UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 1, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 01-13697

__________________________________________

MOHAWK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-1604305

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

160 S. Industrial Blvd.

Calhoun

Georgia

30701

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (706) 629-7721

Former name, former address and former fiscal year, if changed since last report:

__________________________________________

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $.01 par value	MHK	New York Stock Exchange

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 x 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 and post such files). Yes x 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 the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares outstanding of the issuer’s common stock as of ~~October~~July 26, ~~2022,~~2023, the latest practicable date, is as follows: ~~63,534,032~~63,682,156 shares of common stock, $.01 par value.

Table of Contents

MOHAWK INDUSTRIES, INC.

INDEX


		Page No
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of ~~October~~July 1,~~, 2022~~ 2023 and December 31, ~~2021~~2022	3

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~October~~July 1,~~, 2022~~ 2023 and ~~October~~July 2,~~, 2021~~ 2022	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~October~~July 1,~~, 2022~~ 2023 and ~~October~~July 2,~~, 2021~~ 2022	5

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~October~~July 1,~~, 2022~~ 2023 and ~~October~~July 2,~~, 2021~~ 2022	6

	Notes to the Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3227

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4434

Item 4.	Controls and Procedures	4435

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4536

Item 1A.	Risk Factors	4636

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4636

Item 3.	Defaults Upon Senior Securities	4636

Item 4.	Mine Safety Disclosures	4636

Item 5.	Other Information	4637

Item 6.	Exhibits	4738

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except per share data)					(In thousands, except per share data)	July 1, 2023		December 31, 2022
		October 1, 2022		December 31, 2021
		(In thousands, except per share data)
ASSETS	ASSETS				ASSETS
Current assets:	Current assets:				Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	326,971	268,895	Cash and cash equivalents	$	570,933	509,623
Short-term investments	Short-term investments	110,000		323,000	Short-term investments	—		158,000
Receivables, net	Receivables, net	2,003,261		1,839,985	Receivables, net	2,087,071		1,904,786
Inventories	Inventories	2,900,116		2,391,672	Inventories	2,618,711		2,793,765
Prepaid expenses	Prepaid expenses	495,226		394,649	Prepaid expenses	552,162		498,222

Other current assets	Other current assets	18,755		20,156	Other current assets	22,451		30,703
Total current assets	Total current assets	5,854,329		5,238,357	Total current assets	5,851,328		5,895,099
Property, plant and equipment	Property, plant and equipment	9,342,898		9,250,587	Property, plant and equipment	10,136,971		9,647,779
Less: accumulated depreciation	Less: accumulated depreciation	4,818,362		4,613,722	Less: accumulated depreciation	5,179,746		4,986,601
Property, plant and equipment, net	Property, plant and equipment, net	4,524,536		4,636,865	Property, plant and equipment, net	4,957,225		4,661,178
Right of use operating lease assets	Right of use operating lease assets	400,412		389,967	Right of use operating lease assets	400,419		387,816
Goodwill	Goodwill	1,827,968		2,607,909	Goodwill	2,031,034		1,927,759
Tradenames	Tradenames	646,661		694,905	Tradenames	708,243		668,328
Other intangible assets subject to amortization, net	Other intangible assets subject to amortization, net	176,439		205,075	Other intangible assets subject to amortization, net	179,686		189,620
Deferred income taxes and other non-current assets	Deferred income taxes and other non-current assets	370,689		451,439	Deferred income taxes and other non-current assets	457,228		390,632
Total assets	Total assets	$	13,801,034	14,224,517	Total assets	$	14,585,163	14,120,432


LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY				LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:				Current liabilities:
Short-term debt and current portion of long-term debt	Short-term debt and current portion of long-term debt	$	1,542,139	624,503	Short-term debt and current portion of long-term debt	$	1,038,032	840,571
Accounts payable and accrued expenses	Accounts payable and accrued expenses	2,256,097		2,217,418	Accounts payable and accrued expenses	2,143,807		2,124,448
Current operating lease liabilities	Current operating lease liabilities	106,511		104,434	Current operating lease liabilities	106,102		105,266
Total current liabilities	Total current liabilities	3,904,747		2,946,355	Total current liabilities	3,287,941		3,070,285
Deferred income taxes	Deferred income taxes	430,888		495,521	Deferred income taxes	405,159		444,660
Long-term debt, less current portion	Long-term debt, less current portion	1,019,984		1,700,282	Long-term debt, less current portion	2,013,327		1,978,563
Non-current operating lease liabilities	Non-current operating lease liabilities	306,617		297,390	Non-current operating lease liabilities	310,612		296,136
Other long-term liabilities	Other long-term liabilities	313,741		356,753	Other long-term liabilities	356,104		312,874
Total liabilities	Total liabilities	5,975,977		5,796,301	Total liabilities	6,373,143		6,102,518
Commitments and contingencies (Note 17)	Commitments and contingencies (Note 17)				Commitments and contingencies (Note 17)

Stockholders’ equity:	Stockholders’ equity:				Stockholders’ equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued	Preferred stock, $.01 par value; 60 shares authorized; no shares issued	—		—	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
Common stock, $.01 par value; 150,000 shares authorized; 71,018 and 70,875 shares issued and outstanding in 2023 and 2022, respectively					Common stock, $.01 par value; 150,000 shares authorized; 71,018 and 70,875 shares issued and outstanding in 2023 and 2022, respectively	710		709
Additional paid-in capital	Additional paid-in capital	1,925,894		1,911,131	Additional paid-in capital	1,937,320		1,930,789
Retained earnings	Retained earnings	7,376,304		7,692,064	Retained earnings	7,591,215		7,409,760
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,268,663)		(966,952)	Accumulated other comprehensive loss	(1,107,742)		(1,114,258)
		8,034,244		8,636,972
Less: treasury stock at cost; 7,341 and 7,343 shares in 2022 and 2021, respectively		215,491		215,547
Less: treasury stock at cost; 7,338 and 7,341 shares in 2023 and 2022, respectively					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	Total Mohawk Industries, Inc. stockholders’ equity	7,818,753		8,421,425	Total Mohawk Industries, Inc. stockholders’ equity	8,206,106		8,011,509
Nonredeemable noncontrolling interests	Nonredeemable noncontrolling interests	6,304		6,791	Nonredeemable noncontrolling interests	5,914		6,405
Total stockholders’ equity	Total stockholders’ equity	7,825,057		8,428,216	Total stockholders’ equity	8,212,020		8,017,914
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	13,801,034	14,224,517	Total liabilities and stockholders’ equity	$	14,585,163	14,120,432

See accompanying notes to ~~condensed consolidated financial statements~~the Condensed Consolidated Financial Statements.

Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021
(In thousands, except per share data)
Net sales $ 2,917,539 2,817,017 9,086,390 8,439,876
Cost of sales 2,203,878 1,979,702 6,697,404 5,908,585
Gross profit 713,661 837,315 2,388,986 2,531,291
Selling, general and administrative expenses 523,479 477,341 1,510,076 1,449,378��
Impairment of goodwill and indefinite-lived intangibles 695,771 — 695,771 —
Operating (loss) income (505,589) 359,974 183,139 1,081,913
Interest expense 13,797 14,948 37,337 45,083
Other (income) expense, net (1,242) 21 (1,622) (13,374)
(Loss) earnings before income taxes (518,144) 345,005 147,424 1,050,204
Income tax expense 15,569 73,821 155,193 205,756
Net (loss) earnings including noncontrolling interests (533,713) 271,184 (7,769) 844,448
Net earnings attributable to noncontrolling interests 256 206 440 378
Net (loss) earnings attributable to Mohawk Industries, Inc. $ (533,969) 270,978 (8,209) 844,070
Basic (loss) earnings per share attributable to Mohawk Industries, Inc.
Basic (loss) earnings per share attributable to Mohawk Industries, Inc. $ (8.40) 3.95 (0.13) 12.16
Weighted-average common shares outstanding—basic 63,534 68,541 63,923 69,389
Diluted (loss) earnings per share attributable to Mohawk Industries, Inc.
Diluted (loss) earnings per share attributable to Mohawk Industries, Inc. $ (8.40) 3.93 (0.13) 12.11
Weighted-average common shares outstanding—diluted 63,534 68,864 63,923 69,683


	Three Months Ended			Six Months Ended
(In thousands, except per share data)	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022


Net sales	$	2,950,428	3,153,188	5,756,651	6,168,851
Cost of sales	2,218,519		2,279,991	4,381,300	4,493,526
Gross profit	731,909		873,197	1,375,351	1,675,325
Selling, general and administrative expenses	578,863		505,270	1,096,515	986,597

Operating income	153,046		367,927	278,836	688,728
Interest expense	22,857		12,059	39,994	23,540
Other (income) expense, net	2,215		(2,818)	1,649	(380)
Earnings before income taxes	127,974		358,686	237,193	665,568
Income tax expense	26,760		78,176	55,703	139,624


Net earnings including noncontrolling interests	101,214		280,510	181,490	525,944
Less: net earnings (loss) attributable to noncontrolling interests	(3)		79	35	184
Net earnings attributable to Mohawk Industries, Inc.	$	101,217	280,431	181,455	525,760



Basic earnings per share attributable to Mohawk Industries, Inc.	$	1.59	4.41	2.85	8.20
Weighted-average common shares outstanding—basic	63,680		63,540	63,630	64,116



Diluted earnings per share attributable to Mohawk Industries, Inc.	$	1.58	4.40	2.84	8.17
Weighted-average common shares outstanding—diluted	63,900		63,798	63,864	64,374

See accompanying notes to ~~condensed consolidated financial statements.~~the Condensed Consolidated Financial Statements.

Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021
(In thousands)
Net (loss) earnings including noncontrolling interests $ (533,713) 271,184 (7,769) 844,448
Other comprehensive (loss) income:
Foreign currency translation adjustments (254,002) (91,318) (302,384) (178,077)
Prior pension and post-retirement benefit service cost and actuarial gain, net of tax 65 108 672 316
Other comprehensive (loss) income (253,937) (91,210) (301,712) (177,761)
Comprehensive (loss) income (787,650) 179,974 (309,481) 666,687
Comprehensive (loss) income attributable to noncontrolling interests (16) 107 439 88
Comprehensive (loss) income attributable to Mohawk Industries, Inc. $ (787,634) 179,867 (309,920) 666,599


	Three Months Ended			Six Months Ended
(In thousands)	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022


Net earnings including noncontrolling interests	$	101,214	280,510	181,490	525,944
Other comprehensive income (loss):
Foreign currency translation adjustments	(221)		34,065	6,651	(48,382)
Prior pension and post-retirement benefit service cost and actuarial gain (loss), net of tax	(12)		70	(508)	607
Other comprehensive income (loss)	(233)		34,135	6,143	(47,775)
Comprehensive income	100,981		314,645	187,633	478,169
Less: comprehensive income (loss) attributable to noncontrolling interests	(319)		613	(338)	455
Comprehensive income attributable to Mohawk Industries, Inc.	$	101,300	314,032	187,971	477,714

See accompanying notes to ~~condensed consolidated financial statements.~~the Condensed Consolidated Financial Statements.

Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended
October 1,
2022 October 2,
2021
(In thousands)
Cash flows from operating activities:
Net (loss) earnings including noncontrolling interests $ (7,769) 844,448
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Restructuring 21,673 7,410
Impairment of goodwill and indefinite-lived intangibles 695,771 —
Depreciation and amortization 436,449 448,299
Deferred income taxes (47,846) (52,304)
Loss on disposal of property, plant and equipment 591 1,161
Stock-based compensation expense 17,488 19,411
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net (267,546) (275,952)
Inventories (548,711) (330,745)
Accounts payable and accrued expenses 162,841 381,634
Other assets and prepaid expenses (41,678) (23,860)
Other liabilities 6,172 77,233
Net cash provided by operating activities 427,435 1,096,735
Cash flows from investing activities:
Additions to property, plant and equipment (430,084) (375,179)
Acquisitions, net of cash acquired (157,274) (77,187)
Purchases of short-term investments (2,233,000) (778,239)
Redemption of short-term investments 2,446,000 1,344,574
Net cash (used in) provided by investing activities (374,358) 113,969
Cash flows from financing activities:
Payments on Senior Credit Facilities (5,000) —
Proceeds from Senior Credit Facilities 5,000 —
Payments on commercial paper (12,542,311) (94,820)
Proceeds from commercial paper 12,866,175 94,605
Repayments on Senior Notes — (352,609)
Net payments of other financing activities (16,061) (7,874)
Debt issuance costs (1,621) —
Purchase of Mohawk common stock (307,572) (473,334)
Change in outstanding checks in excess of cash (1,588) (921)
Net cash used in financing activities (2,978) (834,953)
Effect of exchange rate changes on cash and cash equivalents 7,977 (16,349)
Net change in cash and cash equivalents 58,076 359,402
Cash and cash equivalents, beginning of period 268,895 768,625
Cash and cash equivalents, end of period $ 326,971 1,128,027


	Six Months Ended
(In thousands)	July 1, 2023		July 2, 2022


Cash flows from operating activities:
Net earnings including noncontrolling interests	$	181,490	525,944
Adjustments to reconcile net earnings to net cash provided by operating activities:
Restructuring	33,425		1,387

Depreciation and amortization	326,542		282,984
Deferred income taxes	(59,483)		(1,377)

Loss on disposal of property, plant and equipment	421		2,444
Stock-based compensation expense	10,383		11,309

Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net	(93,103)		(317,984)

Inventories	208,774		(434,686)
Accounts payable and accrued expenses	(84,044)		176,074

Other assets and prepaid expenses	(19,527)		(48,068)
Other liabilities	15,995		4,634
Net cash provided by operating activities	520,873		202,661
Cash flows from investing activities:
Additions to property, plant and equipment	(245,146)		(280,041)
Acquisitions, net of cash acquired	(515,405)		951
Purchases of short-term investments	(775,000)		(1,763,000)
Redemption of short-term investments	933,000		1,821,000
Net cash used in investing activities	(602,551)		(221,090)
Cash flows from financing activities:
Payments on Senior Credit Facilities	(827,829)		—
Proceeds from Senior Credit Facilities	827,734		—
Payments on commercial paper	(11,827,648)		(6,686,737)
Proceeds from commercial paper	12,013,370		6,964,700






Net payments of other financing activities	(30,567)		(14,263)









Purchase of Mohawk common stock	—		(307,188)
Change in outstanding checks in excess of cash	1,190		640


Net cash provided by (used in) financing activities	156,250		(42,848)
Effect of exchange rate changes on cash and cash equivalents	(13,262)		16,368
Net change in cash and cash equivalents	61,310		(44,909)
Cash and cash equivalents, beginning of period	509,623		268,895
Cash and cash equivalents, end of period	$	570,933	223,986

See accompanying notes to ~~condensed consolidated financial statements.~~the Condensed Consolidated Financial Statements.

Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

1. General

Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Mohawk,” or “the Company” as used in this Form 10-Q refer to Mohawk Industries, Inc.

