Mohawk Industries, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Mohawk is a global flooring manufacturer operating through Global Ceramic, Flooring North America and Flooring Rest of the World (ROW). Approximately 60% of 2021 sales came from the U.S. and 40% from outside the U.S.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $11,200.6 million | $9,552.2 million | +17.3% |
| Gross profit / margin | $3,268.7 million / 29.2% | $2,430.7 million / 25.4% | Margin +380 bps |
| Operating income / margin | $1,335.0 million / 11.9% | $636.0 million / 6.7% | +109.9% |
| Net earnings attributable to Mohawk | $1,033.2 million | $515.6 million | +100.4% |
| Diluted EPS | $14.94 | $7.22 | +$7.72 |
| Cash from operating activities | $1,309.1 million | $1,769.8 million | -$460.7 million |
| Capital expenditures | $676.1 million | $425.6 million | +$250.6 million |
Segment sales and operating income: Global Ceramic sales were $3,917.3 million and operating income $403.1 million (10.3% margin); Flooring NA sales were $4,116.4 million and operating income $407.6 million (9.9%); Flooring ROW sales were $3,166.9 million and operating income $571.1 million (18.0%). Sales rose across all three segments; ROW had the largest percentage increase, up 25.4%.
Liquidity and debt: Year-end cash and cash equivalents were $268.9 million and short-term investments were $323.0 million. Total debt carrying value was $2,324.8 million, including $613.9 million of commercial paper; $1,184.7 million was available under the $1.8 billion senior revolving facility. Current assets were $5,238.4 million and current liabilities $2,946.4 million. The company redeemed €500 million of 2.00% notes in October 2021 and repaid €300 million of floating-rate notes in September.
Material changes and notable items
- Revenue growth reflected approximately $792 million from price and product mix, $739 million from volume and $160 million from foreign exchange, partly offset by one fewer shipping day.
- Profit improved substantially versus 2020, which had been affected by pandemic-related demand declines and manufacturing disruptions. Pricing, mix, productivity, higher volumes and fewer disruptions helped; inflation partially offset gains. Management cited approximately $524 million of higher inflation costs in gross profit and $559 million in operating income analysis.
- Operating cash flow declined mainly because of working-capital changes, including a $519.2 million inventory cash use. The company spent $900.3 million repurchasing shares in 2021; fourth-quarter repurchases were $427.0 million. A new $500 million repurchase authorization was approved in February 2022.
- Fourth-quarter 2021 sales were $2,760.7 million, up 4.5% from the prior-year quarter. The filing text does not provide a clear fourth-quarter earnings or EPS figure in the supplied material.
- 2021 included a $22.2 million one-time Italian tax-planning benefit and a $6.2 million benefit from resolving foreign non-income tax contingencies. Restructuring, acquisition and integration-related costs totaled $23.6 million, down from $128.9 million in 2020.
Outlook, risks and contingencies
- Management planned approximately $800 million of 2022 capital investment, including capacity expansion, LVT and waterproof laminate improvements, ceramic capacity, countertops, cost reduction and maintenance. Management cited potential strength in residential construction and remodeling, but did not provide numerical sales or earnings guidance.
- Management warned that inflation in materials, energy, transportation and labor, supply-chain constraints, labor availability and COVID-19-related disruption could weigh on results. European natural gas prices were described as more than five times the prior-year level; the duration and ability to recover these costs through pricing were uncertain.
- Key broader risks include economic and housing-market weakness, competitive pricing and imports, raw-material availability and cost pass-through, foreign exchange, international operations, cybersecurity, and environmental and regulatory obligations.
- Legal matters include PFC-related water claims and multiple investor, securities and derivative actions. The SEC and U.S. Attorney investigations relating to allegations similar to the securities litigation remained ongoing; the company said it was cooperating and intended to defend the claims. Management stated it could not estimate loss, if any, beyond accrued amounts; it did not expect the matters to materially affect financial condition, but results, cash flows or liquidity in a period could be affected.
- A Belgian tax dispute involves proposed assessments totaling €182.6 million for 2013–2018, excluding interest, with a possible additional 2019 assessment. The company disputes the claims and intends to defend its position.
- KPMG gave unqualified opinions on the financial statements and internal control over financial reporting. Goodwill impairment testing identified no impairment for 2021; the Global Ceramic goodwill valuation was a critical audit matter.
Investor verification checklist
- Check whether pricing actions and productivity can continue to offset input-cost inflation, especially European natural gas and labor.
- Track working capital and inventory growth against operating cash generation, as cash from operations fell despite higher earnings.
- Assess the returns and funding impact of the planned $800 million 2022 capital program and continued share repurchases.
- Review debt maturities, commercial-paper refinancing needs, revolver availability and covenant compliance.
- Monitor developments, potential exposure and cash requirements from the Belgian tax matter, securities-related litigation and government investigations.
- Evaluate whether demand, supply-chain conditions and segment margins support management’s stated expectations; the filing provides no numerical earnings guidance.