UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[Mark One]
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20222023
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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| | 01-13697 | | |
| | (Commission File Number) | | |
MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | | | 01-13697 | 52-1604305 |
(State or other jurisdiction of
incorporation or organization) | | | (Commission File Number) | (I.R.S. Employer
Identification No.) |
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| 160 S. Industrial Blvd., Calhoun, Georgia | | | | 30701 |
| (Address of principal executive offices) | | | | (Zip Code) |
Registrant’s telephone number, including area code: (706) 629-7721
Securities Registered Pursuant to Section 12(b) of the Act:
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| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| Common Stock, $.01 par value | MHK | New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | | ý | | Accelerated filer | | ☐ |
| Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| Emerging growth company | | ☐ | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ý
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
The aggregate market value of the Common Stock of the Registrant held by non-affiliates (excludes beneficial owners of more than 10% of the Common Stock) of the Registrant (52,478,403(52,771,634 shares) on July 2, 20221, 2023 (the last business day of the Registrant’s most recently completed fiscal second quarter) was $6,768,139,635.$5,443,921,763. The aggregate market value was computed by reference to the closing price of the Common Stock on such date.
Number of shares of Common Stock outstanding as of February 17, 2023: 63,540,31021, 2024: 63,696,446 shares of Common Stock, $.01 par value. Mohawk Industries, Inc. common stock trades on the New York Stock Exchange under symbol MHK.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 20232024 Annual Meeting of Stockholders-Part III.
Table of Contents
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PART I
Item 1.Business
Unless this Form 10-K indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Mohawk,” or “the Company” as used in this Form 10-K refer to Mohawk Industries, Inc.
General
Mohawk is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company’s vertically integrated manufacturing and distribution processes provide competitive advantages in carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (“LVT”) and sheet vinyl flooring. The Company’s industry-leading innovation develops products and technologies that differentiate its brands in the marketplace and satisfy all flooring-related remodeling and new construction requirements. The Company’s brands are among the most recognized in the industry and include American Olean®, Daltile®, Decortiles®, Durkan®, Eliane®, Elizabeth®, Feltex®, Godfrey Hirst®, IVC Commercial®, IVC Home®, Karastan®, Kerama Marazzi®, Marazzi®, Moduleo®, Mohawk®, Pergo®, Quick-Step®, Unilin®and UnilinVitromex®. During the past two decades, the Company 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, the United Kingdom and the United States. The Company had annual net sales in 20222023 of $11.7$11.1 billion. Approximately 60%50% of this amount was generated by sales in the United States and approximately 40%50% was generated by sales outside the United States. The Company has three reporting segments: Global Ceramic, Flooring North America (“Flooring NA”) and Flooring Rest of the World (“Flooring ROW”) with their 20222023 net sales representing 37%39%, 36%34% and 27%, respectively, of the Company’s total revenue. Selected financial information for the three segments, geographic net sales and the location of long-lived assets are set forth in Note 18, Segment Reporting.
Global Ceramic designs, manufactures, sources, distributes and markets a broad line of ceramic, porcelain and natural stone tile products used for floor and wall applications in residential and commercial channels for both remodeling and new construction. In addition, Global Ceramic manufactures, sources and distributes other products, including natural stone, porcelain slabs and quartz countertops, as well as installation materials. Global Ceramic markets and distributes its products under various brands, including the following: American Olean®, Daltile®, Decortiles®, Eliane®, Elizabeth®, EmilGroup®, KAI®, Kerama Marazzi®, Marazzi®, Ragno® and RagnoVitromex®. The Segment sells its products through company-ownedhome centers, Company-owned service centers and franchised operations, independent distributors, home centers,stores, floor covering retailers, ceramic tile specialists, e-commerce retailers, residential builders, independent distributors, commercial contractors and commercial end users. Global Ceramic operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile and countertops.
Flooring NA designs, manufactures, sources, distributes and distributesmarkets a broad range of floor covering products in a variety of colors, textures and patterns for both residential and commercial remodeling and new construction channels. The Segment’s product lines include broadloom carpet, carpet tile, rugs and mats, carpet pad, laminate, medium-density fiberboard (“MDF”), wood flooring, LVT and sheet vinyl. Flooring NA markets and distributes its flooring products under various brands, including the following: Aladdin Commercial®, Durkan®, Foss®, IVC®, Karastan®, Mohawk, Mohawk Group®, Mohawk Home®, Pergo®, Portico® and Quick-Step.Quick-Step®. The Segment sells its products through floor covering retailers, distributors, home centers, mass merchants,merchandisers, department stores, e-commerce retailers, shop at home, buying groups, residential builders, independent distributors, commercial contractors and commercial end users. Flooring NA operations are vertically integrated from the production of raw material to the manufacturing and distribution of the Segment’s product lines.
Flooring ROW designs, manufactures, sources, distributes and distributesmarkets a wide variety of laminate, LVT and sheet vinyl, wood flooring, broadloom carpet and carpet tile collections used in residential and commercial markets for both remodeling and new construction. In addition, Flooring ROW manufactures roofing panels, insulation boards, mezzanine flooring, MDF and chipboards primarily for the European market. The Segment also licenses certain patents related to flooring manufacturing throughout the world. The Segment markets and distributes its products under various brands, including the following: Feltex®, GH Commercial®, Godfrey Hirst®, Hycraft®, IVC Commercial®, IVC Home®, Lentex®, Leoline®, Moduleo®, Pergo®, Quick-Step®, Redbook® and Unilin.Unilin®. The Segment sells its products through floor covering retailers, wholesalers, home centers, Company-operated distributors, residential builders, independent distributors, commercial contractors and home centers.commercial end users. Flooring ROW operations are vertically integrated from the production of raw material to the manufacturing and distribution of the Segment’s product lines.
Business Strategy
Mohawk’s business strategy provides a consistent vision for the organization and focuses employees around the globe on key priorities. The strategy is cascaded down through the organization with an emphasis on five key points:
•Optimizing the Company’s position as the industry’s preferred provider by delivering exceptional value to customers;
•Treating employees fairly to retain the best organization;
•Driving innovation in all aspects of the business;
•Taking reasonable, well considered risks to grow the business; and
•Enhancing the communities in which the Company operates.
The Mohawk business strategy provides continuity for the Company’s operating principles and ensures a focus on exceeding customer expectations.
Strengths
Market Position
Mohawk’s fashionable and innovative products, successful participation in all sales channels, creative marketing tools and programs and extensive sales resources have enabled the Company to build market leadership positions in multiple geographies, primarily North America, Brazil, Europe, RussiaLatin America and Australasia, as well as to export products to approximately 170 countries. In North America, Mohawk’s largest marketplace, the Company has leveraged its brands, broad offering and award-winning merchandising to build strong positions across all product categories. In Europe, and Russia, similar advantages have supported market leadership in ceramic tile, premium laminate and sheet vinyl. The Company also has established a strong position in the fast-growing LVT market in the U.S. and Europe following the 2015 acquisition of IVC and subsequent investments to expand productioncapacity and capacity.align the product offering with market trends. The 2018 acquisition of Godfrey Hirst provided the Company with the largest market position in carpet in Australasia to complement the leading hard surface presence that the Company had grown through its earlier acquisitions of national distributors in both Australia and New Zealand. In 2018, the Company acquired Eliane, a leading ceramic tile manufacturer in Brazil, the world’s third largest ceramic market. The Eliane brand is highly regarded for innovative design and strength in high-end porcelain floor and wall tile. TheIn 2023, the Company believes Eliane is Brazil’s largestfurther expanded its presence in Brazil through the acquisition of Elizabeth Revestimentos, a leading Brazilian ceramic tile exporter.business with four manufacturing facilities strategically located throughout Brazil. In 2023, the Company also acquired Vitromex, a leading Mexican ceramic tile business with four manufacturing facilities strategically located throughout Mexico, further solidifying the Company’s position in the Mexico ceramic tile market.
Product Innovation
Mohawk drives performance through innovation and process improvements across all product categories. In ceramic, this includes proprietary Reveal Imaging® printing that replicates the appearance of other surfaces, such as long planks with the visuals and texture of natural wood as well as tiles that mimic natural stone, cement, textiles and other alternatives. The Company has pioneered an innovative ceramic tile technology called StepWise™ that is infused into our top-quality porcelain tile to significantly improve slip resistance. Given the frequent use of ceramic tile in kitchens and baths, the Company has also introduced numerous collections featuring antimicrobial treatment that becomes a permanent part of the product. In Italy and Russia, the Company manufactures large-scale porcelain slabs that can replicate the look of natural stone but are harder and more durable. In addition to satisfying demand for their domestic markets, porcelain slabs produced in Europe are also exported to North America, where along with the Company’s quartz countertop and natural stone slab offerings they provide customers with a comprehensive array of surface options. In carpet, the Company introduced theCompany’s unique Air.o™ unified soft surface collection that integrates a polyester pad into tufted polyester carpet, offering consumers a hypoallergenic and moisture-resistant alternative to traditional carpet. The Company has also launched an innovative carpet backing called Recover™ that is hypoallergenic, latex and VOC free and is easier to install and seam. The Company’s exclusiveproprietary fiber technologies include the proprietary bio-based SmartStrand® and its brand extensions, that representedwhich are made in part with annually renewable plant-based materials and were the first super-soft stain-resistant products on the market as well as the patented Continuum™ process that adds bulk and softness to polyester fiber, differentiating the Company’s products in this fast-growing component of the carpet market. These fiber advantages have been extended into the Company’s rug production, as well, adding luxurious feel and performance enhancements to the Company’s design leadership. In laminate, the Company’s patented Uniclic® installation technology revolutionized the category and has been extendedadapted into the LVT and wood categories, as well. The Company continues to deliver new innovations such as unique HydroSeal™ water-resistance that has extended the laminate category into kitchens and baths, more realistic visuals with GenuEdge® pressed bevel edges and surface embossing in register that precisely recreates the appearance of wood. As consumer preference for water-proof flooring has increased, the Company has introduced a propriety technology called WetProtect™ that makes the joints of installed laminate and LVT water tight and prevents liquid spills from reaching the
subfloor. This technology has been uniquely applied to wood flooring with UltraWood™, which also features an advanced waterproof finish in addition to improved scratch, wear and dent resistance.resistance, and to PureTech™, a new sustainable alternative to waterproof flooring that includes 70% recycled content and is free from PVC plastic. The Company’s vinyl offerings reflect significant investments in leading-edge technology that yield incredibly realistic reproductions of stone, wood and other materials with embossed finishes that create more realistic visuals. To complement the beauty of its LVT collections, the Company has also enhanced the performance of its premium rigid products with a solid stone-plastic composite core and an enhanced lacquer finish to provide a dent proof, scratch resistant surface that can withstand today’s active family homes.
Operational Excellence
Mohawk’s highly efficient manufacturing and distribution assets serve as the foundation for successful growth. By leveraging continuous process improvement and automation, the Company’s operations drive innovation, quality and value. Through its commitment to sustainability practices, the Company has also optimized natural resources and raw materials. The Company has invested to expand capacity, introduce differentiated new products and improve efficiencies. In particular, the Company’s capital investments have improved recently acquired businesses by upgrading their product offerings, expanding their distribution and improving their productivity. For seventeen years, Mohawk’s training and development programs have been ranked among the best by Training magazine, and Forbes has designated Mohawk as one of the Best Large U.S. Employers.Employers and Training magazine ranked the Company’s training and development programs among the best for more than fifteen years.
Sustainability
Mohawk’s sustainability strategy is founded on three pillars: Better for People, Better for the Planet, and Better for Performance. Through the Better for the People pillar, the Company focuses on employee engagement, health and wellbeing,well-being, workforce development, a Zero-Harm Workplace and community engagement initiatives. Highlights of this pillar include Mohawk Group’s ArtLifting partnership working with artists with disabilities to include their designs in commercial flooring collections, and an extensive internal training initiative from the plant floor to the C-suite. In the U.S. and Mexico, the Company operates on-site, near-site or virtual Healthy Life Centers to assist employees and their eligible family members with management of chronic conditions as well as treatment of acute illness. Through the Better for the Planet pillar, Mohawk focuses on a climate-positive future through energy conservation, water restoration and product circularity, including waste reduction and responsible sourcing. The Company uses extensive recycled content in many of its products, including transforming billions of discarded plastic bottles annually to create polyester carpet fiber and millions of pounds of tires annually to produce decorative crumb rubber mats. The Company also produces energy through solar panels, windmills and a waste-to-energy program using scrap wood material. Through the Better for Performance pillar, the Company focuses on ESG governance,sustainability initiatives, ethics, and data security and privacy, including creating and maintaining ESG-relatedsustainability-related policies. The sustainability section of ourMohawk’s corporate website sets forth ourthe Company’s initiatives with respect to these pillars and will beis updated periodicallythroughout each year but is not incorporated into this document.
Sales and Distribution
Global Ceramic
Global Ceramic designs, markets, manufactures, distributes and sources a broad line of ceramic tile, porcelain tile and natural stone products, including natural stone, porcelain slabs and quartz countertops. Products are distributed through various channels, including independent distributors, home centers, Company-operatedCompany-owned service centers and stores, floor covering retailers, ceramic tile specialists, e-commerce retailers, residential builders, independent distributors, commercial contractors and directly to commercial end users. The business is organized with dedicated sales forces to address the specific customer needs of each distribution channel.
The Company provides customers with one of the ceramic tile industry’s broadest product lines—a complete selection of glazed floor tile, glazed wall tile, mosaic tile, porcelain tile, quarry tile, porcelain landscaping pavers, porcelain roofing, stone products, porcelain slabs, quartz countertops and installation products. In addition to products manufactured by the Company’s ceramic tile business, the Company also sources products from other manufacturers to enhance its product offering.
Global Ceramic markets its products under the American Olean, Daltile, Decortiles, Eliane, Elizabeth, EmilGroup, KAI, Kerama Marazzi, Marazzi, Ragno and RagnoVitromex brand names. These brands are supported by a fully integrated marketing program, displays, merchandising boards, literature, catalogs and websites. Innovative design, quality and response to changes in customer preference enhance recognition in the marketplace. The Company is focused on sales growth opportunities through innovative products and programs in both the residential and commercial channels for both remodeling and new construction.
Global Ceramic utilizes various distribution methods including regional distribution centers, service centers, direct shipping and customer pick-up from manufacturingCompany facilities. The Segment’s sales forces are organized by product type and sales channels in order to best serve each type of customer. The Company believes its distribution methods for Global Ceramic provide high-quality customer service and enhance its ability to plan and manage inventory requirements.
Flooring NA
Through Flooring NA, the Company designs, markets, manufactures, distributes and sources broadloom carpet, carpet tile, carpet pad, rugs, laminate, LVT, sheet vinyl and wood flooring in a broad range of colors, textures and patterns. Flooring NA positions product lines in all price ranges and emphasizes quality, style, performance and service. Flooring NA markets and distributes its product lines to independent distributors, floor covering retailers, home centers, mass merchandisers, department stores, e-commerce retailers, shop at home, buying groups, residential builders, independent distributors, commercial contractors and commercial end users. Some products are also marketed through private labeling programs. Sales to customers focused on residential products represent a significant portion of the total industry and the majority of the Segment’s sales.
The Company has positioned its brand names across all price ranges. Karastan, Foss, Mohawk, Mohawk Home, Pergo, Portico and Quick-Step are positioned to sell in the residential flooring markets. Aladdin Commercial and Mohawk Group are positioned to sell in the commercial market, which is made up of corporate office space, educational facilities, institutional facilities, healthcare/assisted living facilities and retail space. The Company also sells into the commercial hospitality space (hotels, restaurants, gaming facilities, etc.) under its Durkan brand.
The Segment’s sales forces are generally organized by sales channels to best serve each type of customer. Product delivery to independent dealers is facilitated predominantly on Mohawk trucks operating from a strategically positioned national network of warehouses and cross-docks that receive inbound product directly from the Company’s manufacturing operations.
Flooring ROW
Flooring ROW designs, markets, manufactures, markets, licenses, distributes and sources laminate, LVT, sheet vinyl, wood flooring, broadloom carpet and carpet tile. It also designs, manufactures, markets and manufacturesdistributes roofing panels, insulation boards, MDF, chipboards, decorative surfaces and chipboards.mezzanine floors. Products are sold through separate distribution channels, consisting of floor retailers, independent distributors, Company-operated distributors, wholesalers, home centers, Company-operated distributors, residential builders, independent distributors, commercial contractors and commercial end users. The business is organized to address the specific customer needs of each distribution channel.
Flooring ROW markets and sells laminate, LVT, sheet vinyl, broadloom carpet, carpet tile and wood under the Feltex, GH Commercial, Godfrey Hirst, Hycraft, IVC Commercial, IVC Home, Lentex, Leoline, Moduleo, Pergo, Quick-Step and Quick-StepRedbook brands. Flooring ROW also sells private label laminate, wood and vinyl flooring products. The Company believes Quick-Step and Pergo are leading brand names in the European flooring industry, and that Godfrey Hirst and Feltex are leading brand names in the Australasian flooring market. In addition, in Europe, Flooring ROW markets and sells insulation boards and roof panels MDF and chipboards in Europe under the Unilin Insulation brand and MDF chipboards and high-pressure laminate (HPL) panels under the Unilin Panels brand. The Segment also licenses its intellectual property to flooring manufacturers throughout the world.
The Company uses regional distribution centers and direct shipping from manufacturing facilities to provide high-quality customer service and enhance the Company’s ability to plan and manage inventory requirements.
Advertising and Promotion
The Company’s brands are among the best known and most widely distributed in the industry. The Company vigorously supports the value and name recognition of its brands through traditional advertising channels, including numerous trade publications and unique promotional events that highlight product design and performance, as well as social media initiatives and Internet-based advertising. The Company has invested significantly in websites that educate consumers about the Company’s products, helping them to make informed decisions about purchases, and that identify local retailers that offer the Company’s collections. The Company offers its customers the award-winning Omnify™, an Internet platform that automatically syncs updated product and sales information between the Company and its U.S. aligned retailer websites, ensuring that consumers have access to the most accurate and timely information and creating a faster connection between the consumer and local retailers.
In North America, the Company actively supports well known programs such as Susan G. Komen® (breast cancer research), Habitat for Humanity® (housing for low income families) and, Operation Finally Home® (housing for disabled veterans), water.org® (accessibility to clean, safe water), ArtLifting® (opportunities for artists with disabilities and financial instability) and PlasticBank® (recovering and recycling plastic waste from oceans), which include marketing partnerships that showcase the Company’s products and highlight its corporate values. The Company also sponsors a European cycling team to promote its Quick-Step brand through logo placements and use of the team in its advertising and point-of-sale displays.
The Company introduces new products, merchandising and marketing campaigns through participation in regional, national and international trade shows as well as at exclusive dealer conventions. The Company supports sales with its retail customers through cooperative advertising programs that extend the reach of the Company’s promotion as well as with innovative merchandising displays that highlight the Company’s differentiated products and provide samples to consumers. The cost of providing merchandising displays, product samples and point of sale promotional marketing, is partially recovered by the purchase of these items by the Company’s customers.
Manufacturing and Operations
Global Ceramic
The Company’s ceramic tile manufacturing operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile and quartz countertops. The Company believes that its manufacturing organization’s leading-edge technology offers competitive advantages due to its ability to create a differentiated product line consisting of one of the industry’s broadest offerings of sizes, shapes, colors, textures and finishes, as well as the industry’s largest offering of trim and decorative pieces. In addition, Global Ceramic also sources a portion of its collections to enhance its product offerings. Global Ceramic continues to invest in equipment that utilizes the latest technologies, which supports the Company’s efforts to increase manufacturing capacity, improve efficiency, meet the growing demand for its innovative products and develop new capabilities.
Flooring NA
The Company’s carpet and rug manufacturing operations are vertically integrated and include the extrusion of triexta, nylon, polyester and polypropylene resins, as well as recycled post-consumer plastics, into fiber. Flooring NA is also vertically integrated in yarn processing, carpet backing manufacturing, tufting, weaving, dyeing, coating and finishing.
The Segment is also vertically integrated with significant manufacturing assets that produce laminate flooring, high density fiber board, wood flooring, fiberglass sheet vinyl and luxury vinyl tile. Flooring NA continues to invest in capital projects,expenditures, such as the expansion of the Company’s North American LVT and premium laminate manufacturing capacity. Other investments in state-of-the-art equipment support market growth, increase manufacturing efficiency and improve overall cost competitiveness.
Flooring ROW
The Company’s laminate and vinyl flooring manufacturing operations in Europe are vertically integrated. The Company believes Flooring ROW has advanced equipment that results in competitive manufacturing in terms of cost and flexibility. In addition, Flooring ROW has significant manufacturing capability for wood flooring, LVT and sheet vinyl. The 2018 acquisition of Godfrey Hirst established vertically integrated broadloom carpet and carpet tile operations in Australia and New Zealand, including the production of wool yarn. Flooring ROW is also vertically integrated in carpet manufacturing, including tufting, weaving, dyeing, coating and finishing.
Flooring ROW continues to invest in capital expenditures such as LVT, and laminate expansions, as well as further investments in new future-proof capacity in chipboards and MDF, respectively, utilizing the latest advances in technologies to increase manufacturing capacity, improve efficiency and develop new capabilities including state-of-the-art, fully integrated production that will leverage the Company’s proven record of bringing innovative and high-quality products to its markets. The manufacturing facilities for roofing panels, insulation boards, MDF and chipboards in Flooring ROW are all configured for cost-efficient manufacturing and production flexibility and are competitive in the European market.
Inputs and Suppliers
Global Ceramic
The principal raw materials used in the production of ceramic tile are clay, talc, feldspar, industrial minerals and glazes. The Company has long-term clay mining rights in North America, Russia, Bulgaria and Brazil that satisfy a portion of its clay requirements for producing tile. The Company also purchases a number of different grades of clay for the manufacture of its tile. Glazes are used on a significant percentage of manufactured tiles. Glazes consist of frit (ground glass), zircon, stains and other materials, with frit being the largest component. The Company manufactures a significant amount of its frit requirements. The Company believes that there is an adequate supply of all grades of clay, talc and industrial minerals that are readily available from a number of independent sources. If these suppliers were unable to satisfy the Company’s requirements, the Company believes that alternative supply arrangements would be available.
Flooring NA
The principal raw materials used in the production of carpet and rugs are polypropelene, polyester, triexta, nylon, polypropylene, caprolactam, recycled post-consumer plastics, synthetic backing materials, latex and various dyes and chemicals, the majority of which are petroleum-based. The Company uses wood chips, wood veneers, lumber, paper and resins in its production of laminate and wood products. In its vinyl flooring operations, the Company uses glass fiber, plasticizers and polyvinyl chloride (PVC) resins. Major raw materials used in the Company’s manufacturing process are available from independent sources, and the Company obtains most of its raw materials from major suppliers that provide inputs to each major product category. If these suppliers were unable to satisfy the requirements, the Company believes that alternative supply arrangements would be available. The market for raw materials is sensitive to temporary disruptions.
Flooring ROW
The principal raw materials used in the production of boards, laminate and wood flooring are wood, paper and resins. The wood suppliers provide a variety of wood species, providing the Company with a cost-effective and secure supply of raw material. In its vinyl flooring operations, the Company uses glass fiber, plasticizers and PVC resins. Major raw materials used in the Company’s manufacturing process are available from independent sources, and the Company has long-standing relationships with a number of suppliers. The principal raw materials used in the production of broadloom carpet and carpet tile are polypropelene,wool, polyester, triexta, nylon, polypropylene, caprolactam, recycled post-consumer plastics, synthetic backing materials, latex and various dyes and chemicals, the majority of which are petroleum-based. If these suppliers were unable to satisfy the requirements, the Company believes that alternative supply arrangements would be available. The market for raw materials is sensitive to temporary disruptions.
Industry and Competition
The Company is the largest flooring manufacturer in a fragmented industry composed of a wide variety of companies ranging from small, privately-held firms to large multinationals. In 2021,2022, the U.S. floor covering industry reported $33.7$37.6 billion in sales, up approximately 21.7%7.5% over 2020’s2021’s sales of $27.7$35.0 billion. In 2021,2022, the primary categories of flooring in the U.S., based on sales, were carpet and rugs (38.5%(33.7%), resilient consisting of LVT, sheet vinyl and various other resilient categories (27.0%), wood (12.9%(32.7%), ceramic tile (12.4%(12.7%), wood (12.1%), stone (6.0%(5.7%) and laminate (3.2%). In 2021,2022, the primary categories of flooring in the U.S., based on square feet sold, were carpet and rugs (45.3%), resilient consisting of LVT, sheet vinyl and various other resilient categories (31.1%(39.3%), carpet and rugs (38.6%), ceramic tile (12.5%(12.0%), wood (6.1%(5.4%), laminate (3.5%(3.3%) and stone (1.5%(1.4%). Each of these categories is influenced by the residential and commercial construction and residential and commercial remodeling end-use markets. These markets are influenced by many factors including changing consumer preferences, consumer confidence, spending for durable goods, interest rates, inflation, availability of credit, turnover in housing and the overall strength of the economy.
The principal methods of competition within the floor covering industry generally are product innovation, style, quality, price, performance technology and service. In each of the markets, price and market coverage are particularly important when competing among product lines. The Company actively seeks to differentiate its products in the marketplace by introducing innovative products with premium features that provide a superior value proposition. The Company’s investments in manufacturing technology, computer systems and distribution network,networks, as well as the Company’s marketing strategies and resources, contribute to its ability to compete on the basis of performance, quality, style and service, rather than price.
Global Ceramic
Globally, the ceramic tile industry is significantly fragmented. Certain regions around the world have established sufficient capacity to allow them to meet domestic needs in addition to exporting product to other markets where their cost, design and/or technical advantages may drive consumer preferences. Some mature markets have seen industry consolidation driven by mergers and acquisitions; however, most markets are comprised of many relatively small manufacturers all working with similar technologies, raw materials and designs. During 2021,2022, the estimated global capacity for ceramic tile was 197180 billion square feet – up slightlydown 9.7% from the prior year primarily due to increased production capacityinflation, an energy crisis and slowing demand for flooring in Chinathe second half of 2022 – with selling prices varying widely based on many factors, including supply within the market, materials used, size, shape and design. While the Company operates ceramic manufacturing facilities in eight countries, the Company has leveraged advantages in technology, design, brand recognition and marketing to extend exports of its products to approximately 160 countries. As a result of this global sales strategy, the Company faces competition in the ceramic tile market from a large number of foreign and domestic manufacturers, all of which compete for sales of ceramic tile to customers through multiple residential and commercial channels. The Company believes it is the largest manufacturer, distributor and marketer of ceramic tile in the world. The Company also believes it is the largest manufacturer, distributor and marketer of ceramic tile in specific markets, including the U.S., Europe and Russia, as well as maintaining leading positions in the Mexican and Brazilian markets. The Company has leveraged the advantages of its scale, product innovation and unique designs in these markets to solidify its leadership position, however the Company continues to face pressures in these markets from imported ceramic products as well as alternate flooring categories.
Flooring NA
The North American flooring industry is highly competitive, with an increasing variety of product categories, shifting consumer preferences, supply chain disruptions and pressures from imported products, particularly in the rug and hard surface categories. Based on industry publications, in 2021,2022, the U.S. flooring industry had carpet and rug sales in excess of $13.0approximately $12.7 billion out of the overall $33.7$37.6 billion market. Based on its 20212022 net sales, the Company believes it is the largest producer of rugs and the second largest producer of carpet in the world. The Company differentiates its carpet and rug products in the marketplace through proprietary fiber systems, state-of-the-art manufacturing technologies and unique styling as well as leveraging the strength of some of the oldest and best-known brands in the industry. The Company also believes it is the largest manufacturer and distributor of laminate flooring in the U.S., as well as the producer of the industry’s first waterproof wood flooring. The Company’s leading position in laminate flooring is driven by the strength of its premium brands as well as technical innovations such as water resistance, realistic visuals, beveled edges, deeply embossed in register surfaces and patented installation technologies. The U.S. resilient industry is highly competitive, and according to industry publications, grew more than 30.3%17.4% in 2021.2022. Based on industry publications, in 2021,2022, LVT, sheet vinyl and other various resilient categories generated sales of $9.1$12.3 billion out of the $33.7$37.6 billion total U.S. flooring market. The Company believes that it is one of the largest manufacturers and distributors of LVT and sheet vinyl in the U.S. The Company’s sheet vinyl operations produce fiberglass backed products, which have proven more popular with consumers in the past several years due to superior performance and durability.
Flooring ROW
The Company faces competition in the non-U.S. laminate, wood, LVT and sheet vinyl flooring business from a large number of domestic manufacturers as well as pressures from imports. The Company believes it is one of the largest manufacturers and distributors of laminate flooring in the world, with a focus on premium products, which the Company supplies under some of the best-known and most widely marketed brands in its regions. In addition, the Company believes it has a competitive advantage in its laminate flooring markets as a result of the Company’s industry-leading water resistance, realistic visuals and embossed-in-register surfaces as well as patented installation technologies, all of which allow the Company to differentiate its products in the areas of design, performance, installation and assembly. In wood flooring, the Company has extended the strength of its well-known laminate brands and its installation technologies to add value to its wood collections. The Company faces competition in the non-U.S. vinyl flooring channel from a large number of domestic and foreign manufacturers, but believes it has a competitive advantage in its LVT and sheet vinyl markets due to industry-leading design, patented technologies, brand recognition and vertical integration. The Company has elevated the performance of its sheet vinyl collections and is now aggressively placing the product in commercial applications. After initially extending its geographic footprint by acquiring national hard surface distributors in Australia and New Zealand, the Company acquired Godfrey Hirst, making the Company the largest manufacturer of carpet in both countries. The Company has integrated its soft and hard surface businesses to provide a comprehensive offering to residential and commercial customers in the region. In Australia and New Zealand, the Company faces competition from a large number of domestic and foreign manufacturers, but believes it has a competitive advantage in its carpet and hard surface offering due to industry-leading design, patented technologies, brand recognition and vertical integration of manufacturing and distribution. Through the acquisitions of Xtratherm and of
Ballytherm, the Company has extended its insulation panel business to the United Kingdom and Ireland while expanding sales in its core Benelux Region. The Company also expanded its European wood panels business by acquiring German-based Berghoef and Otto Schneider (mezzanine flooring) and French-based Panneaux De Corrèze (MDF). The Company also extended its sheet vinyl business with the acquisition of Polish-based Lentex.
Patents and Trademarks
Intellectual property is important to the Company’s business and the Company relies on a combination of patent, copyright, trademark and trade secret laws to protect its interests.
The Company uses several trademarks that it considers important in the marketing of its products, including American Olean, Daltile, Decortiles, Durkan, Eliane, Elizabeth, EmilGroup, Feltex, Foss, Godfrey Hirst, IVC Commercial, IVC Home, Karastan, Kerama Marazzi, Lentex, Leoline, Marazzi, Moduleo, Mohawk, Mohawk Group, Mohawk Home, Pergo, Quick-Step and Unilin. These trademarks reflect innovations in design, performance and installation, which represent competitive advantages and provide differentiation from competing brands in the market.
Flooring ROW owns a number of patent families in Europe and the U.S., some of which the Company licenses to manufacturers throughout the world. The Company continues to explore additional opportunities to generate revenue from its patent portfolio.
Major Customers
During 2022,2023, no single customer accounted for more than 10% of the Company’s total net sales, and the top 10 customers accounted for less than 20% of the Company’s total net sales. The Company believes the loss of one major customer would not have a material adverse effect on its business.
Human Capital
The Company’s management team recognizes the importance of its employees to the Company’s overall long-term success. The Company continues to focusprioritizes its employees by focusing on thea number of human capital objectives, including recruitment, development, safety, engagement and retention, and safety, health and well-being.
The Company’s talent development initiatives center on the education, exposure and experience of its employees.employees, and the Company’s commitment to diversity. The Company continuesprioritizes the development of early-in-career minority talent to monitorbuild and expand future generations of minority leadership. The Company is also dedicated to building community partnerships and leveraging its employer brand to yield an applicant pool that reflects the impactdiversity of the COVID-19 pandemiccommunities in which the Company operates. The Company remains committed to promoting all aspects of diversity, equity and will continueinclusion in its hiring practices and talent development framework.
The Company is dedicated to implementcreating a working environment that is free from hazards, promoting employee well‑being and prioritizing safety proceduresat every level. The Company fosters a collaborative partnership with its employees to prevent workplace transferuphold safe and secure workplaces across the globe. Each of the virus.Company’s business segments prioritizes enhancement of safety measures within their respective facilities, with a heightened focus on equipment maintenance, machine guards and peer‑to‑peer feedback. By consolidating safety data from all business segments, the Company calculates its corporate recordable incident rate, which serves as a key indicator of our overall safety performance.
As of December 31, 2022,2023, the Company employed approximately 40,90043,300 persons, consisting of approximately 17,70017,100 in North America -the United States and Canada, approximately 14,80014,900 in Europe and Russia and approximately 8,40011,300 in other countries. The majority of the Company’s European and Russian manufacturing employees are members of unions. Additionally, theThe Company has not experienced any major strikes or work stoppages in recent years. The Companyyears and believes that its relations with its employees are good.
Governmental Regulations
As a global manufacturing company, theCompany's operations are subject to numerous federal, state and local laws and regulations, both within and outside the U.S., in areas such as environmental protection, international trade, data privacy, tax, consumer protection, government contracts, climate change and others. The Company is subject to import and export controls, tariffs, and other trade-related regulations and restrictions in the countries in which it has operations or otherwise does business. The Company believes that it is in compliance, in all material respects, with presently applicable laws and regulations.
The Company complies with all laws and regulations regarding protection of the environment, and in many cases where laws and regulations are less restrictive, the Company has established and is following its own standards, consistent with the Company’s commitment to environmental responsibility. These compliance requirements align with the Company’s focus on sustainability initiatives. The Company believes that it is in compliance, in all material respects, with presently applicable governmental provisions relating to environmental protection in the countries in which the Company has manufacturing operations. Compliance with these environmental laws and regulations did not have a material effect on capital expenditures, earnings, or the Company’s competitive position during 2023 and is not expected to be material in 2024.
Available Information
The Company’s Internet address is https://www.mohawkind.com. The Company makes available the following reports it files on its website, free of charge, under the heading “Investors”:
•annual reports on Form 10-K;
•quarterly reports on Form 10-Q;
•current reports on Form 8-K; and
•amendments to the foregoing reports.
The foregoing reports are made available on the Company’s website as soon as practicable after they are filed with, or furnished to the Securities and Exchange Commission (“SEC”). In addition to our website, the SEC maintains an Internet site that contains our reports, proxy and information statements, and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
Item 1A.Risk Factors
In addition to the other information provided in this Form 10-K, the following risk factors should be considered when evaluating an investment in shares of the Company’s Common Stock. If any of the events described in these risks were to occur, it could have a material adverse effect on the Company’s business, financial condition and results of operations.
Industry and Economic Risks
The floor covering industry is sensitive to changes in general economic conditions, such as consumer confidence, income and spending, corporate and government spending, interest rate levels, availability of credit and demand for housing. Significant or prolonged declines in the U.S. or global economies could have a material adverse effect on the Company’s business.