Interim Reporting

The accompanying unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the ~~consolidated financial statements~~Consolidated Financial Statements and notes thereto, and the Company’s description of critical accounting policies, included in the Company’s ~~2021~~2022 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Results for interim periods are not necessarily indicative of the results for the year.

~~Hedges~~

2. Acquisitions

2023 Acquisitions

During the first quarter of ~~Net Investments~~2023, the Company completed the acquisitions of two ceramic tile businesses in ~~Non-U.S. Operations~~Brazil and Mexico within Global Ceramic for $516,893. The Company’s acquisitions resulted in a goodwill allocation of $84,367. A portion of the goodwill is expected to 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 preliminary 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	$	98,034
Property, plant and equipment	336,360
Tradenames	38,539
Customer relationships	2,010
Goodwill	84,367
Long-term debt, including current portion	(26,072)
Deferred tax, net	(9,084)
	524,154
Less: cash acquired	(7,261)
Net consideration transferred (net of cash acquired)	$	516,893

The purchase price allocation is preliminary until the Company ~~has numerous investments outside~~obtains information necessary to finalize its valuation of the ~~United States. The~~fair value of net assets ~~of these subsidiaries are exposed~~acquired during the measurement period. The supplemental pro forma information is immaterial 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. In periods when the Company uses foreign currency denominated debt to hedge its non-U.S. net investments, 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. 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 or (loss). 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 nine months ended October 2, 2021, the change in the U.S. dollar value of the Company’s euro denominated debt was a decrease of $35,363 ($27,056 net of taxes).Company's financial statements.

~~Recent Accounting Pronouncements~~

In December 2019, the FASB issued 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.

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~2. Acquisitions~~

2022 Acquisitions

~~On July 6,~~During the third and fourth quarters of 2022, the Company completed ~~its purchase of a Georgia-based manufacturer specializing~~two acquisitions in ~~non-woven, needle-punch technology in the~~ Flooring North America (“Flooring NA”) ~~Segment~~ for ~~$146,409.~~$164,475. The Company’s ~~acquisition~~acquisitions resulted in a ~~preliminary~~ goodwill allocation of ~~$56,172, pending working capital adjustments,~~$60,738 and intangible assets subject to amortization of ~~$15,000.~~$19,900. Approximately half of the goodwill is ~~expected to be~~ deductible for tax purposes. During the third ~~quarter,~~and fourth quarters of 2022, the Company also completed ~~an acquisition of a wood veneer plant~~three acquisitions in ~~the~~ Flooring Rest of the World (“Flooring ROW”) ~~Segment~~ for ~~$13,806.~~

~~2021 Acquisitions~~

During the nine months ended October 2, 2021, the Company made acquisitions in the Flooring ROW Segment totaling $77,187, including the acquisition of an insulation manufacturer, on September 7, 2021 for $67,285. The Company’s acquisition$47,964, which resulted in a goodwill allocation of ~~$31,319 and an intangible asset subject to amortization of $10,601. The goodwill is not expected to be deductible for tax purposes. The remaining acquisitions resulted in goodwill of $1,273~~$14,759 and intangible assets subject to amortization of ~~$5,596.~~$3,376. An immaterial amount of goodwill is deductible for tax purposes.

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 consolidated balance sheets.~~Condensed Consolidated Balance Sheets. The Company had contract liabilities of ~~$72,860~~$70,931 and ~~$65,744~~$72,572 as of ~~October~~July 1, ~~2022~~2023 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 three and ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022 was immaterial.

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.~~Condensed Consolidated Balance Sheets. Capitalized costs to obtain contracts were ~~$60,457~~$69,201 and ~~$49,644~~$59,015 as of ~~October~~July 1, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Straight-line amortization expense recognized during the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022 related to these capitalized costs were ~~$38,394~~$27,479 and ~~$44,042,~~$24,876, respectively.

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Revenue Disaggregation

In the second quarter of 2023, we updated the geographical markets for our disaggregated revenue. We added Latin America and combined Russia into Europe to more closely align with our current business. We have reflected this change in all historical periods presented. The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the three months ended July 1, 2023 and July 2, 2022:


July 1, 2023	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	611,602	973,528	2,268	1,587,398
Europe	297,301		71	611,288	908,660
Latin America	197,990		737	8,238	206,965
Other	48,469		27,362	171,574	247,405
Total	$	1,155,362	1,001,698	793,368	2,950,428

Product Categories
Ceramic & Stone	$	1,145,234	9,883	—	1,155,117
Carpet & Resilient	10,128		791,269	235,423	1,036,820
Laminate & Wood	—		200,546	253,760	454,306
Other (1)	—		—	304,185	304,185
Total	$	1,155,362	1,001,698	793,368	2,950,428


July 2, 2022	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	625,613	1,061,276	4,232	1,691,121
Europe	359,844		1,721	682,802	1,044,367
Latin America	125,003		830	7,769	133,602
Other	48,109		35,711	200,278	284,098
Total	$	1,158,569	1,099,538	895,081	3,153,188

Product Categories
Ceramic & Stone	$	1,153,143	10,055	—	1,163,198
Carpet & Resilient	5,426		862,033	244,700	1,112,159
Laminate & Wood	—		227,450	304,159	531,609
Other (1)	—		—	346,222	346,222
Total	$	1,158,569	1,099,538	895,081	3,153,188

(1)Other includes roofing elements, insulation boards, chipboards and IP contracts.

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the ~~three~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021:~~

October 1, 2022 Global Ceramic Segment Flooring NA Segment Flooring ROW Segment Total
Geographical Markets
United States $ 614,460 1,056,596 3,784 1,674,840
Europe 201,217 2,079 495,291 698,587
Russia 113,195 — 49,001 162,196
Other 167,784 30,959 183,173 381,916
$ 1,096,656 1,089,634 731,249 2,917,539
Product Categories
Ceramic & Stone $ 1,089,593 9,642 — 1,099,235
Carpet & Resilient 7,063 842,069 220,320 1,069,452
Laminate & Wood — 237,923 235,461 473,384
Other(1)
— — 275,468 275,468
$ 1,096,656 1,089,634 731,249 2,917,539
2022:

October 2, 2021 Global Ceramic Segment Flooring NA Segment Flooring ROW Segment Total
Geographical Markets
United States $ 556,496 1,016,015 3,851 1,576,362
Europe 205,263 1,398 545,538 752,199
Russia 81,246 25 40,275 121,546
Other 155,439 33,015 178,456 366,910
$ 998,444 1,050,453 768,120 2,817,017
Product Categories
Ceramic & Stone $ 993,864 9,079 — 1,002,943
Carpet & Resilient 4,580 834,581 231,825 1,070,986
Laminate & Wood — 206,793 250,307 457,100
Other(1)
— — 285,988 285,988
$ 998,444 1,050,453 768,120 2,817,017

Table of Contents


July 1, 2023	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	1,208,244	1,899,336	3,501	3,111,081
Europe	570,770		292	1,242,886	1,813,948
Latin America	342,331		1,566	14,575	358,472
Other	93,351		53,921	325,878	473,150
Total	$	2,214,696	1,955,115	1,586,840	5,756,651

Product Categories
Ceramic & Stone	$	2,195,358	18,500	—	2,213,858
Carpet & Resilient	19,338		1,541,775	317,038	1,878,151
Laminate & Wood	—		394,840	646,834	1,041,674
Other (1)	—		—	622,968	622,968
Total	$	2,214,696	1,955,115	1,586,840	5,756,651


July 2, 2022	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	1,210,844	2,097,156	7,018	3,315,018
Europe	671,598		3,876	1,359,900	2,035,374
Latin America	245,255		2,158	15,324	262,737
Other	95,629		68,258	391,835	555,722
Total	$	2,223,326	2,171,448	1,774,077	6,168,851

Product Categories
Ceramic & Stone	$	2,212,854	19,043	—	2,231,897
Carpet & Resilient	10,472		1,705,115	488,828	2,204,415
Laminate & Wood	—		447,290	601,296	1,048,586
Other (1)	—		—	683,953	683,953
Total	$	2,223,326	2,171,448	1,774,077	6,168,851

(1) Other includes roofing elements, insulation boards, chipboards and IP contracts.

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the nine months ended October 1, 2022 and October 2, 2021:

October 1, 2022 Global Ceramic Segment Flooring NA Segment Flooring ROW Segment Total
Geographical Markets
United States $ 1,825,304 3,153,752 10,802 4,989,858
Europe 702,308 5,932 1,776,686 2,484,926
Russia 283,702 23 127,507 411,232
Other 508,668 101,375 590,331 1,200,374
$ 3,319,982 3,261,082 2,505,326 9,086,390
Product Categories
Ceramic & Stone $ 3,302,446 28,685 — 3,331,131
Carpet & Resilient 17,536 2,547,184 709,148 3,273,868
Laminate & Wood — 685,213 836,756 1,521,969
Other (1)
— — 959,422 959,422
$ 3,319,982 3,261,082 2,505,326 9,086,390

October 2, 2021 Global Ceramic Segment Flooring NA Segment Flooring ROW Segment Total
Geographical Markets
United States $ 1,659,106 3,000,077 8,191 4,667,374
Europe 658,829 1,977 1,702,522 2,363,328
Russia 222,226 75 105,395 327,696
Other 427,657 98,763 555,058 1,081,478
$ 2,967,818 3,100,892 2,371,166 8,439,876
Product Categories
Ceramic & Stone $ 2,958,056 26,062 — 2,984,118
Carpet & Resilient 9,762 2,470,079 745,774 3,225,615
Laminate & Wood — 604,751 776,690 1,381,441
Other (1)
— — 848,702 848,702
$ 2,967,818 3,100,892 2,371,166 8,439,876

~~(1)Other includes roofing elements, insulation boards, chipboards and IP contracts.~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

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.

Restructuring, acquisition transaction and integration-related costs consisted of the following during the three and ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021:~~

Three Months Ended Nine Months Ended
October 1
2022 October 2
2021 October 1
2022 October 2
2021
Cost of sales
Restructuring costs $ 30,421 246 31,722 15,685
Acquisition integration-related costs — 306 349 349
Restructuring and acquisition integration-related costs $ 30,421 552 32,071 16,034
Selling, general and administrative expenses
Restructuring costs $ 2,949 (89) 3,035 226
Acquisition transaction-related costs 481 184 1,508 1,928
Acquisition integration-related costs 687 426 1,741 849
Restructuring, acquisition transaction and integration-related costs $ 4,117 521 6,284 3,003

2022:

Table of Contents


	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Cost of sales
Restructuring costs	$	29,576	403	58,620	1,301

Acquisition integration-related costs	865		309	877	349
Restructuring and acquisition integration-related costs	$	30,441	712	59,497	1,650

Selling, general and administrative expenses
Restructuring costs	$	5,606	86	5,803	86
Acquisition transaction-related costs	929		330	1,304	1,027
Acquisition integration-related costs	4,685		770	7,181	1,054
Restructuring, acquisition transaction and integration-related costs	$	11,220	1,186	14,288	2,167

The restructuring activity for the three months ended July 1, 2023 is as follows:


	Lease impairments		Asset write- downs and gains on disposals	Severance	Other restructuring costs	Total
Balance as of April 1, 2023	$	—	—	8,057		—	8,057
Restructuring costs
Global Ceramic	255		2,133	5,683		43	8,114
Flooring NA	—		6,620	1,503		10,366	18,489
Flooring ROW	—		7,786	—		793	8,579

Total restructuring costs	255		16,539	7,186		11,202	35,182
Cash payments	—		—	(3,574)		(7,072)	(10,646)
Non-cash items	(255)		(16,539)	71		(4,130)	(20,853)
Balances as of July 1, 2023	$	—	—	11,740		—	11,740

Restructuring costs recorded in:
Cost of sales	$	—	16,416	3,014		10,146	29,576
Selling, general and administrative expenses	255		123	4,172		1,056	5,606
Total restructuring costs	$	255	16,539	7,186		11,202	35,182

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

The restructuring activity for the ~~three~~six months ended ~~October~~July 1, ~~2022~~2023 is as follows:

Asset write-downs (gains on disposals) Severance Other
restructuring
costs Total
Balances as of July 2, 2022 $ — 430 — 430
Restructuring costs
Global Ceramic Segment — 3,366 — 3,366
Flooring NA Segment 15,193 870 3,726 19,789
Flooring ROW Segment 5,805 2,611 1,799 10,215
Total restructuring costs 20,998 6,847 5,525 33,370
Cash payments — (1,739) (5,401) (7,140)
Non-cash items (20,998) (34) (124) (21,156)
Balances as of October 1, 2022 $ — 5,504 — 5,504
Restructuring costs recorded in:
Cost of sales $ 20,998 3,924 5,499 30,421
Selling, general and administrative expenses — 2,923 26 2,949
Total restructuring costs $ 20,998 6,847 5,525 33,370

~~The restructuring activity for the nine months ended October 1, 2022 is as follows:~~


		Asset write-downs (gains on disposals)		Severance	Other restructuring costs	Total		Lease impairments		Asset write- downs and gains on disposals	Severance	Other restructuring costs	Total
Balances as of December 31, 2021		$	—	1,634	995	2,629
Balances as of December 31, 2022							Balances as of December 31, 2022	$	—	—	10,037	—	10,037
Restructuring costs	Restructuring costs						Restructuring costs
Global Ceramic Segment		—		3,366	—	3,366
Flooring NA Segment		15,107		870	3,677	19,654
Flooring ROW Segment		5,805		2,611	3,321	11,737
Global Ceramic							Global Ceramic	255		2,133	5,683	43	8,114
Flooring NA							Flooring NA	—		6,106	1,553	17,743	25,402
Flooring ROW							Flooring ROW	—		29,752	1	1,154	30,907

Total restructuring costs	Total restructuring costs	20,912		6,847	6,998	34,757	Total restructuring costs	255		37,991	7,237	18,940	64,423
Cash payments	Cash payments	—		(2,918)	(7,119)	(10,037)	Cash payments	—		—	(5,585)	(14,124)	(19,709)
Non-cash items	Non-cash items	(20,912)		(59)	(874)	(21,845)	Non-cash items	(255)		(37,991)	51	(4,816)	(43,011)
Balances as of October 1, 2022		$	—	5,504	—	5,504
Balances as of July 1, 2023							Balances as of July 1, 2023	$	—	—	11,740	—	11,740

Restructuring costs recorded in:	Restructuring costs recorded in:						Restructuring costs recorded in:
Cost of sales	Cost of sales	$	20,912	3,924	6,886	31,722	Cost of sales	$	—	37,868	3,064	17,688	58,620
Selling, general and administrative expenses	Selling, general and administrative expenses	—		2,923	112	3,035	Selling, general and administrative expenses	255		123	4,173	1,252	5,803
Total restructuring costs	Total restructuring costs	$	20,912	6,847	6,998	34,757	Total restructuring costs	$	255	37,991	7,237	18,940	64,423

The Company expects the remaining severance and other restructuring costs to be paid over the next 12 months.

