Mohawk Industries, Inc. · NYSE:MHK
Mohawk Industries — Q3 2019 Earnings Presentation
45 slides from Mohawk Industries's earnings presentation, October 2019
Slide 1: Focused on Fundamentals – Investor Presentation
Focused on FUNDAMENTALS CERAMIC TILE CARPET LUXURY VINYL TILE Investor Presentation LAMINATE October 2019
Slide 2: Forward-looking Statements
Forward-looking Statements Certain of the statements in this presentation may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties including, but not limited to, those set forth in our press releas
Slide 3: Mohawk Highlights
Mohawk Highlights • World’s largest flooring manufacturer • Market leader in all flooring categories • Ceramic • LVT • Carpet & Rugs • Sheet Vinyl • Laminate • Stone Flooring • Wood • Countertops • Expanding international presence • Differentiated distribution infrastructure • Strong cash flow to fu
Slide 4: Mohawk by the Numbers
Mohawk by the Numbers $10B $1.7B $8.2B 45 2018 Worldwide 2018 Adjusted CapEx & Acquisition Acquisitions Sales EBITDA Investments (2013-18) Since 1992 19 42,000+ 170+ 25,000+ Countries Employees Countries Customers Manufacturing Worldwide Sales Worldwide 4
Slide 5: 2018 Sales Mix
2018 Sales Mix SEGMENT GEOGRAPHY 40% Flooring NA 61% United States 36% Global Ceramic 26% Europe 23% Commercial 24% Flooring ROW 4% Russia 9% Other Subject to rounding 5
Slide 6: International Operations
International Operations ®R Ceramic Ceramic Carpet Ceramic | Laminate Rugs and _— Western Wood | Sheet Vinyl Mats Dist. Europe Ceramic | ¥ LVT / Sheet Vinyl Laminate i Carpet Tile Carpet and Rugs LVT / Sheet Vinyl Ceramic Countertops Laminate © Mexico Malaysia Ceramic Weed India Wood and Laminate (J
Slide 7: Extending Sales Capacity through Investment
Extending Sales Capacity through Investment $2.4B internal investment (2016-2018) MEXICO & UNITED STATES SOUTH AMERICA EUROPE RUSSIA • Doubling capacity in • Doubled ceramic • Modernized Italian • Launched sheet fast-growing LVT; capacity at ceramic facilities; vinyl plant added rigid technology Sal
Slide 8: Aggressive Acquisition Strategy
Aggressive Acquisition Strategy Invested $4.3B in 20 acquisitions since 2013 GEOGRAPHY PRODUCTS MANAGEMENT RETURNS • Strategic fit • Focus on flooring • Proven • Best possible management valuation • Leverage strengths • New product teams in existing categories • Potential for locations • Deep bench
Slide 9: Eliane Acquisition
Eliane Acquisition • Closed acquisition November 16, 2018 • Leading ceramic tile manufacturer in Brazil, one of world’s largest markets • Fiscal 2017 net sales: US$215M • Produces glazed and unglazed porcelain for floors and walls • Balanced sales through builders, home centers, retail & national ac
Slide 10: Industry Outlook
Industry Outlook United States • GDP & flooring industry growth slowing • New housing starts showing weakness • LIRA Index forecasting softer YOY residential remodeling growth • AIA projecting commercial construction growth, led by institutional & educational Before After Rest of World • Economy in
Slide 11: Operational Excellence
Operational Excellence • Deliver growth through innovative new products • Drive demand through differentiated collections • Enhance productivity & profitability through continuous process improvement & automation • Optimize resources & materials • Maintain superior logistics systems to improve servi
Slide 12: Product Innovation
Product Innovation CERAMIC CARPET StepWise ™ Clic-Fit Technology; Superior Slip Proprietary Blended Patented Unified Faster, Easier Resistance Fibers that Coordinate Soft Flooring; Faster, Installation with Hard Surfaces Easier Installation LAMINATE / WOOD LVT / SHEET VINYL Proprietary Exclusive Tec
Slide 13: Nationwide Distribution
Nationwide Distribution • National network of distribution centers provides efficient delivery • Service Centers provide key channel for ceramic distribution • Leading-edge logistics system • 1,600 sales representatives • 350 distribution points • 650 trucks Carpet, Laminate, Wood & Vinyl DCs Cerami
Slide 14: The Business of Sustainability
The Business of Sustainability 6.2B 6.5B 500+ 42M Plastic Bottles Pounds of Waste Products with Pounds of Tires Recycled Annually Recycled Recycled Content Recycled Into Doormats 51 36% 442M 5% Plants with Zero Waste Water Intensity Gallons of Reduced Greenhouse Gas Intensity to Landfill Reduced sin
Slide 15: Global Ceramic
ELIANE PORCELAIN TILE Savana Fumé (floor) and Aqua Branco AC (wall) Global Ceramic
Slide 16: Global Ceramic Segment
Global Ceramic Segment Competitive Advantages • Worldwide ceramic leader with leading positions in North America, Brazil, Eastern & Western Europe and Russia • Most widely recognized ceramic brands • Broad product line satisfies all channels and price points • North American market share substantial
Slide 17: Ceramic: Leveraging Global Assets
Ceramic: Leveraging Global Assets Leading Position Manufacturing Locations Optimizing worldwide product development and distribution to meet market demands in different regions 17
Slide 18: Global Tile Market: 141 Billion Sq. Ft.
