Mohawk Industries Reports Q2 Results
Mohawk Industries, Inc. (NYSE: MHK) today announced second quarter
2023 net earnings of $101 million and diluted earnings per share
(“EPS”) of $1.58. Adjusted net earnings were $176 million, and
adjusted EPS was $2.76, excluding restructuring, acquisition and
other charges. Net sales for the second quarter of 2023 were $3.0
billion, a decrease of 6.4% as reported and 9.6% on a legacy and
constant currency and days basis versus the prior year. For the
second quarter of 2022, net sales were $3.2 billion, net earnings
were $280 million and EPS was $4.40. Adjusted net earnings were
$281 million, and adjusted EPS was $4.41, excluding restructuring,
acquisition and other charges.
For the six-month period ending July 1, 2023, net earnings
and EPS were $181 million and $2.84, respectively. Adjusted net
earnings were $288 million, and adjusted EPS was $4.51, excluding
restructuring, acquisition and other charges. For the first six
months of 2023, net sales were $5.8 billion, a decrease of 6.7% as
reported and 9.0% on a legacy and constant currency and days basis
versus the prior year. For the six-month period ending July 2,
2022, net sales were $6.2 billion, net earnings were $526 million
and EPS was $8.17; adjusted net earnings were $527 million, and
adjusted EPS was $8.18, excluding restructuring, acquisition and
other charges.
Commenting on Mohawk Industries’ second quarter performance,
Jeffrey S. Lorberbaum, Chairman and CEO, stated, “Our margins
across the enterprise expanded sequentially due to seasonal
improvements, increased production, productivity initiatives and
lower input costs. We generated $147 million of free cash flow
during the quarter, further strengthening our financial
position.
Typical of housing recessions, higher interest rates and
inflation are significantly impacting flooring sales around the
world. To manage, we are selectively investing to increase sales
and reducing expenses by enhancing productivity, consolidating
distribution points and improving administrative efficiencies. In
the quarter, we initiated restructuring and integration actions
that should save $35 million annually at a total cost of
approximately $17 million. We anticipate half of the estimated
savings should be realized in the current year, partially
offsetting weak residential remodeling activity. In addition, we
are limiting future capital investments to those delivering
significant sales, margin and operational improvements. In all our
regions, we are taking actions to increase sales, including
promotions, retailer incentives and selective product launches. The
integration of our recent acquisitions is progressing as we combine
strategies and enhance their manufacturing and product
offering.
Across our regions, we continue to see stronger results in the
commercial sector than in residential. Residential remodeling
remains the industry's greatest headwind due to lower home sales
and deferred home improvement projects. We believe channel
inventories have declined and could be at a bottom. Price
competition is increasing with declining industry volume, mix and
input costs. In the U.S., the housing market remains under pressure
due to limited supply, high interest rates and continued inflation.
Existing homeowners are not moving at historical levels to maintain
their low mortgage rates. In the second quarter, new U.S. home
starts increased to an annual rate of 1.45 million, the first
quarterly increase since the beginning of last year. We believe the
trend in housing starts will continue and will positively impact
flooring shipments in the future. In our other regions, home sales
and remodeling are also declining due to inflation and interest
rates. In Europe, energy prices have continued to decline, though
persistent inflation in other categories is limiting consumer
remodeling investments. In the quarter, we benefited from the lower
energy prices that flowed through our P&L. Our investments in
biomass, solar and wind energy production reduce our operational
expenses and carbon footprint, positively impacting our
performance. The Italian government provided energy subsidies at a
reduced level, and the program will not be continued. While
managing lower market demand, we are preparing for the rebound that
historically follows cyclical declines in our industry. Our
porcelain slab, insulation, premium laminate, LVT and quartz
countertop manufacturing expansions should deliver the greatest
growth as the markets recover.