~~Table of Contents~~

~~NOTES TO CONDENSED 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:~~


	July 1, 2023		December 31, 2022


Short-term investments:

Commercial paper (Level 2)	$	—	158,000

At October 1, 2022 At December 31, 2021
Short-term investments:
Commercial paper (Level 2) $ 110,000 323,000

The fair values and carrying values of the Company’s debt are disclosed in Note 18, ~~- Debt.~~Debt.

6. Receivables, net

~~Receivables, net are as follows:~~

At October 1, 2022 At December 31, 2021
Customers, trade $ 1,899,479 1,721,584
Income tax receivable 27,241 73,727
Other 148,283 117,823
2,075,003 1,913,134
Less: allowance for discounts, claims and doubtful accounts 71,742 73,149
Receivables, net $ 2,003,261 1,839,985


	July 1, 2023		December 31, 2022
Customers, trade	$	1,970,737	1,699,130
Income tax receivable	24,693		60,080
Other	168,920		219,355
Less: allowance for discounts, claims and doubtful accounts	77,279		73,779
Receivables, net	$	2,087,071	1,904,786

~~7. Inventories~~

~~The components of inventories are as follows:~~

At October 1, 2022 At December 31, 2021
Finished goods $ 2,025,754 1,677,707
Work in process 176,033 144,004
Raw materials 698,329 569,961
Total inventories $ 2,900,116 2,391,672

1312

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

7. Inventories


	July 1, 2023		December 31, 2022
Finished goods	$	1,837,940	1,986,005
Work in process	160,488		160,757
Raw materials	620,283		647,003
Total inventories	$	2,618,711	2,793,765

8. Goodwill and Intangible Assets

~~The Company performs its annual testing~~Goodwill:


	Global Ceramic		Flooring NA	Flooring ROW	Total



Balance as of December 31, 2022 (1)	$	339,834	591,985	995,940	1,927,759
Goodwill adjustments related to acquisitions	—		(1,145)	3,217	2,072
Goodwill recognized during the period	84,367		—	—	84,367

Currency translation during the period	1,228		—	15,608	16,836




Balance as of July 1, 2023(1)	$	425,429	590,840	1,014,765	2,031,034

(1)Net of ~~goodwill and indefinite-lived intangibles~~accumulated impairment losses of $2,015,939 ($1,220,444 in 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 judgements 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, $343,054 in Flooring NA and $452,441 in Flooring ROW as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgements and assumptions about appropriate sales growth rates, operating margins, weighted 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 flows 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 October 1, 2022. The impairment test indicated a pre-tax, non-cash goodwill impairment charge related to the Global Ceramic reporting unit of $688,514 ($679,664 net of tax) which the Company recorded during the three months ended October 1, 2022. The Company concluded goodwill of its other reporting units was not impaired at October 1, 2022.

The Company compared the estimated fair values of its indefinite-lived intangibles to their carrying values and determined that there were impairments of $7,257 ($5,939 net of tax) in the Flooring ROW and Flooring NA reporting units during the three months ended October 1, 2022.

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, 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. 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. 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.

~~The components of goodwill and other intangible assets are as follows:~~

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~Goodwill:~~

Global Ceramic Segment Flooring NA Segment Flooring ROW Segment Total
Balance as of December 31, 2021
Goodwill $ 1,563,267 874,198 1,497,869 3,935,334
Accumulated impairment losses (531,930) (343,054) (452,441) (1,327,425)
Balance as of December 31, 2021, net 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 — 56,172 — 56,172
Impairment charge during the period (688,514) — — (688,514)
Currency translation during the period (2,355) — (142,522) (144,877)
Balance as of October 1, 2022
Goodwill 1,560,912 930,370 1,352,625 3,843,907
Accumulated impairment losses (1,220,444) (343,054) (452,441) (2,015,939)
Balance as of October 1, 2022, net $ 340,468 587,316 900,184 1,827,968

ROW).

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Intangible assets not subject to amortization:


	Tradenames
Balance as of December 31, ~~2021~~2022	$	~~694,905~~668,328
Intangible assets acquired during the period	38,539
~~Impairment charge~~	~~(7,257)~~
Currency translation during the period	~~(40,987)~~1,376
Balance as of ~~October~~July 1, ~~2022~~2023	$	~~646,661~~708,243

Intangible assets subject to amortization:

Gross carrying amounts: Customer
relationships Patents Other Total
Balance as of December 31, 2021 $ 680,177 256,336 6,786 943,299
Intangible assets acquired during the period 13,064 — 1,900 14,964
Currency translation during the period (65,593) (34,607) (868) (101,068)
Balance as of October 1, 2022 $ 627,648 221,729 7,818 857,195
Accumulated amortization: Customer
relationships Patents Other Total
Balance as of December 31, 2021 $ 483,748 252,414 2,062 738,224
Amortization during the period 20,277 468 172 20,917
Currency translation during the period (44,161) (34,116) (108) (78,385)
Balance as of October 1, 2022 $ 459,864 218,766 2,126 680,756
Intangible assets subject to amortization, net as of October 1, 2022 $ 167,784 2,963 5,692 176,439


	Customer relationships		Patents	Other	Total




Balance 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
Balance as of July 1, 2023
Gross carrying amount	683,755		246,820	8,718	939,293
Accumulated amortization	(513,210)		(243,998)	(2,399)	(759,607)
Net intangible assets subject to amortization	$	170,545	2,822	6,319	179,686

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021
Amortization expense $ 6,918 7,247 20,917 22,081

~~9. Accounts Payable and Accrued Expenses~~

~~Accounts payable and accrued expenses are as follows:~~

At October 1, 2022 At December 31, 2021
Outstanding checks in excess of cash $ 1,416 3,005
Accounts payable, trade 1,217,731 1,228,621
Accrued expenses 725,135 666,209
Product warranties 39,190 45,215
Accrued interest 13,945 17,940
Accrued compensation and benefits 258,680 256,428
Total accounts payable and accrued expenses $ 2,256,097 2,217,418


	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Amortization expense	$	7,053	6,826	14,222	13,999

1613

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

9. Accounts Payable and Accrued Expenses


	July 1, 2023		December 31, 2022
Outstanding checks in excess of cash	$	3,986	2,791
Accounts payable, trade	1,184,104		1,094,038
Accrued expenses	645,185		742,099
Product warranties	43,065		38,425
Accrued interest	5,130		8,748


Accrued compensation and benefits	262,337		238,347
Total accounts payable and accrued expenses	$	2,143,807	2,124,448

10. Accumulated Other Comprehensive Income (Loss)

~~The changes in accumulated other comprehensive income (loss) by component for the nine months ended October 1, 2022 are as follows:~~

Foreign currency translation adjustments Prior pension and post-retirement benefit service cost and actuarial gain (loss) Total
Balance as of December 31, 2021 $ (959,199) (7,753) (966,952)
Current period other comprehensive income (loss) (302,383) 672 (301,711)
Balance as of October 1, 2022 $ (1,261,582) (7,081) (1,268,663)


	Foreign currency translation adjustments		Prior pension and post- retirement benefit service cost and actuarial gain (loss)	Total
Balance as of December 31, 2022	$	(1,114,629)	371	(1,114,258)
Current period other comprehensive income (loss)	7,024		(508)	6,516

Balance as of July 1, 2023	$	(1,107,605)	(137)	(1,107,742)

11. 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 the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the awards’ estimated lives for fixed awards with ratable vesting provisions.

The Company granted no30 restricted stock units (“RSUs”) at a weighted average grant-date fair value of $94.86 per unit for the three months ended ~~October~~July 1, 2023. The Company granted 261 restricted stock units (“RSUs”) at a weighted average grant-date fair value of $102.09 per unit for the six months ended July 1, 2023. The Company granted no RSUs for the three months ended July 2, 2022. The Company granted 189 RSUs at a weighted average grant-date fair value of $137.99 per unit for the ~~nine~~six months ended ~~October 1,~~July 2, 2022. The Company granted 21 RSUs at a weighted average grant-date fair value of $189.91 per unit for the three months ended October 2, 2021. The Company granted 194 RSUs at a weighted average grant-date fair value of $176.73 per unit for the nine months ended October 2, 2021. The Company recognized stock-based compensation ~~costs~~expense related to the issuance of RSUs of ~~$6,179~~$5,351 ($~~4,572~~3,959 net of taxes) and ~~$7,425~~$5,655 ($~~5,494~~4,184 net of taxes) for the three months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, respectively, which has been allocated to cost of sales and selling, general and administrative expenses. The Company recognized stock-based compensation costs related to the issuance of RSUs of ~~$17,488~~$10,383 ($~~12,941~~7,684 net of taxes) and ~~$19,411~~$11,309 ($~~14,364~~8,369 net of taxes) for the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021,~~2022, respectively, which has been allocated to cost of sales and selling, general and administrative expenses. Pre-tax unrecognized compensation expense for unvested RSUs granted to employees, net of estimated forfeitures, was ~~$23,868~~$29,024 as of ~~October~~July 1, ~~2022,~~2023, and will be recognized as expense over a weighted-average period of approximately ~~1.68~~1.93 years.

12. Other (Income) Expense, net


	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Foreign currency (gains) losses, net	$	6,832	(292)	11,786	444



Release of indemnification asset	—		—	—	7,324

All other, net	(4,617)		(2,526)	(10,137)	(8,148)
Total other (income) expense, net	$	2,215	(2,818)	1,649	(380)

~~Other (income) expense, net is as follows:~~

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021
Foreign currency losses (gains), net $ 6,032 3,135 6,476 3,114
Resolution of foreign non-income tax contingencies — — — (6,211)
Release of indemnification asset — — 7,324 —
All other, net (7,274) (3,114) (15,422) (10,277)
Total other (income) expense, net $ (1,242) 21 (1,622) (13,374)

1714

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

13. Income Taxes

For the three months ended ~~October~~July 1, 2023, the Company recorded income tax expense of $26,760 on earnings before income taxes of $127,974 for an effective tax rate of 20.9%. For the three months ended July 2, 2022, the Company recorded income tax expense of ~~$15,569~~$78,176 on ~~loss~~earnings before income taxes of ~~$518,144~~$358,686, for an effective tax rate of ~~(3.0)%, as compared to an income~~21.8%. The decrease in the effective tax ~~expense of $73,821 on~~rate was primarily driven by lower earnings before income taxes and the Company’s geographic dispersion of ~~$345,005,~~profits and losses for the respective periods, partially offset by an ~~effective~~increase in unrecognized tax ~~rate of 21.4% for~~benefits in the three months ended ~~October 2, 2021.~~ July 1, 2023.

For the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, the Company recorded income tax expense of ~~$155,193~~$55,703 on earnings before income taxes of ~~$147,424~~$237,193 for an effective tax rate of ~~105.3%~~23.5%, as compared to income tax expense of ~~$205,756~~$139,624 on earnings before income taxes of ~~$1,050,204,~~$665,568, for an effective tax rate of ~~19.6%~~21.0% for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The ~~difference~~increase in the effective tax ~~rates~~rate was primarily driven by an increase in unrecognized tax benefits in the six months ended July 1, 2023, and an Italian benefit associated with the release of an uncertain tax liability in the six months ended July 2, 2022, partially offset by lower earnings before income taxes and the Company’s geographic dispersion of profits and losses for the ~~comparative periods was primarily impacted by the impairment of non-deductible goodwill and lower earnings in the three and nine months ended October 1, 2022.~~

respective periods.

1815

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

14. Stockholders’ Equity

The following tables reflect the changes in stockholders’ equity for the three months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022 (in thousands).

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
July 2, 2022 70,878 $709 $1,919,742 $7,910,657 ($1,014,999) (7,341) ($215,491) $6,320 $8,606,938
Shares issued under employee and director stock plans — — (27) — — — — — (27)
Stock-based compensation expense — — 6,179 — — — — — 6,179
Repurchases of common stock (3) — — (384) — — — — (384)
Net earnings attributable to noncontrolling interests — — — — — — — 256 256
Currency translation adjustment on noncontrolling interests — — — — — — — (273) (273)
Purchase of noncontrolling interest — — — — — — — 1 1
Currency translation adjustment — — — — (253,729) — — — (253,729)
Prior pension and post-retirement benefit service cost and actuarial gain — — — — 65 — — — 65
Net loss — — — (533,969) — — — — (533,969)
October 1, 2022 70,875 $709 $1,925,894 $7,376,304 ($1,268,663) (7,341) ($215,491) $6,304 $7,825,057


		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















Balance as of April 1, 2023		71,017	$710	$1,931,987	$7,489,998	($1,107,825)	(7,338)	($215,397)	$6,233	$8,105,706
Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards		1	—	(17)	—	—	—	—	—	(17)
Stock-based compensation expense		—	—	5,350	—	—	—	—	—	5,350




Net earnings attributable to noncontrolling interests		—	—	—	—	—	—	—	(3)	(3)
Currency translation adjustment on noncontrolling interests		—	—	—	—	—	—	—	(316)	(316)


Currency translation adjustment		—	—	—	—	95	—	—	—	95
Prior pension and post-retirement benefit service cost and actuarial loss		—	—	—	—	(12)	—	—	—	(12)

Net earnings		—	—	—	101,217	—	—	—	—	101,217
Balances as of July 1, 2023		71,018	$710	$1,937,320	$7,591,215	($1,107,742)	(7,338)	($215,397)	$5,914	$8,212,020


			Total Stockholders’ Equity											Total Stockholders’ Equity
			Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Nonredeemable Noncontrolling Interests	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	Nonredeemable Noncontrolling Interests			Shares	Amount	Shares	Additional Paid-in Capital				Nonredeemable Noncontrolling Interests	Total Stockholders’ Equity

July 3, 2021			76,372	$764	$1,895,612	$7,867,795	($781,506)	(7,343)		($215,547)	$6,824	$8,773,942
Shares issued under employee and director stock plans			—	—	(59)	—	—	—	—	—	(59)
Balances as of April 2, 2022												Balances as of April 2, 2022		70,880		$709	$1,913,518	$7,630,837	($1,048,599)	(7,341)	($215,495)	$6,633	$8,287,603
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		2	—	(2)	—	—	—	4	—	2
Stock-based compensation expense	Stock-based compensation expense		—	—	7,425	—	—	—	—	—	7,425	Stock-based compensation expense		—	—	5,654	—	—	—	—	—	5,654

Repurchases of common stock	Repurchases of common stock		(1,017)	(10)	—	(208,823)	—	—	—	—	(208,833)	Repurchases of common stock		(4)	—	—	(611)	—	—	—	—	(611)

Net earnings attributable to noncontrolling interests	Net earnings attributable to noncontrolling interests		—	—	—	—	—	—	—	206	206	Net earnings attributable to noncontrolling interests		—	—	—	—	—	—	—	79	79
Currency translation adjustment on noncontrolling interests	Currency translation adjustment on noncontrolling interests		—	—	—	—	—	—	—	(99)	(99)	Currency translation adjustment on noncontrolling interests		—	—	—	—	—	—	—	535	535

Purchase of noncontrolling interest, net of taxes												Purchase of noncontrolling interest, net of taxes		—	—	572	—	—	—	—	(927)	(355)

Currency translation adjustment	Currency translation adjustment		—	—	—	—	(91,219)	—	—	—	(91,219)	Currency translation adjustment		—	—	—	—	33,530	—	—	—	33,530
Prior pension and post-retirement benefit service cost and actuarial gain	Prior pension and post-retirement benefit service cost and actuarial gain		—	—	—	—	108	—	—	—	108	Prior pension and post-retirement benefit service cost and actuarial gain		—	—	—	—	70	—	—	—	70

Net earnings	Net earnings		—	—	—	270,978	—	—	—	—	270,978	Net earnings		—	—	—	280,431	—	—	—	—	280,431
October 2, 2021			75,355	$754	$1,902,978	$7,929,950	($872,617)	(7,343)	($215,547)	$6,931	$8,752,449
Balances as of July 2, 2022												Balances as of July 2, 2022		70,878	$709	$1,919,742	$7,910,657	($1,014,999)	(7,341)	($215,491)	$6,320	$8,606,938

1916

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

The following tables reflect the changes in stockholders’ equity for the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 and ~~October~~July 2, ~~2021~~2022 (in thousands).