Global Tile Market: 141 Billion Sq. Ft. Mohawk Capacity – 2.8 Billion Sq. Ft. Indonesia & Vietnam 7.5% China 40% India 8.7% Europe 10.4% Brazil 6.0% Iran & Turkey 5.5% Africa 5.5% China 43.5% USA 1.3% Mexico 1.3% Russia 1.3% Global capacity down 3.4% YOY, Other 9.0% almost all in China. Sources: Cer
Slide 19: Global Ceramic: Brands Serving All Channels
Global Ceramic: Brands Serving All Channels UNITED STATES/CANADA EUROPE • 236 service centers • Independent specialty retail • 40 countertop centers • Home centers • 19 design galleries • New construction • Independent specialty retail • Independent distributors • Home centers • Commercial • Indepen
Slide 20: Global Ceramic: Countertops
Global Ceramic: Countertops Stone Quartz Porcelain High-end, contemporary, luxe Upscale look engineered for Scale and beauty of natural stone feel for any room down-to-earth durability with the benefits of porcelain tile 20
Slide 21: Flooring North America
MOHAWK UNIFIED SOFT FLOORING Air.O Peaceful Moments II Flooring North America
Slide 22: Flooring North America Segment
Flooring North America Segment Competitive Advantages • Leading market share in all channels • Leader in innovation, design & technology • Significant growth opportunity with LVT • Well-known exclusive brands • Leverage customer relationships Mohawk Luxury Vinyl Tile SolidTech Grandwood Pearl Platin
Slide 23: Flooring NA: Brands Serving All Channels
Flooring NA: Brands Serving All Channels RESIDENTIAL CARPET BATH & AREA RUGS • Independent • Mass Merchants Specialty Retail • Department Stores • Aligned Dealers • Home Centers • Home Centers • Independent • Builder Specialty Retail • Multi-family • E-Commerce COMMERCIAL CARPET HARD SURFACES • Corp
Slide 24: Flooring Rest of the World
PERGO LAMINATE Long Plank Natural Ash Flooring Rest of the World
Slide 25: Flooring Rest of the World Segment
Flooring Rest of the World Segment Competitive Advantages • Leader in mid- to high-end categories • Undisputed innovation frontrunner • Significant growth opportunity with LVT • Extend value of well known brands into new product categories • Vertically integrated low-cost QUICK-STEP LAMINATE manufac
Slide 26: Flooring ROW: Brands Serving All Channels
Flooring ROW: Brands Serving All Channels LAMINATE / WOOD LVT • Independent Specialty Retail • Independent Specialty Retail • Home Centers • Home Centers • Independent Distribution • Company-owned Distribution • Company-owned Distribution (U.K., Italy, Switzerland, (U.K., Italy, Switzerland, Austral
Slide 27: Flooring ROW Panels
Flooring ROW Panels MDF & Chipboards Insulation Panels Roofing Panels Furniture and specialty Airtight solutions for Insulated custom roof panels construction renovations or new and hinged roofs construction 27
Slide 28: Financials
MARAZZI PORCELAIN TILE Art Grey Rectifacto (floor), Grande Metal Look Porcelain Slabs (wall) and D_Segni Colore Decoro Mix (desk) Financials
Slide 29: Net Sales & Adjusted EBITDA
Net Sales & Adjusted EBITDA Net Sales (% YOY Growth) EBITDA (% of Net Sales) $1,859 $9,984 $1,711 $1,705 $9,491 $8,959 17.1% 5.2% $1,395 $8,072 $7,803 19.6% 5.9% $1,171 11.0% 19.1% 3.4% 17.3% 6.2% 15.0% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Dollars in Millions, excluding unusual items 29
Slide 30: Earnings Summary
Earnings Summary (ex-unusual items) 2014 2015 2016 2017 2018 Net Sales $7,803 $8,072 $8,959 $9,491 $9,984 % Change 6% 3% 11% 6% 5% EBITDA $1,171 $1,395 $1,711 $1,859 $1,705 EBITDA Margin 15% 17% 19% 20% 17% Operating Income $834 $1,050 $1,298 $1,416 $1,189 Operating Margin 11% 13% 14% 15% 12% Net Ea
Slide 31: Results by Segment
Results by Segment (ex-unusual items) 2014 2015 2016 2017 2018 GLOBAL CERAMIC SEGMENT Sales $3,015 $3,013 $3,175 $3,405 $3,553 % Change 13% 0% 5% 7% 4% Operating Income $360 $422 $481 $545 $463 Operating Margin 12% 14% 15% 16% 13% FLOORING NA SEGMENT Sales $3,441 $3,602 $3,866 $4,011 $4,029 % Change
