Mohawk Industries Reports Q1 Results
Commenting on Mohawk Industries’ first quarter performance,
“Market demand strengthened as the period progressed, and our order backlog remains robust going into the second quarter. Most of our businesses are running at high production rates, though our inventories remain lower than we would like. Our production and operating costs were impacted in the period by supply limitations in most of our markets, as well as absenteeism, new employee training and severe weather in the
“We continue to implement our restructuring plans and have achieved approximately
“For the quarter, our Flooring Rest of the World Segment’s sales increased 30.7% as reported and 14.6% on a constant currency and days basis. The segment’s operating margins increased 780 basis points to 20.7% as reported. The increase was due to higher volume, favorable price and product mix, increased productivity and favorable exchange rates, partially offset by inflation. Q1 benefited from lower marketing expenses, product mix and increased days which resulted in a greater margin in the period. During the period, most of our facilities ran at high levels, though some supply constraints limited our utilization. We anticipate some material shortages continuing at least in the second quarter. Our laminate business, the segment’s largest product category, continues to record significant growth as consumers embrace our more realistic visuals and superior performance. In the second quarter, we are installing additional laminate manufacturing assets to support further growth. Our LVT sales rose substantially, and our margins expanded due to enhanced formulations and increased production speeds. Our sheet vinyl sales were limited by Covid lockdowns of our retailers in
“During the quarter, our Flooring North America Segment’s sales increased 14.3% as reported and approximately 9% on a constant basis and operating margin was 8.4% as reported, increasing 410 basis points. Operating income for the segment increased primarily due to higher volume and productivity, partially offset by inflation. Our order rates remain strong and our backlog is higher than normal. All of our operations are maximizing their output as we managed interference from labor shortages and supply constraints. Our residential carpet sales improved with retail remodeling improving sales of our premium products. Our commercial business continued to improve sequentially from its trough with growing investments in new projects. Our laminate sales are setting records as the appeal of our realistic visuals and water-proof performance expands across all channels. We have significantly increased our domestic laminate production and are supplementing with imports from our global operations. We are installing additional laminate production to further expand our sales by the end of this year. Our LVT sales continue to increase as we expand our offering and our local manufacturing has continued its improvement as we implemented processes similar to our European operations. We are ramping up production of our premium Ultrawood, the first water-proof natural wood flooring that also features industry-leading scratch, dent and fade resistance.
“For the quarter, our Global Ceramic Segment’s sales increased 9.6% as reported and 5.4% on a constant currency and days basis. The segment’s operating margin increased 370 basis points to 9.4% as reported, primarily due to favorable price and mix, higher volumes and increased productivity, partially offset by inflation. Our
“As we progress through the year, we anticipate that historically low interest rates, government actions and fewer pandemic restrictions should improve our markets around the world. Vaccination programs should keep people safer and reduce the risk of further Covid-related disruption. We foresee the present robust residential trends continuing with commercial sales slowly improving in the second period. Across the enterprise, we will increase product introductions that provide additional features and benefits to strengthen our offering and margins. We are enhancing our manufacturing operations to increase our volume and efficiencies, while executing our ongoing cost savings programs. Our suppliers indicate that material availability should improve from the first quarter, though some operations could still face future supply constraints. We are managing challenging labor markets in some of our
“Currently, our strong order backlog reflects the escalated levels of residential demand across the globe. We are introducing new product innovations to enhance our offering and customers sales and optimizing our production to improve our service. We are preparing for an improvement in commercial projects, anticipating an economic expansion and a return to normal business investments. With strong liquidity and historically low leverage, we will increase our capital investments and take advantage of additional opportunities to expand.”
