MOHAWK INDUSTRIES INC

Previous wording

During the past three decades, the Company has grown significantly through a combination of organic growth and acquisitions. Its current geographic breadth and diverse product offering are reflected in three reporting segments: Global Ceramic, Flooring North America, Flooring NA and Flooring ROW. Global Ceramic designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone tile and other products including natural stone, porcelain slabs and quartz countertops, which it distributes primarily in North America, Europe and Latin America through various selling channels, which include home centers, Company-owned service centers and stores, floor covering retailers, ceramic tile specialists, e-commerce retailers, residential builders, independent distributors, commercial contractors and commercial end users. Flooring NA designs, manufactures, sources and markets its floor covering products, including broadloom carpet, carpet tile, carpet cushion, rugs, laminate, vinyl products, including 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 channels, including independent floor covering retailers, home centers, mass merchandisers, department stores, shop at home, buying groups, residential builders, independent distributors, commercial contractors and commercial end users. Flooring ROW designs, manufactures, sources, licenses and markets laminate, vinyl products, including LVT and sheet vinyl, wood flooring, roofing panels, insulation boards, MDF and chipboards, which it distributes primarily in Europe and Australasia through various channels, including independent floor covering retailers, wholesalers, home centers, Company-operated distributors, independent distributors, residential builders, commercial contractors and commercial end users.

Current wording

During the past three decades, the Company has grown significantly through a combination of organic growth and acquisitions. Its current geographic breadth and diverse product offering are reflected in three reporting segments: Global Ceramic, Flooring NA and Flooring ROW. Global Ceramic designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone tile and other products including natural stone, porcelain slabs and quartz countertops, which it distributes primarily in North America, Europe and Latin America through various selling channels, which include home centers, Company-owned service centers and stores, floor covering retailers, ceramic tile specialists, e-commerce retailers, residential builders, independent distributors, commercial contractors and commercial end users. Flooring NA designs, manufactures, sources and markets its floor covering products, including broadloom carpet, carpet tile, carpet cushion, rugs, laminate, vinyl products, including 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 channels, including independent floor covering retailers, home centers, mass merchandisers, department stores, shop at home, buying groups, residential builders, independent distributors, commercial contractors and commercial end users. Flooring ROW designs, manufactures, sources, licenses and markets laminate, vinyl products, including LVT and sheet vinyl, wood flooring, broadloom carpet, carpet tiles, roofing panels, insulation boards, MDF and chipboards, and decorative panels, which it distributes primarily in Europe and Australasia through various channels, including independent floor covering retailers, wholesalers, home centers, Company-operated distributors, independent distributors, residential builders, commercial contractors and commercial end users.

Previous wording

Elevated interest rates, delayed consumer discretionary spending due to inflationary pressures, and other macroeconomic factors continue to impact new home construction and residential renovation and remodeling activity. Residential remodeling is the primary sales driver of flooring products, and most flooring is replaced before a home is listed for sale or just after a home purchase is completed. The current housing market conditions have suppressed remodeling activity as home sales remain soft. While U.S. single-family homebuilding increased during the first quarter of 2024, home mortgage rates once again increased after easing at the beginning of 2024, and consumers continue to face a higher cost of living and reduce discretionary spending on large durable goods purchases such as flooring. The Company has, to some extent, offset the impact of a soft housing market and decreased renovation activity through cost containment, productivity and lower input costs. Due to low housing availability, aging stock and greater household formation, the Company believes demand in its markets will accelerate when interest rates decline. In addition, declining costs in energy and raw materials, coupled with lower industry volumes, have continued to exert pressure on selling prices, although energy prices in certain geographies and materials prices in some product categories remain volatile and may change significantly and unpredictably. During 2022 and 2023, the Company focused on reducing costs through restructuring actions, productivity initiatives and manufacturing enhancements by taking actions to enhance future performance, including facility, asset and product rationalizations and workforce reductions. The Company anticipates these global actions will deliver annual savings of approximately $150 million, with an estimated cost of approximately $215 million.

Current wording

Elevated interest rates, delayed consumer discretionary spending due to inflationary pressures, and other macroeconomic factors continue to impact new home construction and residential renovation and remodeling activity. Residential remodeling is the primary sales driver of flooring products, and most flooring is replaced before a home is listed for sale or just after a home purchase is completed. The current housing market conditions have suppressed remodeling activity as home sales remain soft. Housing turnover rates remain suppressed due to elevated home mortgage rates and the "locked-in" effect on homeowners, and consumers continue to face a higher cost of living and postpone large purchases of durable goods such as flooring. The Company has, to some extent, offset the impact of a soft housing market and decreased renovation activity through cost containment, productivity and lower input costs. Due to low housing availability, aging stock and greater household formation, the Company believes demand in its markets will accelerate when interest rates decline. In addition, declining costs in energy and raw materials, coupled with lower industry volumes, have continued to exert pressure on selling prices, although energy prices in certain geographies and materials prices in some product categories remain volatile and may change significantly and unpredictably. During 2022 and 2023, the Company implemented a number of restructuring actions, productivity initiatives and manufacturing enhancements focused on reducing costs to enhance future performance, including certain facility, asset and product rationalizations and workforce reductions. The Company anticipates these projects will deliver annual savings of approximately $150 million, with an estimated cost of approximately $215 million. In 2024, the Company announced further restructuring actions to take advantage of additional opportunities related to the activities described above. The Company anticipates these projects will deliver further annual savings of approximately $100 million, of which approximately $20-$25 million will be recognized during 2024. The cash cost of these actions is approximately $40 million, with a total cost of approximately $130 million. Execution timelines will vary by project, with some savings extending into 2026.