Total Stockholders’ Equity
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Noncontrolling Interest Total Stockholders’ Equity
Shares Amount Shares Amount
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 107 1 (3,297) — — 2 56 — (3,240)
Stock-based compensation expense — — 17,488 — — — — — 17,488
Repurchases of common stock (2,184) (21) — (307,551) — — — — (307,572)
Net earnings attributable to noncontrolling interests — — — — — — — 440 440
Currency translation adjustment on noncontrolling interests — — — — — — — (1) (1)
Purchase of noncontrolling interest — — 572 — — — — (926) (354)
Currency translation adjustment — — — — (302,383) — — — (302,383)
Prior pension and post-retirement benefit service cost and actuarial gain — — — — 672 — — — 672
Net loss — — — (8,209) — — — — (8,209)
October 1, 2022 70,875 $709 $1,925,894 $7,376,304 ($1,268,663) (7,341) ($215,491) $6,304 $7,825,057


		Total Stockholders’ Equity
		Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Nonredeemable Noncontrolling Interest	Total Stockholders’ Equity
	Shares	Amount	Shares				Amount

Balances as of 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		143	1	(3,905)	—	—	3	94	—	(3,810)
Stock-based compensation expense		—	—	10,383	—	—	—	—	—	10,383




Net earnings attributable to noncontrolling interests		—	—	—	—	—	—	—	35	35
Currency translation adjustment on noncontrolling interests		—	—	—	—	—	—	—	(373)	(373)
Purchase of noncontrolling interest, net of taxes		—	—	53	—	—	—	—	(153)	(100)

Currency translation adjustment		—	—	—	—	7,024	—	—	—	7,024
Prior pension and post-retirement benefit service cost and actuarial loss		—	—	—	—	(508)	—	—	—	(508)

Net earnings		—	—	—	181,455	—	—	—	—	181,455
Balances as of July 1, 2023		71,018	$710	$1,937,320	$7,591,215	($1,107,742)	(7,338)	($215,397)	$5,914	$8,212,020


			Total Stockholders’ Equity											Total Stockholders’ Equity
			Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Noncontrolling Interest	Total Stockholders’ Equity			Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Nonredeemable Noncontrolling Interest	Total Stockholders’ Equity
		Shares	Amount	Shares				Amount	Noncontrolling Interest			Shares	Amount	Shares	Additional Paid-in Capital				Nonredeemable Noncontrolling Interest	Total Stockholders’ Equity

December 31, 2020			77,624	$776	$1,885,142	$7,559,191	($695,145)	(7,346)		($215,648)	$6,842	$8,541,158
Balances as of December 31, 2021												Balances as of 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	Shares issued under employee and director stock plans		115	1	(1,575)	—	—	3	101	—	(1,473)	Shares issued under employee and director stock plans		107	1	(3,270)	—	—	2	56	—	(3,213)
Stock-based compensation expense	Stock-based compensation expense		—	—	19,411	—	—	—	—	—	19,411	Stock-based compensation expense		—	—	11,309	—	—	—	—	—	11,309

Repurchases of common stock	Repurchases of common stock		(2,384)	(23)	—	(473,311)	—	—	—	—	(473,334)	Repurchases of common stock		(2,181)	(21)	—	(307,167)	—	—	—	—	(307,188)

Net earnings attributable to noncontrolling interests	Net earnings attributable to noncontrolling interests		—	—	—	—	—	—	—	378	378	Net earnings attributable to noncontrolling interests		—	—	—	—	—	—	—	184	184
Currency translation adjustment on noncontrolling interests	Currency translation adjustment on noncontrolling interests		—	—	—	—	—	—	—	(289)	(289)	Currency translation adjustment on noncontrolling interests		—	—	—	—	—	—	—	272	272

Purchase of noncontrolling interest, net of taxes												Purchase of noncontrolling interest, net of taxes		—	—	572	—	—	—	—	(927)	(355)

Currency translation adjustment	Currency translation adjustment		—	—		—	(177,788)	—	—	—	(177,788)	Currency translation adjustment		—	—		—	(48,654)	—	—	—	(48,654)
Prior pension and post-retirement benefit service cost and actuarial gain	Prior pension and post-retirement benefit service cost and actuarial gain		—	—	—	—	316	—	—	—	316	Prior pension and post-retirement benefit service cost and actuarial gain		—	—	—	—	607	—	—	—	607

Net earnings	Net earnings		—	—	—	844,070	—	—	—	—	844,070	Net earnings		—	—	—	525,760	—	—	—	—	525,760
October 2, 2021			75,355	$754	$1,902,978	$7,929,950	($872,617)	(7,343)	($215,547)	$6,931	$8,752,449
Balances as of July 2, 2022												Balances as of July 2, 2022		70,878	$709	$1,919,742	$7,910,657	($1,014,999)	(7,341)	($215,491)	$6,320	$8,606,938

2017

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

15. ~~(Loss)~~ Earnings Per Share

Basic ~~(loss)~~ earnings per common share is computed by dividing net ~~(loss)~~ earnings available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted ~~(loss)~~ earnings per common share assumes the exercise of outstanding stock options and the vesting of RSUs using the treasury stock method when the effects of such assumptions are dilutive. A reconciliation of net ~~(loss)~~ earnings attributable to Mohawk Industries, Inc. and weighted-average common shares outstanding for purposes of calculating basic and diluted ~~(loss)~~ earnings per share is as follows:

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021
Net (loss) earnings attributable to Mohawk Industries, Inc. $ (533,969) 270,978 (8,209) 844,070
Weighted-average common shares outstanding-basic and diluted:
Weighted-average common shares outstanding—basic 63,534 68,541 63,923 69,389
Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net (1)
— 323 — 294
Weighted-average common shares outstanding-diluted 63,534 68,864 63,923 69,683
(Loss) earnings per share attributable to Mohawk Industries, Inc.
Basic $ (8.40) 3.95 (0.13) 12.16
Diluted $ (8.40) 3.93 (0.13) 12.11

~~(1)~~Due to the anti-dilutive effect resulting from the reported net loss, 257 and 246 of potentially dilutive securities were omitted from the calculation of weighted-average common shares outstanding for the three and nine months ended October 1, 2022, respectively.

~~Table of Contents~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~


	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Net earnings attributable to Mohawk Industries, Inc.	$	101,217	280,431	181,455	525,760



Weighted-average common shares outstanding—basic and diluted:
Weighted-average common shares outstanding—basic	63,680		63,540	63,630	64,116
Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net	220		258	234	258
Weighted-average common shares outstanding-diluted	63,900		63,798	63,864	64,374

Earnings per share attributable to Mohawk Industries, Inc.
Basic	$	1.59	4.41	2.85	8.20
Diluted	$	1.58	4.40	2.84	8.17

16. Segment Reporting

The Company has three reporting segments: ~~the~~ Global Ceramic, ~~Segment, the~~ Flooring ~~North America (“~~NA and Flooring ~~NA”) Segment and the Flooring Rest of the World (“Flooring ROW”) Segment. The~~ROW. Global Ceramic ~~Segment~~ designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone ~~porcelain slabs, quartz countertops~~tile and other products including natural stone, porcelain slabs and quartz countertops, which it distributes primarily in North America, Europe, ~~South America~~Brazil 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,various selling channels, which include company-owned stores, independent distributors and home ~~center retailers, tile and flooring retailers and contractors. The~~centers. Flooring NA ~~Segment~~ designs, manufactures, sources and markets its floor covering ~~product lines,~~products, including ~~carpets,~~broadloom carpet, carpet tile, carpet cushion, rugs, ~~carpet pad,~~ laminate, ~~resilient (includes sheet~~ vinyl ~~and~~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-operated trucks, common carriers or rail transportation. The Segment’s product lines are sold through various ~~selling~~ channels, including independent floor covering retailers, independent distributors, home centers, mass merchandisers, department stores, shop at home, online retailers, buying groups, commercial contractors and commercial end users. ~~The~~ Flooring ROW ~~Segment~~ designs, manufactures, sources, licenses and markets laminate, vinyl products, including LVT and sheet vinyl, ~~LVT,~~ wood flooring, roofing panels, insulation boards, medium-density fiberboard (“MDF”), and chipboards, ~~and other wood products,~~ which it distributes primarily in Europe, Russia, Australia and New Zealand ~~and Russia~~ through various ~~selling~~ channels, ~~which include~~including independent floor covering retailers, ~~Company-operated distributors,~~ independent distributors, company-owned distributors, home centers, commercial contractors and ~~home centers.~~commercial end users.

The accounting policies for each operating segment are consistent with the Company’s policies for the ~~consolidated financial statements.~~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.

Table of Contents

~~Segment information is as follows:~~

Three Months Ended Nine Months Ended
October 1,
2022 October 2,
2021 October 1,
2022 October 2,
2021
Net sales:
Global Ceramic Segment $ 1,096,656 998,444 3,319,982 2,967,818
Flooring NA Segment 1,089,634 1,050,453 3,261,082 3,100,892
Flooring ROW Segment 731,249 768,120 2,505,326 2,371,166
Total $ 2,917,539 2,817,017 9,086,390 8,439,876
Operating (loss) income:
Global Ceramic Segment $ (559,706) 118,896 (305,099) 343,135
Flooring NA Segment 64,672 118,625 260,026 315,866
Flooring ROW Segment 45,508 133,595 304,265 456,787
Corporate and intersegment eliminations (56,063) (11,142) (76,053) (33,875)
Total $ (505,589) 359,974 183,139 1,081,913


	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Net sales:
Global Ceramic	$	1,155,362	1,158,569	2,214,696	2,223,326
Flooring NA	1,001,698		1,099,538	1,955,115	2,171,448
Flooring ROW	793,368		895,081	1,586,840	1,774,077

Total	$	2,950,428	3,153,188	5,756,651	6,168,851

Operating income (loss):
Global Ceramic	$	84,034	154,269	147,351	254,607
Flooring NA	37,199		100,030	35,186	195,354
Flooring ROW	86,914		124,107	162,159	258,757
Corporate and intersegment eliminations	(55,101)		(10,479)	(65,860)	(19,990)
Total	$	153,046	367,927	278,836	688,728


		At October 1, 2022		At December 31, 2021		July 1, 2023		December 31, 2022
Assets:	Assets:				Assets:
Global Ceramic Segment		$	4,866,822	5,160,776
Flooring NA Segment		4,490,502		4,125,960
Flooring ROW Segment		4,036,675		4,361,741
Global Ceramic					Global Ceramic	$	5,546,167	4,841,310
Flooring NA					Flooring NA	4,210,170		4,299,360
Flooring ROW					Flooring ROW	4,295,257		4,275,519
Corporate and intersegment eliminations	Corporate and intersegment eliminations	407,035		576,040	Corporate and intersegment eliminations	533,569		704,243
Total	Total	$	13,801,034	14,224,517	Total	$	14,585,163	14,120,432

2219

Table of Contents

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

17. Commitments and Contingencies

~~The~~From time to time in the regular course of its business, the Company is involved in various lawsuits, claims, investigations and other legal ~~matters from time to time in the regular course of its business.~~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”) filed an individual complaint in the Circuit Court of Etowah County, Alabama 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 ~~seek~~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~~On March 21, 2023, the Centre Water Board settled its claims against Mohawk Industries, Inc., Mohawk Carpet, LLC, and Aladdin Manufacturing Corporation.

In April 2023, Shelby County, Alabama and Talladega County, Alabama filed a complaint in the Circuit Court of Talladega County, Alabama against Aladdin Manufacturing Corporation, Aladdin Manufacturing Corporation of Alabama, LLC, Mohawk Carpet, LLC, and Mohawk Industries, Inc., among other defendants, that contains allegations substantially similar to those that were made by the Gadsden Water Board and Centre Water Board. The defendants removed this case to federal court on May 12, 2023, and the case 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. On May 31, 2023, Rome settled its claims against Mohawk Industries, Inc., Mohawk Carpet, LLC, and Aladdin Manufacturing Corporation.

Also in December 2019, Jarrod Johnson filed a putative class action 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 Company removed the class action to federal court. The Company filed motions to dismiss in both of these cases. On December 17, 2020, 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.

The Company denies all liability in these matters and intends to defend all pending matters vigorously.

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Putative Securities Class Action

On January 3, 2020, the Company and certain of its executive officers were named as defendants in a putative shareholder class action lawsuit filed in the United States District Court for the Northern District of Georgia (the “Securities Class Action”). The complaint ~~alleges~~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 iswas 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 delivery 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 ~~is ongoing.~~commenced. On January 26, 2022, Lead Plaintiff moved for class certification, to appoint itself as class representative, and for appointment of class counsel. The ~~Company intends~~court granted plaintiff’s motion for class certification on November 28, 2022. On December 13, 2022, the parties reached an agreement in principle to ~~vigorously defend~~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 ~~claims.~~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. Following the final settlement hearing, the court entered final approval of the settlement and closed the case on June 1, 2023. The Company continues to believe the allegations in the Securities Class Action are without merit.

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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”) 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~~In October 2020, the Audit Committee ~~has~~ completed the investigation and concluded that the allegations of wrongdoing are without merit. The Company has cooperated fully with the USAO and ~~SEC investigations are ongoing, and the Company is cooperating fully with those authorities.~~SEC. The Company ~~will continue~~continues to ~~vigorously defend against~~believe the allegations ~~of wrongdoing in the Securities Class Action and does not believe they have~~are without merit.

