MHK
$204.81
Mohawk Industries
$3.14
1.56%
Earnings Details
Quarter December 2020
Thursday, February 11, 2021 4:06:00 PM
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Summary

Mohawk Industries Beats

Mohawk Industries (MHK) reported Quarter December 2020 earnings of $3.54 per share on revenue of $2.6 billion. The consensus earnings estimate was $2.88 per share on revenue of $2.5 billion. The Earnings Whisper number was $3.17 per share. Revenue grew 9.0% on a year-over-year basis.

The company said it expects first quarter earnings of $2.69 to $2.79 per share. The current consensus earnings estimate is $2.23 per share for the quarter ending March 31, 2021.

Mohawk Industries Inc is a flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company' segments are: the Carpet segment, the Ceramic segment and the Laminate and Wood segment.

Results
Reported Earnings
$3.54
Earnings Whisper
$3.17
Consensus Estimate
$2.88
Reported Revenue
$2.64 Bil
Revenue Estimate
$2.50 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Mohawk Industries Reports Q4 Results

CALHOUN, Ga., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) today announced a 2020 fourth quarter net profit of $248 million and diluted earnings per share (EPS) of $3.49. Adjusted net earnings were $252 million, and EPS was $3.54, excluding restructuring, acquisition and other charges. Net sales for the fourth quarter of 2020 were $2.6 billion, an increase of 9.0% as reported and 5.5% on a constant currency and days basis. For the fourth quarter of 2019, net sales were $2.4 billion, net earnings were $265 million and EPS was $3.68, which included a one-time tax benefit. Adjusted net earnings were $162 million, and EPS was $2.25, excluding restructuring, acquisition and other charges in addition to the one-time tax benefit.

For the twelve months ending December 31, 2020, net earnings and EPS were $516 million and $7.22, respectively. Net earnings excluding restructuring, acquisition and other charges were $631 million and EPS was $8.83. For the 2020 twelve-month period, net sales were $9.6 billion, a decrease of 4.2% versus prior year as reported or 3.9% on a constant currency and days basis. For the twelve-month period ending December 31, 2019, net sales were approximately $10 billion, net earnings were $744 million and EPS was $10.30; excluding restructuring, acquisition, other charges and benefits, net earnings and EPS were $725 million and $10.04, respectively.

Commenting on Mohawk Industries’ fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “Our fourth quarter results exceeded our expectations as we posted our highest ever quarterly sales. All of our markets saw strengthening residential purchases, with laminate, LVT and sheet vinyl outperforming other flooring categories. Commercial activity remains weak and impacted sales and margins in the businesses where we have significant participation. Our results improved with higher volumes, restructuring initiatives and leverage on costs, while being adversely affected by lower runs and inventory, higher absenteeism and labor shortages in some operations. We are also seeing greater inflationary pressures in many product categories, and we are increasing prices to recover. We are mitigating the spread of Covid among our employees and customers by utilizing best practices across the business, including testing and tracking employees with potential contacts.

“Through the fourth quarter we have achieved about $50 million of the projected $100 to $110 million in anticipated savings from our restructuring initiatives. We continue to assess some projects based on changing market conditions. Our free cash flow for the period was about $250 million after capital investments of approximately $160 million, and for the year our record free cash flow exceeded $1.3 billion. After paying off our short-term debt and prefunding our longer-term maturities in the second quarter, our net debt leverage is at a historical low. Our strong financial position gives us flexibility to pursue additional opportunities, including internal investments, acquisitions and stock purchases. Since the third quarter, we have acquired approximately one million shares of our stock for $130 million as part of our stock repurchase plan.

“For the quarter, our Flooring Rest of the World Segment’s sales increased 20% as reported and 13% on a constant currency and days basis. The segment’s operating income grew over 60% with a margin of 17.5% as reported and 18.2%, excluding restructuring costs due to higher volumes and better productivity as well as favorable material costs. Sales and margins were strong in most categories and geographies with most of our plants operating near capacity. Raw material costs began to rise in many of our product categories, and we are taking pricing actions to respond to the increases. Laminate, the segment’s largest flooring category, delivered significant growth across most of our markets. Our margins increased as higher volumes drove greater absorption, while increased productivity and better throughputs enhanced our results. Our LVT sales increased substantially, led by accelerated growth of our rigid collections. Both our LVT margins and profitability improved due to increased volume, lower production costs and SG&A absorption. We are introducing new collections with enhanced visuals and exclusive water-tight joints that better prevent water damage. Our sheet vinyl business rebounded as our retailers re-opened their shops and our export markets picked up. Our greenfield Russian sheet vinyl plant’s volume has grown to a level that its margins are in line with our other businesses. Our wood panels business performed well in the period, with sales limited by our capacity and low inventories. We are expanding our capacity and increasing efficiency in melamine products to further improve our margins. In insulation, volume was good, with margins impacted by significant material inflation due to supply constraints. Our sales in Australia and New Zealand were strong, and margins improved with higher volume and lower material cost given their longer supply chain. We enhanced our market position with more aggressive sales initiatives and by providing more consistent service under difficult circumstances.

