Mohawk Industries, Inc. (MHK) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 28, 2023 11:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, my name is Alan and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries’ Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference is being recorded, today Friday, 28 July, 2023.

I would like now to introduce Mr. James Brunk. Mr. Brunk, you may begin your conference.

James F. Brunk

Thank you, Alan. Good morning, everyone. Welcome to Mohawk Industries' quarterly investor conference call.

Joining me on today's call are Jeffrey Lorberbaum, Chairman and Chief Executive Officer; and Chris Wellborn, President and Chief Operating Officer. Today, we'll update you on the company's second quarter performance and provide guidance for the third 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 by 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 a 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.

With that, I'll turn over the call to Jeff, for his opening remarks.

Jeffrey S. Lorberbaum

Thanks, Jim. Mohawk’s second quarter net sales were $2.95 billion, down approximately 6.4% as reported or 9.6% on a constant and legacy basis, primarily due to continued pressure on residential remodeling across all of our regions.

Our adjusted EPS was $2.76, as our margins across the enterprise expanded sequentially due to seasonal improvement, increased production, productivity initiatives and lower input costs. We generated over a [$145 million] (ph) of free cash flow during the quarter, further strengthening our financial position.

Typical of housing recessions, higher interest rates and inflation are significantly impacting flooring sales around the world. To manage, we are selectively investing to increase sales and reducing expenses by enhancing productivity, consolidating distribution points and improving administrative efficiencies. In the quarter, we initiated restructuring and integration actions that will save $35 million annually at a cost of approximately $17 million. We anticipate approximately half of the estimated savings should be realized in the current year, partially offsetting the weak residential remodeling activity.