For the second quarter, the Global Ceramic Segment reported a
0.3% decline in net sales as reported, or a 6.7% decline on a
legacy and constant currency and days basis. The Segment’s
operating margin was 7.3% as reported, or 8.6% on an adjusted
basis, as a result of higher inflation, lower volumes and temporary
shutdowns, partially offset by productivity gains and favorable
pricing and product mix. Our U.S. ceramic business benefited from a
greater participation in the commercial and new construction
channels, enhanced designs and more consistent service. We are
introducing higher styled products to improve our mix and are
focusing on stronger sales channels. We have expanded our customer
base, which is helping to offset the weakness in residential
remodeling. In our European ceramic business, volumes in the
quarter improved sequentially, and our results benefited from sales
of premium residential collections, commercial products and
exports. We are adjusting to the changing environment and using
promotional activities to deliver additional sales volume. As the
integration of our acquisitions in Brazil and Mexico proceed, we
are realigning the organizations, defining new sales and product
strategies and executing cost reductions. The synergies we are
realizing are partially offsetting the weakening market conditions,
and we have begun to leverage sales of our total product portfolio
to expand our distribution.
During the second quarter, our Flooring Rest of the World
Segment’s net sales decreased by 11.4% as reported or 10.2% on a
legacy and constant currency and days basis. The Segment’s
operating margin was 11.0% as reported, or 12.1% on an adjusted
basis, as a result of lower volumes, transactional foreign exchange
headwinds and temporary shutdowns, partially offset by productivity
gains. The Segment continues to successfully manage a difficult
environment. Consumer spending has not improved as we expected,
with confidence remaining low given inflation, higher interest
rates and the war in Ukraine. Though our flooring sales are under
pressure, our sheet vinyl collections are outperforming as
consumers trade down to lower-priced alternatives. We are aligning
laminate and LVT production with present demand and introducing new
products, merchandising and specific promotions to expand sales
volumes. We have begun to transition our residential LVT offering
from flexible to rigid cores and are executing the previously
announced restructuring to support this conversion. In panels,
fewer projects are being initiated and industrial use has decreased
due to slower market conditions. While long-term prospects for our
insulation business remain strong, demand is presently declining as
residential and commercial investments are being deferred. The
Australia and New Zealand housing markets have softened, and we are
introducing new products and selective promotions to increase sales
volume.
In the second quarter, our Flooring North America Segment sales
declined 8.9% as reported or 12.1% on a legacy basis. The Segment's
operating margin was 3.7% as reported, or 6.0% on an adjusted
basis, as a result of unfavorable pricing and product mix along
with reduced volumes and temporary shutdowns, partially offset by
lower inflation. The Segment’s second quarter margins sequentially
expanded due to seasonality and lower costs flowing through
inventory. To control costs, we have enhanced productivity,
streamlined administrative functions and initiated restructuring
actions. To increase sales, we are initiating selective promotional
activity, enhancing our product offering and introducing more
consumer-friendly displays. The U.S. commercial sector has proven
more resilient as businesses continue to invest in new construction
and remodeling projects, though we are experiencing some mix
pressure as customers seek to maintain budgets. The July
Architectural Billing Index reflected a stable environment for new
projects. We continue to see a broader adoption of our waterproof
RevWood products in both the retail and builder channels. We have
increased the offering of our revolutionary Signature Technology,
which accentuates the richness of our Pergo and Karastan laminate
collections. We have enhanced our luxury Karastan and Godfrey Hirst
residential carpet collections and are providing retailer
incentives to grow volumes. Our expanded solution-dyed polyester
carpet portfolio is increasing our position with multifamily
developers and single home builders, negatively impacting our
product mix. We have integrated our recent non-woven acquisition
and are improving its sales and operations. Our new rigid LVT
introductions with updated visuals, WetProtect and antimicrobial
technologies differentiated us in the market, and our sheet vinyl
sales rose as consumers selected more affordable options.
Mohawk’s second quarter performance reflected the positive
impact of many initiatives we are executing across our business. We
are managing the current market conditions while preparing for the
rebound in demand that follows cyclical downturns. Central banks
have raised interest rates to reduce inflation and are signaling
that additional rate hikes are possible. In the U.S., we have seen
a rise in builder confidence and housing starts that will increase
our residential new construction business. We expect the commercial
sector to outperform the residential channel through this year,
even with continued weakness in the office category. Though
employment remains strong, remodeling and existing home sales are
being delayed due to limited housing availability, higher interest
rates and inflation. Historically, when the economy recovers, these
postponed remodeling projects fuel greater industry growth. Our new
restructuring initiatives should save $35 million per year, and our
recent acquisitions will add greater benefit to our results as we
optimize their performance. In this competitive market, we expect
continued pressure on pricing and mix, partially offset by the flow
through of lower material and energy costs. Our third quarter
seasonally weakens due to summer holidays, lower consumer spending
and lower production in Europe. Given these factors, we anticipate
our third quarter adjusted EPS to be between $2.62 to $2.72,
excluding any restructuring, acquisition and other charges.