“For the quarter, our Global Ceramic Segment’s sales increased 7% as reported and 6% on a constant currency and days basis. The segment had an operating margin of 8.7% as reported and 9.5%, excluding restructuring cost. Operating income increased by over 50% as reported versus prior year and by 65%, excluding restructuring charges, primarily due to improved productivity, increased volume and lower shutdown cost, partially offset by unfavorable price and mix. Our U.S. business delivered strong residential sales growth while commercial sales remain challenged as businesses defer investments. Our service centers are experiencing improved customer traffic due to higher home sales and remodeling activity. We have announced price increases across most collections to pass through higher transportation costs. Our plant productivity and costs improved during the period due to higher volumes and continued process improvements. We expect to complete our planned plant consolidations by the end of the first quarter. Sales of our quartz products are growing significantly, and we are increasing our mix with higher stylized products. Our Brazilian and Mexican businesses delivered record quarterly sales and expanded margins even with inflationary headwinds and capacity constraints. In both markets, margins improved due to higher productivity, and we have implemented price increases to cover rising inflation. We are investing to further upgrade our Brazilian manufacturing assets this year. Our European sales and profitability improved with residential sales stronger and lower commercial sales negatively impacting our mix and margins. Our service levels improved with the plants operating at higher rates; though inventories remained low due to higher demand. Our Russian ceramic business delivered strong results, even with inflation and currency headwinds. Sales rose significantly in all channels and were led by new residential construction. We are successfully ramping up our premium sanitaryware manufacturing to expand our product offering in our owned and franchised stores.

“During the quarter, our Flooring North America Segment’s sales increased 3% as reported and were flat on a constant days basis. The segment had an operating margin of 8.6% as reported and 9.5%, excluding restructuring cost. Operating income increased by over 25% excluding restructuring charges, primarily due to productivity, increased volume and lower material costs, partially offset by unfavorable price and mix. The segment had strong growth in the residential channel, offset by lower commercial which improved from its low base in the prior periods. Our service levels improved as we increased production, though high demand required allocating shipments of some products. Due to higher demand and Covid disruptions in our plants, our inventories did not grow as we anticipated. We are taking pricing actions in most products due to rising material, labor and transportation costs. We have executed a large part of our restructuring initiatives, which is benefiting our results with some of the savings flowing through inventory in future periods. Demand for our residential carpet grew as comfort and noise reduction have become more important to consumers. Our laminate business is growing substantially in all channels as our unique visuals and waterproof technology have become desirable alternatives to natural wood and LVT. Our laminate plants are running at capacity to meet the exceptional demand, and by the end of the year a new line should be operational with additional capabilities. We have repurposed a plant to manufacture a waterproof wood flooring with dramatically improved scratch, dent and wear resistance. Sales of our LVT and sheet vinyl increased substantially, and we are introducing updated residential and commercial LVT collections with our water tight technology that will improve our mix and margins. Engineers from our European business are working in our U.S. LVT operations to implement demonstrated improvements to increase output, reduce material cost and enhance product visuals and performance.

“Our fourth quarter sales and operating performance were much stronger than we anticipated. We ran our plants around the world at high levels during the period, but fell short of the inventory build we anticipated. Our operations are taking actions to optimize throughput and reach our desired service levels. Given present trends, the momentum of our residential businesses should remain strong, while the commercial channel should slowly improve from its trough. We will benefit from structural improvements in our costs and innovative new products that will enhance our mix. Most of the Covid restrictions around the world have not directly impacted the sales or installation of our products. Continued government subsidies and low interest rates should support economic recoveries, new home construction and residential remodeling. We are seeing increasing inflation in most of our product categories and are raising prices in response. Assuming current conditions continue, we anticipate our first quarter adjusted EPS to be $2.69 to $2.79, excluding restructuring charges.

“The strength of our organization was demonstrated by our management of last year’s historic decline in sales and the subsequent spike in demand while protecting our employees and customers. Our strategies and initiatives remain flexible to adapt to economic changes. With improving sales and cash flows and a strong balance sheet, we are well positioned to take advantage of future opportunities.