Downturns in the U.S. and global economies negatively impact the floor covering industry and the Company’s business. During times of economic uncertainty or decline, end consumers tend to spend less on remodeling their homes, which is how the Company derives a majority of its sales. Likewise, new home construction - and the corresponding need for new flooring materials - tends to slow down during recessionary periods. In the foreseeable future, cyclicalCyclical economic downturns have caused, and could continue to cause, the industry to deterioratesoften globally or in the local markets in which the Company operates. A significant or prolonged decline in residential or commercial remodeling or new construction activity could have a material adverse effect on the Company’s business and results of operations.
The Company faces intense competition in the flooring industry that could decrease demand for the Company’s products or force it to lower prices, which could have a material adverse effect on the Company’s business.
The floor covering industry is highly competitive. The Company faces competition from a number of manufacturers and independent distributors. Some of the Company’s competition is from companies located outside of the major markets in which the Company participates, and these competitors may benefit from lower input costs or state subsidies. Also, trade tariffs may impact both the Company and its competitors in different and unpredictable ways. Maintaining the Company’s competitive position may require substantial investments in the Company’s product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Competitive pressures may also result in decreased demand for the Company’s products, force the Company to lower prices or prevent the Company from raising prices to keep up with inflation. Moreover, fluctuations in currency exchange rates and input costs may contribute to more attractive pricing for imports that compete with the Company’s products, which may put pressure on the Company’s pricing. Any of these factors could have a material adverse effect on the Company’s business.
The COVID-19 pandemic has materially impacted the Company’s business, and may continue to impact the Company’s business in the future.
The COVID-19 pandemic has impacted areas where the Company operates and sells its products and services. Mohawk generates sales in approximately 170 countries and maintains manufacturing operations in 19 countries. Due to its large global footprint, Mohawk’s business is sensitive to macroeconomic events in the United States and abroad, including the COVID-19 pandemic. The Company may continue to see fluctuating demand across a number of its markets resulting from the COVID-19 pandemic.
During economic downturns, including downturns resulting from the COVID-19 pandemic, demand for the Company’s products may significantly decrease. This reduced demand may lead to lower sales and intensified competitive pressures.
In addition, the Company has experienced certain disruptions to its business related to the COVID-19 pandemic, and further disruptions may occur that could materially affect the Company’s ability to obtain supplies, manufacture its products or deliver inventory in a timely manner. Although the Company believes that it can manage its exposure to these risks, there is no guarantee that the Company will be able to do so in the future. The extent to which the COVID-19 pandemic may continue to impact the Company’s operations, results of operations, liquidity and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
To the extent the COVID-19 pandemic adversely affects the Company’s business, financial conditions and results of operations it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
International Risks
The ongoing military conflict between Russia and Ukraine has impacted and may continue to affect the Company’s business and results of operations.
As a result of Russian military actions in Ukraine during fiscal 2022, the Company experienced supply chain disruption of raw materials sourced from Ukraine (primarily clay), as well as other materials and spare parts needed in the Company’s operations. The Company was also impacted by global increases in the cost of natural gas, oil and oil-based raw materials and chemicals. In addition, the United States, the European Union and other governments have imposed and extended sanctions on certain individuals and financial institutions and have proposed to use broader economic sanctions. Russia also imposed reciprocal sanctions against the United States and European Union. Since first quarter 2022, the Company has suspended new investments in Russia.
The broader consequences of this conflict, which may include further economic sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory actions, including nationalization of foreign-owned businesses; increased tensions between the United States and countries in which the Company operates; and the extent of the conflict’s effect on the Company’s business and results of operations, as well as the global economy, cannot be predicted. Any future consequences of the conflict, including additional economic sanctions, may result in an adverse effect on the Company’s Russian operations, which represented approximately 5% of net sales for the year ended December 31, 2022. The Company continues to monitor the potential impacts on its business and the ancillary impacts that the conflict may have on its other global operations.
The Company manufactures, sources and sells many products internationally and is exposed to risks associated with doing business globally.
The Company’s international activities are significant to its manufacturing capacity, revenues and profits; and the Company continues to expand internationally through theacquisitions, construction of new manufacturing operations and investments in existing ones. Currently, Flooring ROW has significant operations in Europe, Russia, Brazil, Malaysia, Australia and New Zealand and Global Ceramic has significant operations in Brazil, Europe, Russia and Mexico. In addition, the Company sources raw materials and finished goods from multiple international locations.
The Company’s international sales, supply chain, operations and investments are subject to risks and uncertainties, including:
•changes in foreign country regulatory requirements;
•differing business practices associated with foreign operations;
•various import/export restrictions and the availability of required import/export licenses;
•imposition of foreign or domestic tariffs and other trade barriers;
•foreign currency exchange rate fluctuations;
•differing inflationary or deflationary market pressures, including the recent increase in inflation globally;pressures;
•foreign country tax rules, regulations and other requirements, such as changes in tax rates and statutory and judicial interpretations in tax laws;
•differing labor laws and changes in those laws;
•work stoppages and labor shortages, including as a result of the COVID-19 pandemic;shortages;
•disruptions in the shipping of imported and exported products;
•government price controls;
•extended payment terms and the inability to collect accounts receivable;
•potential difficulties repatriating cash from non-U.S. subsidiaries; and
•compliance with laws governing international relations and trade, including those U.S. and European Union laws that relate to sanctions and corruption.corruption; and
•supply chain disruption or price escalations for oil, natural gas and other raw materials due to regional conflict.
The Company cannot assure investors that it will succeed in developing and implementing policies and strategies to address the foregoing risks effectively in each location where the Company does business, and therefore that the foregoing factors will not have a material adverse effect on the Company’s business.
The Company operates in emerging markets, including Brazil, eastern Europe, Malaysia, Mexico and Russia, and therefore has exposure to doing business in potentially unstable areas of the world.
Operations in emerging markets are subject to greater risk than more developed markets, including in some cases significant legal, economic and political risks. Market conditions and the political structures that support them are subject to rapid change in these economies, and the Company may not be able to react quickly enough to protect its assets and business operations. In particular, developing markets in which the Company operates may be characterized by one or more of the following:
•complex and conflicting laws and regulations, which may be inconsistently or arbitrarily enforced;
•high incidences of corruption in state regulatory agencies;
•volatile inflation;
•widespread poverty and resulting political instability;
•compliance with laws governing international relations and trade, including U.S. and European Union laws that relate to sanctions and corruption;
•immature legal and banking systems;
•uncertainty with respect to title to real and personal property;
•underdeveloped infrastructure;
•heavy state control of natural resources and energy supplies;
•state ownership of transportation and supply chain assets;
•high protective tariffs and inefficient customs processes;
•high crime rates; and
•war and/or armed conflict.
Changes in any one or a combination of these factors could have a material adverse effect on the Company’s business.
Fluctuations in currency exchange rates may impact the Company’s financial condition and results of operations and may affect the comparability of results between the Company’s financial periods.
The results of the Company’s foreign subsidiaries are translated into U.S. dollars from the local currency for consolidated reporting. The exchange rates between some of these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. The Company may not be able to manage effectively its currency translation risks, and volatility in currency exchange rates may have a material adverse effect on the Company’s consolidated financial statements and affect comparability of the Company’s results between financial periods.
IndexAs a result of ongoing Russian military actions in Ukraine, the Company has experienced and may continue to Financial Statementsexperience supply chain disruption of raw materials sourced from Ukraine, as well as other materials and spare parts needed in the Company’s operations if alternative sources identified in other countries cannot fulfill these needs. The Company can also be impacted by global increases in the cost of natural gas, oil and oil-based raw materials and chemicals, which were among the broader consequences of Russia’s actions in the initial year of the conflict. In addition, the United States, the European Union and other governments have imposed and extended sanctions on certain individuals and financial institutions and have proposed to use broader economic sanctions. Since first quarter 2022, the Company has suspended new investments in Russia.
The broader consequences of this conflict, which may include further economic sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory actions, including nationalization of foreign-owned businesses; increased tensions between the United States and countries in which the Company operates; and the extent of the conflict’s effect on the Company’s business and results of operations, as well as the global economy, cannot be predicted. Any future consequences of the conflict, including additional economic sanctions, may result in an adverse effect on the Company’s Russian operations, which represented approximately 4% of net sales for the year ended December 31, 2023. The Company continues to monitor the potential impacts on its business and the ancillary impacts that the conflict may have on its other global operations.
Business and Operational Risks
The Company may be unable to predict customer preferences or demand accurately, or to respond effectively to technological developments.
The Company operates in a market sector where demand is strongly influenced by rapidly changing customer preferences as to product design, product category and technical features. Failure to quickly and effectively respond to changing customer demand or technological developments could have a material adverse effect on the business.
In addition, the rapid development of new technologies such as artificial intelligence, as well as other technologies in the future that are not foreseen today, continue to transform the markets within which the Company operates. In order to remain competitive, the Company will need to adapt to and integrate new technologies into its current and future operations, and also guard against existing and new competitors disrupting its business using such technologies. There can be no assurance that the Company will continue to compete effectively with its industry peers due to technological changes, which could result in a material adverse effect on the Company's business and results of operations.
In periods of rising costs, the Company may be unable to pass raw materials, labor, energy and fuel-related cost increases on to its customers, which could have a material adverse effect on the Company’s business.
The supply and prices of raw materials, labor, energy and fuel-related costs, including those related to oil and natural gas, are subject to market conditions and are impacted by many factors beyond the Company’s control, including geopolitical conflict (such as the ongoing conflict in the Middle East and Russian military actions in Ukraine), pandemics (such as the COVID-19 pandemic), international conflicts, labor shortages, weather conditions, natural disasters, governmental programs, regulations and trade and tariff policies, inflation and increased demand, among other factors. For example, in fiscal 2021 and 2022, the price of the natural gas consumed in the Company’s manufacturing operations continued to increase significantly in some markets compared to historical averages. Although the Company generally attempts to pass on
increases in raw material, labor, energy and fuel-related costs to its customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company’s products. In addition to those experienced in fiscal 2021 and 2022, thereThere have been in the past, and may be in the future, periods of time during which increases in these costs cannot be recovered. During such periods of time, the Company’s business has been and may be materially affected.
The Company may be unable to obtain raw materials or sourced product on a timely basis, which could have a material adverse effect on the Company’s business.
The principal raw materials used in the Company’s manufacturing operations include triexta, nylon, polypropylene, and polyester resins and fibers, which are used in the Company’s carpet and rug business; clay, talc, feldspar and glazes, including frit (ground glass), zircon and stains, which are used in the Company’s ceramic tile business; wood, paper and resins, which are used in the Company’s wood and laminate flooring businesses and panels business; and glass fiber, plasticizers, and pvc resins, which are used in the Company’s sheet vinyl and luxury vinyl tile businesses. In addition to raw materials, the Company sources finished goods. For certain raw materials and sourced products, the Company is dependent on one or a small number of suppliers. A material temporary or long-term adverse change in the Company’s relationship with such a supplier, the financial condition of such a supplier or such a supplier’s ability to manufacture or deliver such raw materials or sourced products to the Company could lead to an interruption of supply or require the Company to purchase more expensive alternatives. Also, the Company’s ability to obtain raw materials or source products at reasonable costs may be impacted by tariffs, global trade uncertainties and international crises, such as the COVID-19 pandemic. While the Company continues to monitor the COVID-19 pandemic and government restrictions enacted to address the pandemic, the long-term impact on its supply chain is unpredictable. In addition,ongoing geopolitical conflict. For example, the Russian invasion of Ukraine has resulted in supply chain disruption of raw materials sourced from Ukraine (primarily clay) in 2022.fiscal 2022, and the ongoing conflict in the Middle East may result in an escalation of oil and petroleum-based chemical prices as well as the introduction of sanctions or transportation barriers, which could impact the Company’s operations. An extended interruption in the supply of sourced products or raw materials used in the Company’s business or in the supply of suitable substitute materials or products wouldcould disrupt the Company’s operations, which could have a material adverse effect on the Company’s business.
The Company makes significant capital investments in its business and such capital investments may not be successful or achieve their intended results.
The Company’s business requires significant capital investment to expand capacity to support its growth, introduce new products, enter new markets and improve operating efficiencies. The Company has historically made significant capital investments each year and will continue to make capital investments in future periods, including approximately $560$480 million of capital investments in 2023.2024. While the Company believes that many of its past capital investments have been successful, there is no guarantee that the return on investment from the Company’s recent or future capital projectsexpenditures will be sufficient to recover the expenses and opportunity costs associated with these projects. Furthermore, a meaningful portion of the Company’s capital investment is based on forecasted growth in its business, which is subject to uncertainty such as general economic trends, increased competition and consumer preferences. If the Company does not accurately forecast its future capital investment needs, the Company could have excess capacity or insufficient capacity, either of which would negatively affect its revenues and profitability.
IndexThe Company’s ability to Financial Statementsattract, develop and retain qualified and talented personnel in management, sales, marketing, product design and operations, including in new international markets into which the Company may enter, is key to the Company’s overall success. The Company competes with multinational firms for these employees and invests resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect the Company’s competitive position and its operating results.
The Company may experience certain risks associated with acquisitions, joint ventures and strategic investments.
The Company intends to grow its business through a combination of organic growth and acquisitions. Growth through acquisitions involves risks, many of which may continue to affect the Company after the acquisition. The Company cannot give assurance that an acquired company will achieve the levels of revenue, profitability and production that the Company expects. Acquisitions may require the issuance of additional securities or the incurrence of additional indebtedness, which may dilute the ownership interests of existing security holders or impose higher interest costs on the Company. Additional challenges related to the Company’s acquisition strategy include:
•maintaining executive offices in different locations;
•manufacturing and selling different types of products through different distribution channels;
•conducting business from various locations;
•maintaining different operating systems and software on different computer hardware; and
•retaining key employees.
Failure to successfully manage and integrate an acquisition with the Company’s existing operations could lead to the potential loss of customers of the acquired business, the potential loss of employees who may be vital to the new operations, the potential loss of business opportunities or other adverse consequences that could have a material adverse effect on the Company’s business. Even if integration occurs successfully, failure of the acquisition to achieve levels of anticipated sales growth, profitability, or otherwise perform as expected, may result in goodwill or other asset impairments or otherwise have a material adverse effect on the Company’s business. Finally, acquisition targets may be subject to material liabilities that are not properly identified in due diligence and that are not covered by seller indemnification obligation or third-party insurance. The unknown liabilities of the Company’s acquisition targets may have a material adverse effect on the Company’s business.
In addition, the Company has made certain investments, including through joint ventures, in which the Company has a minority equity interest and lacks management and operational control. The controlling joint venture partner may have business interests, strategies or goals that are inconsistent with those of the Company. Business decisions or other actions or omissions of the controlling joint venture partner, or the joint venture company, may result in harm to the Company’s reputation or adversely affect the value of the Company’s investment in the joint venture.
A failure to identify suitable acquisition candidates or partners for strategic investments and to complete acquisitions could have a material adverse effect on the Company’s business.
As part of the Company’s business strategy, the Company intends to pursue a wide array of potential strategic transactions, including acquisitions of complementary businesses, as well as strategic investments and joint ventures. Although the Company regularly evaluates such opportunities, the Company may not be able to successfully identify suitable acquisition candidates, to secure certain required governmental approvals necessary to consummate such strategic transactions or to obtain sufficient financing on acceptable terms to fund such strategic transactions, which may slow the Company’s growth and have a material adverse effect on the Company’s business.
The Company has been, and in the future may be, subject to costs, liabilities and other obligations under existing or new laws and regulations, which could have a material adverse effect on the Company’s business.
The Company is subject to increasingly numerous and complex laws, regulations and licensing requirements in each of the jurisdictions in which the Company conducts business. In addition, new laws and regulations may be enacted in the U.S. or abroad, the compliance ofwith which may require the Company to incur additional personnel-related, environmental, or other costs on an ongoing basis.
In particular, the Company’s operations are subject to various environmental, social, and health and safety laws and regulations, including those governing air emissions, wastewater discharges, and the use, storage, treatment, recycling and disposal of materials and finished product.products, and other sustainability related matters. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations of agencies or courts. The Company may incur material costs in order to comply with new or existing regulations, including fines and penalties and increased costs of its operations. For example, Extended Producer Responsibilitycertain aspects of the Company’s operations and supply chain have become, and are expected to become increasingly subject to federal, state, local and international laws, place a shared responsibility for post-consumer product management on various entities involvedregulations and international treaties and industry standards related to climate change. Many governing bodies have introduced additional due diligence and disclosure requirements addressing sustainability that the Company expects will apply to its operations and supply chain in the supply chain, including producers and manufacturers. Expansion of Extended Producer Responsibility legislationcoming years, such as California’s Climate Corporate Data Accountability Act in the jurisdictions whereUnited States and the Company operates could impose additional responsibility onCorporate Sustainability Reporting Directive in the Company in relation to the ultimate treatment or disposal of its products, which could lead to an increase in total costs related to the Company’s products. European Union.
Also, the Company’s manufacturing facilities may become subject to further limitations on the emission of “greenhouse gases”emissions due to public policy concerns regarding climate change issues or other environmental or health and safety concerns. WhileBecause the form of any additional regulations cannot be predicted, a “cap-and-trade” system similar to the system that applies to the Company’s businesses in the European Union could be adopted in the United States. The Company’s manufacturing processes use a significant amount of energy, especially natural gas. Anygas, the imposition of greenhouse gas emissions limitations, such as a “cap-and-trade” system, or other limitations imposed on the emission of “greenhouse gases” could require the Company to increase its capital expenditures, use its cash to acquire emission credits or restructure its manufacturing operations, any of which could have a material adverse effect on its business.
Failure to attain certain sustainability targets and goals could have a material adverse effect on the Company's business.
The Company has established strategies, goals and targets related to climate change and other sustainability matters. The Company’s ability to achieve any such strategies, goals or targets depends on a number of factors, including, but not limited to, evolving regulatory standards, changes in carbon markets, consumer demand for low-carbon and sustainable products, technological developments, the conduct of third-party manufacturers and suppliers, climate change-related impacts, and raw material and supply chain disruptions. Actual or perceived failures or delays in achieving strategies, goals and targets related to climate change and other environmental matters could adversely affect the Company’s operations and market competitiveness, and result in reputational harm and increased risk of litigation.
The Company’s business operations could suffer significant losses from climate change, natural disasters, catastrophes, fire, pandemics or other unexpected events.
Many of the Company’s business activities involve substantial investments in manufacturing facilities and many products are produced at a limited number of locations. These facilities could be materially damaged by natural disasters, such as floods, tornados, hurricanes and earthquakes, or by fire, pandemics (including COVID-19) or other unexpected events. Specifically, altered weather conditions associated with climate change may impact the Company’s ability to operate certain manufacturing facilities and could also limit general residential or commercial construction activity, which in turn could adversely impact consumer demand for the Company’s products. The Company could incur uninsured losses and liabilities arising from such events, including damage to its reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on its business.
The Company may be exposed to litigation, claims and other legal proceedings relating to its products, operations and compliance with various laws and regulations, which could have a material adverse effect on the Company’s business.
In the ordinary course of business, the Company is subject to a variety of product-related claims, lawsuits and legal proceedings, including those relating to product liability, product warranty, product recall, personal injury, and other matters. The Company is also subject to various claims related to its operations and its compliance with various corporate laws and regulations, including matters described in Note 16, Commitments and Contingencies. A very large claim or several similar claims asserted by a large class of plaintiffs could have a material adverse effect on the Company’s business, if the Company is unable to successfully defend against or resolve these matters or if its insurance coverage is insufficient to satisfy any judgments against the Company or settlements relating to these matters. Although the Company has product liability insurance and other types of insurance, the policies may not provide coverage for certain claims against the Company or may not be sufficient to cover all possible liabilities. Further, the Company may not be able to maintain insurance at commercially acceptable premium levels. Moreover, adverse publicity arising from claims made against the Company, even if the claims are not successful, could adversely affect the Company’s reputation or the reputation and sales of its products.
The long-term performance of the Company’s business relies on its ability to attract, develop and retain talented personnel.
The Company’s ability to attract, develop and retain qualified and talented personnel in management, sales, marketing, product design and operations, including in new international markets into which the Company may enter, is key to the Company’s overall success. The Company competes with multinational firms for these employees and invests resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect the Company’s competitive position and its operating results.
The Company’s inability to maintain its patent licensing revenues could have a material adverse effect on the Company’s business.
The profit margins of certain of the Company’s businesses, particularly Flooring ROW, depend in part upon the Company’s ability to obtain, maintain and license proprietary technology used in the Company’s principal product families. The Company has filed and is continuing to file patents relating to many different aspects of the Company’s products and associated methods and is generating patent license revenues on these diverse patents; however, certain revenue-producing patents have expired or will expire. The failure to develop alternative revenues to replace expired or invalidated patents in the future could have a material adverse effect on the Company’s business.
The Company’s inability to protect its intellectual property rights could have a material adverse effect on the Company’s business.
The Company relies, in part, on the patent, trade secret and trademark laws of the U.S., countries in the European Union and elsewhere, as well as confidentiality agreements with some of the Company’s employees, to protect its intellectual property. The Company cannot assure investors that any patents owned by or issued to it will provide the Company with competitive advantages, that third parties will not challenge these patents, or that the Company’s pending patent applications will be approved.
Furthermore, despite the Company’s efforts, the Company may be unable to prevent competitors and/or third parties from using the Company’s technology without the Company’s authorization, independently developing technology that is similar to that of the Company or designing around the Company’s patents. The use of the Company’s technology or similar technology by others could reduce or eliminate any competitive advantage the Company has developed, cause the Company to lose sales or otherwise harm the Company’s business.
The Company has obtained and applied for numerous U.S. and foreign service marks and trademark registrations and will continue to evaluate the registration of additional service marks and trademarks, as appropriate. The Company cannot guarantee that any of the Company’s pending or future applications will be approved by the applicable governmental authorities. The failure to obtain trademark registrations in the U.S. and in other countries could limit the Company’s ability to protect its trademarks and impede its marketing efforts in those jurisdictions and could have a material effect on its business.
The Company generally requires third parties with access to the Company’s trade secrets to agree to keep such information confidential. While such measures are intended to protect the Company’s trade secrets, there can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that the Company’s confidential and proprietary information and technology will not be independently developed by or become otherwise known to third parties. In any of these circumstances, the Company’s competitiveness could be significantly impaired, which would limit the Company’s growth and future revenue.
Third parties may claim that the Company infringed their intellectual property or proprietary rights, which could cause the Company to incur significant expenses or prevent the Company from selling its products.
In the past, third parties have claimed that certain technologies incorporated in the Company’s products infringe their patent rights. The Company cannot be certain that the Company’s products do not and will not infringe issued patents or other intellectual property rights of others.
The Company might be required to pay substantial damages (including punitive damages and attorneys’ fees), discontinue the use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses authorizing the use of infringing technology. There can be no assurance that licenses for disputed technology or intellectual property rights would be available on reasonable commercial terms, if at all. In the event of a successful claim against the Company along with failure to develop or license a substitute technology, the Company’s business would be materially and adversely affected.
Information Technology Risks
The Company relies on information systems in managing the Company’s operations and any system failure or deficiency of such systems may have an adverse effect on the Company’s business.
The Company’s businesses rely on sophisticated software applications to obtain, process, analyze and manage data. The Company relies on these systems to, among other things:
•facilitate the purchase, management, distribution, and payment for inventory items;
•manage and monitor the daily operations of the Company’s distribution network;
•receive, process and ship orders on a timely basis;
•manage accurate billing to and collections from customers;
•control logistics and quality control for the Company’s retail operations;
•manage financial reporting; and
•monitor point of sale activity.
The Company also relies on its computer hardware, software and network for the storage, delivery and transmission of data to the Company’s sales and distribution systems, and certain of the Company’s production processes are managed and conducted by computer.
Any event that causes interruptions to the input, retrieval and transmission of data or increase in the service time could disrupt the Company’s normal operations. There can be no assurance that the Company can effectively carry out its disaster recovery plan to handle the failure of its information systems, or that the Company will be able to restore its operational capacity within sufficient time to avoid material disruption to its business. The occurrence of any of these events could cause unanticipated disruptions in service, decreased customer service and customer satisfaction, harm to the Company’s reputation
and loss or misappropriation of sensitive information, which could result in loss of customers, increased operating expenses and financial losses. Any such events could in turn have a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
In addition, the Company, both itself and through third party business partners, collects and processes proprietary, personal, confidential and sensitive data, which may include information about customers, employees, suppliers, distributors and others. Some of this data is stored, accessible or transferred internationally. If the Company does not effectively manage the resources necessary to sustain and protect an appropriate information technology infrastructure, or does not effectively implement system upgrades in a timely manner, the Company’s business or financial results could be negatively impacted.
As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to the Company’s business, compliance with those requirements could also result in additional costs to the Company. Any failure to comply with federal, state or international privacy-related or data protection laws and regulations could result in proceedings against the Company by government entities or others. In addition to reputational impacts, penalties could include significant legal liability.
The Company is subject to cybersecurity risks and expects to incur increasing costs in an effort to minimize those risks.
The Company’s business employs information technology systems that allow for the secure storage and transmission of customers’, consumers’, vendors’, employees’ and its own sensitive and proprietary information. These systems may be subject to computer hacking, acts of vandalism or theft, malware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks. Any significant compromise or breach of the Company’s data security, whether external or internal, or misuse of customer, consumer, employee, supplier or Company data, could result in significant costs, lost sales, fines, lawsuits and damage to the Company’s reputation. Furthermore, as cyber-attacks become more sophisticated, the Company expects to incur increasing costs to strengthen its systems from outside intrusions and to maintain insurance coverage related to the threat of such attacks. While the Company has implemented administrative and technical controls and has taken other preventive actions to reduce the risk of cyber incidents and protect its information technology, they may be insufficient to prevent, or respond to, physical and electronic break-ins, cyber-attacks or other security breaches to the Company’s systems.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to the Company’s business, compliance with those requirements could also result in additional costs to the Company. Any failure to comply with federal, state or international privacy-related or data protection laws and regulations could result in proceedings against the Company by government entities or others. In addition to reputational impacts, penalties could include significant legal liability.
Furthermore, third party business partners provide a number of the key components necessary to the Company’s business functions and systems. Any problems caused by these business partners, including those resulting from disruptions in communication services provided by a business partner, cyber-attacks and security breaches, regulatory restrictions, fines, or orders or other regulatory action causing reputational harm, failure of a business partner to provide services for any reason or poor performance of services, could adversely affect the Company’s ability to conduct its business. In addition, the Company’s business partners could also be sources of operational and information security risk to the Company, including from breakdowns or failures of their own systems or capacity constraints. Replacing these third-party business partners could also create significant delay and expense.
Financial and Liquidity Risks
Changes in the global economy could affect the Company’s overall availability and cost of credit.
A downturn in the U.S. or global economies could impact the Company’s ability to obtain financing in the future, including any financing necessary to refinance existing indebtedness.
Further, negative economic conditions may factor into the Company’s periodic credit ratings assessment by Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Financial Services, LLC (“S&P”) and Fitch, Inc. Any future changes in the credit rating agencies’ methodology in assessing the Company’s credit strength and any downgrades in the Company’s credit ratings could increase the cost of its existing credit and could adversely affect the cost of and ability to obtain additional credit in the future. The Company can provide no assurances that downgrades will not occur. The cost and availability of credit during uncertain economic times could have a material adverse effect on the Company’s financial condition.
If the Company were unable to meet certain covenants contained in its existing credit facilities, it may be required to repay borrowings under the credit facilities prior to their maturity and may lose access to the credit facilities for additional borrowings that may be necessary to fund its operations and growth strategy.
On August 12, 2022, the Company entered into a fourth amendment (the “Amendment”) to its existing senior revolving credit facility (the “Senior Credit Facility”) that provides for revolving credit, including limited amounts of credit in the form of letters of credit and swingline loans. The Amendment, among other things, increased the amount available under the Senior Credit Facility from $1,800 million to $1,950 million until October 18, 2024, after which the amount available under the Senior Credit Facility will decrease to $1,485 million. Any outstanding borrowings under the Company’s U.S. and European commercial paper programs also reduce availability under the Senior Credit Facility. Including commercial paper borrowings, the Company has utilized approximately $848.4$67.9 million under the Senior Credit Facility resulting in a total of $1,101.6$1,882.1 million available as of December 31, 2022.2023.
If the Company’s cash flow is worse than expected, the Company may need to refinance all or a portion of its indebtedness through a public and/or private debt offering or a new bank facility and may not be able to do so on terms acceptable to it, or at all. If the Company is unable to access debt markets at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption, or weakness in the Company’s businesses, the Company’s ability to finance its operations or repay existing debt obligations may be materially and adversely affected.
Additionally, the Company’s credit facilities include certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, indebtedness, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, payments and modifications of certain existing debt, future negative pledges, and changes in the nature of the Company’s business. In addition, the Senior Credit Facility, as amended, requires the Company to maintain a Consolidated Interest Coverage Ratio of at least 3.5 to 1.0. A failure to comply with the obligations contained in the Company’s current or future credit facilities or indentures relating to its outstanding public debt could result in an event of default or an acceleration of debt under other instruments that may contain cross-acceleration or cross-default provisions. The Company cannot be certain that it would have, or be able to obtain, sufficient funds to make these accelerated payments.
Declines in the Company’s business conditions have in the past and may in the future result in an impairment of the Company’s assets, which in turn has resulted in and could result in afuture material non-cash charge.charges.
A significant or prolonged decrease in the Company’s market capitalization, including a decline in stock price, or a negative long-term performance outlook, has in the past resulted in and could in the future result in an impairment of its assets which resultsassets. An impairment occurs when the carrying value of the Company’s assets exceed their fair value. The Company tests the goodwill and intangible assets on its balance sheet for impairment on an annual basis, and also when events occur or circumstances change that indicate that the fair value of the reporting unit or intangible asset may be below its carrying amount. Fair value determinations require considerable judgment and are sensitive to inherent uncertainties and changes in estimates and assumptions. Declines in market conditions, a trend of weaker than anticipated financial performance for the Company’s reporting units or declines in projected revenue, a decline in stock price for a sustained period of time or an increase in the market-based weighted average cost of capital (“WACC”), among other factors, are indicators that the carrying value of the Company’s goodwill or indefinite-lived intangible assets may not be recoverable.
Negative tax consequences could materially and adversely affect the Company’s’s business.
The Company is subject to the tax laws of the many jurisdictions in which it operates. These tax laws are complex, and the manner in which they apply to the Company’s facts is sometimes open to interpretation. In calculating the provision for income taxes, the Company must make judgments about the application of these inherently complex tax laws. The Company’s domestic and international tax liabilities are largely dependent upon the distribution of profit before tax among these many jurisdictions. However, the Company’s provision for income taxes also includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions, including assessments of future earnings of the Company that could impact the valuation of its deferred tax assets. The Company’s future results of operations and tax liability
could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of the Company, changes in tax legislation and rates, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns, and ongoing assessments of the Company’s tax exposures.
Certain countries in which the Company operates have enacted the Organization for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GLOBE”) and Transitional Country-by-Country Reporting (“CBCR”) Safe Harbor rules. The OECD’s GLOBE model rules, and supplemental published administrative guidance, provide a framework that ensures that multinational enterprises (“MNE(s)”) with revenue above €750 million pay a minimum level of tax of 15% on their profits arising in each jurisdiction where they operate.
The framework includes an income inclusion rule (“IIR”) and an undertaxed payments rule (“UTPR”) that work together to ensure a minimum level of tax in each jurisdiction in which a MNE operates. Further, countries can enact their own qualified domestic minimum top up tax (“QDMTT”) in order to limit the application of an IIR or UTPR to their domestic income. IIRs and QDMTTs are expected to be effective for the Company beginning in 2024 in some, but not all, of the jurisdictions in which the Company operates. The UTPR is expected to be effective for the Company beginning in 2025, which could subject the Company’s worldwide profits to a minimum level of tax regardless of whether the country in which the Company earned the income has adopted the GLOBE rules. The Company expects to be able to satisfy the requirements of certain CBCR Safe Harbor rules in many jurisdictions from 2024-2026, limiting the impact of the GLOBE rules in the qualifying jurisdictions, and as such, the Company does not anticipate a material impact to its provision for income taxes in the near term. The Company continues to monitor the OECD’s guidance related to the GLOBE rules and related legislation in the countries in which the Company operates to assess their potential impact to the Company’s income tax position.
Forward-Looking Information
Certain of the statements in this Form 10-K, particularly those 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” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 freight, raw material prices and other input costs; inflation and deflation in consumer markets; currency fluctuations; 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;geopolitical conflict; regulatory and political changes in the jurisdictions in which the Company does business; and other risks identified in Mohawk’s SEC reports and public announcements.
Item 1B.Unresolved Staff Comments
None.
Item 1C.Cybersecurity
Risk Management and Strategy
The Company maintains robust and comprehensive processes, procedures and controls to protect and secure its information systems and data infrastructure from cybersecurity threats. The Company’s cybersecurity program is led by its Senior Director of Cybersecurity, who functions as the chief information security officer (CISO). The Company’s cybersecurity program interfaces with other functional areas within the Company, including but not limited to the Company’s business segments and information technology (“IT”), legal, risk management, human resources and internal audit departments, as well as external third-party partners, to identify and understand potential cybersecurity threats. The Company regularly assesses and updates its processes, procedures and management techniques in light of ongoing cybersecurity developments.
Internally, the CISO coordinates oversight of reviewing security alerts, identifying and monitoring ongoing and potential cybersecurity threats, evaluating strategic business impacts of cybersecurity threats and developing programs and initiatives to educate the Company’s employees regarding cybersecurity. The CISO also manages the Company’s Computer Security Incident Response Plan (the “Incident Response Plan”), which outlines action steps for the preparation, identification, triage, analysis, containment, eradication, recovery and reflection stages of a cybersecurity incident. The Incident Response Plan serves as the charter for the Company’s Computer Security Incident Response Team (the “Incident Response Team”), which includes a strategic team comprised of executives from various cross-functional management teams, as well as a tactical team comprised of internal technical support roles and external third-party service providers. The Incident Response Plan provides how the Incident Response Team will analyze and, as necessary, escalate cybersecurity incidents both internally and with third-party service providers based on type and severity of the specific incident.
The Company also requires cybersecurity training for relevant employees, focusing on the appropriate protection and security of confidential company and third-party information. Additionally, the Company provides annual cybersecurity awareness training that covers a broad range of security topics, including secure access practice, phishing schemes, remote work and response to suspicious activities. In addition to online training, employees are educated through a number of methods, including event-triggered awareness campaigns, recognition programs, security presentations, company intranet articles, videos, system-generated communications, email publications and various simulation exercises.
The Company has engaged a third-party managed detection and response company to monitor the security of its information systems around-the-clock, including intrusion detection, and to provide instantaneous alerting should a cybersecurity event occur. The Company also has engaged a third-party digital forensics and incident response consultant on retainer.