At Mohawk, we are taking the necessary steps to manage today's
challenges while preparing for tomorrow's opportunities. When
central banks shift their focus to a more balanced approach, our
business will accelerate as the industry recovers. In all our
regions, housing is in short supply, aging homes are in need of
remodeling and businesses will invest to grow in more favorable
conditions. These factors will create higher growth for flooring,
and our investments in capacity expansions and our recent
acquisitions will further enhance our results.”
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,
Elizabeth, Feltex, GH Commercial, Godfrey Hirst, Grupo Daltile, IVC
Commercial, IVC Home, Karastan, Marazzi, Mohawk, Mohawk Group,
Mohawk Home, Pergo, Quick-Step, Unilin and Vitromex. 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, 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 freight, raw material prices and other input
costs; inflation and deflation in consumer markets; currency
fluctuations; energy costs and supply; timing and level of capital
expenditures; timing and implementation of price increases for the
Company’s products; impairment charges; integration of
acquisitions; international operations; introduction of new
products; rationalization of operations; taxes and tax reform;
product and other claims; litigation; the risks and uncertainty
related to the COVID-19 pandemic; regulatory and political changes
in the jurisdictions in which the Company does business; and other
risks identified in Mohawk’s SEC reports and public
announcements.
Conference call Friday, July 28, 2023, at
11:00 AM Eastern Time
To participate in the conference call via the Internet, please
visit
http://ir.mohawkind.com/events/event-details/mohawk-industries-inc-2nd-quarter-2023-earnings-call.
To participate in the conference call via telephone, register in
advance at
https://dpregister.com/sreg/10180717/f9e2c175dc to
receive a unique personal identification number or dial
1-833-630-1962 for U.S./Canada and 1-412-317-1843 for
international/local on the day of the call for operator assistance.
A replay will be available until August 25, 2023, by dialing
1-877-344-7529 for U.S./Canada calls and 1-412-317-0088 for
international/local calls and entering access code #5381723.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
(Amounts in thousands, except per share data) |
July 1, 2023 |
|
|
July 2, 2022 |
|
|
July 1, 2023 |
|
July 2, 2022 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
2,950,428 |
|
|
3,153,188 |
|
|
5,756,651 |
|
6,168,851 |
|
Cost of
sales |
|
2,218,519 |
|
|
2,279,991 |
|
|
4,381,300 |
|
4,493,526 |
|
Gross profit |
|
731,909 |
|
|
873,197 |
|
|
1,375,351 |
|
1,675,325 |
|
Selling, general and
administrative expenses |
|
578,863 |
|
|
505,270 |
|
|
1,096,515 |
|
986,597 |
|
Operating income |
|
153,046 |
|
|
367,927 |
|
|
278,836 |
|
688,728 |
|
Interest expense |
|
22,857 |
|
|
12,059 |
|
|
39,994 |
|
23,540 |
|
Other
expense (income), net |
|
2,215 |
|
|
(2,818 |
) |
|
1,649 |
|
(380 |
) |
Earnings before income taxes |
|
127,974 |
|
|
358,686 |
|
|
237,193 |
|
665,568 |
|
Income tax expense |
|
26,760 |
|
|
78,176 |
|
|
55,703 |
|
139,624 |
|
Net earnings including noncontrolling
interests |
|
101,214 |
|
|
280,510 |
|
|
181,490 |
|
525,944 |
|
Net
earnings (loss) attributable to noncontrolling interests |
|
(3 |
) |
|
79 |
|
|
35 |
|
184 |
|
Net earnings attributable to Mohawk Industries,
Inc. |
$ |
101,217 |
|
|
280,431 |
|
|
181,455 |
|
525,760 |
