Mohawk Industries (MHK) Q4 2022 Earnings Call Transcript

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Mohawk Industries Inc. Fourth Quarter 2022 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to James Brunk. Please go ahead.

James Brunk

Thank you, Jason. Good morning, everyone, and welcome to Mohawk Industries' Quarterly Investor Call. Joining me on today's call are Jeff Lorberbaum, Chairman and Chief Executive Officer; and Chris Wellborn, President and Chief Operating Officer. Today, we'll update you on the company's fourth quarter and full year performance and provide guidance for the first quarter of 2023.

I'd like to remind everyone that our press release and statements that we make during this call 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 release and our periodic filings with the Securities and Exchange Commission.

This call may include discussion of non-GAAP numbers. For a reconciliation of any non-GAAP to GAAP amounts, please refer to our Form 8-K and press release in the Investors section of our website.

I'll now turn over the call to Jeff for his opening remarks. Jeff?

Jeff Lorberbaum

Thank you, Jim. For the full year of 2022, Mohawk's net sales were $11.7 billion, up approximately 4.8% as reported or 8.8% on a constant basis. And our adjusted EPS for the year was $12.85. The flooring industry entered 2022 with momentum from strong housing markets supported by record home sales, low interest rates and rising household formations. High home equity levels, shifts to larger homes and the desire to customize living spaces during the pandemic were driving remodeling investments. As the year progressed, the U.S. housing market declined under pressure from rising interest rates and inflation. In Europe, energy and overall inflation escalated and consumers reduced discretionary spending to pay for essentials.

In the first half of the year, the company implemented pricing actions and production that offset the inflation we incurred. With reduced home sales and remodeling in the second half of the year, our Flooring volumes decreased. Our pricing did not cover material and energy inflation. Throughout the year, commercial and new construction and remodeling activity outperformed residential.

Even with the housing industry slowing during the second half of the year, we concluded 2022 with a strong balance sheet, low net debt leverage of 1.3 times EBITDA and available liquidity of approximately $1.8 billion to manage the current environment and optimize our long-term results. We acquired five bolt-on businesses during the year that extend the scope of our product offering and our distribution. These include sheet vinyl, mezzanine flooring and wood veneer plant in Europe, a nonwoven flooring manufacturer and a flooring accessories company in the U.S. When we complete the integration of these acquisitions, we will expand their sales opportunities, enhance their operations and improve their efficiencies.