The Company does not believe that any risks from cybersecurity threats, nor any previous cybersecurity incidents, have materially affected the Company. However, the sophistication of cyber threats continues to increase, and the preventative actions the Company has taken and continues to take to reduce the risk of cyber incidents and protect its systems and information may not successfully protect against all cyber incidents. For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations, or financial condition, please refer to Item 1A Risk Factors.
Governance
The Company’s Audit Committee and Board of Directors provide ultimate oversight of the Company’s cybersecurity risk management. The Audit Committee regularly reviews and discusses with management the strategies, processes, procedures and controls pertaining to the management of the Company’s information technology operations, including cyber risks and cybersecurity. The Company’s Chief Information Officer (“CIO”) provides quarterly reports to the Board of Directors regarding the evolving cybersecurity risk landscape, including emerging risks, as well as the Company’s processes, program and initiatives for managing these risks.
The Company’s CISO reports directly to the CIO, who in turn reports to the CEO. The CISO maintains the certified information systems security professional (CISSP) certification and has over 22 years of experience in cybersecurity. Under the direction of the CISO, the Company’s information technology department continuously analyzes cybersecurity and resiliency risks to our business, considers industry trends and implements controls, as appropriate, to mitigate these risks. This analysis drives the Company’s long- and short-term cybersecurity strategies, which are executed through a collaborative effort within the IT department and are communicated to the Board of Directors regularly.
Item 2.Properties
The Company owns and leases manufacturing and distribution facilities worldwide. The table below lists the primary owned and leased facilities as of December 31, 2022.2023. The Company owns its corporate headquarters in Calhoun, Georgia. The Company also owns and operates service centers and stores in the United States, Canada and Russia, none of which are individually material. The Company believes its existing facilities are suitable for its present needs.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Segment and Property Use | | North America | | Europe and Russia | | Other | | Total |
| | | | | | | | |
| Global Ceramic | | | | | | | | |
| Manufacturing | | 8 | | | 11 | | | 3 | | | 22 | |
| Distribution / Warehouse | | 9 | | | 7 | | | 3 | | | 19 | |
| | | | | | | | |
| Flooring North America | | | | | | | | |
| Manufacturing | | 22 | | | — | | | — | | | 22 | |
| Distribution / Warehouse | | 12 | | | — | | | — | | | 12 | |
| | | | | | | | |
| Flooring Rest of the World | | | | | | | | |
| Manufacturing | | — | | | 21 | | | 5 | | | 26 | |
| Distribution / Warehouse | | — | | | 4 | | | — | | | 4 | |
| | | | | | | | |
| Total | | | | | | | | |
| Manufacturing | | 30 | | | 32 | | | 8 | | | 70 | |
| Distribution / Warehouse | | 21 | | | 11 | | | 3 | | | 35 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Segment and Property Use | | North America | | Europe and Russia | | Other | | Total |
| | | | | | | | |
| Global Ceramic: | | | | | | | | |
Manufacturing (1) | | 11 | | | 11 | | | 5 | | | 27 | |
Distribution / Warehouse (1) | | 9 | | | 10 | | | 1 | | | 20 | |
| | | | | | | | |
| Flooring North America: | | | | | | | | |
Manufacturing (1) | | 23 | | | — | | | 1 | | | 24 | |
Distribution / Warehouse (1) | | 23 | | | — | | | 1 | | | 24 | |
| | | | | | | | |
| Flooring Rest of the World: | | | | | | | | |
Manufacturing (1) | | — | | | 21 | | | 5 | | | 26 | |
Distribution / Warehouse (1) | | — | | | 22 | | | 5 | | | 27 | |
| | | | | | | | |
| Total | | | | | | | | |
Manufacturing (1) | | 34 | | | 32 | | | 11 | | | 77 | |
Distribution / Warehouse (1) | | 32 | | | 32 | | | 7 | | | 71 | |
| | | | | | | | |
(1) Certain geographic locations may contain both manufacturing and distribution facilities.
Item 3.Legal Proceedings
From time to time in the regular course of its business, the Company is involved in various lawsuits, claims, investigations and other legal matters. Except as noted elsewhere in this report, there are no material legal proceedings pending or known by the Company to be contemplated to which the Company is a party or to which any of its property is subject.
See Note 16, Commitments and Contingencies, and Note 15, Income Taxes, of the notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for a discussion of the Company’s legal proceedings.
Item 4.Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this annual report on Form 10-K.
PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for the Common Stock
The Company’s common stock, $0.01 par value per share (the “Common Stock”), is quoted on the New York Stock Exchange (“NYSE”) under the symbol “MHK”.
As of February 17, 2023,21, 2024, there were 211214 holders of record of Common Stock. The Company has not paid or declared any cash dividends on shares of its Common Stock since completing its initial public offering. The payment of future cash dividends will be at the discretion of the Board of Directors and will depend upon the Company’s profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board of Directors.
Issuer Purchases of Equity Securities
On February 10, 2022, the Company’s Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million of its common stock (the “2022 Share Repurchase Program”). As of December 31, 2022,2023, there remains $229.2 million authorized under the 2022 Share Repurchase Program.
Under the 2022 Share Repurchase Programs,Program, the Company may purchase common stock in open market transactions, block or privately negotiated transactions, and may from time to time purchase shares pursuant to trading plans in accordance with Rules 10b5-1 or 10b-18 under the Exchange Act or by any combination of such methods. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, regulatory requirements, the market price of the Company’s stock and the availability of alternative investment opportunities. No time limit was set for completion of repurchases under the 2022 Share Repurchase ProgramsProgram and the 2022 Share Repurchase ProgramsProgram may be suspended or discontinued at any time.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased in Millions | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan in Millions | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan |
| | | | | | | | |
| | (In millions, except per share data) in Millions |
October 21 through November 5, 20224, 2023 | | — | | | $ | — | | | — | | | $ | 229.2 | |
November 65 through December 3, 20222, 2023 | | — | | | $ | — | | | — | | | $ | 229.2 | |
December 43 through December 31, 20222023 | | — | | | $ | — | | | — | | | $ | 229.2 | |
| Total | | — | | | $ | — | | | — | | | |
Item 6.Reserved
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following discussion and analysis of the Company’s Results of Operations includes a comparison of fiscal 20222023 to fiscal 2021.2022. A similar discussion and analysis that compares fiscal 20212022 to fiscal 20202021 may be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Form 10-K for the fiscal year ended December 31, 2021.2022.
During the past twothree decades, the Company has grown significantly.significantly through a combination of organic growth and acquisitions. Its current geographic breadth and diverse product offering are reflected in three reporting segments: Global Ceramic, Flooring NA and Flooring ROW. Global Ceramic designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone tile and other products including natural stone, porcelain slabs and quartz countertops, which it distributes primarily in North America, Europe Brazil and RussiaLatin America through various selling channels, which include company-ownedhome centers, Company-owned service centers and stores, floor covering retailers, ceramic tile specialists, e-commerce retailers, residential builders, independent distributors, commercial contractors and home centers.commercial end users. Flooring NA designs, manufactures, sources and markets its floor covering products, including broadloom carpet, carpet tile, carpet cushion, rugs, laminate, vinyl products, including luxury vinyl tile (“LVT”) and sheet vinyl, and wood flooring, all of which it distributes through its network of regional distribution centers and satellite warehouses using Company-operatedcompany-operated trucks, common carriers or rail transportation. The Segment’s product lines are sold through various channels, including independent floor covering retailers, independent distributors, home centers, mass merchandisers, department stores, shop at home, online retailers, buying groups, residential builders, independent distributors, commercial contractors and commercial end users. Flooring ROW designs, manufactures, sources, licenses and markets laminate, vinyl products, including LVT and sheet vinyl, wood flooring, roofing panels, insulation boards, medium-density fiberboard (“MDF”), chipboards, decorative surfaces and chipboards,mezzanine floors, which it distributes primarily in Europe Russia, Australia and New ZealandAustralasia through various channels, including independent floor covering retailers, wholesalers, home centers, Company-operated distributors, independent distributors, company-owned distributors, home centers,residential builders, commercial contractors and commercial end users.
Mohawk is a significant supplier of every major flooring category with manufacturing operations in 19 nations and sales in approximately 170 countries. Based on its annual sales, the Company believes it is the world’s largest flooring manufacturer. A majority of the Company’s long-lived assets are located in the United States and Europe, which are also the Company’s primary markets. Additionally, the Company maintains operations in Australia, Brazil, Malaysia, Mexico, New Zealand, Russia and other parts of the world. The Company is a leading provider of flooring for residential and commercial markets and has earned significant recognition for its innovation in design and performance as well as sustainability.
Due to its global footprint, Mohawk’s business is sensitive to macroeconomic and geopolitical events in the United States and abroad, including the impact of the COVID-19 pandemic. While the near-term economic and financial impact of the COVID-19 pandemic is unpredictable, the Company may continue to see fluctuating demand across a number of its markets. In addition, asabroad. As a result of ongoing Russian military actions in Ukraine, the Company has experienced and may continue to experience supply chain disruption of raw materials sourced from Ukraine, (primarily clay), as well as other materials and spare parts needed in the Company’s operations.operations if alternative sources identified in other countries cannot fulfill these needs. The Company wascan also be impacted by global increases in the cost of natural gas, oil and oil-based raw materials and chemicals, thatwhich were among the broader consequences of Russia’s actions.actions in the initial year of the conflict. In addition, the United States, the European Union and other governments have imposed and extended sanctions on Russia as well as on certain individuals and financial institutions and have proposed the use of broader economic sanctions. Russia also imposed reciprocal sanctions againstSince the United States and European Union. Since first quarter of 2022, the Company has suspended new investments in Russia. The broader consequences of this conflict, which may include further economic sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory actions, including nationalization of foreign-owned businesses; increased tensions between the United States and countries in which the Company operates; and the extent of the conflict’s effect on the Company’s business and results of operations, as well as the global economy, cannot be predicted. In addition, a prolonged and more expansive conflict in the Middle East region could escalate oil and petroleum-based chemical prices as well as lead to the introduction of sanctions or transportation barriers, though the extent of the conflict’s impact on the Company’s business and results of operations, as well as the global economy, cannot be predicted.
During the past year, rapid cost escalations in materials, energy, transportation and labor have impacted the Company’s profitability across all segments. During 2022, inflation,2023, rising interest rates, delayed consumer spending due to inflationary pressures and other macroeconomic factors impacted new single-family home construction and residential remodeling in most of the Company’s major markets. AsIncreased mortgage rates have suppressed the housing market and decreased home renovation activity. In addition, globally, consumers have faced a higher cost of living, reducing discretionary spending – including flooringon large purchases – declined; and,such as a result, the Company’s flooring customers reduced inventories, with the greatest impact falling in the fourth quarter.flooring. Mohawk has, to some extent, offset the impact of inflationary pressuresdecreased construction and renovation activity through multiple pricing actions across product categories and geographies; improved mix from sales of higher-value, differentiated products; productivity gains in manufacturing and logistics and cost containment, measures. Given the volatility ofproductivity and lower input costs. Declining costs in energy and raw materials, coupled with lower industry volumes, constrained selling prices, although energy prices in somecertain geographies and materialmaterials prices in some product categories these external pressuresremain volatile and may change significantly and unpredictably, which could have an adverse impact on the Company’s results. Similarly, inflationary pressures around the globe may continue to impact consumer and commercial investments in flooring and other large, deferrable purchases. During 2022,2023, the Company tookfocused on reducing costs through restructuring actions and manufacturing enhancements by taking certain actions to enhance future performance, including facility and product rationalizations and workforce reductions. The Company anticipates these global actions will deliver annual savings of approximately $55 to $60$150 million, with an estimated cost of approximately $125 to $130$215 million.
The Company believes it is well positioned with a strong balance sheet and limited debt.sheet. Based on its current liquidity and available credit, the Company is in a position to finance internal investments, acquisitions and/or additional stock purchases.purchases and pay current debt as it becomes due. For information on risk that could impact the Company’s results, please refer to Risk Factors in Part I, Item 1A of this Form 10-K.
Since becoming a publicly traded company in April 1992, Mohawk has grown both organically and through strategic and bolt-on acquisitions. Mohawk has completed a number of smaller acquisitions in recent years, many of which expanded the Company’s hard surface flooring distribution in Europe. In 2021, the Company purchased an Irish insulation manufacturer that complemented its existing insulation production and distribution in Ireland and the U.K. and a French MDF production plant that added additional capacity and product offerings. During 2022, the Company completed five small, bolt-on acquisitions: a wood veneer plant in Romania; a sheet vinyl producer in Poland; a mezzanine flooring manufacturer in Germany; a nonwoven carpet and rug producer in the U.S.; and a commercial flooring trim and accessories business in the U.S.
On June 3, 2022, the Company entered into an agreement to purchase the Vitromex ceramic tile business from Grupo Industrial Saltillo for approximately $293 million in cash. The Vitromex business includes four manufacturing facilities strategically located throughout Mexico. The transaction has received regulatory approval and is expected to close in During the first quarter of 2023, subject to customary closing conditions.
On November 4, 2022, the Company entered into an agreement to purchasecompleted its acquisitions of Vitromex, a Mexican ceramic tile business, and Elizabeth Revestimentos, a Brazilian ceramic tile business, for approximately $217 million in cash. The Elizabeth business includes four manufacturing facilities strategically located throughout Brazil. The transaction closed on February 2, 2023.business. The Company believes thatthese acquisitions have further solidified the combination of the Eliane and Elizabeth businesses should create the leading marketCompany’s position in Brazilthe Mexico and yield significant sales and operational synergies.Brazilian ceramic tile markets, respectively.
In 2022,2023, the Company invested $580.7$612.9 million in capitalnew and existing projects, for capacity expansions, cost reduction initiatives, previously initiated expansion projects, investments to upgrade equipment in Brazil and upgrades forMexico from recent acquisitions as well asand general maintenance across the segments. The largest investments during this period were inbusiness. Primary investment areas include the Company’s LVT portfolio to upgrade its product offering and improve profitability; premium water-proofwaterproof laminate in North America and Europe; and quartz countertop and porcelain slab expansion in North America and Europe; quartz countertop expansion in North America; and porcelain slab expansion in Europe.Europe, respectively. In 2023,2024, the Company plans to invest an additional amount of approximately $560$480 million to complete existingfocused on completing capacity expansion projects and commence new initiatives. The primary areas of investment are expected to be similar to those in 2022.targeted initiatives that will drive cost reduction while improving operational performance.
Net earningsloss attributable to the Company werewas $439.5 million for 2023 compared to net earnings of $25.2 million for 2022 compared to $1,033.2 million for 2021.2022. The change in net earnings was primarily attributable to lower sales volume; higher inflation costs;impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles impairment charge; lower sales volume;intangibles; unfavorable net impact of price and product mix; the unfavorable impact of temporary plant shutdowns; the unfavorable net impact of foreign exchange rates; higher restructuring, acquisition and integration-related and other costs; charges related tohigher legal settlements, reserves and fees, net of insurance proceeds; the unfavorable net impact from of foreign exchange ratesfees; higher interest expense and higher costs associated with investments in new product development and marketing costs. The unfavorable impact of the aforementioned items was partially offset by the favorable net impact of price and product mix; productivity gains and lower taxes due to decreased earnings in 20222023 compared to the prior year.year; productivity gains and lower inflation. The Company believes that a number of circumstances may impactinfluence trends in 2023,2024, including impactscontinued impact of inflation on consumer discretionary spending, barriers to material availabilityhome sales due to disruptionshigher interest rates, continued softness in the global supply chainresidential remodeling and inflation,uncertainty in residential and commercial new construction, but the extent and duration of such impact cannot be predicted.
For the year ended December 31, 2022,2023, the Company generated $669.2$1,329.2 million of cash from operating activities. As of December 31, 2022,2023, the Company had cash and cash equivalents of $509.6$642.6 million, of which $299.3$553.1 million was in the United States and $210.4$89.5 million was in foreign countries, in addition to $158.0 million in short-term investments.countries.
Results of Operations
| | | | For the Years Ended December 31, |
| | | 2022 | | 2021 | |
| | | | | | For the Years Ended December 31, |
| | (In millions) |
| (In millions) | |
| Statement of operations data: | |
| Statement of operations data: | |
| Statement of operations data: | Statement of operations data: | | |
| Net sales | Net sales | $ | 11,737.1 | | | 100.0 | % | | 11,200.6 | | | 100.0 | % | |
| Net sales | |
| Net sales | |
Cost of sales (1) | |
Cost of sales (1) | |
Cost of sales (1) | Cost of sales (1) | 8,793.6 | | | 74.9 | % | | 7,931.9 | | | 70.8 | % | |
| Gross profit | Gross profit | 2,943.4 | | | 25.1 | % | | 3,268.7 | | | 29.2 | % | |
| Gross profit | |
| Gross profit | |
Selling, general and administrative expenses (2) | |
Selling, general and administrative expenses (2) | |
Selling, general and administrative expenses (2) | Selling, general and administrative expenses (2) | 2,003.4 | | | 17.1 | % | | 1,933.7 | | | 17.3 | % | |
| Impairment of goodwill and indefinite-lived intangibles | Impairment of goodwill and indefinite-lived intangibles | 695.8 | | | 5.9 | % | | — | | | — | % | |
| Operating income | 244.2 | | | 2.1 | % | | 1,335.0 | | | 11.9 | % | |
| Impairment of goodwill and indefinite-lived intangibles | |
| Impairment of goodwill and indefinite-lived intangibles | |
| Operating income (loss) | |
| Operating income (loss) | |
| Operating income (loss) | |
| Interest expense | Interest expense | 51.9 | | | 0.4 | % | | 57.3 | | | 0.5 | % | |
Other expense (income) (3) | 8.4 | | | 0.1 | % | | (12.2) | | | (0.1) | % | |
| Earnings before income taxes | 183.9 | | | 1.6 | % | | 1,290.0 | | | 11.5 | % | |
| Interest expense | |
| Interest expense | |
Other (income) expense, net (3) | |
Other (income) expense, net (3) | |
Other (income) expense, net (3) | |
| Earnings (loss) before income taxes | |
| Earnings (loss) before income taxes | |
| Earnings (loss) before income taxes | |
Income tax expense (4) | Income tax expense (4) | 158.1 | | | 1.3 | % | | 256.4 | | | 2.3 | % | |
| Net earnings including noncontrolling interests | 25.8 | | | 0.2 | % | | 1,033.5 | | | 9.2 | % | |
Income tax expense (4) | |
Income tax expense (4) | |
| Net earnings (loss) including noncontrolling interests | |
| Net earnings (loss) including noncontrolling interests | |
| Net earnings (loss) including noncontrolling interests | |
| Less: Net earnings attributable to noncontrolling interests | Less: Net earnings attributable to noncontrolling interests | 0.5 | | | 0.0 | % | | 0.4 | | | 0.0 | % | |
| Net earnings attributable to Mohawk Industries, Inc. | $ | 25.2 | | | 0.2 | % | | 1,033.2 | | | 9.2 | % | |
| Less: Net earnings attributable to noncontrolling interests | |
| Less: Net earnings attributable to noncontrolling interests | |
| Net earnings (loss) attributable to Mohawk Industries, Inc. | |
| Net earnings (loss) attributable to Mohawk Industries, Inc. | |
| Net earnings (loss) attributable to Mohawk Industries, Inc. | |
| (1) Cost of sales includes: | (1) Cost of sales includes: | | |
| Restructuring, acquisition and integration-related charges | $ | 68.0 | | | 0.6 | % | | 18.4 | | | 0.2 | % | |
| (1) Cost of sales includes: | |
| (1) Cost of sales includes: | |
| Restructuring, acquisition and integration-related charges and other costs | |
| Restructuring, acquisition and integration-related charges and other costs | |
| Restructuring, acquisition and integration-related charges and other costs | |
| Acquisition inventory step-up | |
| Acquisition inventory step-up | |
| Acquisition inventory step-up | Acquisition inventory step-up | 2.8 | | | 0.0 | % | | 1.7 | | | 0.0 | % | |
| Other charges | Other charges | 3.2 | | | 0.0 | % | | — | | | — | % | |
| Other charges | |
| Other charges | |
(2) Selling, general and administrative expenses include: | |
(2) Selling, general and administrative expenses include: | |
(2) Selling, general and administrative expenses include: | (2) Selling, general and administrative expenses include: | | |
| Restructuring, acquisition and integration-related charges | Restructuring, acquisition and integration-related charges | 13.7 | | | 0.1 | % | | 5.2 | | | 0.0 | % | |
| Legal settlements, reserves and fees, net of insurance proceeds | 54.2 | | | 0.5 | % | | — | | | — | % | |
| Restructuring, acquisition and integration-related charges | |
| Restructuring, acquisition and integration-related charges | |
| Legal settlements, reserves and fees | |
| Legal settlements, reserves and fees | |
| Legal settlements, reserves and fees | |
| | Other charges | |
| | Other charges | |
| | Other charges | Other charges | 1.0 | | | 0.0 | % | | — | | | — | % | |
| (3) Other expense (income) includes: | | |
(3) Other (income) expense includes: | |
| | Resolution of foreign non-income tax contingencies | — | | | — | % | | (6.2) | | | (0.1) | % | |
| (3) Other (income) expense includes: | |
| (3) Other (income) expense includes: | |
| | Release of indemnification asset | |
| | Release of indemnification asset | |
| | Release of indemnification asset | Release of indemnification asset | 7.3 | | | 0.1 | % | | — | | | — | % | |
| Other charges | Other charges | 1.8 | | | 0.0 | % | | (0.5) | | | 0.0 | % | |
| Other charges | |
| Other charges | |
(4) Income tax expense includes: | |
(4) Income tax expense includes: | |
(4) Income tax expense includes: | (4) Income tax expense includes: | | |
| | One-time tax planning election | — | | | — | % | | (22.2) | | | (0.2) | % | |
| European tax restructuring | |
| | European tax restructuring | |
| | European tax restructuring | |
| Income taxes - reversal of uncertain position | Income taxes - reversal of uncertain position | (7.3) | | | (0.1) | % | | — | | | — | % | |
| Income tax effect on resolution of foreign non-income tax contingencies | — | | | — | % | | 2.3 | | | 0.0 | % | |
| Income taxes - reversal of uncertain position | |
| Income taxes - reversal of uncertain position | |
| | Other charges | Other charges | 0.5 | | | 0.0 | % | | 0.9 | | | 0.0 | % | |
| | Other charges | |
| | Other charges | |
Year Ended December 31, 2022, as Compared with Year Ended December 31, 2021
Net Sales
Net sales for 2022 were $11,737.1 million, reflecting an increase of $536.5 million, or 4.8%, from the $11,200.6 million reported for 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $1,564 million, partially offset by lower sales volume of approximately $580 million, the unfavorable net impact of foreign exchange rates of approximately $412 million and the unfavorable impact of one less shipping day for 2022 of approximately $40 million.
Global Ceramic—Net sales for 2022 were $4,307.7 million, reflecting an increase of $390.4 million, or 10.0%, from the $3,917.3 million reported for 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $610 million, partially offset by lower sales volume of approximately $114 million, the unfavorable net impact of foreign exchange rates of approximately $83 million and the unfavorable impact of one less shipping day for 2022 of approximately $23 million.
Flooring NA—Net sales for 2022 were $4,207.0 million, reflecting an increase of $90.6 million, or 2.2%, from the $4,116.4 million reported for 2021. The increase was attributable to the favorable net impact of price and product mix of approximately $428 million, partially offset by lower sales volume of approximately $321 million and the unfavorable impact of one less shipping day for 2022 of approximately $17 million.
Flooring ROW—Net sales for 2022 were $3,222.3 million, reflecting an increase of $55.4 million, or 1.7%, from the $3,166.9 million reported for 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $525 million, partially offset by the unfavorable net impact of foreign exchange rates of approximately $329 million and lower sales volume of approximately $145 million.
Quarterly net sales and the percentage changes in net sales by quarter for 2022 versus 2021 were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | Change |
| First quarter | $ | 3,015.7 | | | 2,669.0 | | | 13.0 | % |
| Second quarter | 3,153.2 | | | 2,953.8 | | | 6.8 | % |
| Third quarter | 2,917.5 | | | 2,817.0 | | | 3.6 | % |
| Fourth quarter | 2,650.7 | | | 2,760.7 | | | (4.0) | % |
| Full year | $ | 11,737.1 | | | 11,200.6 | | | 4.8 | % |
Gross Profit
Gross profit for 2022 was $2,943.4 million (25.1% of net sales), a decrease of $325.3 million or 10.0%, compared to gross profit of $3,268.7 million (29.2% of net sales) for 2021. As a percentage of net sales, gross profit decreased 410 basis points. The decrease in gross profit dollars was primarily attributable to higher inflation of approximately $1,365 million, lower sales volume of approximately $204 million, the unfavorable impact of temporary plant shutdowns of approximately $138 million, the unfavorable net impact of foreign exchange rates of approximately $67 million and higher restructuring, acquisition and integration-related costs of approximately $54 million, partially offset by the favorable net impact of price and product mix of approximately $1,420 million and productivity gains of approximately $78 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 2022 were $2,003.4 million (17.1% of net sales), an increase of $69.7 million or 3.6% compared to $1,933.7 million (17.3% of net sales) for 2021. As a percentage of net sales, selling, general and administrative expenses decreased 20 basis points. The increase in selling, general and administrative expenses (in dollars) was primarily due to legal settlements, reserves and fees, net of insurance proceeds, of approximately $54 million; the unfavorable net impact of price and product mix of approximately $52 million; higher inflation costs of approximately $32 million; higher restructuring, acquisition and integration-related costs of approximately $10 million; higher costs associated with investments in new product development and marketing costs of approximately $8 million; and lower sales volume of approximately $4 million. The unfavorable impact of the aforementioned items was partially offset by the favorable net impact of foreign exchange rates of approximately $56 million and productivity gains of approximately $33 million.
Year Ended December 31, 2023, as Compared with Year Ended December 31, 2022
Net Sales
Net sales for 2023 were $11,135.1 million compared to net sales of $11,737.1 million for 2022. The change was primarily attributable to lower legacy sales volume of approximately $743 million; the unfavorable net impact of price and product mix of approximately $143 million and the unfavorable net impact of foreign exchange rates of approximately $72 million, partially offset by higher sales volume attributable to acquisitions of approximately $389 million.
Global Ceramic—Net sales for 2023 were $4,300.1 million compared to net sales of $4,307.7 million for 2022. The change was primarily attributable to lower legacy sales volume of approximately $271 million and the unfavorable net impact of foreign exchange rates of approximately $41 million, partially offset by higher sales volume attributable to acquisitions of approximately $294 million and the favorable net impact of price and product mix of approximately $38 million.
Flooring NA—Net sales for 2023 were $3,829.4 million compared to net sales of $4,207.0 million for 2022. The change was primarily attributable to lower legacy sales volume of approximately $304 million and the unfavorable net impact of price and product mix of approximately $139 million, partially offset by higher sales volume attributable to acquisitions of approximately $66 million.
Flooring ROW—Net sales for 2023 were $3,005.6 million compared to net sales of $3,222.3 million for 2022. The change was primarily attributable to lower legacy sales volume of approximately $168 million; the unfavorable net impact of price and product mix of approximately $42 million and the unfavorable net impact of foreign exchange rates of approximately $31 million, partially offset by higher sales volume attributable to acquisitions of approximately $30 million.
Quarterly net sales and the percentage changes in net sales by quarter for 2023 versus 2022 were as follows (dollars in millions):
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | Change |
| First quarter | $ | 2,806.2 | | | 3,015.7 | | | (6.9) | % |
| Second quarter | 2,950.4 | | | 3,153.2 | | | (6.4) | % |
| Third quarter | 2,766.2 | | | 2,917.5 | | | (5.2) | % |
| Fourth quarter | 2,612.3 | | | 2,650.7 | | | (1.4) | % |
| Full year | $ | 11,135.1 | | | 11,737.1 | | | (5.1) | % |
Gross Profit
Gross profit for 2023 was $2,709.7 million compared to gross profit of $2,943.4 million for 2022. The change was primarily attributable to lower sales volume of approximately $190 million; the unfavorable net impact of price and product mix of approximately $111 million; the unfavorable impact of temporary plant shutdowns of approximately $76 million; the unfavorable net impact of foreign exchange rates of approximately $51 million and higher restructuring, acquisition and integration-related, and other costs of approximately $35 million, partially offset by lower inflation of approximately $132 million and productivity gains of approximately $121 million.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 2023 were $2,119.7 million compared to $2,003.4 million for 2022. The change was primarily attributable to higher inflation of approximately $52 million and an increase in expenses due to the net impact of acquired businesses of approximately $33 million.
Impairment of Goodwill and Indefinite-lived Intangibles
DuringImpairment of goodwill and indefinite-lived intangibles for 2023 was $877.7 million compared to impairment of goodwill and indefinite-lived intangibles of $695.8 million for 2022. As a result of a decrease in the third quarter of 2022,Company’s market capitalization, a higher WACC and macroeconomic conditions, the Company performed interim impairment tests of its goodwill and indefinite-lived intangible assets,intangibles, which resulted in impairment charges of $695.8 million ($685.6 million net of tax). The Company performed these interim tests after determining a triggering event had occurred, taking into consideration the impact of a higher weighted average cost of capital (“WACC”), deteriorating macroeconomic conditions, and the reduction in the Company’s market capitalization. If, in the future, the Company’s market capitalization and/or the estimated fair value of the Company’s reporting units declines further, it may be necessary to record additional impairment charges.
Operating Income (Loss)
Operating income for 2022 was $244.2 million (2.1% of net sales) reflecting a decrease of $1,090.8 million, or 81.7%, compared to operating income of $1,335.0 million (11.9% of net sales) for 2021. The decrease in operating income was primarily attributable to higher inflation costs of approximately $1,397 million; the goodwill and indefinite-lived intangibles impairment charge of approximately $696 million; lower sales volume of approximately $208 million; the unfavorable impact of temporary plant shutdowns of approximately $138 million; higher restructuring, acquisition and integration-related costs of approximately $63 million; approximately $54 million related to legal settlements, reserves and fees, net of insurance proceeds; the unfavorable net impact of foreign exchange rates of approximately $10 million and higher costs associated with investments in new product development and marketing costs of approximately $8 million, partially offset by the favorable net impact of price and product mix of approximately $1,368 million and productivity gains of approximately $111 million.
Global Ceramic—Operating loss was $236.1 million ((5.5)% of segment net sales) for 2022 reflecting a decrease of $639.2 million, or 158.6%, compared to operating income of $403.1 million (10.3% of segment net sales) for 2021. The decrease in operating income was primarily attributable to the goodwill and indefinite-lived intangibles impairment charge of approximately $689 million; higher inflation costs of approximately $454 million; lower sales volume of approximately $39 million; the unfavorable impact of temporary plant shutdowns of approximately $19 million and higher costs associated with investments in new product development and marketing costs of approximately $8 million, partially offset by the favorable net impact of price and product mix of approximately $497 million; productivity gains of approximately $63 million and the favorable net impact of foreign exchange rates of approximately $4 million.
Flooring NA—Operating income was $231.1 million (5.5% of segment net sales) for 2022 reflecting a decrease of $176.5 million, or 43.3%, compared to operating income of $407.6 million (9.9% of segment net sales) for 2021. The decrease in operating income was primarily attributable to higher inflation costs of approximately $449 million; lower sales volume of approximately $110 million; the unfavorable impact of temporary plant shutdowns of approximately $57 million; higher restructuring, acquisition and integration-related costs of approximately $33 million and the indefinite-lived intangibles impairment charge of approximately $1 million, partially offset by the favorable net impact of price and product mix of approximately $398 million and productivity gains of approximately $81 million.
Flooring ROW—Operating income was $340.2 million (10.6% of segment net sales) for 2022 reflecting a decrease of $230.9 million, or 40.4%, compared to operating income of $571.1 million (18.0% of segment net sales) for 2021. The decrease in operating income was primarily attributable to higher inflation costs of approximately $504 million; the unfavorable impact of temporary plant shutdowns of approximately $61 million; lower sales volume of approximately $60 million; decreased productivity of approximately $33 million; higher restructuring, acquisition and integration-related costs of approximately $30 million; the unfavorable net impact of foreign exchange rates of approximately $14 million and the indefinite-lived intangibles impairment charge of approximately $6 million, partially offset by the favorable net impact of price and product mix of approximately $473 million.
Interest Expense
Interest expense was $51.9 million for 2022, reflecting a decrease of $5.4 million compared to interest expense of $57.3 million for 2021. The decrease in interest expense was primarily due to the redemption of the $600 million 3.85% Senior Notes on November 1, 2022, the redemption of the €500.0 million 2.00% Senior Notes in October 2021 and miscellaneous interest income, partially offset by the increase in commercial paper borrowings and the utilization of the Term Loan Facility in the fourth quarter of 2022.
Other Expense (Income)Operating Income (Loss)
Other expenseOperating loss for 2023 was $8.4 million for 2022, reflecting an unfavorable change of $20.6$287.8 million compared to otheroperating income of $12.2$244.2 million for 2021.2022. The change was primarily driven by the resolution of foreign non-income tax contingenciesattributable to lower sales volume of approximately $6 million during$223 million; higher impairment charges to reduce the twelve months ended December 31, 2021,carrying amount of goodwill and indefinite-lived intangibles of approximately $182 million; the unfavorable net impact of price and product mix of approximately $111 million; the unfavorable impact of temporary plant shutdowns of approximately $76 million; the unfavorable net impact of foreign exchange rates of approximately $9$49 million; higher restructuring, acquisition and integration-related, and other costs of approximately $48 million and higher legal settlements, reserves and fees of approximately $34 million, partially offset by productivity gains of approximately $111 million and lower inflation of approximately $80 million.
Global Ceramic—Operating loss was $166.4 million for 2023 compared to operating loss of $236.1 million for 2022. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $262 million and productivity gains of approximately $59 million, partially offset by lower sales volume of approximately $94 million; higher inflation of approximately $62 million; the unfavorable impact of temporary plant shutdowns of approximately $40 million and higher restructuring, acquisition and integration-related, and other costs of approximately $37 million.
Flooring NA—Operating loss was $57.2 million for 2023 compared to operating income of $231.1 million for 2022. The change was primarily attributable to higher impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $214 million; the unfavorable net impact of price and product mix of approximately $93 million and lower sales volume of approximately $71 million, partially offset by lower inflation of approximately $89 million and productivity gains of approximately $30 million.
Flooring ROW—Operating income was $69.7 million for 2023 compared to operating income of $340.2 million for 2022. The change was primarily attributable to higher impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $229 million; lower sales volume of approximately $58 million and the releaseunfavorable net impact of an indemnification receivable relatedforeign exchange rates of approximately $35 million, partially offset by lower inflation of approximately $59 million.
Interest Expense
Interest expense was $77.5 million for 2023 compared to interest expense of $51.9 million for 2022. The change was primarily attributable to a significant increase in interest rates, as well as increased borrowings due to the acquisitions made in 2022 and the first quarter of 2023.