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Mohawk Industries,
Inc. |
$ |
1.59 |
|
|
4.41 |
|
|
2.85 |
|
8.20 |
|
Weighted-average common shares outstanding -
basic |
|
63,680 |
|
|
63,540 |
|
|
63,630 |
|
64,116 |
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Mohawk
Industries, Inc. |
$ |
1.58 |
|
|
4.40 |
|
|
2.84 |
|
8.17 |
|
Weighted-average common shares outstanding -
diluted |
|
63,900 |
|
|
63,798 |
|
|
63,864 |
|
64,374 |
|
Other Financial
Information |
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
July 2, 2022 |
|
|
July 1, 2023 |
|
July 2, 2022 |
|
Net cash provided by operating activities |
$ |
263,597 |
|
147,706 |
|
|
520,873 |
|
202,661 |
|
Less:
Capital expenditures |
|
116,653 |
|
150,571 |
|
|
245,146 |
|
280,041 |
|
Free cash flow |
$ |
146,944 |
|
(2,865 |
) |
|
275,727 |
|
(77,380 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
$ |
156,633 |
|
141,569 |
|
|
326,542 |
|
282,984 |
|
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
(Amounts in thousands) |
July 1, 2023 |
|
July 2, 2022 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
570,933 |
|
223,986 |
Short-term investments |
|
— |
|
265,000 |
Receivables, net |
|
2,087,071 |
|
2,105,809 |
Inventories |
|
2,618,711 |
|
2,826,044 |
Prepaid expenses and other current assets |
|
574,613 |
|
519,895 |
Total current assets |
|
5,851,328 |
|
5,940,734 |
Property, plant and equipment,
net |
|
4,957,225 |
|
4,582,075 |
Right of use operating lease
assets |
|
400,419 |
|
404,726 |
Goodwill |
|
2,031,034 |
|
2,536,314 |
Intangible assets, net |
|
887,929 |
|
856,401 |
Deferred income taxes and other non-current assets |
|
457,228 |
|
369,237 |
Total assets |
$ |
14,585,163 |
|
14,689,487 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Short-term debt and current portion of long-term debt |
$ |
1,038,032 |
|
1,498,900 |
Accounts payable and accrued expenses |
|
2,143,807 |
|
2,316,980 |
Current operating lease liabilities |
|
106,102 |
|
108,497 |
Total current liabilities |
|
3,287,941 |
|
3,924,377 |
Long-term debt, less current
portion |
|
2,013,327 |
|
1,052,064 |
Non-current operating lease
liabilities |
|
310,612 |
|
309,261 |
Deferred income taxes and other long-term liabilities |
|
761,263 |
|
796,847 |
Total liabilities |
|
6,373,143 |
|
6,082,549 |
Total stockholders' equity |
|
8,212,020 |
|
8,606,938 |
Total liabilities and stockholders' equity |
$ |
14,585,163 |
|
14,689,487 |
Segment
Information |
|
|
|
|
|
|
|
|
Three Months Ended |
|
As of or for the Six Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
|
July 2, 2022 |
|
|
July 1, 2023 |
|
|
July 2, 2022 |
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
Global Ceramic |
$ |
1,155,362 |
|
|
1,158,569 |
|
|
|
2,214,696 |
|
|
2,223,326 |
|
Flooring NA |
|
1,001,698 |
|
|
1,099,538 |
|
|
|
1,955,115 |
|
|
2,171,448 |
|
Flooring ROW |
|
793,368 |
|
|
895,081 |
|
|
|
1,586,840 |
|
|
1,774,077 |
|
Consolidated net sales |
$ |
2,950,428 |
|
|
3,153,188 |
|
|
$ |
5,756,651 |
|
|
6,168,851 |
|
|
|
|
|
|
|
|
|
Operating income (loss): |
|
|
|
|
|
|
|
Global Ceramic |
$ |
84,034 |
|
|
154,269 |
|
|
|
147,351 |
|
|
254,607 |
|
Flooring NA |
|
37,199 |
|
|
100,030 |
|
|
|
35,186 |
|
|
195,354 |
|
Flooring ROW |
|
86,914 |
|
|
124,107 |
|
|
|
162,159 |
|
|
258,757 |
|
Corporate and intersegment eliminations |
|
(55,101 |
) |
|
(10,479 |
) |
|
|
(65,860 |
) |
|
(19,990 |
) |
Consolidated operating income |
$ |
153,046 |
|
|
367,927 |
|
|
|
278,836 |
|
|
688,728 |
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Global Ceramic |