Delaware State Court Action

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 ~~alleges~~alleged that defendants violated Sections 11 and 12 of the Securities Act of 1933. The complaint iswas 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 ~~at the close of fact discovery in the related Securities Class Action pending in the United States District Court for the Northern District of Georgia~~ according to the terms set forth in the court’s order to stay litigation. The ~~Company intends~~parties reached an agreement in principle to ~~vigorously defend~~settle the lawsuit in exchange for the dismissal and a release of all claims against the ~~claims.~~defendants (the “Settlement Agreement”). The Settlement Agreement, which is subject to court approval, is without admission of fault or wrongdoing by defendants. The Company believes the allegations in the lawsuit are without merit.

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, 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 pending in the United States District Court for the Northern District of Georgia.~~Action. 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 four 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. On January 28, 2022, the Court granted in part and denied in part the motions to dismiss the four actions filed in April 2021, dismissing the Georgia Securities Act claims as to all defendants, and the negligent misrepresentation claim as to the Company.

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On May 19, 2022, the parties in the last-filed action filed a joint motion to transfer the investor action initiated on May 11, 2022 to the Metro Atlanta Business Case Division where the other four actions were 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, March 25, 2022, and April 26, 2022 (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. The federal law claims alleged include 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 include fraud, negligent misrepresentation, violations of the Georgia Securities Act, and violations of the Georgia Racketeering and Corrupt Organizations statute. Plaintiffs in the lawsuits seek compensatory and punitive damages and attorneys’ fees.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

On December 13, 2021, defendants filed motions to dismiss the June 22, 2021 ~~complaint, which motions are fully briefed and remain pending.~~complaint. On July 6, 2022, defendants filed motions to dismiss the March 25, 2022 ~~complaint, which motions are fully briefed and remain pending.~~complaint. On July 27, 2022, defendants filed motions to dismiss the April 26, 2022 complaint. ~~These motions are anticipated to be fully briefed in November 2022.~~ On August 9, 2022, defendants filed a motion to consolidate all three Federal Investor Actions for pre-trial ~~purposes, which~~purposes. On March 31, 2023, the court issued orders in each of the Federal Investor Actions granting in part and denying in part defendants’ motions to dismiss the three Federal Investor Actions, and granting defendants’ motion to consolidate the three Federal Investor Actions for pre-trial purposes. Defendants filed answers to each of the three complaints on April 14, 2023, and fact discovery is ~~fully briefed and remains pending.~~ongoing. The Company intends to vigorously defend against the claims asserted in the Federal Investor Actions.

Derivative Actions

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 July 20, 2020, the court in the NDGA Derivative Actions granted a temporary stay of the litigation. On October 21, 2020, the court entered an order consolidating the NDGA Derivative Actions 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. On March 22, 2023, the temporary stay of the NDGA Derivative Actions expired, and fact discovery is ongoing. The Company intends to vigorously defend against the claims.

~~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 Sarl (“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 is in the process of initiating new assessments for later years against FIL rather than Unilin BV. The BTA now alleges that FIL had a taxable presence in Belgium and should be 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 expects 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, although this will be a point of contention with the BTA. These assessments involve the same underlying facts at issue in the above referenced cases where Unilin BV prevailed at two different levels. Consequently, the Company believes that its tax position in Belgium was correct and will persist with its vigorous defense.

When the BTA issues tax assessments, Belgian tax law requires assurances that the taxes can be paid even while they are being disputed. Consequently, the BTA has placed liens on various properties of Unilin BV to support the original assessments discussed above. Since those assessments have been nullified by the courts, the accompanying liens have been withdrawn. Since FIL does not have property in Belgium, the BTA may require assurances from FIL to support the new assessments for 2013 through 2019. These assurances may take the form of a bond or bank guarantees.

2522

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

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.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

18. 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.

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 ~~October~~July 1, ~~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 ~~October~~July 1, ~~2022)~~2023). At the Company’s election, revolving loans under the Senior Credit Facility denominated in Canadian ~~Dollars,~~dollars, Australian ~~Dollars,~~dollars, Hong Kong ~~Dollars~~dollars or ~~Euros~~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 ~~October~~July 1, ~~2022)~~2023), or (b) the Base Rate plus an applicable margin ranging between 0.00% and 0.75% ~~(0.00%~~(0.13% as of ~~October~~July 1, ~~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 ~~October~~July 1, ~~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.

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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 ~~$1,621~~$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 ~~October~~July 1, ~~2022,~~2023, amounts utilized under the Senior Credit Facility included ~~zero~~$8,185 borrowings and ~~$17,958~~$19,465 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, the Company has utilized ~~$949,958~~$1,042,600 under the Senior Credit Facility, resulting in a total of ~~$1,000,042~~$907,400 available as of ~~October~~July 1, ~~2022.~~2023.

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~~NOTES TO CONDENSED 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 ~~all~~ rank pari passu with ~~all of~~ 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. ~~The~~Accordingly, the total amount outstanding under ~~all of~~ the Company’s commercial paper programs may not exceed ~~$1,800,000~~$1,950,000 (less any amounts drawn on the Senior Credit Facility) at any time.

The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of ~~October~~July 1, ~~2022,~~2023, there ~~were $932,000~~was $616,063 outstanding under the U.S. commercial paper program, and ~~zero~~the euro equivalent of $398,887 under the European program. The weighted-average interest rate and maturity period for the U.S. program were ~~3.35%~~5.49% and ~~19.3~~58.9 days, respectively. The weighted-average interest rate and maturity period for the European program were 3.64% and 16.0 days, respectively.

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 ~~all of~~ 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 ~~all of~~ 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.

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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 ~~are~~were senior unsecured obligations of the Company and ~~rank~~ranked pari passu with ~~all of~~ the Company’s existing and future unsecured indebtedness. Interest on the 3.85% Senior Notes iswas 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 ~~are being~~were amortized over the term of the 3.85% Senior Notes. On ~~September 15,~~November 1, 2022, the Company ~~gave notice that it will redeem~~redeemed at par all of the 3.85% Senior ~~Notes on November 1, 2022.~~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.

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. ~~Subsequent to the quarter end,~~On October 3, 2022, an additional $100,000 of borrowing capacity was added to the Term Loan ~~Facility on October 3, 2022.~~Facility. The Term Loan Facility ~~may~~could be ~~borrowed~~drawn upon in up to two advances on any business day on or before December 31, 2022, ~~and~~with the proceeds ~~of the Term Loan Facility may be~~being used for funding working capital and general corporate ~~purposes~~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 ~~Company. The~~outstanding principal amount of the Term Loan Facility, ~~must be repaid by~~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 plus accrued and unpaid interest.~~penalty.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

At the Company’s election, U.S. dollar-denominated loans under the Term Loan Facility ~~will~~ 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% (0.900% as of July 1, 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 July 1, 2023), determined based upon the Company’s consolidated net leverage ratio. Euro-denominated loans under the Term Loan Facility ~~will~~ 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 ~~1.500%~~1.50% (0.900% as of July 1, 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.

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The fair values and carrying values of the Company’s debt instruments are detailed as follows:


		At October 1, 2022			At December 31, 2021			July 1, 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	$	428,550	490,052	601,037	566,380	1.750% Senior Notes, payable June 12, 2027; interest payable annually	$	505,075	545,673	482,139	535,103
3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually	3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually	416,750		500,000	538,545	500,000	3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually	450,605		500,000	431,605	500,000
3.85% Senior Notes, payable February 1, 2023; interest payable semi-annually		597,966		600,000	615,630	600,000

U.S. commercial paper	U.S. commercial paper	932,000		932,000	598,000	598,000	U.S. commercial paper	616,063		616,063	785,998	785,998
European commercial paper	European commercial paper	—		—	15,859	15,859	European commercial paper	398,887		398,887	42,808	42,808

Senior credit facility, payable August 12, 2027							Senior credit facility, payable August 12, 2027	8,185		8,185	—	—
U.S. Term Loan Facility							U.S. Term Loan Facility	675,000		675,000	675,000	675,000
European Term Loan Facility							European Term Loan Facility	240,096		240,096	235,445	235,445
Finance leases and other	Finance leases and other	47,081		47,081	53,163	53,163	Finance leases and other	73,999		73,999	52,050	52,050
Unamortized debt issuance costs	Unamortized debt issuance costs	(7,010)		(7,010)	(8,617)	(8,617)	Unamortized debt issuance costs	(6,544)		(6,544)	(7,270)	(7,270)
Total debt	Total debt	2,415,337		2,562,123	2,413,617	2,324,785	Total debt	2,961,366		3,051,359	2,697,775	2,819,134
Less current portion of long term-debt and commercial paper	Less current portion of long term-debt and commercial paper	1,540,105		1,542,139	624,503	624,503	Less current portion of long term-debt and commercial paper	1,038,032		1,038,032	840,571	840,571
Long-term debt, less current portion	Long-term debt, less current portion	$	875,232	1,019,984	1,789,114	1,700,282	Long-term debt, less current portion	$	1,923,334	2,013,327	1,857,204	1,978,563

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.

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

19. ~~Consolidated Statements of~~Supplemental Cash ~~Flows~~Flow Information

~~Supplemental cash flow information were as follows:~~

Nine Months Ended
October 1,
2022 October 2,
2021
Net cash paid during the periods for:
Interest $ 50,627 56,023
Income taxes $ 193,895 239,299
Supplemental schedule of non-cash investing and financing activities:
Unpaid property plant and equipment in accounts payable and accrued expenses $ 82,250 65,299
Fair value of assets acquired/adjusted in acquisitions $ 172,845 102,405
Liabilities assumed/adjusted in acquisitions (15,571) (25,218)
$ 157,274 77,187


	Six Months Ended
	July 1, 2023		July 2, 2022
Net cash paid during the periods for:
Interest	$	54,212	34,059
Income taxes	$	85,713	154,386

Supplemental schedule of non-cash investing and financing activities:
Unpaid property plant and equipment in accounts payable and accrued expenses	$	107,686	79,674


Right of use 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	$	97,473	150,553	Operating leases	$	73,131	67,176
Finance leases	Finance leases	$	11,332	11,525	Finance leases	$	20,523	7,925

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~20. Subsequent Events~~

~~Subsequent to the quarter end, an additional $100,000 of borrowing capacity was added to the Term Loan Facility on October 3, 2022.~~

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

During the past ~~two~~three decades, the Company has grown significantly. Its current geographic breadth and diverse product offering are reflected in three reporting segments: Global ~~Ceramic;~~Ceramic, Flooring ~~NA;~~North America (“Flooring NA”) and Flooring ~~ROW. The~~Rest of the World (“Flooring ROW”). Global Ceramic ~~Segment~~ 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 Russia through various selling channels, which include company-owned stores, independent distributors and home centers. ~~The~~ Flooring NA ~~Segment~~ designs, manufactures, sources and markets its floor covering products, including broadloom carpet, carpet tile, carpet cushion, rugs, laminate, ~~resilient,~~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-operated trucks, common carriers or rail transportation. The ~~Flooring NA~~ 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, commercial contractors and commercial end users. ~~The~~ Flooring ROW ~~Segment~~ designs, manufactures, sources, licenses and markets laminate, ~~resilient,~~vinyl products, including LVT and sheet vinyl, wood flooring, roofing panels, insulation boards, medium-density fiberboard (“MDF”) and chipboards, which it distributes primarily in Europe, Russia, Australia and New Zealand through various channels, including independent floor covering retailers, independent distributors, company-owned distributors, home centers, 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 ~~the United Kingdom, Russia,~~Australia, Brazil, Malaysia, Mexico, ~~Australia,~~ New Zealand, ~~Brazil~~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 events in the United States and abroad. The Company may continue to see fluctuating demand across a number of its markets. In ~~response to~~addition, as a result of Russian military actions in Ukraine, 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 that were among the broader consequences of Russia’s actions. 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 against the United States and the European Union. Since the 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 and intentional disruption of natural gas supply to Europe;~~businesses; increased tensions between the ~~U.S.~~United States and countries in which the Company operates; potential supply chain disruption of raw materials sourced from Ukraine, primarily clay, and materials and spare parts needed in the Company’s operations; global increases in the cost of natural gas, oil and oil-based raw materials and chemicals; 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, the current environment has placed demands on the Company’s operations as the COVID-19 pandemic has at times caused disruptions in some of the Company’s markets and operations. The Company anticipates that new variants of the virus could have an impact on its markets and operations in ways that are difficult to predict due to the inconsistent effect the variants have had in different regions.

During ~~the past year,~~2022, rapid cost escalations in materials, energy, transportation and labor ~~have~~ impacted the Company’s profitability across all ~~segments. Mohawk has, to some extent, offset~~segments, and high inflation and rising interest rates affected new home construction and residential remodeling in most of the ~~impact~~Company’s markets. As consumers faced a higher cost of ~~inflationary pressures through~~living, discretionary spending – including flooring purchases – declined; and, as a result, the Company’s customers reduced inventories, which continued into 2023. Despite multiple pricing actions, ~~across~~improved product ~~categories and geographies; improved mix from sales of higher-value, differentiated products; and~~mix; productivity gains and cost containment measures, the Company did not completely offset inflation in ~~manufacturing~~the first half of 2023. Recently, material and ~~logistics. Given the volatility of~~ energy prices ~~in some geographies and material prices in some product categories, these external pressures may change significantly and unpredictably,~~have declined, which ~~could have an adverse impact on~~will benefit the Company’s ~~results. Similarly, inflationary pressures around~~future results as the ~~globe may impact consumer and commercial investments~~costs flow through the statement of operations. To further address energy price volatility, the Company has invested in ~~flooring and other large, deferrable purchases.~~renewable energy initiatives, which provide lower cost power to its facilities. During the ~~quarter,~~first half of 2023, energy from the Company’s biomass plants lowered its cost and benefited its performance. During 2023 and 2022, the Company took actions to enhance future performance including facility and product rationalizations, restructuring initiatives and workforce reductions. ~~We anticipate~~The Company has continued to reduce costs across the enterprise by enhancing productivity, streamlining processes, controlling administrative expenses and executing restructuring actions. The Company anticipates these global actions will deliver annual savings of approximately ~~$35~~$95 to ~~$40~~$100 million, with an estimated cost of approximately ~~$90~~$165 to ~~$95~~$170 million.

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The Company believes it is well positioned with a strong balance sheet and limited debt. Based on its current liquidity and available credit, the Company is in a position to finance internal investments, acquisitions and/or additional stock purchases. For information on risks that could impact the Company’s results, please refer to Risk Factors in Part I, Item 1A in the Company’s 2022 Annual Report filed on Form 10-K.

During the first quarter of 2023, the Company acquired two ceramic tile businesses in Brazil and Mexico. During 2022, the Company ~~intends~~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.

In 2023, the Company plans to invest approximately ~~$620~~$600 million to complete existing projects and commence new initiatives. The Company plans to invest in cost reduction initiatives, upgrades in recent acquisitions, previously initiated expansion projects ~~cost reduction initiatives~~ and ~~upgrades for recent acquisitions as well as~~general maintenance across the ~~businesses.~~ business.The ~~main~~primary investment areas include the Company’s LVT portfolio to upgrade its product offering and improve profitability; premium ~~water-proof~~waterproof laminate in North America and Europe; and quartz countertop and porcelain slab expansion in North America and ~~porcelain slab expansion in Europe.~~

Europe, respectively.