Other Income and Expense
Other income was $10.8 million for 2023 compared to other expense of $8.4 million for 2022. The change was primarily attributable to the reversal of an uncertain tax positionsposition recorded with the EmilCompany’s 2017 acquisition of approximately $7 million, partially offset by other miscellaneous items of approximately $2 million.Emilceramica S.r.l during the twelve months ended December 31, 2022.
Income Tax Expense
For 2022,2023, the Company recorded income tax expense of $84.9 million on loss before income taxes of $354.5 million for an effective tax rate of (23.9)%, as compared to an income tax expense of $158.1 million on earnings before income taxes of $183.9 million, for an effective tax rate of 86.0%, as compared to an income tax expense of $256.4 million on earnings before income taxes of $1,290.0 million, resulting in an effective tax rate of 19.9%86.0% for 2021. In 2022,2022. The change in the lowereffective tax rate was primarily driven by a shift from earnings before income taxes to a loss before income taxes and an increase in the impairment of non-deductible goodwill impairment charge contributed to the higher tax rate. In 2021, the Company also recognized a one-time Italian step-up benefit allowing for the realignment of tax asset values and a benefit from a tax rate differential on a U.S. loss carryback.goodwill.
Liquidity and Capital Resources
The Company’s primary capital requirements are for working capital, capital expenditures and acquisitions. The Company’s capital needs are met primarily through a combination of internally generated funds, commercial paper, bank credit lines, term and senior notes and credit terms from suppliers. As of December 31, 2022,2023, the Company had a total of $1,101.6$1,882.1 million available under its Senior Credit Facility. The Company also maintains local currency revolving lines of credit and other credit facilities to provide liquidity to its businesses around the world. None of such local facilities are material in amount.
Net cash provided by operating activities for the year ended 20222023 was $669.2$1,329.2 million, compared to net cash provided by operating activities of $1,309.1$669.2 million for the year ended 2021. This decrease of $640.0 million2022. The change was primarily attributable to decreasesthe change in inventory and accounts payable and net earnings,receivable, partially offset by higherlower net earnings and the change in accounts receivable.payable.
Net cash used in investing activities for the year ended 20222023 was $625.3$970.3 million compared to net cash used in investing activities of $556.8$625.3 million for the year ended 2021.2022. The increasechange was primarily due to the increase in acquisitions of $85.6$305.8 million and a decreasethe increase in the redemptions of short-term investments of $78.3 million (net of purchases of short-term investments), partially offset by the decrease of capital expenditures of $95.4$32.2 million.
Net cash provided byused in financing activities for the year ended 20222023 was $194.3$210.7 million compared to net cash used inprovided by financing activities of $1,232.2$194.3 million for the year ended 2021.2022. The change in cash iswas primarily attributable to lower proceeds (net of payments) from commercial paper of $1,044 million, lower proceeds from the Term Loan Facility of $908.0$908 million, lower share repurchasespartially offset by higher proceeds (net of $592.8 million and lower paymentspayments) on the Senior Notes of $332.3$1,200 million partially offset by the decrease in net borrowings on commercial paperand lower share repurchases of $394.4$308 million.
On February 10, 2022, the Company’s Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million of its common stock. For the twelve months ended December 31, 2022, the Company purchased $307.6 million of its common stock exhausting the $36.8 million remaining under the prior share repurchase program authorized on September 16, 2021 (the “2021“2022 Share Repurchase Program”), and utilizing $270.8 million under the 2022 Share Repurchase Program.. As of December 31, 2022,2023, there remainedremains $229.2 million authorized under the 2022 Share Repurchase Program.
As of December 31, 2022,2023, the Company had cash of $509.6$642.6 million, of which $210.4$89.5 million was held outside the United States. In addition to its cash on hand, the Company also had short-term investments of $158.0 million as of December 31, 2022. The Company plans to permanently reinvest the cash held outside the United States. The Company believes that its cash and cash equivalents, short-term investments on hand, cash generated from operations and availability under its Senior Credit Facility will be sufficient to meet its planned capital expenditures, working capital investments and debt servicing requirements over the next twelve months.
On January 31, 2024, the Company prepaid the entirety of the USD portion of the Term Loan Facility, in the amount of $675,000. On February 16, 2024, the Company prepaid the entirety of the EUR portion of the Term Loan Facility, in the amount of €220,000.
See Note 10, Long-Term Debt, of the notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further discussion of the Company’s long-term debt. The Company may continue, from time to time, to retire its outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amount involved may be material.
Contractual Obligations and Commitments
The following is a summary of the Company’s future minimum payments under contractual obligations and commitments as of December 31, 20222023 (in millions):
| | Contractual Obligations and Commitments: | | Contractual Obligations and Commitments: | Total | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | Thereafter |
| | Total | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter |
| Contractual obligations and commitments: | | | | | | | | | | | | | |
| Long-term debt, including current maturities | |
| Long-term debt, including current maturities | |
| Long-term debt, including current maturities | Long-term debt, including current maturities | $ | 2,826.4 | | | 840.6 | | | 920.7 | | | 9.0 | | | 7.0 | | | 539.3 | | | 509.8 | |
Interest payments on long-term debt and finance leases (1) | Interest payments on long-term debt and finance leases (1) | 317.9 | | | 108.9 | | | 52.4 | | | 28.0 | | | 27.8 | | | 22.3 | | | 78.5 | |
| | Operating leases | |
| Operating leases | |
| Operating leases | Operating leases | 435.2 | | | 125.1 | | | 103.2 | | | 82.8 | | | 61.8 | | | 34.8 | | | 27.4 | |
Purchase commitments (2) | Purchase commitments (2) | 428.3 | | | 192.3 | | | 66.4 | | | 28.2 | | | 27.9 | | | 26.3 | | | 87.2 | |
Expected pension contributions (3) | Expected pension contributions (3) | 4.5 | | | 4.5 | | | — | | | — | | | — | | | — | | | — | |
Uncertain tax positions (4) | Uncertain tax positions (4) | 8.1 | | | 8.1 | | | — | | | — | | | — | | | — | | | — | |
Guarantees (5) | Guarantees (5) | 15.9 | | | 15.9 | | | — | | | — | | | — | | | — | | | — | |
| Total | Total | $ | 4,036.3 | | | 1,295.4 | | | 1,142.7 | | | 148.0 | | | 124.5 | | | 622.7 | | | 702.9 | |
(1) For fixed-rate debt, the Company calculated interest based on the applicable rates and payment dates. For variable-rate debt, the Company estimated average outstanding balances for the respective periods and applied interest rates in effect as of December 31, 20222023 to these balances.
(2) Includes volume commitments, primarily for raw material purchases.
(3) Includes the estimated pension contributions for 20232024 only, as the Company is unable to estimate the pension contributions beyond 2023.2024. The Company’s projected benefit obligation and plan assets as of December 31, 20222023 were $55.2$80.0 million and $50.7$73.7 million, respectively. The projected benefit obligation liability has not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.
(4) Excludes $54.6$71.7 million of non-current accrued income tax liabilities and related interest and penalties for uncertain tax positions. These liabilities have not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.
(5) Includes bank guarantees and letters of credit.
Critical Accounting Policies
In preparing the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, the Company must make decisions which impact the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Such decisions include the selection of appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, the Company applies judgment based on its understanding and analysis of the relevant circumstances and historical experience. Actual amounts could differ from those estimated at the time the Consolidated Financial Statements are prepared.
The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Some of those significant accounting policies require the Company to make subjective or complex judgments or estimates. Critical accounting estimates are defined as those that are both most important to the portrayal of a company’s financial condition and results and require management’s most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The Company believes the following accounting policies require it to use judgments and estimates in preparing its consolidated financial statements and represent critical accounting policies.
•Acquisition accounting. The fair value of the consideration the Company pays for each new acquisition is allocated to tangible assets and identifiable intangible assets, liabilities assumed, any noncontrolling interest in the acquired entity and goodwill. The accounting for acquisitions involves a considerable amount of judgment and estimate, including the fair value of certain forms of consideration; fair value of acquired intangible assets involving projections of future revenues and cash flows that are then either discounted at an estimated discount rate or measured at an estimated royalty rate; fair value of other acquired assets and assumed liabilities, including potential contingencies; and the useful lives of the acquired assets. The assumptions used are determined at the time of the acquisition in accordance with accepted valuation models. Projections are developed using internal forecasts, available industry and market data and estimates of long-term rates of growth for the business. The impact of prior or future acquisitions on the Company’s financial position or results of operations may be materially impacted by the change in or initial selection of assumptions and estimates. See Note 2, Acquisitions included in Part II, Item 8 of this Form 10-K for further discussion of business combination accounting valuation methodology and assumptions.
•Goodwill and indefinite-lived intangibles.other intangibles - GoodwillThe Company performs its annual testing of goodwill and indefinite-lived intangibles which foron the Company are its tradenames, are tested annually for impairment infirst day of the fourth quarter or earlier uponof each year. Between annual testing dates, the occurrence of certain events or substantive changes in circumstances. The Company’s annual impairment tests of goodwill and tradenames may be completed through qualitative assessments. The Company may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test, for any reporting unit or tradename, in any period. The Company can resume the qualitative assessment for any reporting unit or tradename in any subsequent period.
The Company has identified Global Ceramic, Flooring NA and Flooring ROWmonitors factors such as its reporting units for the purposes of allocating goodwill as well as assessing impairments. The Company considers the relationship between its market capitalization, comparable company market multiples and its book value, among other factors, when reviewing for indicators of impairment.
Under a qualitative approach,macroeconomic conditions to identify conditions that could impact the Company’s impairment review for goodwill consistsassumptions utilized in the determination of an assessmentthe estimated fair values of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. If the Company elects to bypass the qualitative assessment for anyCompany’s reporting units or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value of a reporting unit exceeds its fair value, the Company performs a quantitative goodwill impairment test that requires itand indefinite-lived intangible assets significantly enough to estimate the fair value of the reporting unit.trigger an impairment.
The quantitative goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgments and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy approaches. IfThe Company has identified Global Ceramic, Flooring NA and Flooring ROW as its reporting units for the carrying valuepurposes of a reporting unit exceeds its fair value,allocating and testing for impairment. Indefinite-lived intangibles are recorded and tested for impairment at the Company will measure any goodwill impairment loss as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.asset level. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgmentsjudgements and assumptions about appropriate sales growth rates, operating margins, WACC and comparable company market multiples. When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Should a significant or prolonged deterioration in economic conditions occur, such as declines in spending for new construction, remodeling and replacement activities; the inability to pass increases in the costs of raw materials and fuel on to customers; or a decline in comparable company market multiples, then key judgments and assumptions could be impacted.
Under a qualitative approach, the Company’s impairment review for tradenames consists of an assessment of whether it is more-likely-than-not that a tradename’s fair value is less than its carrying value. If the Company elects to bypass the qualitative assessment for any tradename, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value of a tradename exceeds its fair value, the Company performs a quantitative tradename impairment test of the tradename.
The quantitative impairment test for tradenames involves a comparison of the estimated fair value of the tradename to its carrying value. If the carrying value of the tradename exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The determination of fair value used in the impairment evaluation is based on discounted estimates of future sales projections attributable to ownership of the tradenames. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, discount rates and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that are used in operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the tradenames. Estimated cash flows are sensitive to changes in the economy among other things.
As a result of a decrease in the Company’s market capitalization, comparable company market multiples, projected future cash flowsmacroeconomic conditions and an increase in the WACC, due to increases in the risk free rate and applicable risk premiums, the Company determined that a triggering event occurred requiring goodwill impairment testing for each of its reporting units as of September 30, 2023 and October 1, 2022. The impairment testtests indicated a pre-tax, non-cash goodwill impairment chargecharges related to all 3 reporting units of $870,750 ($859,725 net of tax) and in the Global Ceramic reporting unit of $688,514 ($679,664 net of tax) which the Company recorded during the third quarter of 2022. 2023 and 2022, respectively.
The Company concluded goodwill of its other reporting units was not impaired on October 1, 2022. In addition, the Company compared the estimated fair values of its indefinite-lived intangibles to their carrying values and determined that there were impairmentsimpairment charges of $6,994 ($5,181 net of tax) in all 3 reporting units and $7,257 ($5,939 net of tax) in the Flooring ROW and Flooring NA reporting units during the third quarter of 2022.
The excess of fair value over carrying value for the Flooring ROW reporting unit was approximately 20%2023 and the excess of fair value over carrying value for the Flooring NA reporting unit was less than 5% as of October 1, 2022. The Company’s annual testing date for goodwill and tradenames is the first day of its fourth quarter and due to the fact that there were no significant changes in facts or circumstances in the one calendar day, the Company determined there was no additional impairment of goodwill or tradenames. The Company conducted a qualitative analysis as of December 31, 2022, and determined there was no indication of an impairment.respectively.
A significant or prolonged deterioration in economic conditions, continued increases in the costs of raw materials and energy combined with an inability to pass these costs on to customers, a further decline in the Company’s market capitalization or comparable company market multiples, a reduction in projected future cash flows, or increases in the WACC, could impact the Company’s assumptions and require a reassessment of goodwill or indefinite-lived intangible assets for impairment in future periods. Future declines in estimated after tax cash flows, increases in the WACC or a decline in market capitalization could result in an additional indication of impairment in one or more of the Company’s reporting units.
•Long-lived assets. The Company reviews its long-lived asset groups, which include intangible assets subject to amortization, which for the Company are its patents and customer relationships, for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated by these asset groups. If such asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.
•Income taxes. The Company’s effective tax rate is based on its income, statutory tax rates and tax planning opportunities available in the jurisdictions in which it operates. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining the Company’s tax expense and in evaluating the Company’s tax positions. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in a future period. The Company evaluates the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates, including business forecasts and other projections of financial results over an extended period of time. In the event that the Company is not able to realize all or a portion of its deferred tax assets in the future, a valuation allowance is provided. The Company would recognize such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. For further information regarding the Company’s valuation allowances, see Note 15, Income Taxes, included in Part II, Item 8 of this Form 10-K.
In the ordinary course of business there is inherent uncertainty in quantifying the Company’s income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the Company’s evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information, as required by the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740-10. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the Consolidated Financial Statements. For further information regarding the Company’s uncertain tax positions, see Note 15, Income Taxes, included in Part II, Item 8 of this Form 10-K.
Recent Accounting Pronouncements
See Note 1, Summary of Significant Accounting Policies, of the Company’s accompanying Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a description of recent accounting pronouncements and the potential impact on our financial statements and disclosures.
Impact of Inflation
Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses. The Company expects raw material prices, many of which are petroleum-based, to fluctuate based upon worldwide supply and demand of commodities utilized in the Company’s production processes. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to its customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. In the past, the Company has often been able to enhance productivity and develop new product innovations to help offset increases in costs resulting from inflation in its operations.
Seasonality
The Company is a calendar year-end company. Global Ceramic and the Flooring NA typically have higher net sales in the second and third quarters. Flooring ROW typically has higher net sales in the secondfirst and fourthsecond quarters. Because periods of economic downturn can affect the seasonality of each segment, sales for any one quarter are not necessarily indicative of the sales that may be achieved for any other quarter or for the full year.
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
The Company’s market risk is impacted by changes in foreign currency exchange rates, interest rates and certain commodity prices. Financial exposures to these risks are monitored as an integral part of the Company’s risk management program, which seeks to reduce the potentially adverse effect that the volatility of these markets may have on its operating results. The Company does not regularly engage in speculative transactions, nor does it regularly hold or issue financial instruments for trading purposes. The Company did not have any derivative contracts outstanding as of December 31, 20222023 and 2021.2022.
Interest Rate Risk
As of December 31, 2022,2023, approximately 38%64% of the Company’s debt portfolio was comprised of fixed-rate debt and 62%36% was variable-rate debt. The Company believes that probable near-term changes in interest rates would not materially affect its financial condition, results of operations or cash flows. The annual impact on interest expense of a one-percentage point interest rate change on the outstanding balance of the Company’s variable-rate debt as of December 31, 20222023 would be approximately $3 million, or $0.04 to diluted EPS.$10 million.
Foreign Exchange Risk
As a result of being a global enterprise, there is exposure to market risks from changes in foreign currency exchange rates, which may adversely affect the operating results and financial condition of the Company. Principal foreign currency exposures relate primarily to the euro and to a lesser extent the Russian ruble, the Brazilian real, the Mexican peso, the Australian dollar,British pound, the Brazilian real, the New ZealandAustralian dollar and the Canadian dollar.Bulgarian lev.
The Company’s objective is to balance, where possible, non-functional currency denominated assets to non-functional currency denominated liabilities to have a natural hedge and minimize foreign exchange impacts. The Company enters into cross border transactions through importing and exporting goods to and from different countries and locations. These transactions generate foreign exchange risk as they create assets, liabilities and cash flows in currencies other than their functional currency. This also applies to services provided and other cross border agreements among subsidiaries.
The Company takes steps to minimize risks from foreign currency exchange rate fluctuations through normal operating and financing activities. The Company does not enter into any speculative positions with regard to derivative instruments.
Based on financial results for the year ended December 31, 2022,2023, a hypothetical overall 10 percent change in the U.S. dollar against the euroall foreign currencies would have resulted in a translational adjustment of approximately $28$4 million. The effect of a uniform movement of all currencies by 10% is provided to illustrate a hypothetical scenario and related effect on operating income. Actual results will differ as foreign currencies may move in uniform or different directions and in different magnitudes.
Item 8.Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Mohawk Industries, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Mohawk Industries, Inc. and subsidiaries (the Company) as of December 31, 20222023 and 2021,2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022,2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20222023 and 2021,2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022,2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 202323, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the carrying value of goodwill in the Global CeramicFlooring Rest of World and Flooring North America Reporting Units
As discussed in Note 8 to the consolidated financial statements, during 20222023 the Company recognized $688.5$231.6 million and $214.8 million of goodwill impairment charges for the Global CeramicFlooring Rest of World and Flooring North America reporting unit.units, respectively. The goodwill impairment resulted from a sustained decline in the Company’s market capitalization comparable company market multiples,and projected future cash flows, and an increase in the discount rate. The goodwill balance as of December 31, 20222023 was $1,927.8$1,159.7 million, of which $339.8$787.5 million and $592.0$372.2 million related to the Global CeramicFlooring Rest of World and Flooring North America reporting units, respectively. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill might exceed the fair value of a reporting unit.
We identified the assessment of the carryingfair value of goodwill in the Global CeramicFlooring Rest of World and Flooring North America reporting units as of the measurement date as a critical audit matter. Specifically, the assessment of the Company’s forecasted sales growth rates, forecasted operating margins, discount rates, and selection of comparable company market multiples used in the Company’s fair value estimation of the reporting units required a higher degree of subjective auditor judgment and required the
involvement of valuation professionals. Changes in these assumptions could have a significant impact on the fair value of the reporting units.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process including controls over the reasonableness of the assumptions listed above. We evaluated the Company’s forecasted sales growth rates and operating margins and compared the growth assumptions to the Company’s historical performance and to relevant market data. To assess the Company’s ability to estimate cash flows, including forecasted sales growth rates and operating margins, we compared the Company’s historical cash flow forecasts to actual results. We also performed sensitivity analyses over certain assumptions listed above to assess their impact on the Company’s determination thatof the fair value of the Flooring Rest of World and Flooring North America reporting unit exceeded its carrying value and the determination of the goodwill impairment for the Global Ceramic reporting unit.units. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the reporting units’ discount rates by comparing itthem to a range of discount rates for comparable companies that were independently developed using publicly available data and the Company’s selection of comparable company market multiples.
We have served as the Company’s auditor since 1990.
Atlanta, Georgia
February 22, 202323, 2024
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Mohawk Industries, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Mohawk Industries, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022,2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20222023 and 2021,2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022,2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 202323, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Atlanta, Georgia
February 22, 202323, 2024
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance SheetsStatements of Operations
Years Ended December 31, 2023, 2022 and 2021
| | | | | | | | | | | | | | | | | |
| (In thousands, except per share data) | 2023 | | 2022 | | 2021 |
| Net sales | $ | 11,135,115 | | | 11,737,065 | | | 11,200,613 | |
| Cost of sales | 8,425,463 | | | 8,793,639 | | | 7,931,879 | |
| Gross profit | 2,709,652 | | | 2,943,426 | | | 3,268,734 | |
| Selling, general and administrative expenses | 2,119,716 | | | 2,003,438 | | | 1,933,723 | |
| Impairment of goodwill and indefinite-lived intangibles | 877,744 | | | 695,771 | | | — | |
| Operating income (loss) | (287,808) | | | 244,217 | | | 1,335,011 | |
| Interest expense | 77,514 | | | 51,938 | | | 57,252 | |
| Other (income) expense, net | (10,813) | | | 8,386 | | | (12,234) | |
| Earnings (loss) before income taxes | (354,509) | | | 183,893 | | | 1,289,993 | |
| Income tax expense | 84,862 | | | 158,110 | | | 256,445 | |
| | | | | |
| | | | | |
| Net earnings (loss) including noncontrolling interests | (439,371) | | | 25,783 | | | 1,033,548 | |
| Less: net earnings attributable to noncontrolling interests | 145 | | | 536 | | | 389 | |
| Net earnings (loss) attributable to Mohawk Industries, Inc. | $ | (439,516) | | | 25,247 | | | 1,033,159 | |
| | | | | |
| Basic earnings (loss) per share attributable to Mohawk Industries, Inc. | | | | | |
| | | | | |
| | | | | |
| Basic earnings (loss) per share attributable to Mohawk Industries, Inc. | $ | (6.90) | | | 0.40 | | | 15.01 | |
| Weighted-average common shares outstanding—basic | 63,657 | | | 63,826 | | | 68,852 | |
| | | | | |
| Diluted earnings (loss) per share attributable to Mohawk Industries, Inc. | | | | | |
| | | | | |
| | | | | |
| Diluted earnings (loss) per share attributable to Mohawk Industries, Inc. | $ | (6.90) | | | 0.39 | | | 14.94 | |
| Weighted-average common shares outstanding—diluted | 63,657 | | | 64,062 | | | 69,145 | |
| | | | | | | | | | | |
| 2022 | | 2021 |
| | | |
| | (In thousands, except per share data) |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 509,623 | | | 268,895 | |
| Short-term investments | 158,000 | | | 323,000 | |
| Receivables, net | 1,904,786 | | | 1,839,985 | |
| Inventories | 2,793,765 | | | 2,391,672 | |
| Prepaid expenses | 498,222 | | | 394,649 | |
| | | |
| Other current assets | 30,703 | | | 20,156 | |
| Total current assets | 5,895,099 | | | 5,238,357 | |
| Property, plant and equipment, net | 4,661,178 | | | 4,636,865 | |
| Right of use operating lease assets | 387,816 | | | 389,967 | |
| Goodwill | 1,927,759 | | | 2,607,909 | |
| Tradenames | 668,328 | | | 694,905 | |
| Other intangible assets subject to amortization, net | 189,620 | | | 205,075 | |
| Deferred income taxes and other non-current assets | 390,632 | | | 451,439 | |
| Total assets | $ | 14,120,432 | | | 14,224,517 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Short-term debt and current portion of long-term debt | $ | 840,571 | | | 624,503 | |
| Accounts payable and accrued expenses | 2,124,448 | | | 2,217,418 | |
| Current operating lease liabilities | 105,266 | | | 104,434 | |
| Total current liabilities | 3,070,285 | | | 2,946,355 | |
| Deferred income taxes | 444,660 | | | 495,521 | |
| Long-term debt, less current portion | 1,978,563 | | | 1,700,282 | |
| Non-current operating lease liabilities | 296,136 | | | 297,390 | |
| Other long-term liabilities | 312,874 | | | 356,753 | |
| Total liabilities | 6,102,518 | | | 5,796,301 | |
| Commitments and contingencies (Note 16) | | | |
| | | |
| Stockholders’ equity: | | | |
| Preferred stock, $.01 par value; 60 shares authorized; no shares issued | — | | | — | |
| Common stock, $.01 par value; 150,000 shares authorized; 70,875 and 72,952 shares issued and outstanding in 2022 and 2021, respectively | 709 | | | 729 | |
| Additional paid-in capital | 1,930,789 | | | 1,911,131 | |
| Retained earnings | 7,409,760 | | | 7,692,064 | |
| Accumulated other comprehensive loss | (1,114,258) | | | (966,952) | |
| 8,227,000 | | | 8,636,972 | |
| Less: treasury stock at cost; 7,341 and 7,343 shares in 2022 and 2021, respectively | 215,491 | | | 215,547 | |
| Total Mohawk Industries, Inc. stockholders’ equity | 8,011,509 | | | 8,421,425 | |
| Nonredeemable noncontrolling interests | 6,405 | | | 6,791 | |
| Total stockholders’ equity | 8,017,914 | | | 8,428,216 | |
| Total liabilities and stockholders' equity | $ | 14,120,432 | | | 14,224,517 | |
See accompanying notes to the Consolidated Financial Statements.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of OperationsComprehensive Income (Loss)
Years Ended December 31, 2023, 2022 2021 and 20202021
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| | | | | |
| | (In thousands, except per share data) |
| Net sales | $ | 11,737,065 | | | 11,200,613 | | | 9,552,197 | |
| Cost of sales | 8,793,639 | | | 7,931,879 | | | 7,121,507 | |
| Gross profit | 2,943,426 | | | 3,268,734 | | | 2,430,690 | |
| Selling, general and administrative expenses | 2,003,438 | | | 1,933,723 | | | 1,794,688 | |
| Impairment of goodwill and indefinite-lived intangibles | 695,771 | | | — | | | — | |
| Operating income | 244,217 | | | 1,335,011 | | | 636,002 | |
| Interest expense | 51,938 | | | 57,252 | | | 52,379 | |
| Other expense (income), net | 8,386 | | | (12,234) | | | (751) | |
| Earnings before income taxes | 183,893 | | | 1,289,993 | | | 584,374 | |
| Income tax expense | 158,110 | | | 256,445 | | | 68,647 | |
| | | | | |
| | | | | |
| Net earnings including noncontrolling interests | 25,783 | | | 1,033,548 | | | 515,727 | |
| Net earnings attributable to noncontrolling interests | 536 | | | 389 | | | 132 | |
| Net earnings attributable to Mohawk Industries, Inc. | $ | 25,247 | | | 1,033,159 | | | 515,595 | |
| | | | | |
| Basic earnings per share attributable to Mohawk Industries, Inc. | | | | | |
| | | | | |
| | | | | |
| Basic earnings per share attributable to Mohawk Industries, Inc. | $ | 0.40 | | | 15.01 | | | 7.24 | |
| Weighted-average common shares outstanding—basic | 63,826 | | | 68,852 | | | 71,214 | |
| | | | | |
| Diluted earnings per share attributable to Mohawk Industries, Inc. | | | | | |
| | | | | |
| | | | | |
| Diluted earnings per share attributable to Mohawk Industries, Inc. | $ | 0.39 | | | 14.94 | | | 7.22 | |
| Weighted-average common shares outstanding—diluted | 64,062 | | | 69,145 | | | 71,401 | |
| | | | | | | | | | | | | | | | | | | | |
| (In thousands) | | 2023 | | 2022 | | 2021 |
| Net earnings (loss) including noncontrolling interests | | $ | (439,371) | | | 25,783 | | | 1,033,548 | |
| Other comprehensive income (loss): | | | | | | |
| Foreign currency translation adjustments | | 35,000 | | | (155,424) | | | (279,384) | |
| Prior pension and post-retirement benefit service cost and actuarial gain (loss), net of tax | | (1,037) | | | 8,124 | | | 7,137 | |
| Other comprehensive income (loss) | | 33,963 | | | (147,300) | | | (272,247) | |
| Comprehensive income (loss) | | (405,408) | | | (121,517) | | | 761,301 | |
| Less: comprehensive income (loss) attributable to noncontrolling interests | | (187) | | | 541 | | | (51) | |
| Comprehensive income (loss) attributable to Mohawk Industries, Inc. | | $ | (405,221) | | | (122,058) | | | 761,352 | |
| | | | | | |
See accompanying notes to the Consolidated Financial Statements.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)Balance Sheets
Years Ended December 31, 2022, 20212023 and 2020
| | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| | | | | | |
| | (In thousands) |
| Net earnings including noncontrolling interests | | $ | 25,783 | | | 1,033,548 | | | 515,727 | |
| Other comprehensive (loss) income: | | | | | | |
| Foreign currency translation adjustments | | (155,424) | | | (279,384) | | | 72,956 | |
| Prior pension and post-retirement benefit service cost and actuarial gain, net of tax | | 8,124 | | | 7,137 | | | (2,174) | |
| Other comprehensive (loss) income | | (147,300) | | | (272,247) | | | 70,782 | |
| Comprehensive (loss) income | | (121,517) | | | 761,301 | | | 586,509 | |
| Comprehensive income (loss) attributable to noncontrolling interests | | 541 | | | (51) | | | 235 | |
| Comprehensive (loss) income attributable to Mohawk Industries, Inc. | | $ | (122,058) | | | 761,352 | | | 586,274 | |
| | | | | | |
| | | | | | | | | | | |
| (In thousands, except per share data) | 2023 | | 2022 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 642,550 | | | 509,623 | |
| Short-term investments | — | | | 158,000 | |
| Receivables, net | 1,874,656 | | | 1,904,786 | |
| Inventories | 2,551,853 | | | 2,793,765 | |
| Prepaid expenses | 515,819 | | | 498,222 | |
| Other current assets | 19,339 | | | 30,703 | |
| Total current assets | 5,604,217 | | | 5,895,099 | |
| Property, plant and equipment, net | 4,993,166 | | | 4,661,178 | |
| Right of use operating lease assets | 428,532 | | | 387,816 | |
| Goodwill | 1,159,724 | | | 1,927,759 | |
| Tradenames | 705,746 | | | 668,328 | |
| Other intangible assets subject to amortization, net | 169,637 | | | 189,620 | |
| Deferred income taxes and other non-current assets | 498,847 | | | 390,632 | |
| Total assets | $ | 13,559,869 | | | 14,120,432 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Short-term debt and current portion of long-term debt | $ | 1,001,715 | | | 840,571 | |
| Accounts payable and accrued expenses | 2,035,339 | | | 2,124,448 | |
| Current operating lease liabilities | 108,860 | | | 105,266 | |
| Total current liabilities | 3,145,914 | | | 3,070,285 | |
| Deferred income taxes | 391,500 | | | 444,660 | |
| Long-term debt, less current portion | 1,701,785 | | | 1,978,563 | |
| Non-current operating lease liabilities | 337,506 | | | 296,136 | |
| Other long-term liabilities | 354,028 | | | 312,874 | |
| Total liabilities | 5,930,733 | | | 6,102,518 | |
| Commitments and contingencies (Note 16) | | | |
| | | |
| Stockholders’ equity: | | | |
| Preferred stock, $.01 par value; 60 shares authorized; no shares issued | — | | | — | |
| Common stock, $.01 par value; 150,000 shares authorized; 71,024 and 70,875 shares issued and outstanding in 2023 and 2022, respectively | 710 | | | 709 | |
| Additional paid-in capital | 1,947,477 | | | 1,930,789 | |
| Retained earnings | 6,970,244 | | | 7,409,760 | |
| Accumulated other comprehensive income (loss) | (1,079,963) | | | (1,114,258) | |
| 7,838,468 | | | 8,227,000 | |
| Less: treasury stock at cost; 7,338 and 7,341 shares in 2023 and 2022, respectively | 215,397 | | | 215,491 | |
| Total Mohawk Industries, Inc. stockholders’ equity | 7,623,071 | | | 8,011,509 | |
| Noncontrolling interests | 6,065 | | | 6,405 | |
| Total stockholders’ equity | 7,629,136 | | | 8,017,914 | |
| Total liabilities and stockholders' equity | $ | 13,559,869 | | | 14,120,432 | |
See accompanying notes to the Consolidated Financial Statements.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2023, 2022 2021 and 20202021
| | | | | Total Stockholders’ Equity |
| | | | Common Stock | | Additional
Paid-in
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | Nonredeemable Noncontrolling Interests | | Total
Stockholders’
Equity |
| | | | Shares | | Amount | | Shares | | Amount | | Total
Stockholders’
Equity |
| | | | | | | | | | | | | | | | | | | | | Common Stock | | Additional
Paid-in
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | Nonredeemable
Noncontrolling
Interests | | Total
Stockholders’
Equity |
| (In thousands) | |
| Balances at December 31, 2020 | |
| Balances at December 31, 2020 | |
| Balances at December 31, 2020 | |
| | | | (In thousands) |
| Balances at December 31, 2019 | | 78,980 | | | $ | 790 | | | $ | 1,868,250 | | | $ | 7,232,337 | | | $ | (765,824) | | | (7,348) | | | $ | (215,712) | | | $ | 6,607 | | | $ | 8,126,448 | |
| | Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | | 152 | | | 1 | | | (2,805) | | | — | | | — | | | 2 | | | 64 | | | — | | | (2,740) | |
| Stock-based compensation expense | Stock-based compensation expense | | — | | | — | | | 19,697 | | | — | | | — | | | — | | | — | | | — | | | 19,697 | |
| | Repurchases of common stock | Repurchases of common stock | | (1,508) | | | (15) | | | — | | | (188,610) | | | — | | | — | | | — | | | — | | | (188,625) | |
| Repurchases of common stock | |
| Repurchases of common stock | |
| | Net earnings attributable to noncontrolling interests | |
| Net earnings attributable to noncontrolling interests | |
| Net earnings attributable to noncontrolling interests | Net earnings attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 132 | | | 132 | |
| | Currency translation adjustment on noncontrolling interests | Currency translation adjustment on noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 103 | | | 103 | |
| Currency translation adjustment on noncontrolling interests | |
| Currency translation adjustment on noncontrolling interests | |
| Currency translation adjustment | Currency translation adjustment | | — | | | — | | | — | | | — | | | 72,853 | | | — | | | — | | | — | | | 72,853 | |
| Prior pension and post-retirement benefit service cost and actuarial loss | | — | | | — | | | — | | | — | | | (2,174) | | | — | | | — | | | — | | | (2,174) | |
| CECL adoption | | — | | | — | | | — | | | (131) | | | — | | | — | | | — | | | — | | | (131) | |
| Net earnings | | — | | | — | | | — | | | 515,595 | | | — | | | — | | | — | | | — | | | 515,595 | |
| Balances at December 31, 2020 | | 77,624 | | | 776 | | | 1,885,142 | | | 7,559,191 | | | (695,145) | | | (7,346) | | | (215,648) | | | 6,842 | | | 8,541,158 | |
| Prior pension and post-retirement benefit service cost and actuarial gain (loss), net of tax | |
| | Net earnings (loss) | |
| Net earnings (loss) | |
| Net earnings (loss) | |
| Balances at December 31, 2021 | |
| | Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | | 144 | | | 1 | | | 338 | | | — | | | — | | | 3 | | | 101 | | | — | | | 440 | |
| Stock-based compensation expense | Stock-based compensation expense | | — | | | — | | | 25,651 | | | — | | | — | | | — | | | — | | | — | | | 25,651 | |
| Repurchases of common stock | Repurchases of common stock | | (4,816) | | | (48) | | | — | | | (900,286) | | | — | | | — | | | — | | | — | | | (900,334) | |
| | Net earnings attributable to noncontrolling interests | Net earnings attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 389 | | | 389 | |
| Currency translation adjustment on noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (440) | | | (440) | |
| | Currency translation adjustment | | — | | | — | | | — | | | — | | | (278,944) | | | — | | | — | | | — | | | (278,944) | |
| Prior pension and post-retirement benefit service cost and actuarial gain | | — | | | — | | | — | | | — | | | 7,137 | | | — | | | — | | | — | | | 7,137 | |
| Net earnings | | — | | | — | | | — | | | 1,033,159 | | | — | | | — | | | — | | | — | | | 1,033,159 | |
| Balances at December 31, 2021 | | 72,952 | | | 729 | | | 1,911,131 | | | 7,692,064 | | | (966,952) | | | (7,343) | | | (215,547) | | | 6,791 | | | 8,428,216 | |
| | Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | | 107 | | | 1 | | | (3,323) | | | — | | | — | | | 2 | | | 56 | | | — | | | (3,266) | |
| Stock-based compensation expense | | — | | | — | | | 22,409 | | | — | | | — | | | — | | | — | | | — | | | 22,409 | |
| | Repurchases of common stock | | (2,184) | | | (21) | | | — | | | (307,551) | | | — | | | — | | | — | | | — | | | (307,572) | |
| Net earnings attributable to noncontrolling interests | |
| | Net earnings attributable to noncontrolling interests | Net earnings attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 536 | | | 536 | |
| Currency translation adjustment on noncontrolling interests | Currency translation adjustment on noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 5 | |
| Purchase of redeemable noncontrolling interest and noncontrolling interest, net of taxes | | — | | | — | | | 572 | | | — | | | — | | | — | | | — | | | (927) | | | (355) | |
| Purchase of nonredeemable noncontrolling interest, net of taxes | |
| Currency translation adjustment | Currency translation adjustment | | — | | | — | | | — | | | — | | | (155,430) | | | — | | | — | | | — | | | (155,430) | |
| Prior pension and post-retirement benefit service cost and actuarial gain | | — | | | — | | | — | | | — | | | 8,124 | | | — | | | — | | | — | | | 8,124 | |
| Net earnings | | — | | | — | | | — | | | 25,247 | | | — | | | — | | | — | | | — | | | 25,247 | |
| Prior pension and post-retirement benefit service cost and actuarial gain (loss), net of tax | |
| Net earnings (loss) | |
| Balances at December 31, 2022 | Balances at December 31, 2022 | | 70,875 | | | $ | 709 | | | $ | 1,930,789 | | | $ | 7,409,760 | | | $ | (1,114,258) | | | (7,341) | | | $ | (215,491) | | | $ | 6,405 | | | $ | 8,017,914 | |
| | Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards | |
| Stock-based compensation expense | |
| | Net earnings attributable to noncontrolling interests | |
| | Net earnings attributable to noncontrolling interests | |
| | Net earnings attributable to noncontrolling interests | |
| Currency translation adjustment on noncontrolling interests | |
| Purchase of nonredeemable noncontrolling interest, net of taxes | |
| Currency translation adjustment | |
| Prior pension and post-retirement benefit service cost and actuarial gain (loss), net of tax | |
| Net earnings (loss) | |
| Balances at December 31, 2023 | |
See accompanying notes to the Consolidated Financial Statements.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2023, 2022 2021 and 20202021
| | 2022 | | 2021 | | 2020 |
| | | (In thousands) |
| (In thousands) | | (In thousands) | 2023 | | 2022 | | 2021 |
| Cash flows from operating activities: | Cash flows from operating activities: | |
| Net earnings including noncontrolling interests | $ | 25,783 | | | 1,033,548 | | | 515,727 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |
| Net earnings (loss) including noncontrolling interests | |
| Net earnings (loss) including noncontrolling interests | |
| Net earnings (loss) including noncontrolling interests | |
| Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | |
| Restructuring | |
| Restructuring | |
| Restructuring | Restructuring | 47,716 | | | 10,783 | | | 103,695 | |
| Impairment of goodwill and indefinite-lived intangibles | Impairment of goodwill and indefinite-lived intangibles | 695,771 | | | — | | | — | |
| | Depreciation and amortization | Depreciation and amortization | 595,464 | | | 591,711 | | | 607,507 | |
| | Depreciation and amortization | |
| | Depreciation and amortization | |
| Deferred income taxes | Deferred income taxes | (51,098) | | | (4,929) | | | 22,324 | |
| | Loss on disposal of property, plant and equipment | 697 | | | 5,462 | | | 6,296 | |
| (Gain) loss on disposal of property, plant and equipment | |
| (Gain) loss on disposal of property, plant and equipment | |
| (Gain) loss on disposal of property, plant and equipment | |
| | Stock-based compensation expense | |
| Stock-based compensation expense | |
| Stock-based compensation expense | Stock-based compensation expense | 22,409 | | | 25,651 | | | 19,697 | |
| | Changes in operating assets and liabilities, net of effects of acquisitions: | Changes in operating assets and liabilities, net of effects of acquisitions: | |
| Changes in operating assets and liabilities, net of effects of acquisitions: | |
| Changes in operating assets and liabilities, net of effects of acquisitions: | |
| Receivables, net | |
| Receivables, net | |
| Receivables, net | Receivables, net | (84,381) | | | (207,047) | | | (54,977) | |
| | Inventories | |
| Inventories | |
| Inventories | Inventories | (409,601) | | | (519,229) | | | 357,516 | |
| Accounts payable and accrued expenses | Accounts payable and accrued expenses | (94,137) | | | 360,791 | | | 255,466 | |
| Other assets and prepaid expenses | Other assets and prepaid expenses | (49,552) | | | (66,844) | | | (55,084) | |
| Other liabilities | Other liabilities | (29,918) | | | 79,222 | | | (8,328) | |
| Net cash provided by operating activities | Net cash provided by operating activities | 669,153 | | | 1,309,119 | | | 1,769,839 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | | | | |
| Additions to property, plant and equipment | Additions to property, plant and equipment | (580,742) | | | (676,120) | | | (425,557) | |
| Additions to property, plant and equipment | |
| Additions to property, plant and equipment | |
| | Acquisitions, net of cash acquired | |
| Acquisitions, net of cash acquired | |
| Acquisitions, net of cash acquired | Acquisitions, net of cash acquired | (209,602) | | | (123,969) | | | — | |
| Purchases of short-term investments | Purchases of short-term investments | (2,481,000) | | | (1,211,239) | | | (1,187,891) | |
| Redemption of short-term investments | Redemption of short-term investments | 2,646,000 | | | 1,454,574 | | | 658,650 | |
| | Net cash used in investing activities | Net cash used in investing activities | (625,344) | | | (556,754) | | | (954,798) | |
| | Net cash used in investing activities | |
| | Net cash used in investing activities | |
| Cash flows from financing activities: | Cash flows from financing activities: | | | | | |
| Payments on Senior Credit Facilities | |
| Payments on Senior Credit Facilities | |
| Payments on Senior Credit Facilities | Payments on Senior Credit Facilities | (5,000) | | | — | | | (633,134) | |
| Proceeds from Senior Credit Facilities | Proceeds from Senior Credit Facilities | 5,000 | | | — | | | 617,883 | |
| Payments on commercial paper | Payments on commercial paper | (19,412,925) | | | (570,362) | | | (4,890,991) | |
| Proceeds from commercial paper | Proceeds from commercial paper | 19,633,142 | | | 1,185,020 | | | 4,195,353 | |
| | Proceeds from Senior Notes issuance | Proceeds from Senior Notes issuance | — | | | — | | | 1,062,240 | |
| | Proceeds from Senior Notes issuance | |
| | Proceeds from Senior Notes issuance | |
| | Repayments on Senior Notes | |
| | Repayments on Senior Notes | |
| | Repayments on Senior Notes | Repayments on Senior Notes | (600,000) | | | (932,252) | | | (326,904) | |
| | Proceeds from Term Loan Facility | Proceeds from Term Loan Facility | 907,952 | | | — | | | 500,000 | |
| Payments on Term Loan Facility | — | | | — | | | (500,000) | |
| Proceeds from Term Loan Facility | |
| Proceeds from Term Loan Facility | |
| | Net payments of other financing activities | |
| Net payments of other financing activities | |
| Net payments of other financing activities | Net payments of other financing activities | (23,455) | | | (11,656) | | | (8,338) | |
| Debt issuance costs | Debt issuance costs | (2,543) | | | — | | | (11,413) | |
| | | Purchase of Mohawk common stock | |
| | Purchase of Mohawk common stock | |
| | Purchase of Mohawk common stock | Purchase of Mohawk common stock | (307,572) | | | (900,334) | | | (188,625) | |
| Change in outstanding checks in excess of cash | Change in outstanding checks in excess of cash | (251) | | | (2,641) | | | (4,256) | |
| | Net cash provided by (used in) financing activities | Net cash provided by (used in) financing activities | 194,348 | | | (1,232,225) | | | (188,185) | |
| | Net cash provided by (used in) financing activities | |
| | Net cash provided by (used in) financing activities | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | 2,571 | | | (19,870) | | | 6,984 | |
| Net change in cash and cash equivalents | Net change in cash and cash equivalents | 240,728 | | | (499,730) | | | 633,840 | |
| Cash and cash equivalents, beginning of year | Cash and cash equivalents, beginning of year | 268,895 | | | 768,625 | | | 134,785 | |
| Cash and cash equivalents, end of year | Cash and cash equivalents, end of year | $ | 509,623 | | | 268,895 | | | 768,625 | |
See accompanying notes to the Consolidated Financial Statements.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Years Ended December 31, 2023, 2022 2021 and 20202021
(In thousands, except per share data)
(1) Summary of Significant Accounting Policies
Basis of Presentation
Mohawk Industries, Inc. (“Mohawk” or the “Company”), a term which includes the Company and its subsidiaries, is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company’s vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (“LVT”) and sheet vinyl flooring.
