Mohawk Industries Reports Q3 Results

CALHOUN, Ga., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) announced 2021 third quarter net earnings of $271 million and diluted earnings per share (EPS) of $3.93. Adjusted net earnings were $272 million, and EPS was $3.95, excluding restructuring, acquisition and other charges. Net sales for the third quarter of 2021 were $2.8 billion, up 9.4% as reported and 8.7% on a constant currency basis. For the third quarter of 2020, net sales were $2.6 billion, net profit was $205 million and diluted earnings per share was $2.87, adjusted net earnings were $233 million, and EPS was $3.26, excluding restructuring, acquisition and other charges.

For the nine months ending October 2, 2021, net earnings and EPS were $844 million and $12.11, respectively. Net earnings excluding restructuring, acquisition and other charges were $828 million and EPS was $11.89. For the 2021 nine-month period, net sales were $8.4 billion, an increase of 22.1% versus prior year as reported or approximately 18% on a constant currency and days basis. For the nine-month period ending September 26, 2020, net sales were $6.9 billion, net earnings were $267 million and EPS was $3.75; excluding restructuring, acquisition and other charges, net earnings and EPS were $379 million and $5.31, respectively.

Commenting on Mohawk Industries’ third quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated,

“All of our businesses performed well, managing through a changing environment. In the period, Covid directly and indirectly impacted many economies, creating supply chain difficulties that disrupted production as well as leading to government lockdowns in Australia, New Zealand, and Malaysia that halted manufacturing and retail. Despite these and other headwinds, our third quarter sales trends continued in most regions, with Europe’s results reflecting normal summer seasonality. Home sales were robust across most geographies, and consumers continued remodeling investments at a strong pace. Year over year, the commercial sector showed improvement, though at a slower rate as Covid concerns delayed the timing of some projects. Our strategies to enhance organizational flexibility, reduce product and operational complexity, and align pricing with costs improved our results.

“Even with greater external constraints, we ran most of our operations at high levels, and we successfully managed many interruptions across the enterprise. Rather than improving as expected, the availability of labor, materials and transportation became more challenging, resulting in higher costs in the period. Tight chemical supplies, in particular, reduced the output of our LVT, carpet, laminate and board panels. For the near term, we do not foresee significant changes in these external pressures. Due to supply shortages, government regulations and political issues, natural gas costs in Europe are presently about four times higher than earlier in the year. This adds a temporary challenge to our European businesses as the higher costs are reflected in gas, electricity and materials.

“Most of our businesses are carrying significant order backlogs, and we plan to run our operations at high levels during the fourth period to improve our service and efficiencies. Currently, some of our fastest growing products are being limited by material and capacity constraints. We have initiated additional investments to increase our production of those and increase our sales and service. Completion of these projects is being extended due to longer lead times on building materials and equipment.

“Our results have improved significantly during 2021, and we generated over $1.9 billion of EBITDA for the trailing 12 months. Given this and our current valuation, our board increased our stock purchase program by an additional $500 million. Since the end of the second quarter, we have bought approximately $250 million of our stock at an average price of $193 per share. With our current low leverage, we have the capital to pursue additional investments and acquisitions to expand our sales and profitability.

“For the quarter, our Flooring Rest of the World Segment’s sales increased approximately 13% as reported and 11% on a constant currency basis. The segment’s operating margins were 17.4%, as a result of pricing and mix improvements offset by inflation, a return to more normal seasonality in the period and Covid restrictions. During the quarter, sales were strong across our product categories and geographies, outside those affected by government lockdowns. These Covid restrictions have now been lifted, and we are ramping up production to meet demand. Our laminate collections continued to deliver strong sales growth with consumers embracing our proprietary water-proof products for their performance and realistic visuals. We added new laminate capacity in Europe to meet demand, and we are initiating other projects to support further sales growth. As anticipated, our LVT sales were lower during the period given material shortages and lower production that reduced our output. We minimized the impact by improving our product mix and raising prices to pass through inflation. Our Russian sheet vinyl business performed well with sales growing as our distribution expanded. We have acquired a European wood veneer plant to improve supply yields and costs of our wood flooring. Sales of our European insulation panels grew as we implemented another price increase to offset rising material inflation. We have also acquired an insulation manufacturer in Ireland and have begun integrating their operations with our existing business. Our panels business grew, and margins expanded as we increased our mix and pricing. We have added a new press that will increase our capacity and add more differentiated features to our products. In the fourth quarter, we will complete the acquisition of an MDF manufacturer in France to expand our capacity in Western Europe. The company is a pioneer in bio-based resins, which will enhance our sustainability position.