Slide 32: Third Quarter Earnings Summary
Third Quarter Earnings Summary (ex-unusual items) 2017 2018 2019 Net Sales $2,449 $2,546 $2,519 % Change 7% 4% -1% EBITDA $509 $445 $398 EBITDA Margin 21% 17% 16% Operating Income $398 $314 $250 Operating Margin 16% 12% 10% Adjusted Diluted EPS $3.75 $3.29 $2.75 % Change 7% -12% -16% (Dollars in Mil
Slide 33: Leverage and Capital Structure
Leverage and Capital Structure 1 Maturity Schedule Net Debt-to-Adjusted EBITDA Multiple Average Rate 1.54% (42% Fixed / 58% Floating) As of September 28, 2019. Dollars in Millions 1 Approximately $13 million in capital leases and $9 million in RUB revolver debt in Russia not shown. USCP and ECP amou
Slide 34: Industry Data
LEOLINE SHEET VINYL Woodmark Collection - Cardassian Industry Data
Slide 35: U.S. Flooring Industry: $27.2 Billion
U.S. Flooring Industry: $27.2 Billion Ceramic 14% Wood 13% Carpet & Area Rugs 43% LVT 13% Other 1% Sheet Vinyl 7% Laminate 3% Stone 6% Source: Floor Covering Weekly, July 22, 2019 Subject to rounding 35
Slide 36: U.S. Flooring Sales by End Use Market
U.S. Flooring Sales by End Use Market Commercial 26% Residential Replacement 58% • Anticipate continued expansion in new housing starts • Residential remodeling projected to significantly expand Builder 16% • Commercial indicators suggest future growth Source: Floor Covering Weekly, July 22, 2019 Su
Slide 37: U.S. Flooring Channels
U.S. Flooring Channels Contractors 23% Specialty Stores 53% Home Centers 20% Other 4% Sources: Floor Covering Weekly, July 22, 2019 Subject to rounding 37
Slide 38: Appendix
PERGO EXTREME RIGID LUXURY VINYL TILE Wood Enhanced Plank - Moonbeam Appendix
Slide 39: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures ADJUSTED OPERATING INCOME (Amounts in thousands USD) 2014 2015 2016 2017 2018 Operating income 772,796 837,566 1,279,943 1,354,173 1,095,326 Adjustments to operating income: Restructuring, acquisition and integration-related and other costs 51,604 74,604
Slide 40: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures ADJUSTED NET EARNINGS (Amounts in thousands USD, except EPS) 2014 2015 2016 2017 2018 Net earnings attributable to Mohawk Industries, Inc. 531,965 615,302 930,362 971,638 861,704 Adjusting items: Restructuring, acquisition, integration-related and other
Slide 41: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures ADJUSTED OPERATING INCOME (Amounts in thousands USD) 2014 2015 2016 2017 2018 GLOBAL CERAMIC SEGMENT Operating income 351,113 414,154 478,448 525,401 442,898 Adjustments to operating income: Restructuring, acquisition and integration-related and other co
Slide 42: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures ADJUSTED OPERATING INCOME (Amounts in thousands USD) 2017Q3 2018Q3 2019Q3 Operating income 380,098 287,244 240,220 Adjustments to operating income: Restructuring, acquisition and integration-related and other costs 13,853 19,890 9,515 Release of indemnif
Slide 43: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures ADJUSTED NET EARNINGS (Amounts in thousands USD, except EPS) 2017Q3 2018Q3 2019Q3 Net earnings attributable to Mohawk Industries, Inc. 270,025 227,013 155,518 Adjusting items: Restructuring, acquisition and integration-related and other costs 13,853 19,8
Slide 44: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures NET DEBT (Amounts in thousands USD) 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 Current portion of long-term debt and commercial paper 1,754,077 1,172,781 1,203,683 1,331,917 1,146,511 1,333,853 1,742,373 1,763,332 1,891,512 1,2
Slide 45: Investor Presentation
Investor Presentation PERGO EXTREME RIGID LUXURY VINYL TILE BLUSHWORTHY MARBLE LOOK