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2023, the Company had cash and cash equivalents of $642,550, of which $89,450 was held outside the United States. As of December 31, 2022, the Company had cash and cash equivalents of $509,623, of which $210,368 was held outside the United States. As of December 31, 2021, the Company had cash and cash equivalents of $268,895, of which $200,501 was held outside the United States.
Short-term Investments
The Company invests in high quality credit instruments. At December 31, 2022, and December 31, 2021, short-term investments consisted solely of investments in the Company’s commercial paper by its wholly-owned captive insurance company.
Fair Value
Accounting principles generally accepted in the U.S. define fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Accounts Receivable and Revenue Recognition
The Company recognizes revenue when it satisfies performance obligations as evidenced by the transfer of control of the promised goods to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The nature of the promised goods are ceramic, stone, carpet, resilient (includes sheet vinyl and LVT), laminate, wood and other flooring products. Payment is typically received 90 days or less from the invoice date. The Company adjusts the amounts of revenue for expected cash discounts, sales allowances, returns and claims based upon historical experience. The Company adjusts accounts receivable for doubtful account allowances based upon historical bad debt, claims experience, periodic evaluation of specific customer accounts and the aging of accounts receivable. If the financial condition of the Company’s customers were to deteriorate, resulting in a change in their ability to make payments, additional allowances may be required.
The Company accounts for incremental costs of obtaining a contract as an expense when incurred in selling, general and administrative expenses if the amortization period is less than one year.
The Company accounts for shipping and handling activities performed after control has been transferred as a fulfillment cost in cost of sales.
Inventories
The Company accounts for all inventories on the first-in, first-out (“FIFO”) method. Inventories are stated at the lower of cost or net realizable value. Cost has been determined using the FIFO method. Costs included in inventory include raw materials, direct and indirect labor, employee benefits, depreciation, general manufacturing overhead and various other costs of manufacturing. Inventories on hand are compared against anticipated future usage, which is a function of historical usage, anticipated future selling price, expected sales below cost, excessive quantities and an evaluation for obsolescence.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, including capitalized interest. Depreciation is calculated on a straight-line basis over the estimated remaining useful lives, which are 15-40 years for buildings and improvements, 3-25 years for machinery and equipment, 3-7 years for furniture and fixtures and the shorter of the estimated useful life or lease term for leasehold improvements.
Accounting for Business Combinations
The Company accounts for business combinations under the acquisition method of accounting which requires it to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.
Goodwill and Other Intangible Assets
In accordance with the provisions of the FASB ASC Topic 350, Intangibles-Goodwill and Other, the Company tests goodwill and other intangible assets with indefinite lives, which for the Company are tradenames, for impairment on an annual basis on the first day of the fourth quarter (or on an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value). The Company’s annual impairment tests of goodwill and tradenames may be completed through qualitative assessments. The Company may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test, for any reporting unit or tradename, in any period. The Company can resume the qualitative assessment for any reporting unit or tradename in any subsequent period.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The Company has identified Global Ceramic, Flooring North America (“Flooring NA”) and Flooring Rest of the World (“Flooring ROW”) as its reporting units for the purposes of allocating goodwill as well as assessing impairments. The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment.
Under a qualitative approach, the Company’s impairment review for goodwill consists of an assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount. If the Company elects to bypass the qualitative assessment for any reporting units, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value of a reporting unit exceeds its fair value, the Company performs a quantitative goodwill impairment test that requires it to estimate the fair value of the reporting unit.
The quantitative goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgments and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy approaches. If the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment loss as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital (“WACC”), and comparable company market multiples. When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Should a significant or prolonged deterioration in economic conditions occur, such as declines in spending for new construction, remodeling and replacement activities; the inability to pass increases in the costs of raw materials and fuel on to customers; or a decline in comparable company market multiples, then key judgments and assumptions could be impacted.
Under a qualitative approach, the Company’s impairment review for tradenames consists of an assessment of whether it is more-likely-than-not that a tradename’s fair value is less than its carrying value. If the Company elects to bypass the qualitative assessment for any tradename, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value of a tradename exceeds its fair value, the Company performs a quantitative tradename impairment test of the tradename.
The quantitative impairment evaluation for tradenames involves a comparison of the estimated fair value of the tradename to its carrying amount. If the carrying value of the tradename exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The determination of fair value used in the impairment evaluation is based on discounted estimates of future sales projections attributable to ownership of the tradenames. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, applicable discount rate and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the tradenames. Estimated cash flows are sensitive to changes in the economy among other things.
Intangible assets with finite lives are amortized based on average lives, which range from 5-20 years.
Leases
The Company measures right of use (“ROU”) assets and lease liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term. Variable rent expenses consist primarily of maintenance, property taxes and charges based on usage.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s credit spread adjusted for current market factors and foreign currency rates. The Company also made a policy election to determine its incremental borrowing rate, at the initial application date, using the total lease term and the total minimum rental payments, as the Company believes this rate is more indicative of the implied financing cost.
The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for service centers, warehouses, showrooms, and machinery and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet and expensed as incurred. The Company enters into lease contracts ranging from 1 to 60 years with a majority of the Company’s lease terms ranging from 1 to 10 years.
Some leases include one or more options to renew, with renewal terms that can extend the lease term from 3 to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. An insignificant number of the Company’s leases include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.
Financial Instruments
The Company’s financial instruments consist primarily of short-term investments, receivables, accounts payable, accrued expenses, short-term debt and long-term debt. The carrying amounts of receivables, accounts payable and accrued expenses approximate their fair value because of the short-term maturity of such instruments. The Company has a wholly-owned captive insurance company that may periodically invest in the Company’s commercial paper. These short-term commercial paper investments are classified as trading securities and carried at fair value based upon level two fair value hierarchy. The carrying amount of the Company’s variable-rate debt approximates its fair value based upon level two fair value hierarchy. Interest rates that are currently available to the Company for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of the Company’s long-term debt.
Advertising Costs and Vendor Consideration
Advertising and promotion expenses are charged to earnings during the period in which they are incurred. Advertising and promotion expenses included in selling, general, and administrative expenses were $135,175 in 2023, $126,898 in 2022 and $139,538 in 2021 and $105,974 in 2020.2021.
Vendor consideration, generally cash, is classified as a reduction of net sales, unless specific criteria are met regarding goods or services that the Company may receive in return for this consideration. The Company makes various payments to customers, including rebates, slotting fees, advertising allowances, buy-downs and co-op advertising. All of these payments reduce gross sales with the exception of co-op advertising. Co-op advertising expenses, classified as a selling, general and administrative expense, were $11,592 in 2023, $15,231 in 2022 and $22,092 in 2021 and $16,087 in 2020.2021.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Product Warranties
The Company warrants certain qualitative attributes of its flooring products. The Company has recorded a provision for estimated warranty and related costs based on historical experience and periodically adjusts these provisions to reflect actual experience.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Impairment of Long-Lived Assets
The Company reviews its long-lived asset groups, which include intangible assets such as patents and customer relationships subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated by these asset groups. If such asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.
Foreign Currency Translation
The Company’s subsidiaries that operate outside the United States generally use their local currency as the functional currency. The functional currency is translated into U.S. Dollarsdollars for balance sheet accounts using the month end rates in effect as of the balance sheet date and average exchange rate for revenue and expense accounts for each respective period. The translation adjustments are deferred as a separate component of stockholders’ equity, within accumulated other comprehensive income (loss). Gains or losses resulting from transactions denominated in foreign currencies are included in other income or expense, within the consolidated statements of operations.
Hedges of Net Investments in Non-U.S. Operations
The Company has numerous investments outside the United States. The net assets of these subsidiaries are exposed to changes and volatility in currency exchange rates. The Company has in the past and might in the future use foreign currency denominated debt to hedge its non-U.S. net investments against adverse movements in exchange rates. The gains and losses on the Company’s net investments in its non-U.S. operations are economically offset by losses and gains on its foreign currency borrowings. In June 2015, the Company designated its €500,000 2.00% Senior Notes borrowing as a net investment hedge of a portion of its European operations. On October 19, 2021, the Company redeemed at par the 2.00% Senior Notes, originally due on January 14, 2022, and paid the remaining €500,000 outstanding principal of the 2.00% Senior Notes, plus any unpaid interest, utilizing cash on hand. In connection with this repayment, the Company dedesignated its €500,000 2.00% Senior Notes borrowing as a net investment hedge of a portion of its European operations. For the years ended December 31, 2021 and December 31, 2020, the change in the U.S. dollar value of the Company’s euro denominated debt was a decrease of $35,363 ($26,928 net of taxes) and an increase of $54,907 ($41,708 net of taxes), respectively. Changes in the U.S. dollar value of the Company’s euro denominated debt are recorded in the foreign currency translation adjustment component of accumulated other comprehensive income (loss).
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Earnings (Loss) per Share (“EPS”)
Basic earnings (loss) per share is calculated using net earnings (loss) available to common stockholders divided by the weighted-average number of shares of common stock outstanding during the year. Diluted EPS is similar to basic EPS except that the weighted-average number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
Dilutive common stock options and unvested restricted shares (units) are included in the diluted EPS calculation using the treasury stock method.
Computations of basic and diluted earnings (loss) per share are presented for the years ended December 31, 2023, 2022 and 2021, respectively, in the following table:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| | | | | |
| | | | | |
| Net earnings (loss) available to common stockholders | $ | (439,516) | | | 25,247 | | | 1,033,159 | |
| | | | | |
| Weighted-average common shares outstanding—basic and diluted: | | | | | |
| Weighted-average common shares outstanding—basic | 63,657 | | | 63,826 | | | 68,852 | |
Add weighted-average dilutive potential common shares—RSUs, net (1) | — | | | 236 | | | 293 | |
| Weighted-average common shares outstanding—diluted | 63,657 | | | 64,062 | | | 69,145 | |
| | | | | |
| Earnings (loss) per share attributable to Mohawk Industries, Inc. | | | | | |
| Basic | $ | (6.90) | | | 0.40 | | | 15.01 | |
| Diluted | $ | (6.90) | | | 0.39 | | | 14.94 | |
(1)Due to the anti-dilutive effect, 235 shares of common stock equivalents for the year ended December 31, 2023 were omitted from the calculation of diluted weighted-average common shares outstanding. There were no common stock options and unvested restricted shares (units) that were excluded from the diluted EPS computation because the price was greater than the average market price of the common shares for the periods presented for 2022 2021 and 2020.
Computations of basic and diluted earnings per share are presented for the years ended December 31, 2022, 2021 and 2020, respectively, in the following table:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| | | | | |
| | | | | |
| Net earnings available to common stockholders | $ | 25,247 | | | 1,033,159 | | | 515,595 | |
| | | | | |
| Weighted-average common shares outstanding—basic and diluted: | | | | | |
| Weighted-average common shares outstanding—basic | 63,826 | | | 68,852 | | | 71,214 | |
| Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net | 236 | | | 293 | | | 187 | |
| Weighted-average common shares outstanding-diluted | 64,062 | | | 69,145 | | | 71,401 | |
| | | | | |
| Earnings per share attributable to Mohawk Industries, Inc. | | | | | |
| Basic | $ | 0.40 | | | 15.01 | | | 7.24 | |
| Diluted | $ | 0.39 | | | 14.94 | | | 7.22 | |
Stock-Based Compensation
The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with ASC 718-10, Stock Compensation. Compensation expense is generally recognized on a straight-line basis over the awards’ estimated lives for fixed awards with ratable vesting provisions.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Employee Benefit Plans
The Company has 401(k) retirement savings plans (the “Mohawk Plan”) open to substantially all U.S. and Puerto Rico based employees who have completed 60 days of eligible service. The Company contributes $.50 for every $1.00 of employee contributions up to a maximum of 6% of the employee’s salary based upon each individual participants election. Employee and employer contributions to the Mohawk Plan were $61,486 and $23,892 in 2023, $63,648 and $24,483 in 2022 and $61,082 and $23,884 in 2021, and $56,241 and $13,509 in 2020, respectively.
The Company also has various pension plans covering employees in Belgium, France, and the Netherlands (the “Non-U.S. Plans”) within Flooring ROW. Benefits under the Non-U.S. Plans depend on compensation and years of service. The Non-U.S. Plans are funded in accordance with local regulations. The Company uses December 31 as the measurement date for its Non-U.S. Plans. The Company’s projected benefit obligation and plan assets as of December 31, 20222023 were $55,236$79,967 and $50,702,$73,718, respectively. The Company’s projected benefit obligation and plan assets as of December 31, 20212022 were $80,324$55,236 and $65,118,$50,702, respectively. As of December 31, 2023, the funded status of the Non-U.S. Plans was a liability of $6,249 of which $201 was recorded in accumulated other comprehensive income (loss), for a net liability of $6,048 recorded in other long-term liabilities within the consolidated balance sheets. As of December 31, 2022, the funded status of the Non-U.S. Plans was a liability of $4,534 of which $82 was recorded in accumulated other comprehensive income (loss), for a net liability of $4,452 recorded in other long-term liabilities within the consolidated balance sheets. As of December 31, 2021, the funded status of the Non-U.S. Plans was a liability of $15,206 of which $8,866 was recorded in accumulated other comprehensive income (loss), for a net liability of $6,340 recorded in other long-term liabilities within the consolidated balance sheets.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Comprehensive Income (Loss)
Comprehensive income (loss) includes foreign currency translation of assets and liabilities of foreign subsidiaries, effects of exchange rate changes on intercompany balances of a long-term nature and pension and post-retirement benefit service cost. The Company does not provide income taxes on currency translation adjustments, as earnings from foreign subsidiaries are considered to be indefinitely reinvested. The Company presents currency translation adjustments on noncontrolling interests separately from currency translation adjustments on controlling interests in accumulated other comprehensive income (loss) within stockholders’ equity.
The changes in accumulated other comprehensive income (loss) by component, net of tax, for the years ended December 31, 2023, 2022 2021 and 20202021 are as follows:
| | | | Foreign currency translation adjustments | | Prior pension and post-retirement benefit service cost and actuarial gain (loss) | | Total | | Foreign Currency
Translation
Adjustments | | Prior Pension and
Post-Retirement
Benefit Service
Cost and Actuarial
Gain (Loss) | | Total |
| Balance as of December 31, 2019 | $ | (753,108) | | | (12,716) | | | (765,824) | |
| Balance as of December 31, 2020 | |
| Current period other comprehensive income (loss) | Current period other comprehensive income (loss) | 72,853 | | | (2,174) | | | 70,679 | |
| | Balance as of December 31, 2020 | (680,255) | | | (14,890) | | | (695,145) | |
| Current period other comprehensive (loss) income | (278,944) | | | 7,137 | | | (271,807) | |
| | Balance as of December 31, 2021 | Balance as of December 31, 2021 | (959,199) | | | (7,753) | | | (966,952) | |
| Current period other comprehensive (loss) income | (155,430) | | | 8,124 | | | (147,306) | |
| Balance as of December 31, 2021 | |
| Balance as of December 31, 2021 | |
| Current period other comprehensive income (loss) | |
| | Balance as of December 31, 2022 | Balance as of December 31, 2022 | $ | (1,114,629) | | | 371 | | | (1,114,258) | |
| Balance as of December 31, 2022 | |
| Balance as of December 31, 2022 | |
| Current period other comprehensive income (loss) | |
| | Balance as of December 31, 2023 | |
| Balance as of December 31, 2023 | |
| Balance as of December 31, 2023 | |
Self-Insurance Reserves
The Company is self-insured in the U.S. for various levels of general liability, automobile liability, workers’ compensation and employee medical coverage. Insurance reserves are primarily calculated on an undiscounted basis based on actual claim data and estimates of incurred but not reported claims developed utilizing historical claim trends. Projected settlements and incurred but not reported claims are estimated based on pending claims and historical trends and data. Though the Company does not expect them to do so, actual settlements and claims could differ materially from those estimated. Material differences in actual settlements and claims could have an adverse effect on the Company’s results of operations and financial condition.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The Company has a wholly-owned captive insurance company, Mohawk Assurance Services, Inc. (“MAS”). MAS insures the retained portion of the Company’s U.S. general liability, automobile liability, workers’ compensation exposures, pandemic, terrorism and medical coverage to MAS.
Fiscal Year
The Company ends its fiscal year on December 31. Each of the first three quarters in the fiscal year ends on the Saturday nearest the calendar quarter end with a thirteen week fiscal quarter.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Recent Accounting Pronouncements—Recently Adopted
In December 2019, the FASB issued Accounting Standards Update (“ASU”)ASU 2019-12, Simplifying the Accounting for Income Taxes which simplified the accounting for income taxes in several areas by removing certain exceptions and by clarifying and amending existing guidance applicable to accounting for income taxes. The Company adopted the new standard on January 1, 2021. The effect of adopting the new standard was not material.
Recent Accounting Pronouncements—Effective in Future Years
In June 2016,November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands segment disclosures for public entities, including requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss in assessing segment performance and allocating resources. The new guidance also expands disclosures about a reportable segment’s profit or loss and assets in interim periods and clarifies that a public entity may report additional measures of segment profit if the CODM uses more than one measure of a segment’s profit or loss. The new guidance does not remove existing segment disclosure requirements or change how a public entity identifies its operating segments, aggregates those operating segments, or determines its reportable segments. The guidance effective for fiscal years beginning after December 15, 2023, and subsequent interim periods with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact this new guidance will have on its disclosures upon adoption.
On December 14, 2023, the FASB issued ASU 2016-13,2023-09, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial InstrumentsImprovements to Income Tax Disclosures, which was further amended by additional accounting standards updates issued by the FASB. The new standard replaced the incurred loss impairment methodology for recognizing credit losses with a new methodology that requires recognition of lifetime expected credit losses when a financial asset is originated or purchased, even if the risk of loss is remote. The new methodology (referred to as the current expected credit losses model, or “CECL”) applies to most financial assets measured at amortized cost, including trade receivables, andall entities subject to income taxes. The standard requires considerationdisaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities, this standard will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. Currently, the Company is assessing the impact of a broader range of reasonable and supportable information to estimate expected credit losses.the new guidance. The Company adopteddoes not expect the new standardadoption of the guidance to have a significant impact on January 1, 2020 using a modified retrospective transition approach, with the cumulative impact being immaterial to theits financial statements.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(2) Acquisitions
2023 Acquisitions
During the first quarter of 2023, the Company completed the acquisitions of two ceramic tile businesses in Brazil and Mexico within Global Ceramic for $515,509. The Company’s acquisitions resulted in a goodwill allocation of $87,520. None of the goodwill will be deductible for tax purposes. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisitions. These benefits include opportunities to improve the Company’s ceramic performance by leveraging best practices, operational expertise, product innovation and manufacturing assets across the segment. The following table presents the allocation of the purchase price by major class of assets acquired and liabilities assumed as of the acquisition date.
| | | | | |
| Amounts Recognized as of the Acquisition Date |
| Working capital | $ | 95,336 | |
| Property, plant and equipment | 333,495 | |
| Tradenames | 38,539 | |
| Customer relationships | 4,040 | |
| Goodwill | 87,520 | |
| Long-term debt, including current portion | (26,072) | |
| Deferred tax, net | (10,088) | |
| Consideration transferred | 522,770 | |
| Less: cash acquired | (7,261) | |
| Net consideration transferred (net of cash acquired) | $ | 515,509 | |
The supplemental pro forma information is immaterial to the Company's financial statements.
2022 Acquisitions
During 2022, the Company completed two acquisitions in Flooring NANorth America (“Flooring NA”) for $164,579.$164,475. The Company’s acquisitions resulted in a preliminary goodwill allocation of $60,842, pending working capital adjustments,$55,954 and intangible assets subject to amortization of $19,900. Approximately halfSubstantially all of the goodwill is expected to be deductible for tax purposes. TheDuring the third and fourth quarters of 2022, the Company also completed three acquisitions in Flooring ROWRest of the World (“Flooring ROW”) for $47,964, which resulted in a preliminary goodwill allocation of $11,542, pending working capital adjustments,$14,759 and intangible assets subject to amortization of $3,376. SomeAn immaterial amount of the goodwill is expected to be deductible for tax purposes.
2021 Acquisitions
During 2021, the Company completed acquisitions in Flooring ROW totaling $121,027, including the acquisition of an insulation manufacturer, on September 7, 2021 for $66,334 and the acquisition of a MDF production plant on November 2, 2021 for $44,357. The Company’s acquisitions resulted in a goodwill allocation of $52,536 and intangible assets subject to amortization of $19,910. The goodwill was not deductible for tax purposes. The remaining acquisitions resulted in goodwill of $1,672 and intangible assets subject to amortization of $5,596.
(3) Revenue from Contracts with Customers
Contract Liabilities
The Company records contract liabilities when it receives payment prior to fulfilling a performance obligation. Contract liabilities related to revenues are recorded in accounts payable and accrued expenses on the accompanying condensed
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
consolidated balance sheets. The Company had contract liabilities of $72,572$67,956 and $65,744$72,572 as of December 31, 20222023 and December 31, 2021,2022, respectively.
Performance Obligations
Substantially all of the Company’s revenue is recognized at a point in time when the product is either shipped or received from the Company’s facilities and control of the product is transferred to the customer. Accordingly, in any period, the Company does not recognize a significant amount of revenue from performance obligations satisfied or partially satisfied in prior periods and the amount of such revenue recognized during the years ended December 31, 2023, 2022, 2021, and 20202021 was immaterial.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Costs to Obtain a Contract
The Company incurs certain incremental costs to obtain revenue contracts. These costs relate to marketing display structures and are capitalized when the amortization period is greater than one year, with the amount recorded in other assets on the accompanying condensed consolidated balance sheets. Capitalized costs to obtain contracts were $59,015$66,669 and $49,644$59,015 as of December 31, 20222023 and December 31, 2021,2022, respectively. Straight-line amortization expense recognized during 2023, 2022 2021 and 20202021 related to these capitalized costs were $61,327, $55,520 $61,681 and $68,201,$61,681, respectively.
Revenue Disaggregation
The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories during the years ended December 31, 2023, 2022 2021 and 2020,2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | Global Ceramic | | Flooring NA | | Flooring ROW | | | | Total |
| Geographical Markets | | | | | | | | | |
| United States | $ | 2,403,292 | | | 4,072,952 | | | 13,835 | | | | | 6,490,079 | |
| Europe | 875,414 | | | 6,322 | | | 2,270,315 | | | | | 3,152,051 | |
| Russia | 374,539 | | | 23 | | | 175,035 | | | | | 549,597 | |
| Other | 654,436 | | | 127,744 | | | 763,158 | | | | | 1,545,338 | |
| Total | $ | 4,307,681 | | | 4,207,041 | | | 3,222,343 | | | | | 11,737,065 | |
| | | | | | | | | |
| Product Categories | | | | | | | | | |
| Ceramic & Stone | $ | 4,282,887 | | | 37,536 | | | — | | | | | 4,320,423 | |
| Carpet & Resilient | 24,794 | | | 3,296,152 | | | 914,869 | | | | | 4,235,815 | |
| Laminate & Wood | — | | | 873,353 | | | 1,091,133 | | | | | 1,964,486 | |
Other (1) | — | | | — | | | 1,216,341 | | | | | 1,216,341 | |
| Total | $ | 4,307,681 | | | 4,207,041 | | | 3,222,343 | | | | | 11,737,065 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Global Ceramic | | Flooring NA | | Flooring ROW | | | | | | Total |
| Geographical Markets | | | | | | | | | | | |
| United States | $ | 2,193,234 | | | 3,978,146 | | | 10,248 | | | | | | | 6,181,628 | |
| Europe | 849,247 | | | 2,731 | | | 2,265,914 | | | | | | | 3,117,892 | |
| Russia | 299,621 | | | 94 | | | 150,295 | | | | | | | 450,010 | |
| Other | 575,217 | | | 135,434 | | | 740,432 | | | | | | | 1,451,083 | |
| Total | $ | 3,917,319 | | | 4,116,405 | | | 3,166,889 | | | | | | | 11,200,613 | |
| | | | | | | | | | | |
| Product Categories | | | | | | | | | | | |
| Ceramic & Stone | $ | 3,903,597 | | | 35,057 | | | — | | | | | | | 3,938,654 | |
| Carpet & Resilient | 13,722 | | | 3,287,533 | | | 992,787 | | | | | | | 4,294,042 | |
| Laminate & Wood | — | | | 793,815 | | | 1,058,951 | | | | | | | 1,852,766 | |
Other (1) | — | | | — | | | 1,115,151 | | | | | | | 1,115,151 | |
| Total | $ | 3,917,319 | | | 4,116,405 | | | 3,166,889 | | | | | | | 11,200,613 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 | Global Ceramic | | Flooring NA | | Flooring ROW | | | | Total |
| Geographical Markets: | | | | | | | | | |
| United States | $ | 2,320,019 | | | 3,713,311 | | | 6,728 | | | | | 6,040,058 | |
Europe (2) | 1,071,649 | | | 4,375 | | | 2,304,956 | | | | | 3,380,980 | |
| Latin America | 730,326 | | | 3,776 | | | 33,671 | | | | | 767,773 | |
| Other | 178,113 | | | 107,924 | | | 660,267 | | | | | 946,304 | |
| Total | $ | 4,300,107 | | | 3,829,386 | | | 3,005,622 | | | | | 11,135,115 | |
| | | | | | | | | |
| Product Categories: | | | | | | | | | |
| Ceramic & Stone | $ | 4,258,873 | | | 34,211 | | | — | | | | | 4,293,084 | |
| Carpet & Resilient | 41,234 | | | 3,021,060 | | | 893,066 | | | | | 3,955,360 | |
| Laminate & Wood | — | | | 774,115 | | | 958,499 | | | | | 1,732,614 | |
Other (1) | — | | | — | | | 1,154,057 | | | | | 1,154,057 | |
| Total | $ | 4,300,107 | | | 3,829,386 | | | 3,005,622 | | | | | 11,135,115 | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
| | December 31, 2020 | Global Ceramic | | Flooring NA | | Flooring ROW | | | Total |
| Geographical Markets | | | | | | | | |
| December 31, 2022 | |
| December 31, 2022 | |
| December 31, 2022 | | Global Ceramic | | Flooring NA | | Flooring ROW | | | | | | Total |
| Geographical Markets: | |
| United States | United States | $ | 2,050,470 | | | 3,477,556 | | | 2,381 | | | | 5,530,407 | |
| Europe | 699,715 | | | 1,506 | | | 1,785,549 | | | | 2,486,770 | |
| Russia | 262,846 | | | 50 | | | 122,934 | | | | 385,830 | |
| United States | |
| United States | |
Europe (2) | |
| Latin America | |
| Other | Other | 419,725 | | | 114,963 | | | 614,502 | | | | 1,149,190 | |
| Total | Total | $ | 3,432,756 | | | 3,594,075 | | | 2,525,366 | | | | 9,552,197 | |
| | Product Categories | | | |
| Product Categories: | |
| Product Categories: | |
| Product Categories: | |
| Ceramic & Stone | |
| Ceramic & Stone | |
| Ceramic & Stone | Ceramic & Stone | $ | 3,425,672 | | | 31,531 | | | — | | | | 3,457,203 | |
| Carpet & Resilient | Carpet & Resilient | 7,084 | | | 2,871,050 | | | 857,754 | | | | 3,735,888 | |
| Laminate & Wood | Laminate & Wood | — | | | 691,494 | | | 847,473 | | | | 1,538,967 | |
Other (1) | Other (1) | — | | | — | | | 820,139 | | | | 820,139 | |
| Total | Total | $ | 3,432,756 | | | 3,594,075 | | | 2,525,366 | | | | 9,552,197 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | Global Ceramic | | Flooring NA | | Flooring ROW | | | | Total |
| Geographical Markets: | | | | | | | | | |
| United States | $ | 2,193,234 | | | 3,978,146 | | | 10,248 | | | | | 6,181,628 | |
Europe (2) | 1,148,868 | | | 2,825 | | | 2,416,209 | | | | | 3,567,902 | |
| Latin America | 421,696 | | | 3,663 | | | 9,153 | | | | | 434,512 | |
| Other | 153,521 | | | 131,771 | | | 731,279 | | | | | 1,016,571 | |
| Total | $ | 3,917,319 | | | 4,116,405 | | | 3,166,889 | | | | | 11,200,613 | |
| | | | | | | | | |
| Product Categories: | | | | | | | | | |
| Ceramic & Stone | $ | 3,903,597 | | | 35,057 | | | — | | | | | 3,938,654 | |
| Carpet & Resilient | 13,722 | | | 3,287,533 | | | 992,787 | | | | | 4,294,042 | |
| Laminate & Wood | — | | | 793,815 | | | 1,058,951 | | | | | 1,852,766 | |
Other (1) | — | | | — | | | 1,115,151 | | | | | 1,115,151 | |
| Total | $ | 3,917,319 | | | 4,116,405 | | | 3,166,889 | | | | | 11,200,613 | |
(1) Other includes roofing elements, insulation boards, chipboards and IP contracts.