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The Company announced on June 3, 2022 that it has 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 is expected to close in the first quarter of 2023 subject to customary government approvals and closing conditions.

For the three months ended ~~October~~July 1, ~~2022,~~2023, net ~~loss~~earnings attributable to the Company ~~was $534.0~~were $101.2 million ~~or diluted loss per share of $8.40,~~ compared to net earnings attributable to the Company of ~~$271.0~~$280.4 million ~~or diluted earnings per share (“EPS”) of $3.93~~ for the three months ended ~~October~~July 2, ~~2021.~~2022. The change in ~~EPS~~net earnings was primarily attributable to ~~the impairment charge to reduce the carrying amount of goodwill and indefinite-lived intangibles, higher inflation, increased short-term manufacturing disruptions,~~ lower sales ~~volume, charges related to~~volume; legal settlements, reserves and ~~reserves,~~fees; higher inflation; higher restructuring, acquisition and integration-related, and other ~~costs and higher costs associated with investments in new product development and marketing costs, partially offset by~~costs; the ~~favorable~~unfavorable impact of temporary plant shutdowns; the unfavorable net impact of price and product ~~mix, productivity gains~~mix; higher interest expense and the ~~favorable~~unfavorable net impact ~~from~~of foreign exchange rates. The unfavorable impact of the aforementioned items was partially offset by lower taxes due to decreased earnings in 2023 compared to the prior year and productivity gains. The Company believes that a number of circumstances may ~~impact~~influence trends in ~~2022,~~2023, including ~~Russian military actions in Ukraine,~~ the ~~continuation~~impact of ~~the COVID-19 pandemic, impacts to~~inflation and material availability due to disruptions in the global supply chain, ~~and inflation,~~ but the extent and duration of such ~~impacts~~impact cannot be predicted.

For the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, net ~~loss~~earnings attributable to the Company ~~was $8.2~~were $181.5 million ~~or diluted loss per share of $0.13,~~ compared to net earnings attributable to the Company of ~~$844.1~~$525.8 million ~~or diluted EPS of $12.11~~ for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The change in ~~EPS~~net earnings was primarily attributable to higher ~~inflation, the impairment charge to reduce the carrying amount of goodwill and indefinite-lived intangibles,~~inflation; lower sales ~~volume, increased short-term manufacturing disruptions, charges related to legal settlements and reserves,~~volume; higher restructuring, acquisition and integration-related, and other ~~costs,~~costs; the unfavorable ~~net~~ impact ~~from foreign exchange rates,~~of temporary plant shutdowns; legal settlements, reserves and fees; higher interest expense; higher costs associated with investments in new product development and marketing costs and ~~increased startup costs,~~the unfavorable net impact of foreign exchange rates. The unfavorable impact of the aforementioned items was partially offset by lower taxes due to decreased earnings in 2023 compared to the prior year; the favorable net impact of price and product mix and productivity gains. The Company believes that a number of circumstances may ~~impact~~influence trends in ~~2022,~~2023, including ~~Russian military actions in Ukraine,~~ the ~~continuation~~impact of ~~the COVID-19 pandemic, impacts to~~inflation and material availability due to disruptions in the global supply chain, ~~and inflation,~~ but the extent and duration of such ~~impacts~~impact cannot be predicted.

For the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, the Company generated ~~$427.4~~$520.9 million of cash from operating activities. As of ~~October~~July 1, ~~2022,~~2023, the Company had cash and cash equivalents of ~~$327.0~~$570.9 million, of which ~~$145.9~~$393.3 million was in the United States and ~~$181.0~~$177.6 million was in foreign countries.

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Results of Operations

Quarter Ended ~~October~~July 1, ~~2022,~~2023, as compared with Quarter Ended ~~October~~July 2, ~~2021~~2022

Net sales

Net sales for the three months ended ~~October~~July 1, ~~2022~~2023 were ~~$2,917.5~~$2,950.4 million, reflecting ~~an increase~~a decrease of ~~$100.5~~$202.8 million, or ~~3.6%~~6.4%, from ~~the $2,817.0~~$3,153.2 million reported for the three months ended ~~October~~July 2, ~~2021.~~2022. The ~~increase~~decrease was primarily attributable to lower legacy sales volume of approximately $256 million, the unfavorable net impact of price and product mix of approximately $46 million, the unfavorable net impact of foreign exchange rates of approximately $19 million and one less shipping day in the second quarter of 2023 of approximately $17 million, partially offset by higher sales volume attributable to acquisitions of approximately $135 million.

Global Ceramic—Net sales for the three months ended July 1, 2023 were $1,155.4 million, reflecting a decrease of $3.2 million, or 0.3%, from $1,158.6 million reported for the three months ended July 2, 2022. The decrease was primarily attributable to lower legacy sales volume of approximately $85 million, the unfavorable net impact of foreign exchange rates of approximately $12 million and one less shipping day in the second quarter of 2023 of approximately $5 million, partially offset by higher sales volume attributable to acquisitions of approximately $91 million and the favorable net impact of price and product mix of approximately ~~$374 million, partially offset by lower sales volume of approximately $139 million, the unfavorable net impact from foreign exchange rates of approximately $117 million and~~ ~~the unfavorable impact from one less shipping day in Europe in the third quarter of 2022 of approximately $18~~$8 million.

~~Global Ceramic Segment~~Flooring NA—Net sales ~~increased $98.3 million, or 9.8%, to $1,096.7 million~~ for the three months ended ~~October~~July 1, ~~2022, compared to $998.4~~2023 were $1,001.7 million, reflecting a decrease of $97.8 million, or 8.9%, from $1,099.5 million reported for the three months ended ~~October~~July 2, ~~2021.~~2022. The ~~increase~~decrease was primarily attributable to lower legacy sales volume of approximately $84 million and the ~~favorable~~unfavorable net impact of price and product mix of approximately ~~$159~~$49 million, partially offset by ~~lower~~higher sales volume attributable to acquisitions of approximately ~~$36 million, the unfavorable net impact from foreign exchange rates of approximately $21 million and~~ ~~the unfavorable impact from one less shipping day in Europe in the third quarter of 2022 of approximately $5~~$35 million.

Flooring ~~NA Segment~~ROW—Net sales ~~increased $39.1~~for the three months ended July 1, 2023 were $793.4 million, reflecting a decrease of $101.7 million, or ~~3.7%~~11.4%, ~~to $1,089.6~~from $895.1 million for the three months ended ~~October 1, 2022, compared to $1,050.5 million for the three months ended October~~July 2, ~~2021.~~2022. The ~~increase~~decrease was primarily attributable to lower legacy sales volume of approximately $87 million, one less shipping day in the ~~favorable~~second quarter of 2023 of approximately $13 million, the unfavorable net impact of foreign exchange rates of approximately $7 million and the unfavorable net impact of price and product mix of approximately ~~$84~~$5 million, partially offset by ~~lower~~higher sales volume attributable to acquisitions of approximately ~~$45 million.~~

~~Flooring ROW Segment~~—Net sales decreased $36.9 million, or 4.8%, to $731.2 million for the three months ended October 1, 2022, compared to $768.1 million for the three months ended October 2, 2021. The decrease was primarily attributable to the unfavorable net impact from foreign exchange rates of approximately $96 million, lower sales volume of approximately $58 million and ~~the unfavorable impact from one less shipping day in Europe in the third quarter of 2022 of approximately $13 million, partially offset by the favorable net impact of price and product mix of approximately $130~~$10 million.

Gross profit

Gross profit for the three months ended ~~October~~July 1, ~~2022~~2023 was ~~$713.7~~$731.9 million ~~(24.5%~~(24.8% of net sales), a decrease of ~~$123.6~~$141.3 million, or ~~14.8%~~16.2%, compared to gross profit of ~~$837.3~~$873.2 million ~~(29.7%~~(27.7% of net sales) for the three months ended ~~October~~July 2, ~~2021.~~2022. As a percentage of net sales, gross profit decreased ~~520~~290 basis points. The decrease in gross profit dollars was primarily attributable to ~~higher inflation of approximately $348 million, increased short-term manufacturing disruptions of approximately $55 million,~~ lower sales volume of approximately ~~$45 million,~~$58 million; higher restructuring, acquisition and integration-related, and other costs of approximately $31 ~~million and~~million; the unfavorable ~~net~~ impact ~~from foreign exchange rates~~of temporary plant shutdowns of approximately ~~$11 million, partially offset by~~$30 million; the ~~favorable~~unfavorable net impact of price and product mix of approximately ~~$359~~$25 million; higher inflation of approximately $18 million and the unfavorable net impact of foreign exchange rates of approximately $8 million, partially offset by productivity gains of approximately $9$25 million.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended ~~October~~July 1, ~~2022~~2023 were ~~$523.5~~$578.9 million ~~(17.9%~~(19.6% of net sales), an increase of ~~$46.2~~$73.6 million compared to ~~$477.3~~$505.3 million ~~(16.9%~~(16.0% of net sales) for the three months ended ~~October~~July 2, ~~2021.~~2022. As a percentage of net sales, selling, general and administrative expenses increased ~~100~~360 basis points. The increase in selling, general and administrative expenses in dollars was primarily attributable to ~~$45 million related to~~ legal settlements, reserves and ~~reserves,~~fees of approximately $48 million; higher inflation of approximately $13 million; higher restructuring, acquisition and integration-related, and other costs of approximately $10 million and the net impact of acquired businesses of approximately $9 million, partially offset by productivity gains of approximately $2 million.

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Operating income

Operating income for the three months ended July 1, 2023 was $153.0 million (5.2% of net sales), reflecting a decrease of $214.9 million, or 58.4%, compared to operating income of $367.9 million (11.7% of net sales) for the three months ended July 2, 2022. The decrease in operating income was primarily attributable to lower sales volume of approximately $67 million; legal settlements, reserves and fees of approximately $48 million; higher restructuring, acquisition and integration-related, and other costs of approximately $41 million; higher inflation of approximately $30 million; the unfavorable impact of temporary plant shutdowns of approximately $30 million; the unfavorable net impact of price and product mix of approximately ~~$10~~$24 million and the unfavorable net impact of foreign exchange rates of approximately $8 million, partially offset by productivity gains of approximately $27 million.

Global Ceramic—Operating income was $84.0 million (7.3% of segment net sales) for the three months ended July 1, 2023, reflecting a decrease of $70.3 million compared to operating income of $154.3 million (13.3% of segment net sales) for the three months ended July 2, 2022. The decrease in operating income was primarily attributable to higher inflation of approximately $41 million; lower sales volume of approximately $24 million; higher restructuring, acquisition and integration-related, and other costs of approximately $4$15 million and ~~higher costs associated with investments in new product development and marketing costs~~the unfavorable impact of temporary plant shutdowns of approximately $4$14 million, partially offset by productivity gains of approximately $15 million; the favorable net impact ~~from~~of price and product mix of approximately $5 million and the favorable net impact of foreign exchange rates of approximately ~~$17 million and productivity gains of approximately $12~~$3 million.

~~Impairment~~Flooring NA—Operating income was $37.2 million (3.7% of ~~goodwill and indefinite-lived intangibles~~

During the third quarter of 2022, due to the impact of a higher WACC, macroeconomic conditions, and the reduction in the Company’s market capitalization, the Company performed interim impairment tests of its goodwill and indefinite-lived intangible assets, which resulted in impairment charges of $695.8 million ($685.6 million net of tax). If, in the future, the Company’s market capitalization and/or the estimated fair value of the Company’s reporting units were to decline further, it may be necessary to record additional impairment charges.

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~~Operating (loss) income~~

Operating loss for the three months ended October 1, 2022 was $505.6 million ((17.3)% of net sales), reflecting a decrease of $865.6 million, or 240.5%, compared to operating income of $360.0 million (12.8% ofsegment net sales) for the three months ended ~~October~~July 1, 2023, reflecting a decrease of $62.8 million compared to operating income of $100.0 million (9.1% of segment net sales) for the three months ended July 2, ~~2021.~~2022. The decrease in operating income was primarily attributable to the ~~impairment charge to reduce the carrying amount~~unfavorable net impact of ~~goodwill~~price and ~~indefinite-lived intangibles~~product mix of approximately $696 million, higher inflation of approximately $358 million, increased short-term manufacturing disruptions of approximately $55 million, lower sales volume of approximately $45 million, $45 million related to legal settlements and reserves,$26 million; higher restructuring, acquisition and integration-related, and other costs of approximately ~~$35~~$19 million; lower sales volume of approximately $19 million; the unfavorable impact of temporary plant shutdowns of approximately $9 million and legal settlements, reserves and fees of approximately $5 million, partially offset by lower inflation of approximately $11 million.

Flooring ROW—Operating income was $86.9 million (11.0% of segment net sales) for the three months ended July 1, 2023, reflecting a decrease of $37.2 million compared to operating income of $124.1 million (13.9% of segment net sales) for the three months ended July 2, 2022. The decrease in operating income was primarily attributable to lower sales volume of approximately $25 million; the unfavorable net impact of foreign exchange rates of approximately $11 million; higher ~~costs associated with investments in new product development~~restructuring, acquisition and ~~marketing~~integration-related, and other costs of approximately $7 million and the unfavorable impact of temporary plant shutdowns of approximately $7 million, partially offset by productivity gains of approximately $12 million.

Interest expense

Interest expense was $22.9 million for the three months ended July 1, 2023, reflecting an increase of $10.8 million compared to interest expense of $12.1 million for the three months ended July 2, 2022. The increase in interest expense was primarily due to a significant increase in interest rates, as well as increased borrowing due to the acquisitions made in 2022 and the first quarter of 2023.

Other (income) expense, net

Other expense, net was $2.2 million for the three months ended July 1, 2023, reflecting an unfavorable change of $5.0 million compared to other income, net of $2.8 million for the three months ended July 2, 2022. The change was primarily attributable to the unfavorable net impact of foreign exchange rates of approximately $7 million.

Income tax expense

For the three months ended July 1, 2023, the Company recorded income tax expense of $26.8 million on earnings before income taxes of $128.0 million, for an effective tax rate of 20.9%. For the three months ended July 2, 2022, the Company recorded income tax expense of $78.2 million on earnings before income taxes of $358.7 million, for an effective tax rate of 21.8%. The decrease in the effective tax rate was primarily driven by lower earnings before income taxes and the Company’s geographic dispersion of profits and losses for the respective periods, partially offset by an increase in unrecognized tax benefits in the three months ended July 1, 2023.

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Six Months Ended July 1, 2023, as compared with Six Months Ended July 2, 2022

Net sales

Net sales for the six months ended July 1, 2023 were $5,756.7 million, reflecting a decrease of $412.2 million, or 6.7%, from $6,168.9 million reported for the six months ended July 2, 2022. The decrease was primarily attributable to lower legacy sales volume of approximately $665 million, the unfavorable net impact of foreign exchange rates of approximately $50 million and the unfavorable impact from fewer shipping days for the six months ended July 1, 2023 of approximately $16 million, partially offset by higher sales volume attributable to acquisitions of approximately $209 million and the favorable net impact of price and product mix of approximately $115 million.