|
|
|
|
$ |
5,546,167 |
|
|
5,537,075 |
|
Flooring NA |
|
|
|
|
|
4,210,170 |
|
|
4,345,912 |
|
Flooring ROW |
|
|
|
|
|
4,295,257 |
|
|
4,334,649 |
|
Corporate and intersegment eliminations |
|
|
|
|
|
533,569 |
|
|
471,851 |
|
Consolidated assets |
|
|
|
|
$ |
14,585,163 |
|
|
14,689,487 |
|
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. |
|
Three Months Ended |
|
Six Months Ended |
(Amounts in thousands, except per share data) |
July 1, 2023 |
|
|
July 2, 2022 |
|
|
July 1, 2023 |
|
|
July 2, 2022 |
|
Net earnings attributable to Mohawk Industries, Inc. |
$ |
101,217 |
|
|
280,431 |
|
|
181,455 |
|
|
525,760 |
|
Adjusting items: |
|
|
|
|
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
41,557 |
|
|
1,801 |
|
|
72,690 |
|
|
3,658 |
|
Inventory step-up from purchase accounting |
|
1,276 |
|
|
143 |
|
|
4,581 |
|
|
143 |
|
Legal settlements, reserves and fees |
|
48,022 |
|
|
— |
|
|
49,012 |
|
|
— |
|
Release of indemnification asset |
|
— |
|
|
— |
|
|
— |
|
|
7,324 |
|
Income taxes - reversal of uncertain tax position |
|
— |
|
|
— |
|
|
— |
|
|
(7,324 |
) |
Income tax effect of adjusting items |
|
(15,956 |
) |
|
(1,181 |
) |
|
(19,679 |
) |
|
(2,805 |
) |
Adjusted net earnings attributable to Mohawk Industries, Inc. |
$ |
176,116 |
|
|
281,194 |
|
|
288,059 |
|
|
526,756 |
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share attributable to Mohawk
Industries, Inc. |
$ |
2.76 |
|
|
4.41 |
|
|
4.51 |
|
|
8.18 |
|
Weighted-average common shares outstanding - diluted |
|
63,900 |
|
|
63,798 |
|
|
63,864 |
|
|
64,374 |
|
Reconciliation of
Total Debt to Net Debt |
|
(Amounts in thousands) |
July 1, 2023 |
Short-term debt and current portion of long-term debt |
$ |
1,038,032 |
Long-term debt, less current portion |
|
2,013,327 |
Total debt |
|
3,051,359 |
Less:
Cash and cash equivalents |
|
570,933 |
Net debt |
$ |
2,480,426 |
Reconciliation of Net Earnings (Loss) to Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve |
|
Three Months Ended |
|
Months Ended |
(Amounts in thousands) |
October 1, 2022 |
|
|
December 31, 2022 |
|
|
April 1, 2023 |
|
|
July 1, 2023 |
|
July 1, 2023 |
|
Net earnings (loss) including noncontrolling interests |
$ |
(533,713 |
) |
|
33,552 |
|
|
80,276 |
|
|
101,214 |
|
(318,671 |
) |
Interest expense |
|
13,797 |
|
|
14,601 |
|
|
17,137 |
|
|
22,857 |
|
68,392 |
|
Income tax expense |
|
15,569 |
|
|
2,917 |
|
|
28,943 |
|
|
26,760 |
|
74,189 |
|
Net (earnings) loss attributable to noncontrolling interests |
|
(256 |
) |
|
(96 |
) |
|
(38 |
) |
|
3 |
|
(387 |
) |
Depreciation and amortization(1) |
|
153,466 |
|
|
159,014 |
|
|
169,909 |
|
|
156,633 |
|
639,022 |
|
EBITDA |
|
(351,137 |
) |
|
209,988 |
|
|
296,227 |
|
|
307,467 |
|
462,545 |
|
Restructuring, acquisition and integration-related and other
costs |
|
21,375 |
|
|
33,786 |
|
|
8,114 |
|
|
33,579 |
|
96,854 |
|
Inventory step-up from purchase accounting |
|
1,401 |
|
|
1,218 |
|
|
3,305 |
|
|
1,276 |
|
7,200 |
|
Impairment of goodwill and indefinite-lived intangibles |
|
695,771 |
|
|
— |
|
|
— |
|
|
— |
|
695,771 |
|
Legal settlements, reserves and fees, net of insurance
proceeds |
|
45,000 |
|
|
9,231 |
|
|
990 |
|
|
48,022 |
|
103,243 |
|
Adjusted EBITDA |
$ |
412,410 |
|
|
254,223 |
|
|
308,636 |
|
|
390,344 |
|
1,365,613 |
|
|
|
|
|
|
|
|
|
|
|
Net debt to adjusted EBITDA |
|
|
|
|
|
|
|
|
1.8 |
|
(1)Includes accelerated depreciation of $13,085 for Q3 2022,
$15,915 for Q4 2022 and $23,019 for Q1 2023 in addition to $7,978
for Q2 2023.
