22,789 | 45,372 | ||||||||||||||||
Adjusted gross profit | $ | 760,873 | 668,179 | |||||||||||||||
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Selling, general and administrative expenses | $ | 455,351 | 467,993 | |||||||||||||||
Adjustments to selling, general and administrative expenses: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 394 | (4,651 | ) | |||||||||||||||
Release of indemnification asset | - | (2 | ) | |||||||||||||||
Adjusted selling, general and administrative expenses | $ | 455,745 | 463,340 | |||||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Operating income | $ | 282,733 | 154,814 | |||||||||||||||
Adjustments to operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 22,395 | 49,802 | ||||||||||||||||
Release of indemnification asset | - | 2 | ||||||||||||||||
Acquisitions purchase accounting, including inventory step-up | - | 222 | ||||||||||||||||
Adjusted operating income | $ | 305,128 | 204,840 | |||||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Global Ceramic | ||||||||||||||||||
Operating income | $ | 79,565 | 52,068 | |||||||||||||||
Adjustments to segment operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 8,164 | 1,204 | ||||||||||||||||
Adjusted segment operating income | $ | 87,729 | 53,272 | |||||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring NA | ||||||||||||||||||
Operating income | $ | 82,407 | 29,556 | |||||||||||||||
Adjustments to segment operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 8,651 | 42,149 | ||||||||||||||||
Adjusted segment operating income | $ | 91,058 | 71,705 | |||||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Flooring ROW | ||||||||||||||||||
Operating income | $ | 132,505 | 81,595 | |||||||||||||||
Adjustments to segment operating income: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 5,496 | 6,235 | ||||||||||||||||
Acquisitions purchase accounting, including inventory step-up | - | 222 | ||||||||||||||||
Adjusted segment operating income | $ | 138,001 | 88,052 | |||||||||||||||
Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes |
||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Earnings before income taxes | $ | 273,578 | 153,374 | |||||||||||||||
Net earnings attributable to noncontrolling interests | (176 | ) | (6 | ) | ||||||||||||||
Adjustments to earnings including noncontrolling interests before income taxes: | ||||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 22,395 | 49,802 | ||||||||||||||||
Acquisitions purchase accounting, including inventory step-up | - | 222 | ||||||||||||||||
Impairment of net investment in a manufacturer and distributor of Ceramic tile in |
- | (5,226 | ) | |||||||||||||||
Release of indemnification asset | (13 | ) | 603 | |||||||||||||||
Deferred loan cost write off | - | 601 | ||||||||||||||||
Adjusted earnings including noncontrolling interests before income taxes | $ | 295,784 | 199,370 | |||||||||||||||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
Income tax expense | $ | 25,180 | (111,299 | ) | ||||||||||||||
European tax restructuring | - | 136,194 | ||||||||||||||||
Income taxes - reversal of uncertain tax position | (13 | ) | 603 | |||||||||||||||
Income tax effect of adjusting items | 18,609 | 12,183 | ||||||||||||||||
Adjusted income tax expense | $ | 43,776 | 37,681 | |||||||||||||||
Adjusted income tax rate | 14.8 | % | 18.9 | % | ||||||||||||||
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 |
||||||||||||||||||
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. |
Source: Mohawk Industries, Inc.