Global Ceramic—Net sales for the six months ended July 1, 2023 were $2,214.7 million, reflecting a decrease of $8.6 million, or 0.4%, from $2,223.3 million reported for the six months ended July 2, 2022. The decrease was primarily attributable to lower legacy sales volume of approximately $223 million, the unfavorable net impact of foreign exchange rates of approximately $6 million and the unfavorable impact from fewer shipping days for the six months ended July 1, 2023 of approximately $4 million, partially offset by higher sales volume attributable to acquisitions of approximately $131 million and the favorable net impact of price and product mix of approximately $93 million.

Flooring NA—Net sales for the six months ended July 1, 2023 were $1,955.1 million, reflecting a decrease of $216.3 million, or 10.0%, from $2,171.4 million reported for the six months ended July 2, 2022. The decrease was primarily attributable to lower legacy sales volume of approximately $226 million and the unfavorable net impact of price and product mix of approximately $50 million, partially offset by higher sales volume attributable to acquisitions of approximately $60 million.

Flooring ROW—Net sales for the six months ended July 1, 2023 were $1,586.8 million, reflecting a decrease of $187.3 million, or 10.6%, from $1,774.1 million reported for the six months ended July 2, 2022. The decrease was primarily attributable to lower legacy sales volume of approximately $216 million, the unfavorable net impact of foreign exchange rates of approximately $45 million and the unfavorable impact from fewer shipping days for the six months ended July 1, 2023 of approximately $13 million, partially offset by the favorable net impact of price and product mix of approximately ~~$350~~$71 million ~~productivity gains~~and higher sales volume attributable to acquisitions of approximately ~~$20 million and the favorable net impact from foreign exchange rates of approximately $5~~$18 million.

Gross profit

~~Global Ceramic Segment~~
~~—Operating loss~~

Gross profit for the six months ended July 1, 2023 was ~~$559.7~~$1,375.4 million ~~((51.0)%~~(23.9% of ~~segment~~net sales), a decrease of $299.9 million or 17.9%, compared to gross profit of $1,675.3 million (27.2% of net sales) for the ~~three~~six months ended ~~October 1, 2022, reflecting~~July 2, 2022. As a ~~decrease~~percentage of ~~$678.6 million compared to operating income of $118.9 million (11.9% of segment~~ net ~~sales) for the three months ended October 2, 2021.~~sales, gross profit decreased 330 basis points. The decrease in ~~operating income~~gross profit dollars was primarily attributable to ~~the impairment charge to reduce the carrying amount of goodwill of approximately $689 million, higher inflation of approximately $128 million,~~ lower sales volume of approximately ~~$8 million,~~$173 million; higher ~~costs associated with investments in new product development and marketing costs~~inflation of approximately ~~$4 million,~~$159 million; the unfavorable impact of temporary plant shutdowns of approximately $72 million; higher restructuring, acquisition and integration-related, and other costs of approximately $3$62 million and ~~increased short-term manufacturing disruptions~~the unfavorable net impact of foreign exchange rates of approximately $3$11 million, partially offset by the favorable net impact of price and product mix of approximately ~~$134 million, productivity gains of approximately $15 million and the favorable net impact from foreign exchange rates of approximately $4 million.~~

~~Flooring NA Segment~~—Operating income was $64.7 million (5.9% of segment net sales) for the three months ended October 1, 2022, reflecting a decrease of $53.9 million compared to operating income of $118.6 million (11.3% of segment net sales) for the three months ended October 2, 2021. The decrease in operating income was primarily attributable to higher inflation of approximately $105 million, increased short-term manufacturing disruptions of approximately $22 million, higher restructuring, acquisition and integration-related, and other costs of approximately $20 million, lower sales volume of approximately $15 million and the impairment charge to reduce the carrying amount of indefinite-lived intangibles of approximately $1 million, partially offset by the favorable net impact of price and product mix of approximately $102$125 million and productivity gains of approximately ~~$11 million.~~

~~Flooring ROW Segment~~—Operating income was $45.5 million (6.2% of segment net sales) for the three months ended October 1, 2022, reflecting a decrease of $88.1 million compared to operating income of $133.6 million (17.4% of segment net sales) for the three months ended October 2, 2021. The decrease in operating income was primarily attributable to higher inflation of approximately $126 million, increased short-term manufacturing disruptions of approximately $30 million, lower sales volume of approximately $22 million, higher restructuring, acquisition and integration-related, and other costs of approximately $11 million, the impairment charge to reduce the carrying amount of indefinite-lived intangibles of approximately $6 million and decreased productivity of approximately $5 million, partially offset by the favorable net impact of price and product mix of approximately $114 million.

~~Interest expense~~

Interest expense was $13.8 million for the three months ended October 1, 2022, reflecting a decrease of $1.1 million compared to interest expense of $14.9 million for the three months ended October 2, 2021. The decrease in interest expense was primarily due to the Company’s redemption of the 2.00% Senior Notes on October 19, 2021 and an increase in miscellaneous interest income, partially offset by the increase in commercial paper borrowings.

~~Other (income) expense, net~~

Other income, net was $1.2 million for the three months ended October 1, 2022, reflecting a favorable change of $1.2 million compared to other expense, net of $0.0 million for the three months ended October 2, 2021. The change was primarily attributable to the favorable net impact of other miscellaneous items of approximately $4 million, partially offset by the unfavorable net impact of foreign exchange rates of approximately $3 million.

~~Table of Contents~~

~~Income tax expense~~

For the three months ended October 1, 2022, the Company recorded income tax expense of $15.6 million on loss before income taxes of $518.1 million, for an effective tax rate of (3.0)%, as compared to an income tax expense of $73.8 million on earnings before income taxes of $345.0 million, for an effective tax rate of 21.4% for the three months ended October 2, 2021. The difference in the effective tax rates for the comparative periods was primarily impacted by the impairment of non-deductible goodwill and lower earnings in the three months ended October 1, 2022.

~~Table of Contents~~

~~Nine Months Ended October 1, 2022, as compared with Nine Months Ended October 2, 2021~~

~~Net sales~~

Net sales for the nine months ended October 1, 2022 were $9,086.4 million, reflecting an increase of $646.5 million, or 7.7%, from the $8,439.9 million reported for the nine months ended October 2, 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $1,292 million, partially offset by the unfavorable net impact from foreign exchange rates of approximately $327 million, lower sales volume of approximately $272 million and the unfavorable impact from fewer shipping days for the nine months ended October 1, 2022 of approximately $49 million.

~~Global Ceramic Segment~~—Net sales increased $352.2 million, or 11.9%, to $3,320.0 million for the nine months ended October 1, 2022, compared to $2,967.8 million for the nine months ended October 2, 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $478 million, partially offset by the unfavorable net impact from foreign exchange rates of approximately $75 million, lower sales volume of approximately $32 million and the unfavorable impact from fewer shipping days for the nine months ended October 1, 2022 of approximately $20 million.

~~Flooring NA Segment~~—Net sales increased $160.2 million, or 5.2%, to $3,261.1 million for the nine months ended October 1, 2022, compared to $3,100.9 million for the nine months ended October 2, 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $369 million, partially offset by lower sales volume of approximately $192 million and the unfavorable impact from fewer shipping days for the nine months ended October 1, 2022 of approximately $17 million.

~~Flooring ROW Segment~~—Net sales increased $134.1 million, or 5.7%, to $2,505.3 million for the nine months ended October 1, 2022, compared to $2,371.2 million for the nine months ended October 2, 2021. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $444 million, partially offset by the unfavorable net impact from foreign exchange rates of approximately $252 million, lower sales volume of approximately $48 million and the unfavorable impact from fewer shipping days for the nine months ended October 1, 2022 of approximately $13 million.

~~Gross profit~~

Gross profit for the nine months ended October 1, 2022 was $2,389.0 million (26.3% of net sales), a decrease of $142.3 million or 5.6%, compared to gross profit of $2,531.3 million (30.0% of net sales) for the nine months ended October 2, 2021. As a percentage of net sales, gross profit decreased 370 basis points. The decrease in gross profit dollars was primarily attributable to higher inflation of approximately $1,103 million, lower sales volume of approximately $109 million, increased short-term manufacturing disruptions of approximately $69 million, the unfavorable net impact from foreign exchange rates of approximately $55 million, higher restructuring, acquisition and integration-related, and other costs of approximately $17 million and increased startup costs of approximately $7 million, partially offset by the favorable net impact of price and product mix of approximately $1,151 million, and productivity gains of approximately $62$43 million.

Selling, general and administrative expenses

Selling, general and administrative expenses for the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 were ~~$1,510.1~~$1,096.5 million ~~(16.6%~~(19.0% of net sales), an increase of ~~$60.7~~$109.9 million compared to ~~$1,449.4~~$986.6 million ~~(17.2%~~(16.0% of net sales) for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. As a percentage of net sales, selling, general and administrative expenses ~~decreased 60~~increased 300 basis points. The increase in selling, general and administrative expenses in dollars was primarily attributable to ~~the unfavorable net impact of price~~legal settlements, reserves and ~~product mix~~fees of approximately ~~$46 million, $45 million related to legal settlements and reserves,~~$49 million; higher inflation of approximately ~~$29 million,~~$30 million; and the net impact of acquired businesses of approximately $14 million; higher costs associated with investments in new product development and marketing costs of approximately ~~$8 million, the unfavorable impact due to sales volume changes of approximately $7~~$14 million and higher restructuring, acquisition and integration-related, and other costs of approximately $3$12 million, partially offset by productivity gains of approximately $6 million and the favorable net impact ~~from~~of foreign exchange rates of approximately ~~$44 million and productivity gains of approximately $35~~$4 million.

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~~Impairment of goodwill and indefinite-lived intangibles~~

During the nine months ended October 1, 2022, due to the impact of a higher WACC, macroeconomic conditions, and the reduction in the Company’s market capitalization, the Company performed interim impairment tests of its goodwill and indefinite-lived intangible assets, which resulted in impairment charges of $695.8 million ($685.6 million net of tax). If, in the future, the Company’s market capitalization and/or the estimated fair value of the Company’s reporting units were to decline further, it may be necessary to record additional impairment charges.

Operating income ~~(loss)~~

Operating income for the ~~nine~~six months ended ~~October~~July 1, ~~2022~~2023 was ~~$183.1~~$278.8 million ~~(2.0%~~(4.8% of net sales), reflecting a decrease of ~~$898.8~~$409.9 million, or ~~83.1%~~59.5%, compared to operating income of ~~$1,081.9~~$688.7 million ~~(12.8%~~(11.2% of net sales) for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The decrease in operating income was primarily attributable to higher inflation of approximately ~~$1,132 million, the impairment charge to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $696 million,~~$189 million; lower sales volume of approximately ~~$116 million, increased short-term manufacturing disruptions of approximately $69 million, $45 million related to legal settlements and reserves,~~$187 million; higher restructuring, acquisition and integration-related, and other costs of approximately ~~$20 million,~~$74 million; the unfavorable ~~net~~ impact ~~from foreign exchange rates~~of temporary plant shutdowns of approximately ~~$11 million,~~$72 million; legal settlements, reserves and fees of approximately $49 million; higher costs associated with investments in new product development and marketing costs of approximately $8$14 million and ~~increased startup costs~~the unfavorable net impact of foreign exchange rates of approximately $7 million, partially offset by the favorable net impact of price and product mix of approximately ~~$1,105~~$122 million and productivity gains of approximately ~~$97~~$49 million.

Global Ceramic ~~Segment~~—Operating ~~loss~~income was ~~$305.1~~$147.4 million ~~((9.2)%~~(6.7% of segment net sales) for the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, reflecting a decrease of ~~$648.2~~$107.2 million compared to operating income of ~~$343.1~~$254.6 million ~~(11.6%~~(11.5% of segment net sales) for the ~~nine~~six months ended ~~October~~July 2, 2021. The decrease in operating income was primarily attributable to the impairment charge to reduce the carrying amount of goodwill of approximately $689 million, higher inflation of approximately $369 million, lower sales volume of approximately $11 million, higher costs associated with investments in new product development and marketing costs of approximately $7 million and increased short-term manufacturing disruptions of approximately $6 million, partially offset by favorable net impact of price and product mix of approximately $386 million and productivity gains of approximately $46 million.

~~Flooring NA Segment~~—Operating income was $260.0 million (8.0% of segment net sales) for the nine months ended October 1, 2022, reflecting a decrease of $55.9 million compared to operating income of $315.9 million (10.2% of segment net sales) for the nine months ended October 2, 2021.2022. The decrease in operating income was primarily attributable to higher inflation of approximately ~~$340 million,~~$92 million; lower sales volume of approximately ~~$77 million, increased short-term manufacturing disruptions~~$71 million; the unfavorable impact of temporary plant shutdowns of approximately ~~$24~~$26 million ~~increased startup costs of approximately $6 million,~~and higher restructuring, acquisition and integration-related, and other costs of approximately ~~$6 million and the impairment charge to reduce the carrying amount of indefinite-lived intangibles of approximately $1~~$19 million, partially offset by the favorable net impact of price and product mix of approximately ~~$327~~$63 million, ~~and~~ productivity gains of approximately ~~$73~~$28 million and the favorable net impact of foreign exchange rates of approximately $9 million.

Flooring ~~ROW Segment~~NA—Operating income was ~~$304.3~~$35.2 million ~~(12.1%~~(1.8% of segment net sales) for the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, reflecting a decrease of ~~$152.5~~$160.2 million compared to operating income of ~~$456.8~~$195.4 million ~~(19.3%~~(9.0% of segment net sales) for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The decrease in operating income was primarily attributable to ~~higher inflation of approximately $425 million, increased short-term manufacturing disruptions of approximately $39 million,~~ lower sales volume of approximately ~~$28 million, decreased productivity~~$50 million; higher inflation of approximately ~~$23 million,~~$40 million; the unfavorable impact of temporary plant shutdowns of approximately $26 million; higher restructuring, acquisition and integration-related, and other costs of approximately ~~$13~~$25 million; higher costs associated with investments in new product development and marketing costs of approximately $14 million; the unfavorable net impact of price and product mix of approximately $11 million and legal settlements, reserves and fees of approximately $5 million, partially offset by productivity gains of approximately $9 million.

Flooring ROW—Operating income was $162.2 million (10.2% of segment net sales) for the six months ended July 1, 2023, reflecting a decrease of $96.6 million compared to operating income of $258.8 million (14.6% of segment net sales) for the six months ended July 2, 2022. The decrease in operating income was primarily attributable to lower sales volume of approximately $67 million; higher inflation of approximately $54 million; higher restructuring, acquisition and integration-related, and other costs of approximately $30 million; the unfavorable impact of temporary plant shutdowns of approximately $20 million and the unfavorable net impact of foreign exchange rates of approximately ~~$10 million and the impairment charge to reduce the carrying amount of indefinite-lived intangibles of approximately $6~~$16 million, partially offset by the favorable net impact of price and product mix of approximately ~~$392~~$70 million and productivity gains of approximately $12 million.

