EX-99.1 2 a2023q4pressreleaseandtabl.htm EX-99.1 Document

NEWS RELEASE


For Release:    Immediately

Contact:    James Brunk, Chief Financial Officer
        (706) 624-2239


MOHAWK INDUSTRIES REPORTS Q4 RESULTS

Calhoun, Georgia, February 8, 2024 — Mohawk Industries, Inc. (NYSE: MHK) today announced fourth quarter 2023 net earnings of $139 million and earnings per share (“EPS”) of $2.18; adjusted net earnings were $125 million, and adjusted EPS was $1.96. Net sales for the fourth quarter of 2023 were $2.6 billion, a decrease of 1.4% as reported and 4.1% on a legacy and constant basis versus the prior year. During the fourth quarter of 2022, the Company reported net sales of $2.7 billion, net earnings of $33 million and EPS of $0.52; adjusted net earnings were $84 million, and adjusted EPS was $1.32.
For the twelve months ending December 31, 2023, the Company reported a net loss of $440 million and a loss per share of $6.90, which included non-cash impairment charges of $878 million; adjusted net earnings were $587 million, and adjusted EPS was $9.19. For the 2023 twelve-month period, net sales were $11.1 billion, a decrease of 5.1% as reported and 7.7% on a legacy and constant basis versus the prior year. For the twelve-month period ending December 31, 2022, the Company reported net sales of $11.7 billion, net earnings of $25 million and EPS of $0.39; adjusted net earnings were $823 million, and adjusted EPS was $12.85.
Commenting on the Company’s fourth quarter and full year results, Chairman and CEO Jeff Lorberbaum stated, “Our fourth quarter results were ahead of our expectations, with benefits from cost containment, productivity and lower input costs. The industry reduced selling prices and we passed through declining costs in energy and raw materials. Under these conditions, we focused on optimizing our revenues and reducing our costs through restructuring actions and manufacturing enhancements. We aggressively managed inventory levels, which reduced our working capital compared to prior year by more than $300 million, excluding acquisitions. We also have invested in sales resources, merchandising and new products with innovative features to inspire consumers to purchase flooring. We closed the year with a net debt to adjusted EBITDA ratio of 1.5 times, free cash flow of $716 million and available liquidity of $1.9 billion, and we are retiring a higher interest rate term loan of approximately $900 million in the first quarter of 2024. We are well



positioned to manage current conditions and emerge stronger from this economic cycle when the rebound occurs.
For the fourth quarter, the Global Ceramic Segment reported a 0.6% increase in net sales as reported, or a 4.7% decline on a legacy and constant basis. The Segment’s operating margin was 4.2% as reported, or 4.8% on an adjusted basis. Across the segment, we are managing production to align with demand and have significantly reduced inventory throughout the year. To contain costs, we have increased productivity, reduced overhead and implemented alternative formulations. In the U.S., we are expanding our distribution through our local service centers and offering new collections with premium Italian styling to improve our product mix. We have integrated Vitromex in Mexico and Elizabeth in Brazil and are enhancing our sales, marketing and operational strategies. In both countries, demand significantly declined last year due to rising interest rates and slowing economic conditions, which reduced our results. In Italy, we are optimizing our recent expansion of premium porcelain slabs to meet growing demand in both the residential and commercial channels.
During the fourth quarter, our Flooring Rest of the World Segment’s net sales decreased by 1.5% as reported, or 4.1% on a legacy and constant currency basis. The Segment’s operating margin was 9.5% as reported, or 10.6% on an adjusted basis. The European building product category remains under stress, with consumers remaining cautious and retailers reducing their inventory levels. We are investing in new products for 2024 while implementing tight cost controls. We are re-energizing our flagship Quick-Step brand with inspirational interactive merchandising displays. We are completing the transition to rigid LVT, and we have decommissioned our residential flexible line. Our wood panels performance has declined during the year from cyclically high pricing to a more competitive environment with excess capacity. We continue to implement restructuring actions in the segment and enhance our recent smaller European bolt-on acquisitions, including insulation, MDF boards, sheet vinyl and mezzanine flooring.
In the fourth quarter, our Flooring North America Segment sales declined 3.6%. The Segment’s operating margin was 8.2% as reported, or 6.9% on an adjusted basis. Reduced market volumes led to low industry utilization rates and aggressive competition in the marketplace. We are continuing to invest in sales and marketing initiatives to expand our distribution and improve our long-term growth. To enhance our business, we are making capital investments to increase our differentiated features and lower our manufacturing costs. In each product category, we are introducing innovative new collections, which are being well accepted. The commercial channel outperformed our expectations, led by the hospitality sector. We are leveraging our customer relationships to expand our needle punch flooring and trim acquisitions.