(2) Russia revenue included in Europe.
(4) Restructuring, Acquisition and Integration-Related Costs
The Company incurs costs in connection with acquiring, integrating and restructuring acquisitions and in connection with its global cost-reduction/productivity initiatives. For example:
•In connection with acquisition activity, the Company typically incurs costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and
•In connection with the Company’s cost-reduction/productivity initiatives, it typically incurs costs and charges associated with site closings and other facility rationalization actions, including accelerated depreciation ("asset write-downs") and workforce reductions.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Restructuring, acquisition and integration-related costs consisted of the following during the year ended December 31, 2023, 2022 2021 and 2020,2021, respectively (in thousands):
| | 2022 | | 2021 | | 2020 |
| Cost of sales | | | | | | |
| | 2023 | | | | 2023 | | 2022 | | 2021 |
| Cost of sales: | |
| Restructuring costs | |
| Restructuring costs | |
| Restructuring costs | Restructuring costs | | $ | 67,621 | | | 17,899 | | | 101,230 | |
| | Acquisition integration-related costs | Acquisition integration-related costs | | 396 | | | 497 | | | 1,153 | |
| Acquisition integration-related costs | |
| Acquisition integration-related costs | |
| Restructuring and acquisition integration-related costs | Restructuring and acquisition integration-related costs | | $ | 68,017 | | | 18,396 | | | 102,383 | |
| | Selling, general and administrative expenses | |
| Selling, general and administrative expenses: | |
| Selling, general and administrative expenses: | |
| Selling, general and administrative expenses: | |
| Restructuring costs | |
| Restructuring costs | |
| Restructuring costs | Restructuring costs | | $ | 9,094 | | | 1,301 | | | 24,127 | |
| Acquisition transaction-related costs | Acquisition transaction-related costs | | 1,654 | | | 2,372 | | | 213 | |
| Acquisition integration-related costs | Acquisition integration-related costs | | 2,992 | | | 1,568 | | | 2,127 | |
| Restructuring, acquisition transaction and integration-related costs | Restructuring, acquisition transaction and integration-related costs | | $ | 13,740 | | | 5,241 | | | 26,467 | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The restructuring activity for the years ended December 31, 20222023 and 2021,2022, respectively is as follows (in thousands):
| | Lease
Impairments | |
| Lease
Impairments | |
| Lease
Impairments | |
| | | Lease impairments | | Asset write-downs
(gains on disposals) | | Severance | | Other restructuring costs | | Total | |
| | Balance as of December 31, 2020 | $ | — | | | — | | | 11,576 | | | 729 | | | 12,305 | | |
| Restructuring costs | | | | | | | | | | |
| Global Ceramic | 226 | | | 1,458 | | | 134 | | | 808 | | | 2,626 | | |
| Flooring NA | (37) | | | 7,595 | | | (284) | | | 9,614 | | | 16,888 | | |
| Flooring ROW | — | | | (1,968) | | | (1,096) | | | 1,538 | | | (1,526) | | |
| Corporate | — | | | 1,017 | | | 195 | | | — | | | 1,212 | | |
| Total restructuring costs for 2021 | 189 | | | 8,102 | | | (1,051) | | | 11,960 | | | 19,200 | | |
| Cash payments | — | | | — | | | (8,507) | | | (10,822) | | | (19,329) | | |
| Non-cash items | (189) | | | (8,102) | | | (384) | | | (872) | | | (9,547) | | |
| Balance as of December 31, 2021 | Balance as of December 31, 2021 | — | | | — | | | 1,634 | | | 995 | | | 2,629 | | |
| Restructuring costs | | | | | | | | | | |
| Global Ceramic | — | | | — | | | 3,365 | | | — | | | 3,365 | | |
| Flooring NA | — | | | 29,327 | | | 741 | | | 14,406 | | | 44,474 | | |
| Flooring ROW | — | | | 9,371 | | | 12,677 | | | 6,828 | | | 28,876 | | |
| Corporate | — | | | — | | | — | | | — | | | — | | |
| Total restructuring costs for 2022 | — | | | 38,698 | | | 16,783 | | | 21,234 | | | 76,715 | | |
| Cash payments | — | | | — | | | (8,557) | | | (21,241) | | | (29,798) | | |
| Non-cash items | — | | | (38,698) | | | 177 | | | (988) | | | (39,509) | | |
| Balance as of December 31, 2022 | $ | — | | | — | | | 10,037 | | | — | | | 10,037 | | |
| | | 2021 restructuring costs recorded in: | | |
| Cost of sales | $ | — | | | 6,721 | | | (370) | | | 11,548 | | | 17,899 | | |
| Selling, general and administrative expenses | 189 | | | 1,381 | | | (681) | | | 412 | | | 1,301 | | |
| Total restructuring costs for 2021 | $ | 189 | | | 8,102 | | | (1,051) | | | 11,960 | | | 19,200 | | |
| | Balance as of December 31, 2021 | |
| | Balance as of December 31, 2021 | |
| Restructuring costs: | |
| Restructuring costs: | |
| Restructuring costs: | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | |
| Flooring NA | |
| Flooring NA | |
| Flooring NA | |
| Flooring ROW | |
| Flooring ROW | |
| Flooring ROW | |
| Corporate | |
| Corporate | |
| Corporate | |
| Total restructuring costs for 2022 | |
| Total restructuring costs for 2022 | |
| Total restructuring costs for 2022 | |
| Cash payments | |
| Cash payments | |
| Cash payments | |
| Non-cash items | |
| Non-cash items | |
| Non-cash items | |
| Balance as of December 31, 2022 | |
| Balance as of December 31, 2022 | |
| Balance as of December 31, 2022 | |
| Restructuring costs: | |
| Restructuring costs: | |
| Restructuring costs: | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | |
| Flooring NA | |
| Flooring NA | |
| Flooring NA | |
| Flooring ROW | |
| Flooring ROW | |
| Flooring ROW | |
| Corporate | |
| Corporate | |
| Corporate | |
| Total restructuring costs for 2023 | |
| Total restructuring costs for 2023 | |
| Total restructuring costs for 2023 | |
| Cash payments | |
| Cash payments | |
| Cash payments | |
| Non-cash items | |
| Non-cash items | |
| Non-cash items | |
| Balance as of December 31, 2023 | |
| Balance as of December 31, 2023 | |
| Balance as of December 31, 2023 | |
| | 2022 restructuring costs recorded in: | |
| | 2022 restructuring costs recorded in: | |
| | | 2022 restructuring costs recorded in: | 2022 restructuring costs recorded in: | | |
| Cost of sales | Cost of sales | $ | — | | | 38,698 | | | 7,915 | | | 21,008 | | | 67,621 | | |
| Cost of sales | |
| Cost of sales | |
| Selling, general and administrative expenses | |
| Selling, general and administrative expenses | |
| Selling, general and administrative expenses | Selling, general and administrative expenses | — | | | — | | | 8,868 | | | 226 | | | 9,094 | | |
| Total restructuring costs for 2022 | Total restructuring costs for 2022 | $ | — | | | 38,698 | | | 16,783 | | | 21,234 | | | 76,715 | | |
| Total restructuring costs for 2022 | |
| Total restructuring costs for 2022 | |
| | 2023 restructuring costs recorded in: | |
| | 2023 restructuring costs recorded in: | |
| | 2023 restructuring costs recorded in: | |
| Cost of sales | |
| Cost of sales | |
| Cost of sales | |
| Selling, general and administrative expenses | |
| Selling, general and administrative expenses | |
| Selling, general and administrative expenses | |
| Total restructuring costs for 2023 | |
| Total restructuring costs for 2023 | |
| Total restructuring costs for 2023 | |
|
The Company generally expects the remaining severance and other restructuring costs to be paid over the next year.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(5) Fair Value
The Company’s wholly-owned captive insurance company may invest in the Company’s commercial paper. These short-term commercial paper investments are classified as trading securities and carried at fair value based upon the Level 2 fair value hierarchy.
Items Measured at Fair Value
The following table presents the items measured at fair value as of December 31, 20222023 and December 31, 2021:2022:
| | | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 | |
| | | | | |
| | | | | |
| Short-term investments: | | | | | |
| | | | | |
| Commercial paper (Level 2) | | $ | 158,000 | | | 323,000 | | |
| | | | | | | | | | | | | | | |
| | December 31, 2023 | | December 31, 2022 | |
| | | | | |
| | | | | |
| Short-term investments: | | | | | |
| | | | | |
| Commercial paper (Level 2) | | $ | — | | | 158,000 | | |
The fair values and carrying values of the Company’s debt are disclosed in Note 10, Long-Term Debt.
(6) Receivables, net
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Customers, trade | $ | 1,699,130 | | | 1,721,584 | |
| Income tax receivable | 60,080 | | | 73,727 | |
| Other | 219,355 | | | 117,823 | |
| 1,978,565 | | | 1,913,134 | |
| Less: allowance for discounts, returns, claims and doubtful accounts | 73,779 | | | 73,149 | |
| Receivables, net | $ | 1,904,786 | | | 1,839,985 | |
The following table reflects the activity of allowances for discounts, returns, claims and doubtful accounts for the years ended December 31:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at beginning of year | | Acquisitions | | Additions charged to net sales or
costs and expenses | | Deductions (1) | | Balance at end of year |
| 2020 | $ | 61,921 | | | — | | | 384,403 | | | 362,642 | | | 83,682 | |
| 2021 | 83,682 | | | 644 | | | 357,635 | | | 368,812 | | | 73,149 | |
| 2022 | 73,149 | | | 584 | | | 382,027 | | | 381,981 | | | 73,779 | |
(1) Represents charge-offs, net of recoveries. | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Customers, trade | $ | 1,716,309 | | | 1,699,130 | |
| Income tax receivable | 48,399 | | | 60,080 | |
| Other | 176,808 | | | 219,355 | |
| 1,941,516 | | | 1,978,565 | |
| Less: allowance for discounts, claims and doubtful accounts | 66,860 | | | 73,779 | |
| Receivables, net | $ | 1,874,656 | | | 1,904,786 | |
(7) Inventories
The components of inventories are as follows:
| | December 31, 2022 | | December 31, 2021 |
| December 31, 2023 | | | December 31, 2023 | | December 31, 2022 |
| Finished goods | Finished goods | $ | 1,986,005 | | | 1,677,707 | |
| Work in process | Work in process | 160,757 | | | 144,004 | |
| Raw materials | Raw materials | 647,003 | | | 569,961 | |
| Total inventories | Total inventories | $ | 2,793,765 | | | 2,391,672 | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(8) Goodwill and Other Intangible Assets
The Company performs its annual testing of goodwill and indefinite-lived intangibles inon the first day of the fourth quarter of each year. Between annual testing dates, the Company monitors factors such as its market capitalization, comparable company market multiples and macroeconomic conditions to identify conditions that could impact the Company’s assumptions utilized in the determination of the estimated fair values of the Company’s reporting units and indefinite-lived intangible assets significantly enough to trigger an impairment.
The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgementsjudgments and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy approaches. The Company has identified Global Ceramic, Flooring NA and Flooring ROW as its reporting units for the purposes of allocating goodwill and intangibles at the asset level, as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgementsjudgments and assumptions about appropriate sales growth rates, operating margins, WACCweighted average cost of capital (“WACC”) and comparable company market multiples.
As a result of a decrease in the Company’s market capitalization, comparable company market multiples, projected future cash flowsmacroeconomic conditions and an increase in the WACC, due to increases in the risk free rate and applicable risk premiums, the Company determined that a triggering event occurred requiring goodwill impairment testing for each of its reporting units as of September 30, 2023 and October 1, 2022. The impairment testtests indicated a pre-tax, non-cash goodwill impairment chargecharges related to all 3 reporting units of $870,750 ($859,725 net of tax) and in the Global Ceramic reporting unit of $688,514 ($679,664 net of tax), which the Company recorded during the third quarter of 2022. 2023 and 2022, respectively.
The Company concluded the goodwill of its other reporting units was not impaired on October 1, 2022. In addition, the Company compared the estimated fair values of its indefinite-lived intangibles to their carrying values and determined that there were impairmentsimpairment charges of $6,994 ($5,181 net of tax) in all 3 reporting units and $7,257 ($5,939 net of tax) in the Flooring ROW and Flooring NA reporting units during the third quarter of 2022.2023 and 2022, respectively.
The excess of fair value over carrying value for the Flooring ROW reporting unit was approximately 20% and the excess of fair value over carrying value for the Flooring NA reporting unit was less than 5%, as of October 1, 2022. The Company’s annual testing date for goodwill and tradenames is the first day of its fourth quarter and due to the fact
that there were no significant changes in facts or circumstances in the one calendar day, the Company determined there was no additional impairment of goodwill or tradenames. The Company conducted a qualitative analysis as of December 31, 20222023 and determined there was no indication of an impairment.
A significant or prolonged deterioration in economic conditions, continued increases in the costs of raw materials and energy combined with an inability to pass these costs on to customers, a further decline in the Company’s market capitalization or comparable company market multiples, a reduction in projected future cash flows, or increases in the WACC, could impact the Company’s assumptions and require a reassessment of goodwill or indefinite-lived intangible assets for impairment in future periods. Future declines in estimated after tax cash flows, increases in the WACC or a decline in market capitalization could result in an additional indication of impairment in one or more of the Company’s reporting units.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The following tables summarize the components of goodwill and intangible assets:
Goodwill:
| | | | | | | | | | | | | | | | | | | | | | | |
| Global Ceramic | | Flooring NA | | Flooring ROW | | Total |
Balances as of December 31, 2020 (1) | $ | 1,047,561 | | | 531,144 | | | 1,072,126 | | | 2,650,831 | |
| Goodwill recognized during the period | — | | | — | | | 56,930 | | | 56,930 | |
| Currency translation during the period | (16,224) | | | — | | | (83,628) | | | (99,852) | |
Balances as of December 31, 2021 (1) | 1,031,337 | | | 531,144 | | | 1,045,428 | | | 2,607,909 | |
| Goodwill adjustments related to acquisitions | — | | | — | | | (2,722) | | | (2,722) | |
| Goodwill recognized during the period | — | | | 60,841 | | | 11,542 | | | 72,383 | |
| Impairment charge during the period | (688,514) | | | — | | | — | | | (688,514) | |
| Currency translation during the period | (2,989) | | | — | | | (58,308) | | | (61,297) | |
| Balances as of December 31, 2022 | $ | 339,834 | | | 591,985 | | | 995,940 | | | 1,927,759 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Global Ceramic | | Flooring NA | | Flooring ROW | | Total |
Balances as of December 31, 2021 (1) | $ | 1,031,337 | | | 531,144 | | | 1,045,428 | | | 2,607,909 | |
| Goodwill adjustments related to acquisitions | — | | | — | | | (2,722) | | | (2,722) | |
| Goodwill recognized | — | | | 60,841 | | | 11,542 | | | 72,383 | |
| Impairment charges | (688,514) | | | — | | | — | | | (688,514) | |
| Currency translation | (2,989) | | | — | | | (58,308) | | | (61,297) | |
| Balances as of December 31, 2022 | 339,834 | | | 591,985 | | | 995,940 | | | 1,927,759 | |
| Goodwill adjustments related to acquisitions | — | | | (4,888) | | | 3,217 | | | (1,671) | |
| Goodwill recognized | 87,520 | | | — | | | — | | | 87,520 | |
| Impairment charges | (424,286) | | | (214,830) | | | (231,634) | | | (870,750) | |
| Currency translation | (3,068) | | | — | | | 19,934 | | | 16,866 | |
| Balances as of December 31, 2023 | $ | — | | | 372,267 | | | 787,457 | | | 1,159,724 | |
(1) Net of accumulated impairment losses of $1,327,425 ($531,930 in Global Ceramic, $343,054 in Flooring NA and $452,441 in Flooring ROW).
Intangible assets:
| | | | | |
| Tradenames |
| Indefinite life assets not subject to amortization: | |
Balance as of December 31, 2020 | $ | 727,268 | |
Intangible assets acquired during the year | 2,725 | |
| |
Currency translation during the year | (35,088) | |
| Balance as of December 31, 2021 | $ | 694,905 | |
Intangible assets acquired during the year | 335 | |
Intangible assets impaired during the year | (7,257) | |
Currency translation during the year | (19,655) | |
| Balance as of December 31, 2022 | 668,328 | |
| Intangible assets acquired | 38,539 | |
| Intangible assets impaired | (6,994) | |
| Currency translation | 5,873 | |
| Balance as of December 31, 2023 | $ | 668,328705,746 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Customer
relationships | | Patents | | Other | | Total |
| Intangible assets subject to amortization: | | | | | | | |
| Balances as of December 31, 2020 | | | | | | | |
| Gross carrying amount | $ | 699,795 | | | 273,570 | | | 6,945 | | | 980,310 | |
| Accumulated amortization | (481,256) | | | (273,426) | | | (1,289) | | | (755,971) | |
| Net intangible assets subject to amortization | 218,539 | | | 144 | | | 5,656 | | | 224,339 | |
| Balances as of December 31, 2021 | | | | | | | |
| Gross carrying amount | 680,177 | | | 256,336 | | | 6,786 | | | 943,299 | |
| Accumulated amortization | (483,748) | | | (252,414) | | | (2,062) | | | (738,224) | |
| Net intangible assets subject to amortization | 196,429 | | | 3,922 | | | 4,724 | | | 205,075 | |
| Balances as of December 31, 2022 | | | | | | | |
| Gross carrying amount | 673,586 | | | 242,089 | | | 8,511 | | | 924,186 | |
| Accumulated amortization | (493,361) | | | (239,010) | | | (2,195) | | | (734,566) | |
| Net intangible assets subject to amortization | $ | 180,225 | | | 3,079 | | | 6,316 | | | 189,620 | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Amortization expense | $ | 28,086 | | | 29,280 | | | 28,891 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Customer Relationships | | Patents | | Other | | Total |
| Intangible assets subject to amortization: | | | | | | | |
| Balances as of December 31, 2021 | | | | | | | |
| Gross carrying amount | $ | 680,177 | | | 256,336 | | | 6,786 | | | 943,299 | |
| Accumulated amortization | (483,748) | | | (252,414) | | | (2,062) | | | (738,224) | |
| Net intangible assets subject to amortization | 196,429 | | | 3,922 | | | 4,724 | | | 205,075 | |
| Balances as of December 31, 2022 | | | | | | | |
| Gross carrying amount | 673,586 | | | 242,089 | | | 8,511 | | | 924,186 | |
| Accumulated amortization | (493,361) | | | (239,010) | | | (2,195) | | | (734,566) | |
| Net intangible assets subject to amortization | 180,225 | | | 3,079 | | | 6,316 | | | 189,620 | |
| Balances as of December 31, 2023 | | | | | | | |
| Gross carrying amount | 691,498 | | | 249,680 | | | 8,754 | | | 949,932 | |
| Accumulated amortization | (531,003) | | | (247,150) | | | (2,142) | | | (780,295) | |
| Net intangible assets subject to amortization | $ | 160,495 | | | 2,530 | | | 6,612 | | | 169,637 | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| Amortization expense | $ | 28,339 | | | 28,086 | | | 29,280 | |
Estimated amortization expense for the years ending December 31 are as follows:
| | 2023 | $ | 28,049 | |
| Amount | | | Amount |
| 2024 | 2024 | 27,334 | |
| 2025 | 2025 | 27,117 | |
| 2026 | 2026 | 26,896 | |
| 2027 | 2027 | 19,972 | |
| 2028 | |
(9) Property, Plant and Equipment
Following is a summary of property, plant and equipment:
| | December 31, 2022 | | December 31, 2021 |
| December 31, 2023 | | | December 31, 2023 | | December 31, 2022 |
| Land | Land | $ | 466,820 | | | 465,240 | |
| Buildings and improvements | Buildings and improvements | 1,851,390 | | | 1,862,463 | |
| Machinery and equipment | Machinery and equipment | 6,310,442 | | | 6,023,087 | |
| Furniture and fixtures | Furniture and fixtures | 162,864 | | | 158,315 | |
| Leasehold improvements | Leasehold improvements | 107,079 | | | 102,766 | |
| Construction in progress | Construction in progress | 749,184 | | | 638,716 | |
| 9,647,779 | | | 9,250,587 | |
| 10,392,297 | |
| Less: accumulated depreciation | Less: accumulated depreciation | 4,986,601 | | | 4,613,722 | |
| Net property, plant and equipment | Net property, plant and equipment | $ | 4,661,178 | | | 4,636,865 | |
Additions to property, plant and equipment included capitalized interest of $23,544, $16,895 and $9,082 in 2023, 2022 and $6,362 in 2022, 2021, and 2020, respectively. Depreciation expense was $598,874, $564,255 and $558,818 for 2023, 2022 and $574,095 for 2022, 2021, and 2020, respectively. Included in property, plant and equipment are finance leases with a cost of $82,653$117,350 and $67,984$82,653 and accumulated depreciation of $30,218$45,967 and $19,902$30,218 as of December 31, 2023 and 2022, and 2021, respectively.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(10) Long-Term Debt
Senior Credit Facility
On August 12, 2022, the Company entered into a fourth amendment (the “Amendment”) to its existing senior revolving credit facility (the “Senior Credit Facility”). The Amendment, among other things, (i) extended the maturity of the Senior Credit Facility from October 18, 2024 to August 12, 2027, (ii) renewed the Company’s option to extend the maturity of the Senior Credit Facility up to two times for an additional one-year period each, (iii) increased the Consolidated Interest Coverage Ratio financial maintenance covenant from 3.00:1.00 to 3.50:1.00, (iv) eliminated certain covenants applicable to the Company and its subsidiaries, including, but not limited to, restrictions on dispositions, restricted payments, and transactions with affiliates, and the Consolidated Net Leverage Ratio financial covenant, and (v) increased the amount available under the Senior Credit Facility to $1,950,000 until October 18, 2024, after which the amount available under the Senior Credit Facility will decrease to $1,485,000. The Amendment also permits the Company to increase the commitments under the Senior Credit Facility by an aggregate amount not to exceed $600,000.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
At the Company’s election, U.S.-dollar denominated revolving loans under the Senior Credit Facility bear interest at annual rates equal to either (a) SOFR (plus a 0.10% SOFR adjustment) for 1, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 1.00% and 1.75% (1.00%(1.13% as of December 31, 2022)2023), or (b) the Base Rate (defined as the higher of the Wells Fargo Bank, National Association prime rate, the Federal Funds Effective Rate plus 0.5%, or SOFR (plus a 0.10% SOFR adjustment) for a 1 month period rate plus 1.0%), plus an applicable margin ranging between 0.00% and 0.75% (0.00%(0.13% as of December 31, 2022)2023). At the Company’s election, revolving loans under the Senior Credit Facility denominated in Canadian dollars, Australian dollars, Hong Kong dollars or euros bear interest at annual rates equal to either (a) the applicable benchmark for such currency plus an applicable margin ranging between 1.00% and 1.75% (1.00%(1.13% as of December 31, 2022)2023), or (b) the Base Rate plus an applicable margin ranging between 0.00% and 0.75% (0.00%(0.13% as of December 31, 2022)2023). The Company also pays a commitment fee to the lenders under the Senior Credit Facility on the average amount by which the aggregate commitments of the lenders exceed utilization of the Senior Credit Facility ranging from 0.09% to 0.20% per annum (0.09%(0.11% as of December 31, 2022)2023). The applicable margins and the commitment fee are determined based on whichever of the Company’s Consolidated Net Leverage Ratio or its senior unsecured debt rating (or if not available, corporate family rating) results in the lower applicable margins and commitment fee (with applicable margins and the commitment fee increasing as that ratio increases or those ratings decline, as applicable). On October 28, 2021, the Company amended the Senior Credit Facility to replace LIBOR for euros with the EURIBOR benchmark rate.
The obligations of the Company and its subsidiaries in respect of the Senior Credit Facility are unsecured.
The Senior Credit Facility includes certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, subsidiary indebtedness, fundamental changes, future negative pledges, and changes in the nature of the Company’s business. The limitations contain customary exceptions or, in certain cases, do not apply as long as the Company is in compliance with the financial ratio requirement and is not otherwise in default. The Senior Credit Facility originally required the Company to maintain a Consolidated Interest Coverage Ratio of at least 3.00 to 1.00 and a Consolidated Net Leverage Ratio of no more than 3.75 to 1.00, each as of the last day of any fiscal quarter. However, on May 7, 2020 the Company amended the Senior Credit Facility to temporarily increase the minimum Consolidated Net Leverage Ratio to 4.75 to 1.00 and to increase the amount of certain adjustments to Net Income that are permitted to calculate the ratio. The relief provided by the amendment was in effect for the fiscal quarters ending on September 26, 2020 through (and including) the fiscal quarter ending December 31, 2021. As described above, the Consolidated Net Leverage Ratio financial covenant was eliminated on August 12, 2022.
The Senior Credit Facility also contains customary representations and warranties and events of default, subject to customary grace periods.
In 2022, the Company paid financing costs of $1,879 in connection with the Amendment of its Senior Credit Facility. These costs were deferred and, along with previously unamortized costs of $2,663, are being amortized over the term of the Senior Credit Facility.
As of December 31, 2022,2023, amounts utilized under the Senior Credit Facility included zero$67,117 borrowings and $19,614$746 of standby letters of credit related to various insurance contracts and foreign vendor commitments. Any outstanding borrowings under the Company’s U.S. and European commercial paper programs reduce the availability of the Senior Credit Facility. Including commercial paper borrowings, theThe Company has utilized $848,420$67,863 under the Senior Credit Facility, resulting in a total of $1,101,580$1,882,137 available as of December 31, 2022.2023.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Commercial Paper
On February 28, 2014 and July 31, 2015, the Company established programs for the issuance of unsecured commercial paper in the United States and Eurozone capital markets, respectively. Commercial paper issued under the U.S. and European programs will have maturities ranging up to 397 and 183 days, respectively. None of the commercial paper notes may be voluntarily prepaid or redeemed by the Company and rank pari passu with the Company’s other unsecured and unsubordinated indebtedness. To the extent that the Company issues European commercial paper notes through a subsidiary of the Company, the notes will be fully and unconditionally guaranteed by the Company.
The Company uses its Senior Credit Facility as a liquidity backstop for its commercial paper programs. Accordingly, the total amount outstanding under the Company’s commercial paper programs may not exceed $1,950,000 (less any amounts drawn on the Senior Credit Facility) at any time.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of December 31, 2022,2023, there was $785,998zero outstanding under the U.S. commercial paper program and the euro equivalent of $42,808 under the European program. The weighted-average interest rate and maturity period for the U.S. program were 4.85% and 27.0 days, respectively. The weighted-average interest rate and maturity period for the European program were 1.98% and 11.8 days, respectively.
Senior Notes
On September 18, 2023, the Company completed the issuance and sale of $600,000 aggregate principal amount of 5.850% Senior Notes (“5.850% Senior Notes”) due September 18, 2028. The 5.850% Senior Notes are senior unsecured obligations of the Company and rank pari passu with the Company’s other existing and future senior unsecured indebtedness. Interest on the 5.850% Senior Notes is payable semi-annually in cash on March 18 and September 18 of each year, commencing on March 18, 2024. The Company paid financing costs of $5,592 in connection with the 5.850% Senior Notes. These costs were deferred and are being amortized over the term of the 5.850% Senior Notes.
On June 12, 2020, Mohawk Capital Finance S.A. (“Mohawk Finance”), an indirect wholly-owned finance subsidiary of the Company, completed the issuance and sale of €500,000 aggregate principal amount of 1.750% Senior Notes (“1.750% Senior Notes”) due June 12, 2027. The 1.750% Senior Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with Mohawk Finance’s other existing and future senior unsecured indebtedness. The 1.750% Senior Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. Interest on the 1.750% Senior Notes is payable annually in cash on June 12 of each year, commencing on June 12, 2021. The Company paid financing costs of $4,400 in connection with the 1.750% Senior Notes. These costs were deferred and are being amortized over the term of the 1.750% Senior Notes.
On May 14, 2020, the Company completed the issuance and sale of $500,000 aggregate principal amount of 3.625% Senior Notes (“3.625% Senior Notes”) due May 15, 2030. The 3.625% Senior Notes are senior unsecured obligations of the Company and rank pari passu with the Company’s existing and future unsecured indebtedness. Interest on the 3.625% Senior Notes is payable semi-annually in cash on May 15 and November 15 of each year, commencing on November 15, 2020. The Company paid financing costs of $5,476 in connection with the 3.625% Senior Notes. These costs were deferred and are being amortized over the term of the 3.625% Senior Notes.
On January 31, 2013, the Company issued $600,000 aggregate principal amount of 3.85% Senior Notes (“3.85% Senior Notes”) due February 1, 2023. The 3.85% Senior Notes were senior unsecured obligations of the Company and ranked pari passu with the Company’s existing and future unsecured indebtedness. Interest on the 3.85% Senior Notes was payable semi-annually in cash on February 1 and August 1 of each year. The Company paid financing costs of $6,000 in connection with the 3.85% Senior Notes. These costs were deferred and were amortized over the term of the 3.85% Senior Notes. On November 1, 2022, the Company redeemed at par all of the 3.85% Senior Notes.
As defined in the related agreements, the Company’s senior notes contain covenants, representations and warranties and events of default, subject to exceptions, and restrictions on the Company’s financial and business operations, including limitations on liens, restrictions on entering into sale and leaseback transactions, fundamental changes, and a provision allowing the holder of the notes to require repayment upon a change of control triggering event.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Term Loan
On August 12, 2022, the Company and its indirect wholly-owned subsidiary, Mohawk International Holdings S.à r.l. (“Mohawk International”), entered into an agreement that provides for a delayed draw term loan facility (the “Term Loan Facility”), consisting of borrowings of up to $575,000 and €220,000. On October 3,2022,3, 2022, an additional $100,000 of borrowing capacity was added to the Term Loan Facility. The Term Loan Facility could be drawn upon in up to two advances on any business day on or before December 31, 2022, with the proceeds being used for funding working capital and general corporate purposes. On October 31, 2022 and December 6, 2022, the Company made draws of $675,000 and €220,000, respectively. The Company must pay the outstanding principal amount of the Term Loan Facility, plus accrued and unpaid interest, not later than the maturity date of August 12, 2024. The Company may prepay all or a portion of the Term Loan Facility, plus accrued and unpaid interest, from time to time, without premium or penalty.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
At the Company’s election, U.S. dollar-denominated loans under the Term Loan Facility bear interest at an annual rate equal to either (a) SOFR (plus a 0.10% SOFR adjustment) for 1, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 0.825% and 1.50% (0.825%(0.900% as of December 31, 2022)2023), determined based upon the Company’s consolidated net leverage ratio, or (b) the base rate (defined as the higher of the Wells Fargo Bank, National Association prime rate, the Federal Funds Effective Rate plus 0.5%, and SOFR (plus a 0.10% SOFR adjustment) for a 1 month period plus 1.0%) plus an applicable margin ranging between 0.00% and 0.50% (0.00% as of December 31, 2022)2023), determined based upon the Company’s consolidated net leverage ratio. Euro-denominated loans under the Term Loan Facility bear interest at an annual rate equal to EURIBOR for 1, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 0.825% and 1.50% (0.825%(0.900% as of December 31, 2022)2023), determined based upon the Company’s consolidated net leverage ratio.
In 2022, the Company paid financing costs of $664 in connection with the Term Loan Facility. These costs were deferred and are being amortized over the term of the Term Loan Facility.
The obligations of the Company and its subsidiaries in respect of the Term Loan Facility are unsecured.