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, United Kingdom 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; the risks and uncertainty related to the COVID-19 pandemic; and other risks identified in Mohawk’s SEC reports and public announcements.

Conference call Friday, February 12, 2021, at 11:00 AM Eastern Time
The telephone number is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 7346226. A replay will be available until March 12, 2021, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 7346226.

Contact: Frank Boykin, Chief Financial Officer (706) 624-2695


MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES        
(Unaudited)        
Condensed Consolidated Statement of Operations Data Three Months Ended Twelve Months Ended
(Amounts in thousands, except per share data) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
         
Net sales $2,641,764  2,424,512   9,552,197  9,970,672 
Cost of sales  1,903,680  1,801,705   7,121,507  7,294,629 
Gross profit  738,084  622,807   2,430,690  2,676,043 
Selling, general and administrative expenses  455,351  467,993   1,794,688  1,848,819 
Operating income  282,733  154,814   636,002  827,224 
Interest expense  15,897  10,962   52,379  41,272 
Other (income) expense, net  (6,742) (9,522)  (751) 36,407 
Earnings before income taxes  273,578  153,374   584,374  749,545 
Income tax expense  25,180  (111,299)  68,647  4,974 
Net earnings including noncontrolling interests  248,398  264,673   515,727  744,571 
Net earnings attributable to noncontrolling interests  176  6   132  360 
Net earnings attributable to Mohawk Industries, Inc. $248,222  264,667   515,595  744,211 
         
Basic earnings per share attributable to Mohawk Industries, Inc.        
Basic earnings per share attributable to Mohawk Industries, Inc. $3.50  3.69   7.24  10.34 
Weighted-average common shares outstanding - basic  70,951  71,640   71,214  71,986 
         
Diluted earnings per share attributable to Mohawk Industries, Inc.        
Diluted earnings per share attributable to Mohawk Industries, Inc. $3.49  3.68   7.22  10.30 
Weighted-average common shares outstanding - diluted  71,209  71,954   71,401  72,264 
         
         
         
Other Financial Information        
(Amounts in thousands)        
Net cash provided by operating activities $407,844  440,675   1,769,839  1,418,761 
Less: Capital expenditures  160,142  139,849   425,557  545,462 
Free cash flow $247,702  300,826   1,344,282  873,299 
         
Depreciation and amortization $156,555  153,759   607,507  576,452 
         
         
Condensed Consolidated Balance Sheet Data        
(Amounts in thousands)        
      December 31, 2020 December 31, 2019
ASSETS        
Current assets:        
Cash and cash equivalents     $768,625  134,785 
Short-term investments      571,741  42,500 
Receivables, net      1,709,493  1,526,619 
Inventories      1,913,020  2,282,328 
Prepaid expenses and other current assets      400,775  443,225 
Total current assets      5,363,654  4,429,457 
Property, plant and equipment, net      4,591,229  4,698,917 
Right of use operating lease assets      323,138  323,003 
Goodwill      2,650,831  2,570,027 
Intangible assets, net      951,607  928,879 
Deferred income taxes and other non-current assets      447,292  436,397 
Total assets     $14,327,751  13,386,680 
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Short-term debt and current portion of long-term debt     $377,255  1,051,498 
Accounts payable and accrued expenses      1,895,951  1,559,140 
Current operating lease liabilities      98,042  101,945 
Total current liabilities      2,371,248  2,712,583 
Long-term debt, less current portion      2,356,887  1,518,388 
Non-current operating lease liabilities      234,726  228,155 
Deferred income taxes and other long-term liabilities      823,732  801,106 
Total liabilities      5,786,593  5,260,232 
Total stockholders' equity      8,541,158  8,126,448 
Total liabilities and stockholders' equity     $14,327,751  13,386,680 
         
Segment Information Three Months Ended As of or for the Twelve Months Ended
(Amounts in thousands) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
         
Net sales:        
Global Ceramic $919,668  858,337   3,432,756  3,631,142 
Flooring NA  963,365  936,387   3,594,075  3,843,714 
Flooring ROW  758,731  629,788   2,525,366  2,495,816 
Consolidated net sales $2,641,764  2,424,512   9,552,197  9,970,672 
         
Operating income (loss):        
Global Ceramic $79,565  52,068   167,731  335,639 
Flooring NA  82,407  29,556   147,442  177,566 
Flooring ROW  132,505  81,595   366,934  353,666 
Corporate and intersegment eliminations  (11,744) (8,405)  (46,105) (39,647)
Consolidated operating income (a) $282,733  154,814   636,002  827,224 
         