ABOUT
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/
Contact: James Brunk, Chief Financial Officer (706) 624-2239
(Unaudited) | ||||||
Condensed Consolidated Statement of Operations Data | Three Months Ended | |||||
(Amounts in thousands, except per share data) | ||||||
Net sales | $ | 2,669,026 | 2,285,763 | |||
Cost of sales | 1,877,257 | 1,669,323 | ||||
Gross profit | 791,769 | 616,440 | ||||
Selling, general and administrative expenses | 474,254 | 464,957 | ||||
Operating income | 317,515 | 151,483 | ||||
Interest expense | 15,241 | 8,671 | ||||
Other (income) expense, net | (2,227 | ) | 5,679 | |||
Earnings before income taxes | 304,501 | 137,133 | ||||
Income tax expense | 67,690 | 26,668 | ||||
Net earnings including noncontrolling interests | 236,811 | 110,465 | ||||
Net earnings (loss) attributable to noncontrolling interests | 4 | (49 | ) | |||
Net earnings attributable to |
$ | 236,807 | 110,514 | |||
Basic earnings per share attributable to |
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Basic earnings per share attributable to |
$ | 3.37 | 1.54 | |||
Weighted-average common shares outstanding - basic | 70,179 | 71,547 | ||||
Diluted earnings per share attributable to |
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Diluted earnings per share attributable to |
$ | 3.36 | 1.54 | |||
Weighted-average common shares outstanding - diluted | 70,474 | 71,777 | ||||
Other Financial Information | ||||||
(Amounts in thousands) | ||||||
Net cash provided by operating activities | $ | 259,605 | 194,974 | |||
Less: Capital expenditures | 114,735 | 115,632 | ||||
Free cash flow | $ | 144,870 | 79,342 | |||
Depreciation and amortization | $ | 151,216 | 145,516 | |||
Condensed Consolidated Balance Sheet Data | ||||||
(Amounts in thousands) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 557,262 | 263,086 | |||
Short-term investments | 782,267 | 60,300 | ||||
Receivables, net | 1,813,858 | 1,644,750 | ||||
Inventories | 1,996,628 | 2,195,434 | ||||
Prepaid expenses and other current assets | 415,997 | 449,461 | ||||
Total current assets | 5,566,012 | 4,613,031 | ||||
Property, plant and equipment, net | 4,432,110 | 4,472,913 | ||||
Right of use operating lease assets |
337,767 | 331,329 | ||||
2,594,727 | 2,519,979 | |||||
Intangible assets, net | 921,846 | 904,023 | ||||
Deferred income taxes and other non-current assets | 437,611 | 415,667 | ||||
Total assets | $ | 14,290,073 | 13,256,942 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Short-term debt and current portion of long-term debt | $ | 953,913 | 1,210,525 | |||
Accounts payable and accrued expenses | 1,954,396 | 1,554,085 | ||||
Current operating lease liabilities | 98,982 | 106,673 | ||||
Total current liabilities | 3,007,291 | 2,871,283 | ||||
Long-term debt, less current portion | 1,719,115 | 1,514,000 | ||||
Non-current operating lease liabilities | 248,022 | 238,830 | ||||
Deferred income taxes and other long-term liabilities | 816,613 | 785,186 | ||||
Total liabilities | 5,791,041 | 5,409,299 | ||||
Total stockholders' equity | 8,499,032 | 7,847,643 | ||||
Total liabilities and stockholders' equity | $ | 14,290,073 | 13,256,942 | |||
Segment Information | As of or for the Three Months Ended | |||||
(Amounts in thousands) | ||||||
Net sales: | ||||||
Global Ceramic | $ | 929,871 | 848,450 | |||
Flooring NA | 969,250 | 848,330 | ||||
Flooring ROW | 769,905 | 588,983 | ||||
Consolidated net sales | $ | 2,669,026 | 2,285,763 | |||
Operating income (loss): | ||||||
Global Ceramic | $ | 87,804 | 47,976 | |||
Flooring NA | 81,298 | 36,206 | ||||
Flooring ROW | 159,306 | 75,816 | ||||
Corporate and intersegment eliminations | (10,893 | ) | (8,515 | ) | ||
Consolidated operating income (a) | $ | 317,515 | 151,483 | |||
Assets: | ||||||
Global Ceramic | $ | 5,161,660 | 5,237,631 | |||
Flooring NA | 3,731,032 | 3,841,815 | ||||
Flooring ROW | 4,120,381 | 3,810,348 | ||||
Corporate and intersegment eliminations | 1,277,000 | 367,148 | ||||
Consolidated assets | $ | 14,290,073 | 13,256,942 | |||
(a)During the second quarter of 2020, the Company revised the methodology it uses to estimate and allocate corporate general and administrative expenses to its operating segments to better align usage of corporate resources allocated to the Company segments. The updated allocation methodology had no impact on the Company’s consolidated statements of operations. This change was applied retrospectively, and segment operating income for all comparative periods has been updated to reflect this change. | ||||||
Reconciliation of Net Earnings Attributable to |
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(Amounts in thousands, except per share data) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Net earnings attributable to |
$ | 236,807 | 110,514 | |||||||||||||
Adjusting items: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 11,877 | 11,930 | ||||||||||||||
Income taxes | (2,735 | ) | (3,080 | ) | ||||||||||||
Adjusted net earnings attributable to |
$ | 245,949 | 119,364 | |||||||||||||
Adjusted diluted earnings per share attributable to |
$ | 3.49 | 1.66 | |||||||||||||
Weighted-average common shares outstanding - diluted | 70,474 | 71,777 | ||||||||||||||
Reconciliation of Total Debt to Net Debt Less Short-Term Investments | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Short-term debt and current portion of long-term debt | $ | 953,913 | ||||||||||||||
Long-term debt, less current portion | 1,719,115 | |||||||||||||||
Total debt | 2,673,028 | |||||||||||||||
Less: Cash and cash equivalents | 557,262 | |||||||||||||||
Net Debt | 2,115,766 | |||||||||||||||
Less: Short-term investments | 782,267 | |||||||||||||||
Net debt less short-term investments | $ | 1,333,499 | ||||||||||||||
Reconciliation of Operating Income (Loss) to Adjusted EBITDA | ||||||||||||||||