As we enter 2024, our industry is at a cyclical low and we expect seasonality in the first quarter to be more aligned with long-term historical levels. Our businesses are minimizing expenses, reducing overhead and restructuring operations to adapt to present conditions. We are continuing to invest in innovative products to increase sales and mix. We are reacting to competitive pressures to optimize our volumes as we pass through declines in input costs. We continue to manage our inventory and anticipate temporary shutdowns to align with demand. All of our businesses are implementing process enhancement initiatives to reduce the impact of inflation. Given these factors, we anticipate our first quarter adjusted EPS to be between $1.60 and $1.70.
During the past eighteen months, we have initiated many actions across the company to improve our cost structure, manage lower volume and integrate our recent acquisitions. Combined with these actions, improving industry conditions as we emerge from the bottom of this cycle should improve our results in the second half of the year. Markets anticipate that central banks will lower interest rates, expanding home sales, residential remodeling and commercial projects. The pace of improvement of the flooring category will be dependent on inflation rates, consumer confidence and the strength of home sales. We believe the U.S. and Latin American markets could improve before Europe, which could lag due to current geopolitical pressures. After past housing recessions, our industry has rebounded with increased sales and expanding margins for multiple years. Housing remains in short supply across all our geographies, and increased remodeling investments will be required to update the aging housing stock. Our restructuring actions, investments in new technologies, targeted expansions and recent acquisitions will enable us to further expand our business. As the world’s largest flooring company, we believe we are uniquely positioned to improve our results as the market recovers.”
# # #
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; geopolitical conflict; 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, February 9, 2024, 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-4th-quarter-2023-earnings-call. To participate in the conference call via telephone, register in advance at https://dpregister.com/sreg/10185489/fb57257e00 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 March 8, 2024, by dialing 1-877-344-7529 for U.S./Canada calls and 1-412-317-0088 for international/local calls and entering access code #3161276.



MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months EndedTwelve Months Ended
(Amounts in thousands, except per share data)December 31, 2023December 31, 2022December 31, 2023December 31, 2022
Net sales$2,612,278 2,650,675 11,135,115 11,737,065 
Cost of sales1,969,984 2,096,235 8,425,463 8,793,639 
    Gross profit642,294 554,440 2,709,652 2,943,426 
Selling, general and administrative expenses473,560 493,362 2,119,716 2,003,438 
Impairment of goodwill and indefinite-lived intangibles1,636 — 877,744 695,771 
Operating income (loss)167,098 61,078 (287,808)244,217 
Interest expense17,376 14,601 77,514 51,938 
Other (income) expense, net(3,911)10,008 (10,813)8,386 
Earnings (loss) before income taxes153,633 36,469 (354,509)183,893 
Income tax expense14,205 2,917 84,862 158,110 
Net earnings (loss) including noncontrolling interests139,428 33,552 (439,371)25,783 
Net earnings (loss) attributable to noncontrolling interests(60)96 145 536 
Net earnings (loss) attributable to Mohawk Industries, Inc.$139,488 33,456 (439,516)25,247 
Basic earnings (loss) per share attributable to Mohawk Industries, Inc.$2.19 0.53 (6.90)0.40 
Weighted-average common shares outstanding - basic63,683 63,534 63,657 63,826 
Diluted earnings (loss) per share attributable to Mohawk Industries, Inc.$2.18 0.52 (6.90)0.39 
Weighted-average common shares outstanding - diluted63,938 63,792 63,657 64,062 

Other Financial Information
Three Months EndedTwelve Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022December 31, 2023December 31, 2022
Net cash provided by operating activities$296,322 241,718 1,329,229 669,153 
Less: Capital expenditures240,364 150,658 612,929 580,742 
Free cash flow$55,958 91,060 716,300 88,411 
Depreciation and amortization$154,215 159,014 630,327 595,464 



MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)December 31, 2023December 31, 2022
ASSETS
Current assets:
    Cash and cash equivalents$642,550 509,623 
    Short-term investments 158,000 
    Receivables, net1,874,656 1,904,786 
    Inventories2,551,853 2,793,765 
    Prepaid expenses and other current assets535,158 528,925 
        Total current assets5,604,217 5,895,099 
Property, plant and equipment, net4,993,166 4,661,178 
Right of use operating lease assets428,532 387,816 
Goodwill1,159,724 1,927,759 
Intangible assets, net875,383 857,948 
Deferred income taxes and other non-current assets498,847 390,632 
    Total assets$13,559,869 14,120,432 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt$1,001,715 840,571 
Accounts payable and accrued expenses2,035,339 2,124,448 
Current operating lease liabilities108,860 105,266 
        Total current liabilities3,145,914 3,070,285 
Long-term debt, less current portion1,701,785 1,978,563 
Non-current operating lease liabilities337,506 296,136 
Deferred income taxes and other long-term liabilities745,528 757,534 
        Total liabilities5,930,733 6,102,518 
Total stockholders' equity7,629,136 8,017,914 
    Total liabilities and stockholders' equity$13,559,869 14,120,432 