Interest expense

Interest expense was ~~$37.3~~$40.0 million for the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, reflecting ~~a decrease~~an increase of ~~$7.8~~$16.5 million compared to interest expense of ~~$45.1~~$23.5 million for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The ~~decrease~~increase in interest expense was primarily due to ~~the Company’s redemption of the 2.00% Senior Notes on October 19, 2021 and an~~a significant increase in ~~miscellaneous~~ interest ~~income, partially offset by~~rates, as well as increased borrowing due to the ~~increase~~acquisitions made in ~~commercial paper borrowings.~~

~~Table~~2022 and the first quarter of ~~Contents~~

2023.

Other (income) expense, net

Other ~~income,~~expense, net was $1.6 million for the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, reflecting an unfavorable change of ~~$11.8~~$2.0 million compared to other income, net of ~~$13.4~~$0.4 million for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The change was primarily ~~driven by the release of an indemnification receivable related~~attributable to the resolution of foreign non-income tax contingencies of approximately $6 million during the nine months ended October 2, 2021, the reversal of uncertain tax positions recorded with the Emil acquisition of approximately $7 million and the unfavorable net impact of foreign exchange rates of approximately $3$11 million, partially offset by ~~other miscellaneous items~~the reversal of an uncertain tax position recorded with the Emil acquisition of approximately ~~$5 million.~~$7 million during the six months ended July 2, 2022.

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Income tax expense

For the ~~nine~~six months ended ~~October~~July 1, ~~2022,~~2023, the Company recorded income tax expense of ~~$155.2~~$55.7 million on earnings before income taxes of ~~$147.4~~$237.2 million for an effective tax rate of ~~105.3%~~23.5%, as compared to an income tax expense of ~~$205.8~~$139.6 million on earnings before income taxes of ~~$1,050.2~~$665.6 million, for an effective tax rate of ~~19.6%~~21.0% for the ~~nine~~six months ended ~~October~~July 2, ~~2021.~~2022. The ~~difference~~increase in the effective tax ~~rates~~rate was primarily driven by an increase in unrecognized tax benefits in the six months ended July 1, 2023, and an Italian benefit associated with the release of an uncertain tax liability in the six months ended July 2, 2022, partially offset by lower earnings before income taxes and the Company’s geographic dispersion of profits and losses for the ~~comparative periods was primarily impacted by the impairment of non-deductible goodwill and lower earnings in the nine months ended October 1, 2022.~~respective periods.

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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.

Net cash provided by operating activities in the first ~~nine~~six months of ~~2022~~2023 was ~~$427.4~~$520.9 million, compared to net cash provided by operating activities of ~~$1,096.7~~$202.7 million in the first ~~nine~~six months of ~~2021.~~2022. The ~~decrease~~increase of ~~$669.3~~$318.2 million in ~~2022~~2023 was primarily attributable to the change in ~~working capital~~inventory and accounts receivable, partially offset by lower net ~~earnings.~~earnings and the change in accounts payable.

Net cash used in investing activities in the first ~~nine~~six months of ~~2022~~2023 was ~~$374.4~~$602.6 million compared to net cash ~~provided by~~used in investing activities of ~~$114.0~~$221.1 million in the first ~~nine~~six months of ~~2021.~~2022. The ~~decrease~~increase was primarily due to the increase in acquisition costs of $516.4 million, partially offset by an increase in the ~~purchases~~redemptions of short-term investments of ~~$353.3~~$100.0 million (net of ~~redemptions~~purchases of short-term investments)~~, the increase of capital expenditures of $54.9 million and increased acquisition costs of $80.1 million.~~.

Net cash ~~used in~~provided by financing activities in the first ~~nine~~six months of ~~2022~~2023 was ~~$3.0~~$156.3 million compared to net cash used in financing activities of ~~$835.0~~$42.8 million in the ~~nine~~first six months of ~~2021.~~2022. The change in cash ~~used in~~provided by financing activities is primarily attributable to ~~the higher net~~lower share repurchase of $307.2 million, partially offset by lower proceeds from commercial paper of ~~$324.1~~$92.2 million ~~lower payments on Senior Notes~~(net of ~~$352.6 million and lower share repurchases~~borrowing of ~~$165.8 million.~~commercial paper).

As of ~~October~~July 1, ~~2022,~~2023, the Company had cash of ~~$327.0~~$570.9 million, of which ~~$181.0~~$177.6 million was held outside the United States. The Company plans to permanently reinvest the cash held outside the United States. The Company believes that its cash and cash equivalents on hand, cash generated from operations and availability under its existing credit facilities will be sufficient to meet its capital expenditure, working capital and debt servicing requirements over at least the next twelve months. The Company continually evaluates its projected needs and may conduct additional debt financings, subject to market conditions, to increase its liquidity and to take advantage of attractive financing opportunities.

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”). For the nine months ended October 1, 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 Share Repurchase Program"), and utilizing $270.8 million under the 2022 Share Repurchase Program. As of ~~October~~July 1, ~~2022,~~2023, there ~~remains~~remained $229.2 million authorized under the 2022 Share Repurchase Program.

See Note ~~18.~~18, Debt, of the notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q 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.

~~Table of Contents~~

Contractual Obligations

There have been no significant changes to the Company’s contractual obligations as disclosed in the Company’s ~~2021~~2022 Annual Report filed on Form 10-K except as described herein.

~~Critical Accounting Policies and Estimates~~

Other than the Critical Accounting Policy described below, there have been no significant changes to the Company’s critical accounting policies and estimates during the period. The Company's critical accounting policies are described in its 2021 Annual Report filed on Form 10-K.

~~Goodwill and other intangibles -~~ The Company performs its annual testing of goodwill and indefinite-lived intangibles in 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 judgements 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 as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgements and assumptions about appropriate sales growth rates, operating margins, WACC and comparable company market multiples.

~~Recent Accounting Pronouncements~~

~~See Note 1 in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q under the heading “Recent Accounting Pronouncements” for a discussion of new accounting pronouncements which is incorporated herein by reference.~~

~~Table of Contents~~

~~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 process. 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, reduce costs and develop new product innovations to help offset increases in costs resulting from inflation in its operations.

~~Off-Balance Sheet Arrangements~~

~~The Company did not have any off-balance sheet arrangements as of October 1, 2022.~~

~~Seasonality~~

The Company is a calendar year-end company. With respect to its Global Ceramic Segment, the second quarter typically sees higher net sales, followed by the third and first quarters, while the fourth quarter shows weaker net sales. For the Global Ceramic Segment’s operating income, generally, the second quarter shows stronger earnings, followed by third and first quarters, and the fourth quarter shows weaker earnings. The Flooring NA Segment’s second quarter typically produces higher net sales followed by moderate third and fourth quarters, and a weaker first quarter. For the Flooring NA Segment’s operating income, historically, the third quarter shows stronger earnings, followed by second and fourth quarters, and a weaker first quarter. The Flooring ROW Segment’s second quarter historically produces higher net sales followed by moderate fourth and third quarters, and a weaker first quarter. For the Flooring ROW Segment’s operating income, generally, the second quarter shows stronger earnings, followed by first and third quarters, and the fourth quarter shows weaker earnings.

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~~Forward-Looking Information~~

Certain of the statements in this Form 10-Q, 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 raw material prices, freight 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; tax and tax reform, product and other claims; litigation; Russian military actions in Ukraine or other geopolitical events; the risks and uncertainty related to the COVID-19 pandemic; 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.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

As of ~~October~~July 1, ~~2022,~~2023, approximately ~~64%~~37% of the Company’s debt portfolio was comprised of fixed-rate debt and ~~36%~~63% was floating-rate debt. A 1.0 percentage point increase in the interest rate of the floating-rate debt would have resulted in an increase in interest expense of ~~$2.3~~$4.8 million and ~~$7.0~~$9.7 million for the three and ~~nine~~six months ended ~~October~~July 1, ~~2022.~~2023.

There have been no significant changes to the Company’s exposure to market risk as disclosed in the Company’s ~~2021~~2022 Annual Report filed on Form 10-K.

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Item 4.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.

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The Company is involved in various lawsuits, claims, investigations and other legal matters from time to time in the regular course of its business. 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 ~~17.~~17, Commitments and Contingencies, of the notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for a discussion of the Company’s legal proceedings.

~~Table of Contents~~

Item 1A.Risk Factors

There have been no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021 and Part II, Item 1A to our quarterly report on Form 10-Q for the period ended April 2,~~ 2022. The risk factors disclosed in these reports, in addition to the other information set forth in this report, could materially affect ~~our~~the Company's business, financial condition or results.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

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.~~stock (the “2022 Share Repurchase Program”). In the ~~third~~first quarter of ~~2022,~~2023, the Company ~~purchased $0.4 million~~did not purchase any of its common stock. As of ~~October~~July 1, ~~2022,~~2023, there ~~remains~~remained $229.2 million authorized under the 2022 Share Repurchase Program.

Under the ~~share repurchase program,~~2022 Share Repurchase 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 ~~share repurchase program~~2022 Share Repurchase Program and the ~~share repurchase program~~2022 Share Repurchase Program may be suspended or discontinued at any time.

The following table provides information regarding share repurchase activity during the three months ended ~~October~~July 1, ~~2022.~~2023:

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
July 3 through August 6, 2022 0.0 $ 120.00 0.0 $ 229.2
August 7 through September 3, 2022 0.0 $ — 0.0 $ 229.2
September 4 through October 1, 2022 0.0 $ — 0.0 $ 229.2
Total 0.0 $ 120.00 0.0


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
April 2 through May 6, 2023	0.0	$	—	0.0	$	229.2
May 7 through June 3, 2023	0.0	$	—	0.0	$	229.2
June 4 through July 1, 2023	0.0	$	—	0.0	$	229.2
Total	0.0	$	—	0.0

Item 3.Defaults Upon Senior Securities

None.

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 quarterly report on Form 10-Q.

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Item 5.Other Information

None.

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Item 6.Exhibits


No.						Description

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						Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.1 of ~~the Company’s~~ ~~Current~~ ~~Report on Form 8-K~~ ~~filed on~~ ~~February 19, 2019.)~~
~~10.1~~						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.~~February 19, 2019.)
~~10.2~~						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 10.1 of the Company’s Current Report on Form 8-K filed on August 12, 2022.)
~~10.3~~						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.
31.1						Certification Pursuant to Rule 13a-14(a).
31.2						Certification Pursuant to Rule 13a-14(a).
32.1						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95.1						Mine Safety Disclosure pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
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)

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SIGNATURES

Pursuant to the requirements 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.

(Registrant)

Dated:

~~October~~July 28, ~~2022~~2023

By:

/s/ Jeffrey S. Lorberbaum

JEFFREY S. LORBERBAUM

Chairman and Chief Executive Officer

(principal executive officer)

Dated:

~~October~~July 28, ~~2022~~2023

By:

/s/ James F. Brunk

JAMES F. BRUNK

Chief Financial Officer

(principal financial officer)

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	Three Months Ended			Nine Months Ended
	October 1, 2022		October 2, 2021	October 1, 2022	October 2, 2021
	(In thousands, except per share data)
Net sales	$	2,917,539	2,817,017	9,086,390	8,439,876
Cost of sales	2,203,878		1,979,702	6,697,404	5,908,585
Gross profit	713,661		837,315	2,388,986	2,531,291
Selling, general and administrative expenses	523,479		477,341	1,510,076	1,449,378��
Impairment of goodwill and indefinite-lived intangibles	695,771		—	695,771	—
Operating (loss) income	(505,589)		359,974	183,139	1,081,913
Interest expense	13,797		14,948	37,337	45,083
Other (income) expense, net	(1,242)		21	(1,622)	(13,374)
(Loss) earnings before income taxes	(518,144)		345,005	147,424	1,050,204
Income tax expense	15,569		73,821	155,193	205,756


Net (loss) earnings including noncontrolling interests	(533,713)		271,184	(7,769)	844,448
Net earnings attributable to noncontrolling interests	256		206	440	378
Net (loss) earnings attributable to Mohawk Industries, Inc.	$	(533,969)	270,978	(8,209)	844,070

Basic (loss) earnings per share attributable to Mohawk Industries, Inc.


Basic (loss) earnings per share attributable to Mohawk Industries, Inc.	$	(8.40)	3.95	(0.13)	12.16
Weighted-average common shares outstanding—basic	63,534		68,541	63,923	69,389

Diluted (loss) earnings per share attributable to Mohawk Industries, Inc.


Diluted (loss) earnings per share attributable to Mohawk Industries, Inc.	$	(8.40)	3.93	(0.13)	12.11
Weighted-average common shares outstanding—diluted	63,534		68,864	63,923	69,683


October 1, 2022	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Geographical Markets
United States	$	614,460	1,056,596	3,784	1,674,840
Europe	201,217		2,079	495,291	698,587
Russia	113,195		—	49,001	162,196
Other	167,784		30,959	183,173	381,916
	$	1,096,656	1,089,634	731,249	2,917,539

Product Categories
Ceramic & Stone	$	1,089,593	9,642	—	1,099,235
Carpet & Resilient	7,063		842,069	220,320	1,069,452
Laminate & Wood	—		237,923	235,461	473,384
Other(1)	—		—	275,468	275,468
	$	1,096,656	1,089,634	731,249	2,917,539


	Three Months Ended			Nine Months Ended
	October 1 2022		October 2 2021	October 1 2022	October 2 2021
Cost of sales
Restructuring costs	$	30,421	246	31,722	15,685

Acquisition integration-related costs	—		306	349	349
Restructuring and acquisition integration-related costs	$	30,421	552	32,071	16,034

Selling, general and administrative expenses
Restructuring costs	$	2,949	(89)	3,035	226
Acquisition transaction-related costs	481		184	1,508	1,928
Acquisition integration-related costs	687		426	1,741	849
Restructuring, acquisition transaction and integration-related costs	$	4,117	521	6,284	3,003


Gross carrying amounts:	Customer relationships		Patents	Other	Total
Balance as of December 31, 2021	$	680,177	256,336	6,786	943,299
Intangible assets acquired during the period	13,064		—	1,900	14,964

Currency translation during the period	(65,593)		(34,607)	(868)	(101,068)
Balance as of October 1, 2022	$	627,648	221,729	7,818	857,195

Accumulated amortization:	Customer relationships		Patents	Other	Total
Balance as of December 31, 2021	$	483,748	252,414	2,062	738,224
Amortization during the period	20,277		468	172	20,917
Currency translation during the period	(44,161)		(34,116)	(108)	(78,385)
Balance as of October 1, 2022	$	459,864	218,766	2,126	680,756

Intangible assets subject to amortization, net as of October 1, 2022	$	167,784	2,963	5,692	176,439