(Amounts in thousands) | Trailing Twelve | |||||||||||||||
Three Months Ended | Months Ended | |||||||||||||||
Operating income (loss) | $ | (60,958 | ) | 262,744 | 282,733 | 317,515 | 802,034 | |||||||||
Other (expense) income | (1,037 | ) | 726 | 6,742 | 2,227 | 8,658 | ||||||||||
Net (income) loss attributable to noncontrolling interests | 331 | (336 | ) | (176 | ) | (4 | ) | (185 | ) | |||||||
Depreciation and amortization (1) | 154,094 | 151,342 | 156,555 | 151,216 | 613,207 | |||||||||||
EBITDA | 92,430 | 414,476 | 445,854 | 470,954 | 1,423,714 | |||||||||||
Restructuring, acquisition and integration-related and other costs | 91,940 | 26,925 | 15,947 | 6,059 | 140,871 | |||||||||||
Adjusted EBITDA | $ | 184,370 | 441,401 | 461,801 | 477,013 | 1,564,585 | ||||||||||
Net Debt less short-term investments to Adjusted EBITDA | 0.9 | |||||||||||||||
(1) Includes |
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Reconciliation of |
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(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Net sales | $ | 2,669,026 | 2,285,763 | |||||||||||||
Adjustment to net sales on constant shipping days | (110,948 | ) | - | |||||||||||||
Adjustment to net sales on a constant exchange rate | (63,899 | ) | - | |||||||||||||
Net sales on a constant exchange rate and constant shipping days | $ | 2,494,179 | 2,285,763 | |||||||||||||
Reconciliation of Segment |
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(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Global Ceramic | ||||||||||||||||
Net sales | $ | 929,871 | 848,450 | |||||||||||||
Adjustment to segment net sales on constant shipping days | (33,930 | ) | - | |||||||||||||
Adjustment to segment net sales on a constant exchange rate | (1,421 | ) | - | |||||||||||||
Segment net sales on a constant exchange rate and constant shipping days | $ | 894,520 | 848,450 | |||||||||||||
Reconciliation of Segment |
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(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Flooring NA | ||||||||||||||||
Net sales | $ | 969,250 | 848,330 | |||||||||||||
Adjustment to segment net sales on constant shipping days | (44,735 | ) | - | |||||||||||||
Segment net sales on constant shipping days | $ | 924,515 | 848,330 | |||||||||||||
Reconciliation of Segment |
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(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Flooring ROW | ||||||||||||||||
Net sales | $ | 769,905 | 588,983 | |||||||||||||
Adjustment to segment net sales on constant shipping days | (32,283 | ) | - | |||||||||||||
Adjustment to segment net sales on a constant exchange rate | (62,479 | ) | - | |||||||||||||
Segment net sales on a constant exchange rate and constant shipping days | $ | 675,143 | 588,983 | |||||||||||||
Reconciliation of Gross Profit to Adjusted Gross Profit | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Gross Profit | $ | 791,769 | 616,440 | |||||||||||||
Adjustments to gross profit: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 10,485 | 11,080 | ||||||||||||||
Adjusted gross profit | $ | 802,254 | 627,520 | |||||||||||||
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Selling, general and administrative expenses | $ | 474,254 | 464,957 | |||||||||||||
Adjustments to selling, general and administrative expenses: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | (1,002 | ) | (895 | ) | ||||||||||||
Adjusted selling, general and administrative expenses | $ | 473,252 | 464,062 | |||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Operating income | $ | 317,515 | 151,483 | |||||||||||||
Adjustments to operating income: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 11,487 | 11,975 | ||||||||||||||
Adjusted operating income | $ | 329,002 | 163,458 | |||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Global Ceramic | ||||||||||||||||
Operating income | $ | 87,804 | 47,976 | |||||||||||||
Adjustments to segment operating income: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 1,273 | (122 | ) | |||||||||||||
Adjusted segment operating income | $ | 89,077 | 47,854 | |||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Flooring NA | ||||||||||||||||
Operating income | $ | 81,298 | 36,206 | |||||||||||||
Adjustments to segment operating income: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 8,859 | 8,067 | ||||||||||||||
Adjusted segment operating income | $ | 90,157 | 44,273 | |||||||||||||
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Flooring ROW | ||||||||||||||||
Operating income | $ | 159,306 | 75,816 | |||||||||||||
Adjustments to segment operating income: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 1,357 | 3,969 | ||||||||||||||
Adjusted segment operating income | $ | 160,663 | 79,785 | |||||||||||||
Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Earnings before income taxes | $ | 304,501 | 137,133 | |||||||||||||
Net (earnings) loss attributable to noncontrolling interests | (4 | ) | 49 | |||||||||||||
Adjustments to earnings including noncontrolling interests before income taxes: | ||||||||||||||||
Restructuring, acquisition and integration-related and other costs | 11,877 | 11,930 | ||||||||||||||
Adjusted earnings including noncontrolling interests before income taxes | $ | 316,374 | 149,112 | |||||||||||||
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Income tax expense | $ | 67,690 | 26,668 | |||||||||||||
Income tax effect of adjusting items | 2,735 | 3,080 | ||||||||||||||
Adjusted income tax expense | $ | 70,425 | 29,748 | |||||||||||||
Adjusted income tax rate | 22.3 | % | 20.0 | % | ||||||||||||
The Company supplements its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, with certain non-GAAP financial measures. As required by the |
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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.