Assets:        
Global Ceramic     $5,250,069  5,419,896 
Flooring NA      3,594,976  3,823,654 
Flooring ROW      4,194,447  3,925,246 
Corporate and intersegment eliminations      1,288,259  217,884 
Consolidated assets     $14,327,751  13,386,680 
         
(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 Mohawk Industries, Inc. to Adjusted Net Earnings Attributable to Mohawk Industries, Inc. and Adjusted Diluted Earnings Per Share Attributable to Mohawk Industries, Inc.
(Amounts in thousands, except per share data)            
    Three Months Ended Twelve Months Ended  
    December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019  
Net earnings attributable to Mohawk Industries, Inc.   $248,222  264,667  515,595  744,211   
Adjusting items:            
Restructuring, acquisition and integration-related and other costs    22,395  49,802  167,079  99,679   
Acquisitions purchase accounting, including inventory step-up    -  222  -  3,938   
Deferred loan cost write off    -  601  -  601   
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China (1) -  (5,226) -  59,946   
European tax restructuring(2)    -  (136,194) -  (136,194)  
Release of indemnification asset    (13) 603  (262) (57)  
Income taxes - reversal of uncertain tax position    13  (603) 262  56   
Income taxes    (18,609) (12,183) (52,002) (46,842)  
Adjusted net earnings attributable to Mohawk Industries, Inc.   $252,008  161,689  630,672  725,338   
             
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc.   $3.54  2.25  8.83  10.04   
Weighted-average common shares outstanding - diluted    71,209  71,954  71,401  72,264   
             
             
[1] In September 2019, the US commerce department imposed a 104% countervailing duty on top of the 25% general tariffs on all ceramic produced in China. As a consequence, ceramic purchases from China would dramatically decline and Mohawk took a $60 million write off to our investment in a Chinese manufacturer and distributor.
 
[2] In 2019, the Company implemented select operational, administrative and financial restructurings that centralized certain business processes and intangible assets in various European jurisdictions into a new entity. The restructurings resulted in a current tax liability of $136 million, calculated by measuring the fair value of intangible assets transferred. The Company offset the tax liability with the utilization of $136 million of deferred tax assets from accumulated net operating loss carry forwards. The restructurings also resulted in the Company recording a $136 million deferred tax asset, and a corresponding deferred tax benefit, related to the tax basis of the intangible assets transferred.
             
Reconciliation of Total Debt to Net Debt Less Short-Term Investments        
(Amounts in thousands)            
    December 31, 2020        
Short-term debt and current portion of long-term debt   $377,255         
Long-term debt, less current portion    2,356,887         
Total debt    2,734,142         
Less: Cash and cash equivalents    768,625         
Net Debt    1,965,517         
Less: Short-term investments    571,741         
Net debt less short-term investments   $1,393,776         
             
             
             
             
             
Reconciliation of Operating Income (Loss) to Adjusted EBITDA            
(Amounts in thousands)           Trailing Twelve
    Three Months Ended Months Ended
    March 28, 2020 June 27, 2020 September 26, 2020 December 31, 2020 December 31, 2020
Operating income (loss)   $151,483  (60,958) 262,744  282,733  636,002 
Other (expense) income    (5,679) (1,037) 726  6,742  752 
Net (income) loss attributable to noncontrolling interests    49  331  (336) (176) (132)
Depreciation and amortization (1)    145,516  154,094  151,342  156,555  607,507 
EBITDA    291,369  92,430  414,476  445,854  1,244,129 
Restructuring, acquisition and integration-related and other costs    10,376  91,963  27,116  15,960  145,415 
Release of indemnification asset    (35) (23) (191) (13) (262)
Adjusted EBITDA   $301,710  184,370  441,401  461,801  1,389,282 
             
Net Debt less short-term investments to Adjusted EBITDA           1.0 
(1) Includes $1,589 of accelerated depreciation in Q1 2020 with $8,395 in Q2 2020, $5,243 in Q3 2020 and $6,435 in Q4 2020.      
             
