Mohawk Industries Inc (NYSE:MHK) Q4 2019 Earnings Conference Call - Final Transcript

Feb 14, 2020 • 11:00 am ET


Mohawk Industries Inc (NYSE:MHK) Q4 2019 Earnings Conference Call - Final Transcript


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Good morning. My name is Lisa and I'll be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Fourth Quarter 2019 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, February 14, 2020. Thank you.

I would now like to introduce Mr. Ken Huelskamp. You may begin your conference.

Ken Huelskamp

Thank you. Good morning everyone and welcome to the Mohawk Industries quarterly investor conference call. Today, we'll update you on the Company's results for the fourth quarter of 2019 and the full year as well as provide guidance for the first quarter of this year. 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 the 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 the press release in the Investors section of our website.

The key speakers today are Jeff Lorberbaum, Chairman and Chief Executive Officer; Chris Wellborn, Chief Operating Officer; and Glenn Landau, Chief Financial Officer.

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

Jeffrey S. Lorberbaum

Thank you, Ken. Our fourth quarter adjusted results were as we expected with sales flat to last year, operating income of $205 million or 8.4% of sales and EPS of $2.25. For the year, our sales were $10 billion, adjusted operating income was $938 million or 9.4% of sales and EPS was $10.04. Our cash generation remained strong with operating and free cash flow for the quarter of about $440 million and $300 million. For the year, operating and free cash flow were about $1.4 billion and $870 million. Our leverage is approaching historical lows, which provides us the flexibility to pursue additional opportunities. In the period, we bought back approximately $23 million of stock for a total of $375 million since authorized.

We anticipated our business -- as we anticipated, our business remained challenged by soft demand, greater competition and reduced production volume. In the US markets continued to be influenced by the strong dollar and the impact of LVT on other product categories. Consumer confidence remained high and lower US interest rates are positively influencing new and existing home sales. US tariffs on clickable LVT from China were ascended [Phonetic] in the fourth quarter and market pricing has declined for these products.

Imports of ceramic tile from China dropped off substantially in the fourth quarter and shipments from other countries have not offset, which we believe is due to soft demand and a