“During the quarter, our Flooring North America Segment’s sales increased 6.9% as reported and on a constant basis and operating margin increased to approximately 11% from 8% as reported, primarily due to favorable price and mix and productivity improvements, partially offset by inflation. Flooring North America had strong results given the material, transportation and labor constraints impacting our sales and production during the period. We implemented additional price increases across most product categories as inflationary pressures intensified. We continue to streamline our product portfolio and reduce operational complexity benefiting our efficiencies and quality. In carpet, residential was limited by material and labor, which affected our production and costs. Commercial sales improved, though the rate of growth slowed as Covid cases increased. In both residential and commercial manufacturing, we are investing in more efficient assets to improve cost, enhance styling and reduce labor requirements. Our laminate and wood business continues to grow, though our sales were restricted by our capacities. Our new laminate line should be operational by the end of this year to expand our sales and provide more advanced features. Our new high performance UltraWood collections are increasing our mix in wood, and the productivity of our new plant is improving as volume increases. Our LVT sales increased in the period, even with material supply limiting production and shipping delays in our sourced products. We have improved our LVT mix with enhanced features and lowered our cost by streamlining our processes. We are also increasing our sheet vinyl plant’s production to satisfy expanding sales of our collections.

“For the quarter, our Global Ceramic Segment’s sales increased 9.6% as reported and 9.1% on a constant currency basis. The segment’s operating margin increased to approximately 12% from 8% as reported, primarily due to pricing and mix improvements and favorable productivity, partially offset by inflation. Our U.S. ceramic business grew during the period with the residential sector remaining strong and commercial continuing to show improvement. We are reducing our manufacturing costs by re-engineering our products, utilizing alternative materials and enhancing our logistics strategies. We are introducing higher value products with new printing technologies, textured finishes and polished surfaces to provide alternatives to premium imported tile. Our quartz countertops sales continue to grow substantially as production recovered during the period, and sales of our higher end visuals grew at a faster rate. Our Mexican and Brazilian ceramic businesses are growing, as we increase prices to offset inflation in both countries. We are refining our product offering, improving our efficiencies and increasing our output. In both countries, we are investing in new assets to expand our production and enhance our product offering. Sales in our European ceramic business remained strong as vacation schedules returned to normal. Increases in price, mix and productivity enhanced our results, though they were more than offset by rising inflation. In the period, natural gas and electricity prices in Europe rose to unprecedented levels due to anticipated shortages. Our margins will be negatively impacted until our prices align with energy costs in the future. We are upgrading production lines to further enhance our styling and improve our efficiencies. Sales and margins increased in our Russian ceramic business as enhanced mix and increased prices offset higher inflation. Lower inventories and capacity limitations impacted our sales volumes in the period, and we will continue to manage our mix until our new capacity is operational.

“Throughout 2021, Mohawk has delivered exceptional results with higher sales growth, margin expansion and robust cash generation. For the fourth quarter, we anticipate that industry seasonality will be more typical, unlike last year when demand was unusually high. In the period, we will run our operations at high levels to support our sales, improve service and increase inventories. Our sales in some categories are being limited by our manufacturing capacities, and we are increasing investments to expand the production of these growing categories. We are continuing to implement additional price increases and manage staffing, supply and transportation constraints across our businesses. We are maintaining aggressive cost management, leveraging technology and enhancing our strategies across the enterprise. In Ceramic Europe, record natural gas prices are increasing net costs by approximately $25 million in the fourth quarter, and it will take some time for the industry to adjust to higher costs. In addition, our fourth quarter calendar has 6% fewer days than the prior year. Given these factors, we anticipate our fourth quarter adjusted EPS to be $2.80 to $2.90, excluding any restructuring charges.

“Despite temporary challenges from inflation and material availability, our long-term outlook remains optimistic with new home construction and residential remodeling projected to remain robust, and the commercial sector improving as businesses invest and grow. Next year, our sales should grow with capacity expansions and innovative new product introductions. Our strategies to optimize our results continue to evolve with the economic and supply chain conditions. Our balance sheet is the strongest in our history, and it supports increased investments and strategic acquisitions to maximize our growth.”

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 October 29, 2021, at 11:00 AM Eastern Time

The telephone number is 1-800-603-9255 for U.S./Canada and 1-706-634-2294 for International/Local. Conference ID # 4259806. A replay will be available until November 29, 2021, by dialing 1-855-859-2056 for U.S./local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 4259806.

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 attached 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.

CONTACT:

James Brunk

Chief Financial Officer

tel. (706) 624-2239

Source: GlobeNewswire