The Term Loan Facility includes certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, indebtedness, fundamental changes, and changes in the nature of the Company’s business. Many of these limitations are subject to numerous exceptions. The Company is also required to maintain a Consolidated Interest Coverage Ratio of at least 3.5 to 1.0 as of the last day of any fiscal quarter.
The Term Loan Facility also contains customary representations and warranties.
The Term Loan Facility contains events of default customary for this type of financing, including a cross default and cross acceleration provision to certain other material indebtedness of the Company. Upon the occurrence of an event of default, the outstanding obligations under the Term Loan Facility may be accelerated and become due and payable immediately. In addition, if certain change of control events occur with respect to the Company, the Company is required to repay the loans outstanding under the Term Loan Facility.
On April 7, 2020,January 31, 2024, the Company entered into a credit agreement that provided for a $500,000 delayed draw term loan facility (the “Term Loan Facility”). On April 15, 2020,prepaid the Company borrowed the full amount on the Term Loan Facility, the proceeds of which could be used for funding working capital and general corporate purposesentirety of the Company. The principal amount of the Term Loan Facility was to be repaid in a single installment on April 6, 2021. The Company could prepay all or aUSD portion of the Term Loan Facility, from time to time, plus accrued and unpaid interest. The obligationsin the amount of $675,000. On February 16, 2024, the Company prepaid the entirety of the Company and its subsidiaries in respectEUR portion of the Term Loan Facility, were unsecured. The Term Loan Facility was subject to the same affirmative and negative covenants that are applicable to the Senior Credit Facility. The Company recorded financing costs of $1,088 in connection with the Term Loan Facility. On May 15, 2020, the Company prepaid the entire outstanding balance on the Term Loan Facility utilizing cash on hand and proceeds from the 3.625% Senior Notes and associated financing costs were written off in the quarter ending June 27, 2020.amount of €220,000.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The fair values and carrying values of the Company’s debt instruments are detailed as follows:
| | | | December 31, 2022 | | December 31, 2021 | | December 31, 2023 | | December 31, 2022 |
| | | Fair Value | | Carrying
Value | | Fair Value | | Carrying
Value | | Fair Value | | Carrying
Value | | Fair Value | | Carrying
Value |
| 1.750% Senior Notes, payable June 12, 2027; interest payable annually | 1.750% Senior Notes, payable June 12, 2027; interest payable annually | $ | 482,139 | | | 535,103 | | | 601,037 | | | 566,380 | |
| 3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually | 3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually | 431,605 | | | 500,000 | | | 538,545 | | | 500,000 | |
| 3.85% Senior Notes, payable February 1, 2023; interest payable semi-annually | — | | | — | | | 615,630 | | | 600,000 | |
| 5.85% Senior Notes, payable September 18, 2028; interest payable semi-annually | |
| | | U.S. commercial paper | |
| | U.S. commercial paper | |
| | U.S. commercial paper | U.S. commercial paper | 785,998 | | | 785,998 | | | 598,000 | | | 598,000 | |
| European commercial paper | European commercial paper | 42,808 | | | 42,808 | | | 15,859 | | | 15,859 | |
| | Senior credit facility, payable August 12, 2027 | |
| Senior credit facility, payable August 12, 2027 | |
| Senior credit facility, payable August 12, 2027 | |
| | U.S. Term Loan Facility | |
| U.S. Term Loan Facility | |
| U.S. Term Loan Facility | U.S. Term Loan Facility | 675,000 | | | 675,000 | | | — | | | — | |
| European Term Loan Facility | European Term Loan Facility | 235,445 | | | 235,445 | | | — | | | — | |
| Finance leases and other | Finance leases and other | 52,050 | | | 52,050 | | | 53,163 | | | 53,163 | |
| Unamortized debt issuance costs | Unamortized debt issuance costs | (7,270) | | | (7,270) | | | (8,617) | | | (8,617) | |
| Total debt | Total debt | 2,697,775 | | | 2,819,134 | | | 2,413,617 | | | 2,324,785 | |
| Less current portion of long term-debt and commercial paper | 840,571 | | | 840,571 | | | 624,503 | | | 624,503 | |
| Less: current portion of long term-debt and commercial paper | |
| Long-term debt, less current portion | Long-term debt, less current portion | $ | 1,857,204 | | | 1,978,563 | | | 1,789,114 | | | 1,700,282 | |
The fair values of the Company’s debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values.
The aggregate maturities of total debt as of December 31, 20222023 are as follows (1):follows:
| | 2023 | $ | 840,571 | |
| Amount (1) | | | Amount (1) |
| 2024 | 2024 | 920,725 | |
| 2025 | 2025 | 9,012 | |
| 2026 | 2026 | 6,990 | |
| 2027 | 2027 | 539,284 | |
| 2028 | |
| Thereafter | Thereafter | 509,822 | |
| Total maturities | |
| | $ | 2,826,404 | |
|
(1) Debt maturity table excludes deferred loan costs.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(11) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are as follows:
| | December 31, 2022 | | December 31, 2021 |
| December 31, 2023 | | | December 31, 2023 | | December 31, 2022 |
| Outstanding checks in excess of cash | Outstanding checks in excess of cash | $ | 2,791 | | | 3,005 | |
| Accounts payable, trade | Accounts payable, trade | 1,094,038 | | | 1,228,621 | |
| Accrued expenses | Accrued expenses | 742,099 | | | 666,209 | |
| Product warranties | Product warranties | 38,425 | | | 45,215 | |
| Accrued interest | Accrued interest | 8,748 | | | 17,940 | |
| | Accrued compensation and benefits | Accrued compensation and benefits | 238,347 | | | 256,428 | |
| | Accrued compensation and benefits | |
| | Accrued compensation and benefits | |
| Total accounts payable and accrued expenses | Total accounts payable and accrued expenses | $ | 2,124,448 | | | 2,217,418 | |
|
(12) Leases
The Company has operating and finance leases for service centers, warehouses, showrooms, and machinery and equipment. Certain of the Company’s leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of the Company’s leases contain residual value guarantees and none of the Company’s agreements contain material restrictive covenants.
The Company rents or subleases certain real estate to third parties. The Company’s sublease portfolio consists mainly of operating leases.
The components of lease costs for the twelve months ended December 31, 2023, 2022 2021 and 2020,2021, respectively, are as follows:
| | December 31, 2022 | Cost of Goods Sold | | Selling, General and Administrative Expenses | | Total |
| Operating lease costs | | | | | |
| December 31, 2023 | | December 31, 2023 | Cost of Goods
Sold | | Selling, General
and Administrative
Expenses | | Total |
| Operating lease costs: | |
| Fixed | |
| Fixed | |
| Fixed | Fixed | $ | 21,321 | | | 110,716 | | | 132,037 | |
| Short-term | Short-term | 17,005 | | | 19,154 | | | 36,159 | |
| Variable | Variable | 7,689 | | | 35,985 | | | 43,674 | |
| Sub-leases | Sub-leases | (691) | | | (1,652) | | | (2,343) | |
| Total operating lease costs | |
| | $ | 45,324 | | | 164,203 | | | 209,527 | |
| | Depreciation and Amortization | | Interest | | Total |
| Finance lease costs | | | | | |
| Depreciation and
Amortization | |
| Depreciation and
Amortization | |
| Depreciation and
Amortization | | | Interest | | Total |
| Finance lease costs: | |
| Amortization of leased assets | |
| Amortization of leased assets | |
| Amortization of leased assets | Amortization of leased assets | $ | 11,108 | | | — | | | 11,108 | |
| Interest on lease liabilities | Interest on lease liabilities | — | | | 816 | | | 816 | |
| $ | 11,108 | | | 816 | | | 11,924 | |
| Net lease costs | | | | | $ | 221,451 | |
| Total finance lease costs | |
| Total lease costs | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
| | December 31, 2021 | Cost of Goods Sold | | Selling, General and Administrative Expenses | | Total |
| Operating lease costs | | | | | |
| December 31, 2022 | | December 31, 2022 | Cost of Goods
Sold | | Selling, General
and Administrative
Expenses | | Total |
| Operating lease costs: | |
| Fixed | |
| Fixed | |
| Fixed | Fixed | $ | 20,130 | | | 104,651 | | | 124,781 | |
| Short-term | Short-term | 13,415 | | | 18,434 | | | 31,849 | |
| Variable | Variable | 7,949 | | | 30,127 | | | 38,076 | |
| Sub-leases | Sub-leases | (529) | | | (1,113) | | | (1,642) | |
| Total operating lease costs | |
| | $ | 40,965 | | | 152,099 | | | 193,064 | |
| | Depreciation and Amortization | | Interest | | Total |
| Finance lease costs | | | | | |
| Depreciation and
Amortization | |
| Depreciation and
Amortization | |
| Depreciation and
Amortization | | | Interest | | Total |
| Finance lease costs: | |
| Amortization of leased assets | |
| Amortization of leased assets | |
| Amortization of leased assets | Amortization of leased assets | $ | 9,193 | | | — | | | 9,193 | |
| Interest on lease liabilities | Interest on lease liabilities | — | | | 772 | | | 772 | |
| $ | 9,193 | | | 772 | | | 9,965 | |
| Net lease costs | | | | | $ | 203,029 | |
| Total finance lease costs | |
| Total lease costs | |
| | December 31, 2020 | Cost of Goods Sold | | Selling, General and Administrative Expenses | | Total |
| Operating lease costs | | | | | |
| December 31, 2021 | | December 31, 2021 | Cost of Goods
Sold | | Selling, General
and Administrative
Expenses | | Total |
| Operating lease costs: | |
| Fixed | |
| Fixed | |
| Fixed | Fixed | $ | 25,067 | | | 102,504 | | | 127,571 | |
| Short-term | Short-term | 11,633 | | | 16,021 | | | 27,654 | |
| Variable | Variable | 8,285 | | | 30,036 | | | 38,321 | |
| Sub-leases | Sub-leases | (411) | | | (741) | | | (1,152) | |
| Total operating lease costs | |
| | $ | 44,574 | | | 147,820 | | | 192,394 | |
| | Depreciation and Amortization | | Interest | | Total |
| Finance lease costs | | | | | |
| Depreciation and
Amortization | |
| Depreciation and
Amortization | |
| Depreciation and
Amortization | | | Interest | | Total |
| Finance lease costs: | |
| Amortization of leased assets | |
| Amortization of leased assets | |
| Amortization of leased assets | Amortization of leased assets | $ | 6,423 | | | — | | | 6,423 | |
| Interest on lease liabilities | Interest on lease liabilities | — | | | 690 | | | 690 | |
| $ | 6,423 | | | 690 | | | 7,113 | |
| Net lease costs | | | | | $ | 199,507 | |
| Total finance lease costs | |
| Total lease costs | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Supplemental balance sheet information related to leases is as follows:
| | Classification | | December 31, 2022 | | December 31, 2021 | |
| Classification | |
| Classification | |
| Classification | |
| Assets | Assets | | | | | | |
| Operating Leases | | |
| Assets | |
| Assets | |
| Operating Leases: | |
| Operating Leases: | |
| Operating Leases: | |
| ROU operating lease assets | ROU operating lease assets | ROU operating lease assets | | $ | 387,816 | | | 389,967 | | |
| Finance Leases | | |
| ROU operating lease assets | |
| ROU operating lease assets | |
| Finance Leases: | |
| Finance Leases: | |
| Finance Leases: | |
| Property, plant and equipment, gross | |
| Property, plant and equipment, gross | |
| Property, plant and equipment, gross | Property, plant and equipment, gross | Property, plant and equipment | | 82,653 | | | 67,984 | | |
| Accumulated depreciation | Accumulated depreciation | Accumulated depreciation | | (30,218) | | | (19,902) | | |
| Accumulated depreciation | |
| Accumulated depreciation | |
| Property, plant and equipment, net | Property, plant and equipment, net | Property, plant and equipment, net | | 52,435 | | | 48,082 | | |
| Property, plant and equipment, net | |
| Property, plant and equipment, net | |
| Total lease assets | |
| Total lease assets | |
| Total lease assets | Total lease assets | | $ | 440,251 | | | 438,049 | | |
| | Liabilities | Liabilities | | |
| Operating Leases | | |
| | Liabilities | |
| | Liabilities | |
| Operating Leases: | |
| Operating Leases: | |
| Operating Leases: | |
| Other current | |
| Other current | |
| Other current | Other current | Current operating lease liabilities | | $ | 105,266 | | | 104,434 | | |
| Non-current | Non-current | Non-current operating lease liabilities | | 296,136 | | | 297,390 | | |
| Non-current | |
| Non-current | |
| Total operating liabilities | Total operating liabilities | | 401,402 | | | 401,824 | | |
| Finance Leases | | | | | |
| Total operating liabilities | |
| Total operating liabilities | |
| Finance Leases: | |
| Finance Leases: | |
| Finance Leases: | |
| Short-term debt | |
| Short-term debt | |
| Short-term debt | Short-term debt | Short-term debt and current portion of long-term debt | | 11,765 | | | 9,560 | | |
| Long-term debt | Long-term debt | Long-term debt, less current portion | | 40,285 | | | 38,390 | | |
| Long-term debt | |
| Long-term debt | |
| Total finance liabilities | |
| Total finance liabilities | |
| Total finance liabilities | Total finance liabilities | | 52,050 | | | 47,950 | | |
| Total lease liabilities | Total lease liabilities | | $ | 453,452 | | | 449,774 | | |
| Total lease liabilities | |
| Total lease liabilities | |
|
Maturities of lease liabilities as of December 31, 20222023 are as follows:
| | Year ending December 31, | Finance Leases | | Operating Leases | | Total |
| 2023 | $ | 12,574 | | | 125,068 | | | 137,642 | |
| Year Ending December 31, | | Year Ending December 31, | Finance Leases | | Operating Leases | | Total |
| 2024 | 2024 | 10,939 | | | 103,229 | | | 114,168 | |
| 2025 | 2025 | 9,498 | | | 82,839 | | | 92,337 | |
| 2026 | 2026 | 7,344 | | | 61,815 | | | 69,159 | |
| 2027 | 2027 | 4,433 | | | 34,829 | | | 39,262 | |
| 2028 | |
| Thereafter | Thereafter | 10,509 | | | 27,414 | | | 37,923 | |
| Total lease payments | Total lease payments | 55,297 | | | 435,194 | | | 490,491 | |
| Less imputed interest | 3,247 | | | 33,792 | | | |
| Less: imputed interest | |
| Present value, Total | Present value, Total | $ | 52,050 | | | 401,402 | | |
The Company had approximately $6,516$8,330 of leases that commenced after December 31, 20222023 that created rights and obligations to the Company. These leases are not included in the above maturity schedule.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Lease term and discount rate are as follows:
| | December 31, 2022 | | December 31, 2021 | |
| Weighted Average Remaining Lease Term | | | | |
| December 31, 2023 | |
| December 31, 2023 | |
| December 31, 2023 | |
| Weighted Average Remaining Lease Term: | |
| Weighted Average Remaining Lease Term: | |
| Weighted Average Remaining Lease Term: | |
| Operating Leases | |
| Operating Leases | |
| Operating Leases | Operating Leases | 4.5 years | | 4.7 years | |
| Finance Leases | Finance Leases | 6.2 years | | 7.2 years | |
| Finance Leases | |
| Finance Leases | |
| | Weighted Average Discount Rate | | |
| Weighted Average Discount Rate: | |
| | Weighted Average Discount Rate: | |
| | Weighted Average Discount Rate: | |
| Operating Leases | |
| Operating Leases | |
| Operating Leases | Operating Leases | 3.8 | % | | 2.4 | % | |
| Finance Leases | Finance Leases | 1.5 | % | | 1.3 | % | |
| Finance Leases | |
| Finance Leases | |
Supplemental cash flow information related to leases was as follows:
| | Twelve Months Ended | |
| December 31, 2022 | | December 31, 2021 | | December 31, 2020 | |
| Twelve Months Ended | |
| Twelve Months Ended | |
| Twelve Months Ended | |
| December 31, 2023 | |
| December 31, 2023 | |
| December 31, 2023 | |
| Cash paid for amounts included in measurement of lease liabilities: | |
| Cash paid for amounts included in measurement of lease liabilities: | |
| Cash paid for amounts included in measurement of lease liabilities: | Cash paid for amounts included in measurement of lease liabilities: | | | | | | |
| Operating cash flows from operating leases | Operating cash flows from operating leases | $ | 129,895 | | | 122,886 | | | 124,708 | | |
| Operating cash flows from operating leases | |
| Operating cash flows from operating leases | |
| Operating cash flows from finance leases | |
| Operating cash flows from finance leases | |
| Operating cash flows from finance leases | Operating cash flows from finance leases | 816 | | | 772 | | | 690 | |
| Financing cash flows from finance leases | Financing cash flows from finance leases | 10,770 | | | 9,289 | | | 6,386 | | |
| Financing cash flows from finance leases | |
| Financing cash flows from finance leases | |
| ROU assets obtained in exchange for lease obligations: | |
| ROU assets obtained in exchange for lease obligations: | |
| ROU assets obtained in exchange for lease obligations: | ROU assets obtained in exchange for lease obligations: | | |
| Operating leases | Operating leases | 119,115 | | | 186,605 | | | 110,036 | | |
| Operating leases | |
| Operating leases | |
| Finance leases | |
| Finance leases | |
| Finance leases | Finance leases | 16,160 | | | 13,395 | | | 18,248 | | |
| Amortization: | Amortization: | | |
| Amortization: | |
| Amortization: | |
Amortization of ROU operating lease assets (1) | Amortization of ROU operating lease assets (1) | 120,666 | | | 115,650 | | | 113,898 | | |
Amortization of ROU operating lease assets (1) | |
Amortization of ROU operating lease assets (1) | |
(1) Amortization of ROU operating lease assets during the period is reflected in Other assets and prepaid expenses on the Consolidated Statements of Cash Flows.
(13) Stock-Based Compensation
The Company recognized compensation expense for all share-based payments granted for the years ended December 31, 2023, 2022 2021 and 20202021 based on the grant-dategrant date fair market value estimated in accordance with the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the options’ or other awards’ estimated lives for fixed awards with ratable vesting provisions.
UnderOn May 19, 2017, the Company’s 2012stockholders approved the 2017 Long-Term Incentive Plan (“2012(the “2017 Plan”), which allows the Company reservedto reserve up to a maximum of 3,2003,000 shares of common stock for issuance upon the grant or exercise of stock options, restricted stock, restricted stock units (“RSUs”) and other types of awards, to directors and key employees through December 31, 2022. Optionthe 2027 stockholders’ meeting, unless earlier terminated or amended. On May 9, 2012, the Company’s stockholders approved the 2012 Incentive Plan (the “2012 Plan”). Under the 2012 Plan, the Company reserved up to a maximum of 3,200 shares of common stock for issuance upon the grant or exercise of stock options, restricted stock, RSUs and other types of awards, areto directors and key employees through the 2022 stockholders’ meeting, unless earlier terminated or amended. Following the approval of the 2017 Plan by the Company’s stockholders, no additional awards may be granted with an exercise priceunder the 2012 Plan after May 19, 2017.
Under the 2017 Plan (and previously, the 2012 Plan), the grant date fair market value of restricted stock and RSUs is equal to the closing market price of the Company’s common stock on the date of the grant, and such awards generally vest between three and five years. In addition, option awards may be granted with an exercise price equal to or greater than the fair market value of the Company’s common stock on the date of the grant, and such awards generally vest between three and five years with a 10-year contractual term. The grant date fair value of restricted stock and RSUs is equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years.
On May 19, 2017, the Company’s stockholders approved the 2017 Long-Term Incentive Plan (“2017 Plan”), which allows the Company to reserve up to a maximum of 3,000 shares of common stock for issuance upon the grant or exercise of awards under the 2017 Plan. No additional awards may be granted under the 2012 Plan after May 19, 2017.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Restricted Stock Plans
A summary of the Company’s RSUs under the Company’s long-term incentive plans as of December 31, 2022,2023, and changes during the year then ended is presented as follows:
| | Shares | | Weighted average
grant date fair value | | Weighted average remaining
contractual term (years) | | Aggregate
intrinsic value |
| RSUs outstanding, December 31, 2021 | 439 | | | $ | 128.62 | | | | | |
| Shares | | | Shares | | Weighted Average Grant Date Fair Value | | Weighted
Average
Remaining
Contractual
Term (Years) | | Aggregate Intrinsic Value |
| RSUs outstanding, December 31, 2022 | |
| Granted | |
| Granted | |
| Granted | Granted | 192 | | | 137.30 | | |
| Released | Released | (134) | | | 143.41 | | |
| Released | |
| Released | |
| Forfeited | Forfeited | (43) | | | 140.66 | | |
| RSUs outstanding, December 31, 2022 | 454 | | | $ | 126.79 | | | 1.0 | | $ | 46,378 | |
| Expected to vest as of December 31, 2022 | 437 | | | 1.0 | | $ | 44,668 | |
| Forfeited | |
| Forfeited | |
| RSUs outstanding, December 31, 2023 | |
| RSUs outstanding, December 31, 2023 | |
| RSUs outstanding, December 31, 2023 | |
| Expected to vest as of December 31, 2023 | |
The Company recognized stock-based compensation costs related to the issuance of RSUs of $20,960 ($15,510, net of taxes), $22,409 ($16,582, net of taxes), and $25,651 ($18,982, net of taxes) and $19,697 ($14,576, net of taxes) for the years ended December 31, 2023, 2022 2021 and 2020,2021, respectively, which has been allocated to selling, general and administrative expenses and cost of goods sold. Pre-tax unrecognized compensation expense for unvested RSUs granted to employees, net of estimated forfeitures, was $19,321$18,851 as of December 31, 2022,2023, and will be recognized as expense over a weighted-average period of approximately 1.451.57 years.
Additional information relating to the Company’s RSUs under the Company’s long-term incentive plans are as follows:
| | 2022 | | 2021 | | 2020 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| RSUs outstanding, January 1 | RSUs outstanding, January 1 | 439 | | | 375 | | | 362 | |
| Granted | Granted | 192 | | | 194 | | | 192 | |
| Released | Released | (134) | | | (105) | | | (146) | |
| Forfeited | Forfeited | (43) | | | (25) | | | (33) | |
| RSUs outstanding, December 31 | RSUs outstanding, December 31 | 454 | | | 439 | | | 375 | |
| Expected to vest as of December 31 | Expected to vest as of December 31 | 437 | | | 418 | | | 361 | |
During 2023, 2022 2021 and 2020,2021, shares were awarded each year to certain non-employee directors in lieu of cash for their annual retainers. The total number of shares were 3, 2, 3, and 2,3, respectively.
(14) Other Income and Expense, (Income)net
Following is a summary of other (income) expense, (income):net:
| | 2023 | | | 2023 | | 2022 | | 2021 |
| Foreign currency (gains) losses, net | |
| Release of indemnification asset | |
| | | 2022 | | 2021 | | 2020 |
| Foreign currency losses (gains), net | $ | 15,429 | | | 6,298 | | | 7,815 | |
| Release of indemnification asset | 7,324 | | | — | | | — | |
| Impairment of joint venture in Brazil | — | | | — | | | 3,599 | |
| | Resolution of foreign non-income tax contingencies | |
| | Resolution of foreign non-income tax contingencies | |
| | Resolution of foreign non-income tax contingencies | Resolution of foreign non-income tax contingencies | — | | | (6,211) | | | — | |
| All other, net | All other, net | (14,367) | | | (12,321) | | | (12,165) | |
| Total other expense (income), net | $ | 8,386 | | | (12,234) | | | (751) | |
| Total other (income) expense, net | |
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(15) Income Taxes
Following is a summary of earnings (loss) earnings before income taxes for United States and foreign operations:
| | 2022 | | 2021 | | 2020 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| United States | United States | $ | (233,208) | | | 380,632 | | | 94,829 | |
| Foreign | Foreign | 417,101 | | | 909,361 | | | 489,545 | |
| Earnings before income taxes | $ | 183,893 | | | 1,289,993 | | | 584,374 | |
| Earnings (loss) before income taxes | |
Income tax (benefit) expense (benefit) for the years ended December 31, 2023, 2022 2021 and 20202021 consists of the following:
| | 2022 | | 2021 | | 2020 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Current income taxes: | Current income taxes: | | | | | |
| U.S. federal | |
| U.S. federal | |
| U.S. federal | U.S. federal | $ | 91,948 | | | 93,085 | | | (33,821) | |
| State and local | State and local | 11,230 | | | 24,904 | | | 7,794 | |
| Foreign | Foreign | 106,032 | | | 143,385 | | | 72,350 | |
| Total current | Total current | 209,210 | | | 261,374 | | | 46,323 | |
| Deferred income taxes: | Deferred income taxes: | | | | | |
| U.S. federal | U.S. federal | (27,756) | | | (2,655) | | | 14,533 | |
| U.S. federal | |
| U.S. federal | |
| State and local | State and local | 9,586 | | | 13,306 | | | 112 | |
| Foreign | Foreign | (32,930) | | | (15,580) | | | 7,679 | |
| Total deferred | Total deferred | (51,100) | | | (4,929) | | | 22,324 | |
| Total income tax expense | Total income tax expense | $ | 158,110 | | | 256,445 | | | 68,647 | |
The geographic dispersion of earnings and losses contributes to the annual changes in the Company’s effective tax rates. A substantial portion of the Company’s business activities are conducted in the United States, which gave rise to a loss in the current year. The Company is also subject to taxation in other jurisdictions where it has operations, including Australia, Belgium, Brazil, Bulgaria, France, Ireland, Italy, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Russia, Spain and the United Kingdom. The effective tax rates that the Company accrues in these jurisdictions vary widely, but they are generally lower than the Company’s overall effective tax rate. The Company’s domestic effective tax rates for the years ended December 31, 2023, 2022 and 2021 and 2020 were (5.3)%, (36.5)%, 33.8%, and (12.0)%33.8%, respectively, and its non-U.S. effective tax rates for the years ended December 31, 2023, 2022 and 2021 and 2020 were 71.2%, 17.5%, 14.1%, and 16.3%14.1%, respectively. The difference in rates applicable in foreign jurisdictions results from many factors, including lower statutory rates, increase in valuation allowance, historical loss carry-forwards, financing arrangements, and other factors. The Company’s effective tax rate has been and will continue to be impacted by the geographical dispersion of the Company’s earnings and losses. To the extent that domestic earnings increase while the foreign earnings remain flat or decrease, or increase at a lower rate, the Company’s effective tax rate will increase.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Income tax expense (benefit) attributable to earnings before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to earnings before income taxes as follows:
| | 2022 | | 2021 | | 2020 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Income taxes at statutory rate | Income taxes at statutory rate | $ | 38,618 | | | 270,898 | | | 122,719 | |
| State and local income taxes, net of federal income tax benefit | State and local income taxes, net of federal income tax benefit | 4,858 | | | 25,658 | | | 8,081 | |
Foreign income taxes (1) | Foreign income taxes (1) | (50,483) | | | (34,981) | | | (57,898) | |
| Change in valuation allowance | Change in valuation allowance | 44,814 | | | 5,947 | | | 35,381 | |
| Impairment of non-deductible goodwill | Impairment of non-deductible goodwill | 132,497 | | | — | | | — | |
| | Loss on previously taxed earnings | — | | | — | | | (10,346) | |
| Carryback rate differential (2) | Carryback rate differential (2) | — | | | (15,743) | | | (33,739) | |
| Carryback rate differential (2) | |
| Carryback rate differential (2) | |
| | Fixed asset adjustments | |
| Fixed asset adjustments | |
| Fixed asset adjustments | Fixed asset adjustments | (7,289) | | | (7,113) | | | (8,630) | |
| Non-deductible expenses | Non-deductible expenses | 11,250 | | | 8,128 | | | 8,424 | |
| General business credits and incentives | General business credits and incentives | (21,833) | | | (3,958) | | | (4,004) | |
| | Global intangible low-taxed income | Global intangible low-taxed income | 7,200 | | | 34,400 | | | 2,500 | |
| Global intangible low-taxed income | |
| Global intangible low-taxed income | |
Italy step-up adjustment (3) | Italy step-up adjustment (3) | — | | | (22,163) | | | — | |
| Prior period adjustments | |
| Tax impact of restructuring | |
| Tax contingencies and audit settlements, net | Tax contingencies and audit settlements, net | (96) | | | 12,505 | | | 6,779 | |
| | Other, net | Other, net | (1,426) | | | (17,133) | | | (620) | |
| | $ | 158,110 | | | 256,445 | | | 68,647 | |
| Other, net | |
| | Other, net | |
| Income tax expense | |
(1) Foreign income taxes include statutory rate differences, financing arrangements, withholding taxes, local income taxes, notional deductions, and other miscellaneous items.
(2) The CARES Act permits the Company to carry back its 2020 U.S. taxable loss to a tax year before the corporate income tax rate was lowered by the Tax Cuts and Jobs Act.
(3) The companyCompany realized a one-time Italian step-up benefit allowing for the realignment of tax asset values.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 20222023 and 20212022 are presented below:
| | 2022 | | 2021 |
| 2023 | | | 2023 | | 2022 |
| Deferred tax assets: | Deferred tax assets: | | | |
| Accounts receivable | |
| Accounts receivable | |
| Accounts receivable | Accounts receivable | $ | 15,783 | | | 16,550 | |
| Inventories | Inventories | 53,088 | | | 38,388 | |
| Employee benefits | Employee benefits | 47,089 | | | 54,865 | |
| Accrued expenses and other | Accrued expenses and other | 95,682 | | | 73,983 | |
| Deductible state tax and interest benefit | Deductible state tax and interest benefit | 7,584 | | | 7,206 | |
| Intangibles | Intangibles | 122,710 | | | 135,777 | |
| Lease liabilities | Lease liabilities | 108,596 | | | 106,753 | |
| Interest expense | Interest expense | 10,749 | | | — | |
| Federal, foreign and state net operating losses and credits | Federal, foreign and state net operating losses and credits | 448,759 | | | 408,434 | |
| Gross deferred tax assets | Gross deferred tax assets | 910,040 | | | 841,956 | |
| Valuation allowance | Valuation allowance | (284,347) | | | (236,357) | |
| Net deferred tax assets | Net deferred tax assets | 625,693 | | | 605,599 | |
| Deferred tax liabilities: | Deferred tax liabilities: | | | |
| Inventories | Inventories | (17,415) | | | (23,484) | |
| Inventories | |
| Inventories | |
| Plant and equipment | Plant and equipment | (463,810) | | | (467,451) | |
| Intangibles | Intangibles | (175,788) | | | (188,417) | |
| Right of use operating lease assets | Right of use operating lease assets | (102,959) | | | (101,935) | |
| Prepaids | Prepaids | (47,079) | | | (45,077) | |
| Other liabilities | Other liabilities | (58,799) | | | (67,914) | |
| Gross deferred tax liabilities | Gross deferred tax liabilities | (865,850) | | | (894,278) | |
| Net deferred tax liability | Net deferred tax liability | $ | (240,157) | | | (288,679) | |
The Company evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing its forecasted taxable income using both historic and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. The valuation allowance as of December 31, 2023, and 2022 is $582,683 and 2021 is $284,347, and $236,357, respectively. The valuation allowance as of December 31, 20222023 relates to the net deferred tax assets of certain of the Company’s foreign subsidiaries as well as certain state net operating losses and tax credits. The total change in the 2023 valuation allowance was an increase of $298,336 primarily related to a $300,000 credit received in Switzerland where realizability is uncertain as of December 31, 2023. The total change in the 2022 valuation allowance was an increase of $47,990 related to increased losses, foreign currency translation, and other activities. The total change in the 2021 valuation allowance was a decrease of $31,481 related to tax rate changes, foreign currency translation, and other activities.
Management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances, based upon the expected reversal of deferred tax liabilities and the level of historic and forecasted taxable income over periods in which the deferred tax assets are deductible.
As of December 31, 2022,2023, the Company has state net operating loss carry forwards and state tax credits with potential tax benefits of $46,388,$50,368, net of federal income tax benefit; these carry forwards expire over various periods based on taxing jurisdiction.benefit. A valuation allowance totaling $31,760$37,970 has been recorded against these state deferred tax assets as of December 31, 2022.2023. In addition, as of December 31, 2022,2023, the Company has credits and net operating loss carry forwards in the U.S. with potential tax benefits of $6,753$7,811 and in various foreign jurisdictions with potential tax benefits of $1,565,514.$1,962,774. A valuation allowance of $6,242 and $246,345,$538,471, respectively, has been recorded against these deferred tax assets as of December 31, 2022.2023. A portion of the carryforwards expire over various periods beginning in 2024 and the remaining carryforwards have an indefinite life.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
As a result of the redemption of hybrid instruments in response to changes in global tax regimes, the Company has an ASC 740-10 liability of $1,169,896 for the full tax effected loss on the hybrid instrument in the Tax Uncertainties section below. This ASC 740-10-45 liability is recorded as a reduction to the related deferred tax asset in the financial statements as a result of management’s determination that it is not more likely than not that the benefit will be realized.
The Company has no intentions or plans to repatriate foreign earnings and continues to assert that historical earnings of its foreign subsidiaries as of December 31, 20222023 are permanently reinvested. Should the remaining earnings be distributed in the form of dividends in the future, the Company might be subject to withholding taxes (possibly offset by U.S. foreign tax credits) in various foreign jurisdictions, but the Company would not expect incremental U.S. federal or state taxes to be accrued on these previously taxed earnings.
Tax Uncertainties
In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing jurisdictions. Accordingly, the Company accrues liabilities when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense (benefit). Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s consolidated financial position but could possibly be material to the Company’s consolidated results of operations or cash flow in any given quarter or annual period.
As of December 31, 2022,2023, the Company’s gross amount of unrecognized tax benefits is $1,230,632,$1,304,874, excluding interest and penalties. If the Company were to prevail on all uncertain tax positions, $47,881$75,299 of the unrecognized tax benefits would affect the Company’s effective tax rate, exclusive of any benefits related to interest and penalties.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| | 2022 | | 2021 |
| 2023 | | | 2023 | | 2022 |
| Balance as of January 1 | Balance as of January 1 | $ | 1,296,523 | | | 1,388,391 | |
| Additions based on tax positions related to the current year | Additions based on tax positions related to the current year | 1,439 | | | 458 | |
| | Additions for tax positions of acquired companies | |
| Additions for tax positions of prior years | Additions for tax positions of prior years | 4,678 | | | 18,001 | |
| | Reductions resulting from the lapse of the statute of limitations | Reductions resulting from the lapse of the statute of limitations | (3,419) | | | (3,336) | |
| Reductions resulting from the lapse of the statute of limitations | |
| Reductions resulting from the lapse of the statute of limitations | |
| | Settlements with taxing authorities | |
| Settlements with taxing authorities | |
| Settlements with taxing authorities | |
| Effects of foreign currency translation | Effects of foreign currency translation | (68,589) | | | (106,991) | |
| Balance as of December 31 | Balance as of December 31 | $ | 1,230,632 | | | 1,296,523 | |
As a result of the redemption of hybrid instruments in response to changes in global tax regimes, the Company has an ASC 740-10 liability for the full tax effected loss on hybrid instruments. This ASC 740-10-45 liability is recorded as a reduction to the related deferred tax asset in the financial statements as a result of management’s determination that it is not more likely than not that the benefit will be realized. The tax effected loss was adjusted for foreign currency translation changes in 2022,2023, resulting in an updated balance of $1,169,896$1,206,569 as of December 31, 2022.2023.