Reconciliation of Net Sales to Adjusted Net
Sales |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
|
July 2, 2022 |
|
July 1, 2023 |
|
|
July 2, 2022 |
Mohawk
Consolidated |
|
|
|
|
Net sales |
$ |
2,950,428 |
|
|
3,153,188 |
|
5,756,651 |
|
|
6,168,851 |
Adjustment for constant
shipping days |
|
17,305 |
|
|
— |
|
16,356 |
|
|
— |
Adjustment for constant
exchange rates |
|
19,376 |
|
|
— |
|
50,336 |
|
|
— |
Adjustment for acquisition volume |
|
(135,483 |
) |
|
— |
|
(209,037 |
) |
|
— |
Adjusted net sales |
$ |
2,851,626 |
|
|
3,153,188 |
|
5,614,306 |
|
|
6,168,851 |
|
Three Months Ended |
|
July 1, 2023 |
|
|
July 2, 2022 |
Global
Ceramic |
Net sales |
$ |
1,155,362 |
|
|
1,158,569 |
Adjustment for constant
shipping days |
|
4,642 |
|
|
— |
Adjustment for constant
exchange rates |
|
11,884 |
|
|
— |
Adjustment for acquisition volume |
|
(90,604 |
) |
|
— |
Adjusted net sales |
$ |
1,081,284 |
|
|
1,158,569 |
|
|
|
|
|
|
|
|
Flooring
NA |
|
|
|
Net sales |
$ |
1,001,698 |
|
|
1,099,538 |
Adjustment for acquisition volume |
|
(34,890 |
) |
|
— |
Adjusted net sales |
$ |
966,808 |
|
|
1,099,538 |
Flooring
ROW |
|
|
|
Net sales |
$ |
793,368 |
|
|
895,081 |
Adjustment to segment net
sales on constant shipping days |
|
12,663 |
|
|
— |
Adjustment for constant
exchange rates |
|
7,492 |
|
|
— |
Adjustment for acquisition volume |
|
(9,989 |
) |
|
— |
Adjusted net sales |
$ |
803,534 |
|
|
895,081 |
Reconciliation of Gross Profit to Adjusted Gross
Profit |
|
Three Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
July 2, 2022 |
Gross Profit |
$ |
731,909 |
|
873,197 |
Adjustments to gross
profit: |
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
30,441 |
|
713 |
Inventory step-up from purchase accounting |
|
1,276 |
|
143 |
Adjusted gross profit |
$ |
763,626 |
|
874,053 |
|
|
|
|
|
Adjusted gross profit as a percent of net sales |
|
25.9% |
|
27.7% |
Reconciliation of Selling, General and Administrative
Expenses to Adjusted Selling, General and Administrative
Expenses |
|
Three Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
|
July 2, 2022 |
|
Selling, general and administrative expenses |
$ |
578,863 |
|
|
505,270 |
|
Adjustments to selling,
general and administrative expenses: |
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
(11,219 |
) |
|
(1,186 |
) |
Legal settlements, reserves and fees |
|
(48,022 |
) |
|
— |
|
Adjusted selling, general and administrative expenses |
$ |
519,622 |
|
|
504,084 |
|
|
|
|
|
Adjusted selling, general and administrative expenses as a percent
of net sales |
17.6% |
|
|
16.0% |
|
Reconciliation of Operating Income to Adjusted Operating
Income |
|
Three Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
July 2, 2022 |
Mohawk Consolidated |
|
|
|
Operating income |
$ |
153,046 |
|
367,927 |
Adjustments to operating income: |
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
41,660 |
|
1,899 |
Inventory step-up from purchase accounting |
|
1,276 |
|
143 |
Legal settlements, reserves and fees |
|
48,022 |
|
— |
Adjusted operating income |
$ |
244,004 |
|
369,969 |
|
|
|
|
|
Adjusted operating income as a percent of net sales |
|
8.3% |
|
11.7% |
|
|
|
|
|
Global
Ceramic |
|