Segment Information
Three Months EndedAs of or for the Twelve Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022December 31, 2023December 31, 2022
Net sales:
    Global Ceramic$993,739 987,699 4,300,107 4,307,681 
    Flooring NA912,049 945,959 3,829,386 4,207,041 
    Flooring ROW706,490 717,017 3,005,622 3,222,343 
        Consolidated net sales$2,612,278 2,650,675 11,135,115 11,737,065 
Operating income (loss):
    Global Ceramic$41,505 69,033 (166,448)(236,066)
    Flooring NA74,605 (28,950)(57,182)231,076 
    Flooring ROW67,137 35,902 69,727 340,167 
    Corporate and intersegment eliminations(16,149)(14,907)(133,905)(90,960)
        Consolidated operating income (loss)$167,098 61,078 (287,808)244,217 
Assets:
    Global Ceramic$4,988,347 4,841,310 
    Flooring NA3,909,943 4,299,360 
    Flooring ROW4,051,647 4,275,519 
    Corporate and intersegment eliminations609,932 704,243 
        Consolidated assets$13,559,869 14,120,432 




Reconciliation of Net Earnings (Loss) 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 EndedTwelve Months Ended
(Amounts in thousands, except per share data)December 31, 2023December 31, 2022December 31, 2023December 31, 2022
Net earnings (loss) attributable to Mohawk Industries, Inc.$139,488 33,456 (439,516)25,247 
Adjusting items:
Restructuring, acquisition and integration-related and other costs8,591 49,701 129,323 87,819 
Inventory step-up from purchase accounting 1,218 4,476 2,762 
Impairment of goodwill and indefinite-lived intangibles1,636 — 877,744 695,771 
Legal settlements, reserves and fees(4,652)9,231 87,824 54,231 
Release of indemnification asset(107)— (2,957)7,324 
Income taxes - reversal of uncertain tax position107 — 2,957 (7,324)
Income taxes - impairment of goodwill and indefinite-lived intangibles — (12,838)(10,168)
European tax restructuring(9,999)— (9,999)— 
Income tax effect of adjusting items
(9,805)(9,245)(50,038)(32,536)
 Adjusted net earnings attributable to Mohawk Industries, Inc.$125,259 84,361 586,976 823,126 
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $1.96 1.32 9.19 12.85 
Weighted-average common shares outstanding - diluted63,938 63,792 63,892 64,062 



Reconciliation of Total Debt to Net Debt
(Amounts in thousands)December 31, 2023
Short-term debt and current portion of long-term debt$1,001,715 
Long-term debt, less current portion1,701,785 
Total debt2,703,500 
Less: Cash and cash equivalents642,550 
  Net debt$2,060,950 




Reconciliation of Net Earnings(Loss) to Adjusted EBITDA
Trailing Twelve
Three Months EndedMonths Ended
(Amounts in thousands)April 1,
2023
July 1,
2023
September 30,
2023
December 31,
2023
December 31,
2023
Net earnings (loss) including noncontrolling interests$80,276 101,214 (760,289)139,428 (439,371)
Interest expense17,137 22,857 20,144 17,376 77,514 
Income tax expense28,943 26,760 14,954 14,205 84,862 
Net (earnings) loss attributable to noncontrolling interests(38)(170)60 (145)
Depreciation and amortization(1)
169,909 156,633 149,570 154,215 630,327 
  EBITDA296,227 307,467 (575,791)325,284 353,187 
Restructuring, acquisition and integration-related and other costs8,971 33,682 47,606 5,959 96,218 
Inventory step-up from purchase accounting3,305 1,276 (105) 4,476 
Impairment of goodwill and indefinite-lived intangibles— — 876,108 1,636 877,744 
Legal settlements, reserves and fees990 48,022 43,464 (4,652)87,824 
Release of indemnification asset(857)(103)(1,890)(107)(2,957)
Adjusted EBITDA$308,636 390,344 389,392 328,120 1,416,492 
Net debt to adjusted EBITDA1.5 
(1)Includes accelerated depreciation of $23,019 for Q1 2023, $7,978 for Q2 2023, ($525) for Q3 2023 and $2,632 for Q4 2023.