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and on Constant Shipping Days
      
(Amounts in thousands)            
    Three Months Ended Twelve Months Ended  
    December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019  
Net sales   $2,641,764  2,424,512  9,552,197  9,970,672   
Adjustment to net sales on constant shipping days    (65,438) -  (30,192) -   
Adjustment to net sales on a constant exchange rate    (17,445) -  58,799  -   
Net sales on a constant exchange rate and constant shipping days $2,558,881  2,424,512  9,580,804  9,970,672   
             
             
             
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days
      
(Amounts in thousands)            
    Three Months Ended      
Global Ceramic   December 31, 2020 December 31, 2019      
Net sales   $919,668  858,337       
Adjustment to segment net sales on constant shipping days    (25,205) -       
Adjustment to segment net sales on a constant exchange rate    17,465  -       
Segment net sales on a constant exchange rate and constant shipping days $911,928  858,337       
             
             
Reconciliation of Segment Net Sales to Segment Net Sales on Constant Shipping Days
      
(Amounts in thousands)            
    Three Months Ended      
Flooring NA   December 31, 2020 December 31, 2019      
Net sales   $963,365  936,387       
Adjustment to segment net sales on constant shipping days    (29,193) -       
Segment net sales on constant shipping days $934,172  936,387       
             
             
             
             
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days
      
(Amounts in thousands)            
    Three Months Ended      
Flooring ROW   December 31, 2020 December 31, 2019      
Net sales   $758,731  629,788       
Adjustment to segment net sales on constant shipping days    (11,041) -       
Adjustment to segment net sales on a constant exchange rate    (34,911) -       
Segment net sales on a constant exchange rate and constant shipping days $712,779  629,788       
             
             
             
Reconciliation of Gross Profit to Adjusted Gross Profit            
(Amounts in thousands)            
    Three Months Ended      
    December 31, 2020 December 31, 2019      
Gross Profit   $738,084  622,807       
Adjustments to gross profit:            
Restructuring, acquisition and integration-related and other costs    22,789  45,372       
Adjusted gross profit   $760,873  668,179       
             
             
             
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses
      
(Amounts in thousands)            
    Three Months Ended      
    December 31, 2020 December 31, 2019      
Selling, general and administrative expenses   $455,351  467,993       
Adjustments to selling, general and administrative expenses:            
Restructuring, acquisition and integration-related and other costs    394  (4,651)      
Release of indemnification asset    -  (2)      
Adjusted selling, general and administrative expenses   $455,745  463,340       
          
             
             
             
Reconciliation of Operating Income to Adjusted Operating Income            
(Amounts in thousands)            
    Three Months Ended      
    December 31, 2020 December 31, 2019      
Operating income   $282,733  154,814       
Adjustments to operating income:            
Restructuring, acquisition and integration-related and other costs    22,395  49,802       
Release of indemnification asset    -  2       
Acquisitions purchase accounting, including inventory step-up    -  222       
Adjusted operating income   $305,128  204,840       
             
             
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
      
(Amounts in thousands)            
    Three Months Ended      
Global Ceramic   December 31, 2020 December 31, 2019      
Operating income   $79,565  52,068       
Adjustments to segment operating income:            
Restructuring, acquisition and integration-related and other costs    8,164  1,204       
Adjusted segment operating income   $87,729  53,272       
             
             
             
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
      
(Amounts in thousands)            
    Three Months Ended      
Flooring NA    December 31, 2020 December 31, 2019      
Operating income   $82,407  29,556       
Adjustments to segment operating income:            
Restructuring, acquisition and integration-related and other costs    8,651  42,149       
Adjusted segment operating income   $91,058  71,705       
             
             
             
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income
      
(Amounts in thousands)            
    Three Months Ended      
Flooring ROW    December 31, 2020 December 31, 2019      
Operating income   $132,505  81,595       
Adjustments to segment operating income:            
Restructuring, acquisition and integration-related and other costs    5,496  6,235       
Acquisitions purchase accounting, including inventory step-up    -  222       
Adjusted segment operating income   $138,001  88,052       
             
             
             
Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes
   
(Amounts in thousands)            
    Three Months Ended      
    December 31, 2020 December 31, 2019      
Earnings before income taxes   $273,578  153,374       
Net earnings attributable to noncontrolling interests    (176) (6)      
Adjustments to earnings including noncontrolling interests before income taxes:           
Restructuring, acquisition and integration-related and other costs    22,395  49,802       
Acquisitions purchase accounting, including inventory step-up    -  222       
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China   -  (5,226)      
Release of indemnification asset    (13) 603       
Deferred loan cost write off    -  601       
Adjusted earnings including noncontrolling interests before income taxes   $295,784  199,370       
             
             
             
             
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense      
(Amounts in thousands)            
    Three Months Ended      
    December 31, 2020 December 31, 2019      
Income tax expense   $25,180  (111,299)      
European tax restructuring    -  136,194       
Income taxes - reversal of uncertain tax position    (13) 603       
Income tax effect of adjusting items    18,609  12,183       
Adjusted income tax expense   $43,776  37,681       
             
Adjusted income tax rate    14.8% 18.9%      
             
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 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.

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Source: Mohawk Industries, Inc.