|
|
|
Operating income |
$ |
84,034 |
|
154,269 |
Adjustments to segment
operating income: |
|
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
13,810 |
|
— |
Inventory step-up from purchase accounting |
|
1,276 |
|
— |
Adjusted segment operating income |
$ |
99,120 |
|
154,269 |
|
|
|
|
|
Adjusted segment operating income as a percent of net sales |
|
8.6% |
|
13.3% |
|
|
|
|
|
Flooring NA |
|
|
|
|
Operating income |
$ |
37,199 |
|
100,030 |
Adjustments to segment operating (loss) income: |
|
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
18,488 |
|
(239) |
Legal settlement and reserves |
|
4,875 |
|
— |
Adjusted segment operating income |
$ |
60,562 |
|
99,791 |
|
|
|
|
|
Adjusted segment operating income as a percent of net sales |
|
6.0% |
|
9.1% |
|
|
|
|
|
Flooring ROW |
|
|
|
|
Operating income |
$ |
86,914 |
|
124,107 |
Adjustments to segment operating income: |
|
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
9,362 |
|
2,139 |
Inventory step-up from purchase accounting |
|
— |
|
143 |
Adjusted segment operating income |
$ |
96,276 |
|
126,389 |
|
|
|
|
|
Adjusted segment operating income as a percent of net sales |
|
12.1% |
|
14.1% |
Corporate and
intersegment eliminations |
|
|
|
Operating (loss) |
$ |
(55,101 |
) |
|
(10,479 |
) |
Adjustments to segment
operating (loss): |
|
|
|
Legal settlement, reserves and fees |
|
43,147 |
|
|
— |
|
Adjusted segment operating (loss) |
$ |
(11,954 |
) |
|
(10,479 |
) |
Reconciliation of Earnings Including Noncontrolling
Interests Before Income Taxes to Adjusted Earnings Including
Noncontrolling Interests Before Income Taxes |
|
Three Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
July 2, 2022 |
|
Earnings before income taxes |
$ |
127,974 |
|
358,686 |
|
Net earnings attributable to
noncontrolling interests |
|
3 |
|
(79 |
) |
Adjustments to earnings
including noncontrolling interests before income taxes: |
|
|
|
Restructuring, acquisition and integration-related and other
costs |
|
41,557 |
|
1,801 |
|
Inventory step-up from purchase accounting |
|
1,276 |
|
143 |
|
Legal settlements, reserves and fees |
|
48,022 |
|
— |
|
Adjusted earnings including noncontrolling interests before income
taxes |
$ |
218,832 |
|
360,551 |
|
Reconciliation of Income Tax Expense to Adjusted Income Tax
Expense |
|
Three Months Ended |
(Amounts in thousands) |
July 1, 2023 |
|
July 2, 2022 |
Income tax expense |
$ |
26,760 |
|
78,176 |
Income
tax effect of adjusting items |
|
15,956 |
|
1,181 |
Adjusted income tax expense |
$ |
42,716 |
|
79,357 |
|
|
|
|
Adjusted income tax rate |
|
19.5% |
|
22.0% |
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; more or fewer
shipping days in a period 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, legal settlements, reserves
and fees, net of insurance proceeds, impairment of goodwill and
indefinite-lived intangibles, acquisition purchase accounting,
including inventory step-up from purchase accounting, release of
indemnification assets and the reversal of uncertain tax
positions.
Contact: |
James
Brunk, Chief Financial Officer |
|
(706) 624-2239 |
Mohawk Industries (LSE:0K2F)
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