Reconciliation of Net Sales to Adjusted Net Sales
 Three Months EndedTwelve Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022December 31, 2023December 31, 2022
Mohawk Consolidated
Net sales$2,612,278 2,650,675 11,135,115 11,737,065 
Adjustment for constant shipping days1,878 — 20,707 — 
Adjustment for constant exchange rates9,987 — 71,553 — 
Adjustment for acquisition volume(82,669)— (389,018)— 
Adjusted net sales$2,541,474 2,650,675 10,838,357 11,737,065 

Three Months Ended
 December 31, 2023December 31, 2022
Global Ceramic
Net sales$993,739 987,699 
Adjustment for constant shipping days12,719 — 
Adjustment for constant exchange rates15,521 — 
Adjustment for acquisition volume(80,321)— 
Adjusted net sales$941,658 987,699 




Flooring ROW
Net sales$706,490 717,017 
Adjustment for constant shipping days(10,841)— 
Adjustment for constant exchange rates(5,534)— 
Adjustment for acquisition volume(2,348)— 
Adjusted net sales$687,767 717,017 

Reconciliation of Gross Profit to Adjusted Gross Profit
Three Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022
Gross Profit$642,294 554,440 
Adjustments to gross profit:
Restructuring, acquisition and integration-related and other costs2,829 39,159 
Inventory step-up from purchase accounting 1,218 
Adjusted gross profit$645,123 594,817 
Adjusted gross profit as a percent of net sales24.7 %22.4 %

Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses
Three Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022
Selling, general and administrative expenses$473,560 493,362 
Adjustments to selling, general and administrative expenses:
Restructuring, acquisition and integration-related and other costs(8,507)(8,480)
Legal settlements, reserves and fees4,652 (9,231)
Adjusted selling, general and administrative expenses$469,705 475,651 
Adjusted selling, general and administrative expenses as a percent of net sales18.0 %17.9 %

Reconciliation of Operating Income (Loss) to Adjusted Operating Income
Three Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022
Mohawk Consolidated
Operating income$167,098 61,078 
Adjustments to operating income:
Restructuring, acquisition and integration-related and other costs11,336 47,639 
Inventory step-up from purchase accounting 1,218 
Impairment of goodwill and indefinite-lived intangibles1,636 — 
Legal settlements, reserves and fees(4,652)9,231 
Adjusted operating income$175,418 119,166 

Adjusted operating income as a percent of net sales6.7 %4.5 %




Global Ceramic
Operating income$41,505 69,033 
Adjustments to segment operating income:
Restructuring, acquisition and integration-related and other costs4,907 1,054 
Impairment of goodwill and indefinite-lived intangibles1,636 — 
Adjusted segment operating income$48,048 70,087 
Adjusted segment operating income as a percent of net sales4.8 %7.1 %

Flooring NA
Operating income (loss)$74,605 (28,950)
Adjustments to segment operating income (loss):
Restructuring, acquisition and integration-related and other costs(1,113)28,174 
Legal settlements, reserves and fees(10,250)— 
Adjusted segment operating income (loss)$63,242 (776)
Adjusted segment operating income (loss) as a percent of net sales6.9 %(0.1)%

Flooring ROW
Operating income$67,137 35,902 
Adjustments to segment operating income:
Restructuring, acquisition and integration-related and other costs7,542 18,411 
Acquisitions purchase accounting, including inventory step-up 1,218 
Adjusted segment operating income$74,679 55,531 
Adjusted segment operating income as a percent of net sales10.6 %7.7 %

Corporate and intersegment eliminations
Operating (loss)$(16,149)(14,907)
Adjustments to segment operating (loss):
Legal settlement, reserves and fees5,598 9,231 
  Adjusted segment operating (loss)$(10,551)(5,676)




Reconciliation of Earnings (Loss) Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes
Three Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022
Earnings before income taxes$153,633 36,469 
Net earnings (loss) attributable to noncontrolling interests60 (96)
Adjustments to earnings including noncontrolling interests before income taxes:
Restructuring, acquisition and integration-related and other costs8,591 49,701 
Inventory step-up from purchase accounting 1,218 
Impairment of goodwill and indefinite-lived intangibles1,636 — 
Legal settlements, reserves and fees(4,652)9,231 
Release of indemnification asset(107)— 
Adjusted earnings including noncontrolling interests before income taxes$159,161 96,523 

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense
Three Months Ended
(Amounts in thousands)December 31, 2023December 31, 2022
Income tax expense$14,205 2,917 
Income taxes - reversal of uncertain tax position(107)— 
European tax restructuring9,999 — 
Income tax effect of adjusting items9,805 9,245 
Adjusted income tax expense$33,902 12,162 
Adjusted income tax rate21.3%12.6%

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, impairment of goodwill and indefinite-lived intangibles, acquisition purchase accounting, including inventory step-up from purchase accounting, release of indemnification assets, the reversal of uncertain tax positions and European tax restructuring.