As of December 31, 20222023 and 2021,2022, the Company has $14,801$26,926 and $14,494,$14,801, respectively, accrued for the payment of interest and penalties, excluding the federal tax benefit of interest deductions where applicable. During the years ended December 31, 2023, 2022 2021 and 2020,2021, the Company accrued interest and penalties through income tax expense of $6,463, $437 $3,236 and $(695),$3,236, respectively.
The Company believes that its unrecognized tax benefits could decrease by $9,152$22,680 within the next twelve months. The Company’s 2018, 2019 and 2020 federal tax returns are currently under audit by the Internal Revenue Service. As permitted by the CARES Act, the company carried back its 2020 taxable losses to tax years before the corporate income tax rate was lowered by the Tax Cut and Jobs Act. Federal income tax matters related to years prior to 2014 have been effectively settled. Various other state and foreign income tax returns are open to examination for various years.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Belgian Tax Matter
The Company has been in a dispute with the Belgian Tax Authority (the “BTA”) regarding the proper tax treatment of the royalty income arising from intellectual property (“IP”) owned by a Luxembourg subsidiary, Flooring Industries Limited S.à r.l. (“FIL”). The BTA had assessed Unilin BV for the calendar years ending December 2005 through 2010 in an amount totaling €223,321 (including penalties but excluding interest), alleging that Unilin BV inappropriately transferred valuable IP to FIL and income associated with that IP should be taxed in Belgium. Unilin BV challenged all of these assessments and prevailed both in the Court of First Appeal in Bruges and in the Ghent Court of Appeal. In 2021, the BTA indicated it will not appeal these cases to the Supreme Court and has withdrawn all of the assessments for 2005 through 2010. Consequently, all of those tax years are now closed.
Having lost under its original theory, the BTA initiated new assessments for later years against FIL rather than Unilin BV. In that connection, the BTA alleged that FIL had a taxable presence in Belgium and should have been taxed on royalties received in respect of its IP. The BTA issued initial assessments in December 2020 and June 2021 that totaled €371,696 (including penalties but excluding interest) for calendar years ending December 2013 through 2018. However, in November and December of 2021, the BTA cancelled these assessments and in April 2022 issued new assessments that total €186,734 (including penalties but excluding interest) for those years using different calculations. The Company was expecting an additional assessment for 2019. Under the statute of limitations, the BTA may not assess FIL for any years prior to 2013, and the Company believes that FIL’s statute of limitations is closed for 2013 through 2016. These assessments would involve the same underlying facts at issue in the above referenced cases where Unilin BV prevailed at two different levels. Although Mohawk believes its tax position in Belgium was correct, FIL entered into an agreement with the BTA on November 23, 2022, to settle the dispute for a one-time payment of €3,000. No fines were upheld due to the good faith of the company. This settlement covers calendar years ending December 31, 2013, through 2020. Consequently, FIL will not be liable for additional taxes, penalties, or interest related to all calendar years through the year ending December 31, 2020.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(16) Commitments and Contingencies
The Company had approximately $19,614$746 and $1,432$19,614 in standby letters of credit for various insurance contracts and commitments to foreign vendors as of December 31, 20222023 and 2021,2022, respectively that expire within two years.
From time to time in the regular course of its business, the Company is involved in various lawsuits, claims, investigations and other legal matters. Except as noted below, there are no material legal proceedings pending or known by the Company to be contemplated to which the Company is a party or to which any of its property is subject.
Perfluorinated Compounds (“PFCs”) Litigation
In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama (the “Gadsden Water Board”)December 2019, Jarrod Johnson filed an individual complaint in the Circuit Court of Etowah County, Alabamaa putative class action against certain manufacturers, suppliers, and users of chemicals containing specific PFCs, including the Company. In May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama (the “Centre Water Board”) filed a similar complaint in the Circuit Court of Cherokee County, Alabama. The Gadsden Water Board and the Centre Water Board both sought monetary damages and injunctive relief claiming that their water supplies contain excessive amounts of PFCs. Certain defendants, including the Company, filed dispositive motions in each case arguing that the Alabama state courts lack personal jurisdiction over them. These motions were denied. In June and September 2018, certain defendants, including the Company, petitioned the Alabama Supreme Court for Writs of Mandamus directing each lower court to enter an order granting the defendants’ dispositive motions on personal jurisdiction grounds. The Alabama Supreme Court denied the petitions on December 20, 2019. Certain defendants, including the Company, filed an Application for Rehearing with the Alabama Supreme Court asking the court to reconsider its December 2019 decision. The Alabama Supreme Court denied the application for rehearing. On August 21, 2020, certain defendants, including the Company, petitioned the Supreme Court of the United States for review of the matter. On January 19, 2021, the Supreme Court denied the defendants’ petition for review. On October 14, 2022, the Gadsden Water Board settled its claims against Mohawk Industries, Inc. and Mohawk Carpet, LLC. The case filed by the Centre Water Board remains pending.
In December 2019, the City of Rome, Georgia (“Rome”) filed a complaint in the Superior Court of Floyd County, Georgia that is similar to the Gadsden Water Board and Centre Water Board complaints, again seeking monetary damages and injunctive relief related to PFCs. Also in December 2019, Jarrod Johnson filed a putative class actionperfluorinated compounds (PFCs) in the Superior Court of Floyd County, Georgia purporting to represent all water subscribers with the Rome (Georgia) Water and Sewer Division and/or the Floyd County (Georgia) Water Department and seeking to recover, among other things, damages in the form of alleged increased rates and surcharges incurred by ratepayers for the costs associated with eliminating certain PFCs from their drinking water. In January 2020, defendant 3M Companywater, as well as injunctive relief. The defendants removed the class action to federal court. The Company has filed motions to dismiss in both of these cases. On December 17, 2020,a motion for summary judgment and that motion is pending before the Superior Court of Floyd County denied the Company’s motion to dismiss in the Rome case. On September 20, 2021, the Northern District of Georgia denied the Company’s motion to dismiss in the class action.court.
The Company denies all liability in these mattersIn April 2023, Shelby County, Alabama and intends to defend all pending matters vigorously.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Putative Securities Class Action
On January 3, 2020, the Company and certain of its executive officers were named as defendants inTalladega County, Alabama filed a putative shareholder class action lawsuit filedcomplaint in the United States DistrictCircuit Court forof Talladega County, Alabama against certain manufacturers, suppliers, and users of chemicals containing certain PFCs, seeking monetary damages and injunctive relief, claiming that their water supplies contain excessive amounts of PFCs. The defendants removed the Northern District of Georgia (the “Securities Class Action”). The complaint alleged that defendants violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making materially false and misleading statements and that the officers are control persons under Section 20(a) of the Securities Exchange Act of 1934. The complaint was filed on behalf of shareholders who purchased shares of the Company’s common stock between April 28, 2017 and July 25, 2019 (“Class Period”). On June 29, 2020, an amended complaint was filed in the Securities Class Action against Mohawk and its CEO Jeff Lorberbaum, based on the same claims and the same Class Period. The amended complaint alleges that the Company (1) engaged in fabricating revenues by attempting deliverycase to customers that were closed and recognizing these attempts as sales; (2) overproduced product to report higher operating margins and maintained significant inventory that was not salable; and (3) valued certain inventory improperly or improperly delivered inventory with knowledge that it was defective and customers would return it. On October 27, 2020, defendants filed a motion to dismiss the amended complaint. On September 29, 2021, the court issued an order granting in part and denying the defendants’ motion to dismiss the amended complaint. Defendants filed an answer to the amended complaint on November 12, 2021, and fact discovery commenced. On January 26, 2022, Lead Plaintiff moved for class certification, to appoint itself as class representative, and for appointment of class counsel. The court granted plaintiff’s motion for class certification on November 28, 2022. On December 13, 2022, the parties reached an agreement in principle to settle the Securities Class Action for $60,000, of which a significant portion is covered by insurance, in exchange for the dismissal and a release of all claims against the defendants (the “Agreement”). The Agreement, which is subject to court approval, is without admission of fault or wrongdoing by defendants. On February 6, 2023, the court issued an order granting Lead Plaintiff’s motion to preliminarily approve the settlement and setting May 31, 2023 as the date of the final settlement hearing.federal court. The Company believes the allegations in the Securities Class Action are without merit.
Government Subpoenas
As previously disclosed, on June 25, 2020, the Company received subpoenas issued by the U.S. Attorney’s Office for the Northern District of Georgia (the “USAO”)merit and the U.S. Securities and Exchange Commission (the “SEC”) relating to matters similar to the allegations of wrongdoing raised by the Securities Class Action. The Company’s Audit Committee, with the assistance of outside legal counsel, conducted a thorough internal investigation into these allegations. The Audit Committee has completed the investigation and concluded that the allegations of wrongdoing are without merit. The USAO and SEC investigations are ongoing, and the Company is cooperating fully with those authorities. The Company will continuecontinues to vigorously defend against claims relating to its prior use of certain PFCs in the allegations of wrongdoing and does not believe they have merit.carpet manufacturing process.
Delaware State Court ActionSecurities Actions
The Company and certain of its present and former executive officers were named as defendants in a putative state securities class action lawsuit filed in the Superior Court of the State of Delaware on January 30, 2020. The complaint alleged that defendants violated Sections 11 and 12 of the Securities Act of 1933. The complaint1933 and was filed on behalf of shareholders who purchased shares of the Company’s common stock in Mohawk Industries Retirement Plan 1 and Mohawk Industries Retirement Plan 2 between April 27, 2017 and July 25, 2019. On March 27, 2020, the court granted a temporary stay of the litigation. The stay may be lifted according to the terms set forth in the court’s order to stay litigation. The parties reached an agreement in principle to settle the lawsuit which will be funded in full by Mohawk’s insurers, in exchange for the dismissal and a release of all claims against the defendants (the “Settlement Agreement”).defendants. The Settlement Agreement,settlement agreement, which is subject to court approval, is without admission of fault or wrongdoing by defendants. The court will hold a final settlement hearing on March 21, 2024. The Company believes the allegations in the lawsuit are without merit.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Georgia State Court Investor Actions
The Company and certain of its present and former executive officers were named as defendants in certain investor actions, filed in the State Court of Fulton County of the State of Georgia on April 22, 2021 and April 23, 2021, and May 11, 2022. Five complaints brought on behalf of purported former Mohawk stockholders each allege that defendants defrauded the respective plaintiffs through false or misleading statements and thereby induced plaintiffs to purchase Company stock at artificially inflated prices. The allegations are similar to those of the Securities Class Action.2021. The claims alleged include fraud, negligent misrepresentation, violations of the Georgia Securities Act, and violations of the Georgia Racketeering and Corrupt Organizations statute. Plaintiffs in the investor actions seek compensatory and punitive damages. On June 28, 2021, defendants filed motions to dismiss each of the four complaints filed in April 2021 and answers to the same. On October 5, 2021, all fourthe investor actions filed in April 2021 were transferred by the State Court of Fulton County to the Metro Atlanta Business Case Division, where fact discovery is ongoing.Division. On January 28, 2022, the Court granted in part and denied in part the motions to dismiss the four actionsOctober 4, 2023, plaintiffs filed in April 2021, dismissing the Georgia Securities Act claims as to all defendants, and the negligent misrepresentation claim as to the Company.
On May 19, 2022, the partiesamended complaints in the last-filed action filed a joint motion to transferremaining four investor actions. The Company believes the investor action initiated on May 11, 2022 to the Metro Atlanta Business Case Division where the other four actions wereclaims are without merit and are pending. On August 2, 2022, this motion was granted and the last-filed investor action initiated on May 11, 2022 was transferred to the Metro Atlanta Business Case Division. On September 1, 2022, defendants in the last-filed investor action filed motions to dismiss the complaint filed on May 2022 and answers to the same. On November 16, 2022, plaintiffs in the last-filed investor action voluntarily dismissed the suit. The Company intends to vigorously defend against the claims in these actions.
Federal Investor Actions
The Company and certain of its present and former executive officers were named as defendants in three additional non-class action lawsuits filed in the United States District Court for the Northern District of Georgia on June 22, 2021 (the “Maverick Action”), March 25, 2022 (the “Hound Action”), and April 26, 2022 (collectively,(the “Fir Tree Action,” and collectively, “Federal Investor Actions”), respectively. Each complaint is brought on behalf of one or more purported former Mohawk stockholders and alleges that defendants defrauded the plaintiffs through false or misleading statements and thereby induced plaintiffs to purchase Company stock at artificially inflated prices. The allegations are similar to those of the Securities Class Action.stockholders. The federal law claims alleged includeincluded violations of Sections 10(b) and 18 of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, by making materially false and misleading statements and that the officers are control persons under Section 20(a) of the Securities Exchange Act of 1934. The state law claims alleged includeincluded fraud, negligent misrepresentation, violations of the Georgia Securities Act, and violations of the Georgia Racketeering and Corrupt Organizations statute. PlaintiffsThe parties reached settlement agreements and filed stipulations of voluntary dismissal with prejudice in the lawsuits seek compensatory and punitive damages and attorneys’ fees.
On December 13, 2021, defendants filed motions to dismiss the June 22, 2021 complaint, which motions are fully briefed and remain pending. On July 6, 2022, defendants filed motions to dismiss the March 25, 2022 complaint, which motions are fully briefed and remain pending. On July 27, 2022, defendants filed motions to dismiss the April 26, 2022 complaint, which motions are fully briefed as of November 4, 2022 and remain pending. On August 9, 2022, defendants filed a motion to consolidate all three Federal Investor Actions for pre-trial purposes, which motion is fully briefedActions. The Court granted dismissal and remains pending. The Company intends to vigorously defend againstterminated the claims asserted inMaverick Action, the Federal Investor Actions.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
DerivativeDecember 28, 2023, respectively. The Company continues to believe the allegations in the Federal Investor Actions were without merit.
The Company and certain of its executive officers and directors were named as defendants in certain derivative actions filed in the United States District Court for the Northern District of Georgia on May 18, 2020 and August 6, 2020, respectively (the “NDGA Derivative Actions”), in the Superior Court of Gordon County of the State of Georgia on March 3, 2021 and July 12, 2021 (the “Georgia Derivative Actions”), and in the Delaware Court of Chancery on March 10, 2022 (the “Delaware Derivative Action”). The complaints allege that defendants breached their fiduciary duties to the Company by causing the Company to issue materially false and misleading statements. The complaints are filed on behalf of the Company and seek to remedy fiduciary duty breaches occurring from April 28, 2017 to July 25, 2019. On JulyDecember 20, 2020, the court2023, plaintiffs in the NDGA Derivative Actions granted a temporary stay offiled an amended complaint. The Company believes the litigation. On October 21, 2020, the court entered an order consolidating the NDGA Derivative Actionsclaims are without merit and appointing Lead Counsel. Other shareholders of record jointly moved to intervene in the derivative actions to stay the proceedings. On September 28, 2021, the court in the NDGA Derivative Actions issued an order granting the request to intervene. On April 8, 2021, the court in the first-filed of the Georgia Derivative Actions granted a temporary stay of the litigation. On January 18, 2022, the Court in the NDGA Derivative Actions lifted the temporary stay of the litigation. On January 20, 2022, the court in the second-filed of the Georgia Derivative Actions entered an order on scheduling requiring defendants to file and serve their response to the complaint on February 21, 2022. On February 28, 2022, the court granted a stay of the Georgia Derivative Actions until the entry of a final judgment in the NDGA Derivative Actions and stipulating that the prevailing party in the NDGA Derivative Actions would be the prevailing party in the Georgia Derivative Actions. On April 6, 2022, the court granted a stay of the Delaware Derivative Action until the entry of a final judgment in the NDGA Derivative Actions and stipulating that the prevailing party in the NDGA Derivative Actions would be the prevailing party in the Delaware Derivative Action. The Company intends to vigorously defend against the claims.
General
The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses that are reasonably estimable. These contingencies are subject to significant uncertainties and the Company is unable to estimate the amount or range of loss, if any, in excess of amounts accrued. The Company does not believe that the ultimate outcome of these actions will have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations, cash flows or liquidity in a given quarter or year.
The Company is subject to various federal, state, local and foreign environmental health and safety laws and regulations, including those governing air emissions, wastewater discharges, the use, storage, treatment, recycling and disposal of solid and hazardous materials and finished product, and the cleanup of contamination associated therewith. Because of the nature of the Company’s business, the Company has incurred, and will continue to incur, costs relating to compliance with such laws and regulations. The Company is involved in various proceedings relating to environmental matters and is currently engaged in environmental investigation, remediation and post-closure care programs at certain sites. The Company has provided accruals for such activities that it has determined to be both probable and reasonably estimable. The Company does not expect that the ultimate liability with respect to such activities will have a material adverse effect on its financial condition but acknowledges that it could have a material adverse effect on its results of operations, cash flows or liquidity in a given quarter or year.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
(17) Consolidated Statements of Cash Flows Information
Supplemental disclosures of cash flow information are as follows:
| | 2022 | | 2021 | | 2020 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Net cash paid during the years for: | Net cash paid during the years for: | | | | | |
| Interest | |
| Interest | |
| Interest | Interest | $ | 75,199 | | | 75,514 | | | 44,584 | |
| Income taxes | Income taxes | $ | 248,693 | | | 323,718 | | | 106,891 | |
| | Supplemental schedule of non-cash investing and financing activities: | Supplemental schedule of non-cash investing and financing activities: | |
| Supplemental schedule of non-cash investing and financing activities: | |
| Supplemental schedule of non-cash investing and financing activities: | |
| Unpaid property plant and equipment in accounts payable and accrued expenses | |
| Unpaid property plant and equipment in accounts payable and accrued expenses | |
| Unpaid property plant and equipment in accounts payable and accrued expenses | Unpaid property plant and equipment in accounts payable and accrued expenses | $ | 118,701 | | | 117,084 | | | 90,767 | |
| | Fair value of assets acquired, net of liabilities assumed: | |
| Fair value of assets acquired, net of liabilities assumed: | |
| Fair value of assets acquired, net of liabilities assumed: | |
| Fair value of net assets acquired in acquisition | |
| Fair value of net assets acquired in acquisition | |
| Fair value of net assets acquired in acquisition | Fair value of net assets acquired in acquisition | $ | 243,934 | | | 176,924 | | | — | |
| | Liabilities assumed in acquisition | Liabilities assumed in acquisition | (34,332) | | | (52,955) | | | — | |
| Liabilities assumed in acquisition | |
| Liabilities assumed in acquisition | |
| | $ | 209,602 | | | 123,969 | | | — | |
| Fair value of net assets acquired | |
| Fair value of net assets acquired | |
| Fair value of net assets acquired | |
(18) Segment Reporting
The Company has three reporting segments: Global Ceramic, Flooring NA and Flooring ROW. Global Ceramic designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone, porcelain slabs, quartz countertops and other products, which it distributes primarily in North America, Europe Southand Latin America and Russia through its network of regional distribution centers and Company-operated service centers using Company-operated trucks, common carriers or rail transportation. The segment’s product lines are sold through Company-operated service centers, independent distributors, home center retailers, tile and flooring retailers and contractors. Flooring NA designs, manufactures, sources and markets its floor covering product lines, including carpets, rugs, carpet pad, laminate, resilient (includes sheet vinyl and LVT) and wood flooring, which it distributes through its network of regional distribution centers and satellite warehouses using Company-operated trucks, common carriers or rail transportation. The segment’s product lines are sold through various selling channels, including independent floor covering retailers, distributors, home centers, mass merchandisers, department stores, shop at home, buying groups, commercial contractors and commercial end users. Flooring ROW designs, manufactures, sources, licenses and markets laminate, sheet vinyl, LVT, wood flooring, roofing elements, insulation boards, medium-density fiberboard (“MDF”), chipboards and other wood products, which it distributes primarily in Europe Australia, New Zealand and RussiaAustralasia through various selling channels, which include retailers, Company-operated distributors, independent distributors and home centers.
The accounting policies for each operating segment are consistent with the Company’s policies for the Consolidated Financial Statements. Amounts disclosed for each segment are prior to any elimination or consolidation entries. Corporate general and administrative expenses attributable to each segment are estimated and allocated accordingly. Segment performance is evaluated based on operating income. No single customer accounted for more than 10% of net sales for the years ended December 31, 2023, 2022 2021 or 2020.2021.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
Segment information is as follows:
| | 2022 | | 2021 | | 2020 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Assets: | Assets: | | | | | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | Global Ceramic | $ | 4,841,310 | | | 5,160,776 | | | 5,250,069 | |
| Flooring NA | Flooring NA | 4,299,360 | | | 4,125,960 | | | 3,594,976 | |
| Flooring ROW | Flooring ROW | 4,275,519 | | | 4,361,741 | | | 4,194,447 | |
| Corporate and intersegment eliminations | Corporate and intersegment eliminations | 704,243 | | | 576,040 | | | 1,288,259 | |
| Total | Total | $ | 14,120,432 | | | 14,224,517 | | | 14,327,751 | |
| | Geographic net sales: | Geographic net sales: | |
| Geographic net sales: | |
| Geographic net sales: | |
| United States | United States | $ | 6,490,079 | | | 6,181,628 | | | 5,530,407 | |
| Europe | 3,152,051 | | | 3,117,892 | | | 2,486,770 | |
| Russia | 549,597 | | | 450,010 | | | 385,830 | |
| United States | |
| United States | |
Europe (2) | |
| Latin America | |
| Other | Other | 1,545,338 | | | 1,451,083 | | | 1,149,190 | |
| Total | Total | $ | 11,737,065 | | | 11,200,613 | | | 9,552,197 | |
| Long-lived assets: (1) | Long-lived assets: (1) | |
Long-lived assets: (1) | |
Long-lived assets: (1) | |
| United States | |
| United States | |
| United States | United States | $ | 2,317,409 | | | 2,309,575 | | | 2,230,971 | |
| Belgium | Belgium | 961,086 | | | 976,311 | | | 983,627 | |
| Other | Other | 1,770,499 | | | 1,740,946 | | | 1,699,768 | |
| Total | Total | $ | 5,048,994 | | | 5,026,832 | | | 4,914,366 | |
| | Net sales by product categories: | Net sales by product categories: | |
| Net sales by product categories: | |
| Net sales by product categories: | |
| Ceramic & Stone | |
| Ceramic & Stone | |
| Ceramic & Stone | Ceramic & Stone | $ | 4,320,423 | | | 3,938,654 | | | 3,457,203 | |
| Carpet & Resilient | Carpet & Resilient | 4,235,815 | | | 4,294,042 | | | 3,735,888 | |
| Laminate & Wood | Laminate & Wood | 1,964,486 | | | 1,852,766 | | | 1,538,967 | |
Other (2) | 1,216,341 | | | 1,115,151 | | | 820,139 | |
Other (3) | |
| Total | Total | $ | 11,737,065 | | | 11,200,613 | | | 9,552,197 | |
| | Net sales: | Net sales: | |
| Net sales: | |
| Net sales: | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | Global Ceramic | $ | 4,307,681 | | | 3,917,319 | | | 3,432,756 | |
| Flooring NA | Flooring NA | 4,207,041 | | | 4,116,405 | | | 3,594,075 | |
| Flooring ROW | Flooring ROW | 3,222,343 | | | 3,166,889 | | | 2,525,366 | |
| | Total | Total | $ | 11,737,065 | | | 11,200,613 | | | 9,552,197 | |
| Total | |
| Total | |
(1) Long-lived assets are composed of property, plant and equipment - net, and ROU operating lease assets.
(2) Russia revenue included in Europe.
(3) Other includes roofing elements, insulation boards, chipboards and IP contracts.
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
| | 2022 | | 2021 | | 2020 |
| Operating (loss) income: | | | | | |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Operating income (loss): | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | Global Ceramic | $ | (236,066) | | | 403,135 | | | 167,731 | |
| Flooring NA | Flooring NA | 231,076 | | | 407,577 | | | 147,442 | |
| Flooring ROW | Flooring ROW | 340,167 | | | 571,126 | | | 366,934 | |
| Corporate and intersegment eliminations | Corporate and intersegment eliminations | (90,960) | | | (46,827) | | | (46,105) | |
| Total | Total | $ | 244,217 | | | 1,335,011 | | | 636,002 | |
| | Depreciation and amortization: | Depreciation and amortization: | |
| Depreciation and amortization: | |
| Depreciation and amortization: | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | Global Ceramic | $ | 198,866 | | | 210,634 | | | 215,488 | |
| Flooring NA | Flooring NA | 231,279 | | | 211,872 | | | 214,599 | |
| Flooring ROW | Flooring ROW | 156,041 | | | 156,700 | | | 164,701 | |
| Corporate | Corporate | 9,278 | | | 12,505 | | | 12,719 | |
| Total | Total | $ | 595,464 | | | 591,711 | | | 607,507 | |
| | Capital expenditures (excluding acquisitions): | Capital expenditures (excluding acquisitions): | |
| Capital expenditures (excluding acquisitions): | |
| Capital expenditures (excluding acquisitions): | |
| Global Ceramic | |
| Global Ceramic | |
| Global Ceramic | Global Ceramic | $ | 154,266 | | | 167,224 | | | 121,418 | |
| Flooring NA | Flooring NA | 231,068 | | | 327,691 | | | 186,179 | |
| Flooring ROW | Flooring ROW | 178,313 | | | 164,318 | | | 113,378 | |
| Corporate | Corporate | 17,095 | | | 16,887 | | | 4,582 | |
| Total | Total | $ | 580,742 | | | 676,120 | | | 425,557 | |
(19) Subsequent Event
On January 31, 2024, the Company prepaid the entirety of the USD portion of the Term Loan Facility, in the amount of $675,000. On February 16, 2024, the Company prepaid the entirety of the EUR portion of the Term Loan Facility, in the amount of €220,000.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), which have been designed to provide reasonable assurance that such controls and procedures will meet their objectives, as of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective at a reasonable assurance level for the period covered by this report.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company maintains internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, internal control over financial reporting determined to be effective provides only reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Under the supervision and with the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s internal control over financial reporting as of December 31, 2022.2023. In conducting this evaluation, the Company used the framework set forth in the report titled “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022.2023.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 20222023 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their audit report which is included herein.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the year ended December 31, 20222023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls
The Company’s management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Item 9B.Other Information
None.
Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 20232024 Annual Meeting of Stockholders under the following headings: “Election of Directors—Director, Director Nominee and Executive Officer Information,” “—Nominees for Director,” “—Continuing Directors,” “—Contractual Obligations with respect to the Election of Directors”, “—Executive Officers,” “—Meetings and Committees of the Board of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit Committee” and “Corporate Governance.” The Company has adopted the Mohawk Industries, Inc. Standards of Conduct and Ethics, which applies to all of its directors, officers and employees. The standards of conduct and ethics are publicly available on the Company’s website at http://www.mohawkind.com and will be made available in print without charge to any stockholder who requests them. If the Company makes any substantive amendments to the standards of conduct and ethics, or grants any waiver, including any implicit waiver, from a provision of the standards required by regulations of the Commission to apply to the Company’s chief executive officer, chief financial officer or chief accounting officer, the Company will disclose the nature of the amendment or waiver on its website. The Company may elect to also disclose the amendment or waiver in a report on Form 8-K filed with the SEC. The Company has adopted the Mohawk Industries, Inc. Board of Directors Corporate Governance Guidelines, which are publicly available on the Company’s website and will be made available in print without charge to any stockholder who requests it.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 20232024 Annual Meeting of Stockholders under the following headings: “Compensation Discussion and Analysis,” “Executive Compensation—Summary Compensation Table,” “—Grants of Plan Based Awards,” “—Outstanding Equity Awards at Year End,” “—Option Exercises and Stock Vested,” “—Nonqualified Deferred Compensation,” “—Certain Relationships and Related Transactions,” “—Compensation Committee Interlocks and Insider Participation,” “—Compensation Committee Report” and “Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 20232024 Annual Meeting of Stockholders under the following headings: “Executive Compensation—Equity Compensation Plan Information,” and “—Principal Stockholders of the Company.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 20232024 Annual Meeting of Stockholders under the following heading: “Election of Directors—Meetings and Committees of the Board of Directors,” and “Executive Compensation—Certain Relationships and Related Transactions.”
Item 14.Principal Accounting Fees and Services
Our independent registered public accounting firm is KPMG LLP, Atlanta, GA, Auditor ID: 185.
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 20232024 Annual Meeting of Stockholders under the following heading: “Audit Committee—Principal Accountant Fees and Services” and “Election of Directors—Meetings and Committees of the Board of Directors.”
PART IV
Item 15.Exhibits, Financial Statement Schedules
(a) 1. Consolidated Financial Statements
The Consolidated Financial Statements of Mohawk Industries, Inc. and subsidiaries listed in Part II, Item 8 of this Form 10-K are incorporated by reference into this item.
2. Consolidated Financial Statement Schedules
Schedules not listed above have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or notes thereto.
3. Exhibits
The exhibit number for the exhibit as originally filed is included in parentheses at the end of the description.
| | | | | | | | |
| Mohawk Exhibit Number | | Description |
| |
| *2.1 | | Agreement and Plan of Merger dated as of December 3, 1993 and amended as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin and certain Shareholders of Aladdin. (Incorporated herein by reference to Exhibit 2.1(a) in the Company’s Registration Statement on Form S-4, Registration No. 333-74220.) |
| | |
| *3.1 | | Restated Certificate of Incorporation of Mohawk, as amended. (Incorporated herein by reference to Exhibit 3.1 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) |
| |
| *3.2 | | |
| |
| *4.1 | | |
| | |
| *4.2 | | |
| | |
| *4.3 | | Form of Note for the 3.850% Senior Notes due 2023 (Incorporated herein by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K dated January 31, 2013.) |
| | |
| *4.4 | | |
| | |
| *4.5 | | |
| | |
| *4.6 | | |
| | |
| *4.7 | | Fourth Supplemental Indenture, dated as of June 12, 2020, by and among Mohawk Capital Finance S.A., as issuer, Mohawk Industries, Inc., as parent guarantor, U.S. Bank National Association, as trustee, registrar and transfer agent and Elavon Financial Services DAC, as paying agent. (Incorporated herein by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on June 12, 2020.) |
| | |
| *4.8 | | |
| | |
| *4.9 | | |
| | |
| | | | | | | | |
| *4.10 | | |
| | |
| *4.11 | | |
| | | | | |
| *10.1 | | Registration Rights Agreement by and among Mohawk and the former shareholders of Aladdin. (Incorporated herein by reference to Exhibit 10.32 of the Company’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 1993.) |
| |
| *10.2 | | Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of March 23, 1994 to the Registration Rights Agreement dated as of February 25, 1994 between Mohawk and those other persons who are signatories thereto. (Incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q (File No. 001-13697) for the quarter ended July 2, 1994.) |
| | |
| *10.3 | | Second Amended and Restated Credit Facility, dated October 18, 2019, by and among the Company and certain of its subsidiaries, as borrowers, Wells Fargo Bank, National Association, as administrative agent, swing line lender, and an L/C issuer, and the other lenders party thereto. (Incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated October 18, 2019.) |
| | |
| *10.4 | | First Amendment to Second Amended and Restated Credit Agreement, dated as of April 7, 2020, by and among the Company and certain of its subsidiaries, as borrowers, Wells Fargo Bank, National Association, as administrative agent, swing line lender, and an L/C issuer, and the other lenders party thereto. (Incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on April 13, 2020.) |
| | |
| *10.5 | | |
| | |
| *10.6 | | |
| | |
| *10.7 | | Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of August 12, 2022, by and among the Company and certain of its subsidiaries, as borrowers, Wells Fargo Bank, National Association, as administrative agent, swing line lender, and an L/C issuer, and the other lenders party thereto. (Incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 12, 2022.) |
| | |
| *10.8 | | Credit Agreement, dated as of August 12, 2022, by and among the Company and Mohawk International Holdings S.à r.l., as borrowers, certain of its subsidiaries, as guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. (Incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on August 12, 2022.) |
| | |
| *10.9 | | First Amendment to Credit Agreement and Increase Agreement, dated as of October 3, 2022, by and among the Company and Mohawk International Holdings S.à r.l., as borrowers, certain of its subsidiaries, as guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. (Incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on October 28, 2022.) |
| | |
| Exhibits Related to Executive Compensation Plans, Contracts and other Arrangements: |
| | |
| *10.10 | | |
| |
| *10.11 | | |
| | |
| *10.12 | | |
| |
| *10.13 | | |
| | |
| *10.14 | |
| | |
| | | | | | | | |
*10.1510.14 | | |
| | |
*10.1610.15 | | |
| | |
10.17*10.16 | | |
| | |
| 21 | | |
| |
| 22 | | |
| | |
| 23.1 | | |
| |
| 31.1 | | |
| |
| 31.2 | | |
| |
| 32.1 | | |
| |
| 32.2 | | |
| |
| 95.1 | | |
| | |
| 97 | | |
| | |
| 101.INS | | XBRL Instance Document |
| |
| 101.SCH | | XBRL Taxonomy Extension Schema Document |
| |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
| |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
| |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) |
| | | | | |
| * | Indicates exhibit incorporated by reference. |
Item 16.Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| Mohawk Industries, Inc. | | |
| By: | /s/ JEFFREY S. LORBERBAUM |
February 22, 202323, 2024 | | Jeffrey S. Lorberbaum |
| | Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | |
February 22, 202323, 2024 | /s/ JEFFREY S. LORBERBAUM |
| Jeffrey S. Lorberbaum |
| Chairman and Chief Executive Officer
(principal executive officer) |
| | | | | |
February 22, 202323, 2024 | /s/ JAMES F. BRUNK |
| James F. Brunk |
| Chief Financial Officer
(principal financial officer) |
| | | | | |
February 22, 202323, 2024 | /s/ WILLIAM W. HARKINS II |
| William W. Harkins II, |
| Chief Accounting Officer and Corporate Controller
(principal accounting officer) |
| | | | | |
February 22, 202323, 2024 | /s/ BRUCE C. BRUCKMANN |
| Bruce C. Bruckmann |
| Director |
| | | | | |
February 22, 202323, 2024 | /s/ JERRY W. BURRIS |
| Jerry W. Burris |
| Director |
| | | | | |
February 22, 202323, 2024 | /s/ JOHN M. ENGQUIST |
| John M. Engquist |
| Director |
| | | | | |
February 22, 202323, 2024 | /s/ JOSEPH A. ONORATO |
| Joseph A. Onorato |
| Director |
| | | | | |
February 22, 202323, 2024 | /s/ WILLIAM H. RUNGE III |
| William H. Runge III |
| Director |
| | | | | |
February 22, 202323, 2024 | /s/ KAREN A. SMITH BOGART |
| Karen A. Smith Bogart |
| Director |
| | | | | |
February 22, 202323, 2024 | |
| Bernard P. Thiers |
| Director |
| | | | | |
| February 23, 2024 | /s/ W. CHRISTOPHER WELLBORN |
| W. Christopher Wellborn |
| Director |