Previous wording

In 2024, the Company plans to invest approximately $500 million focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance.

Current wording

In 2024, the Company plans to invest approximately $480 million focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance.

Previous wording

For the three months ended March 30, 2024, the net earnings attributable to the Company were $105.0 million compared to the net earnings attributable to the Company of $80.2 million for the three months ended April 1, 2023. The change was primarily attributable to lower input costs and productivity gains. The favorable impact of the aforementioned items was partially offset by the unfavorable net impact of price and product mix and the unfavorable net impact of foreign exchange rates. The Company believes that a number of circumstances may influence trends in 2024, including the impact of inflation and material availability due to disruptions in the global supply chain, but the extent and duration of such impact cannot be predicted.

Current wording

For the three months ended June 29, 2024, the net earnings attributable to the Company were $157.4 million compared to the net earnings attributable to the Company of $101.2 million for the three months ended July 1, 2023. The change was primarily attributable to lower inflation; productivity gains and lower legal settlements, reserves and fees, partially offset by the unfavorable net impact of price and product mix; higher taxes due to increased earnings for the three months ended June 29, 2024 and the unfavorable net impact of foreign exchange rates.

Previous wording

For the three months ended March 30, 2024, the Company generated $183.7 million of cash from operating activities. As of March 30, 2024, the Company had cash and cash equivalents of $658.5 million, of which $433.4 million was in the United States and $225.1 million was in foreign countries.

Current wording

For the six months ended June 29, 2024, the Company generated $417.3 million of cash from operating activities. As of June 29, 2024, the Company had cash and cash equivalents of $497.4 million, of which $283.5 million was in the United States and $213.9 million was in foreign countries.

Previous wording

Global Ceramic—Net sales for the three months ended March 30, 2024 were $1,044.8 million compared to net sales of $1,059.3 million for the three months ended April 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $43 million, partially offset by higher sales volume attributable to acquisitions of approximately $48 million.

Current wording

Global Ceramic—Net sales for the three months ended June 29, 2024 were $1,115.6 million compared to net sales of $1,155.4 million for the three months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $23 million and the unfavorable net impact of foreign exchange rates of approximately $15 million.

Previous wording

Gross profit for the three months ended March 30, 2024 was $649.5 million compared to gross profit of $643.4 million for the three months ended April 1, 2023. The change was primarily attributable to lower input costs of approximately $146 million and productivity gains of approximately $35 million, partially offset by the unfavorable net impact of price and product mix of approximately $152 million.

Current wording

Gross profit for the three months ended June 29, 2024 was $723.8 million compared to gross profit of $732.0 million for the three months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix and the unfavorable net impact of foreign exchange rates, partially offset by lower input costs and productivity gains. Gross profit did not significantly change as a percentage of net sales for the three months ended June 29, 2024 compared to the three months ended July 1, 2023.

Previous wording

Selling, general and administrative expenses for the three months ended March 30, 2024 were $502.9 million compared to $517.7 million for the three months ended April 1, 2023. Selling, general and administrative expenses did not significantly change as a percentage of net sales for the three months ended March 30, 2024 compared to the three months ended April 1, 2023.

Current wording

Selling, general and administrative expenses for the three months ended June 29, 2024 were $509.8 million compared to $578.9 million for the three months ended July 1, 2023. The change was primarily attributable to lower legal settlements, reserves and fees. Selling, general and administrative expenses did not significantly change as a percentage of net sales for the three months ended June 29, 2024 compared to the three months ended July 1, 2023.

Previous wording

Operating income for the three months ended March 30, 2024 was $146.6 million compared to operating income of $125.7 million for the three months ended April 1, 2023. The change was primarily attributable to lower input costs of approximately $136 million and productivity gains of approximately $47 million, partially offset by the unfavorable net impact of price and product mix of approximately $153 million and the unfavorable net impact of foreign exchange rates of approximately $12 million.

Current wording

Operating income for the three months ended June 29, 2024 was $214.0 million compared to operating income of $153.1 million for the three months ended July 1, 2023. The change was primarily attributable to lower input costs of approximately $83 million, productivity gains of approximately $49 million and lower legal settlements, reserves and fees of approximately $47 million, partially offset by the unfavorable net impact of price and product mix of approximately $111 million and the unfavorable net impact of foreign exchange rates of approximately $11 million.

Previous wording

Global Ceramic—Operating income was $48.8 million for the three months ended March 30, 2024 compared to operating income of $63.3 million for the three months ended April 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $40 million and the unfavorable net impact of foreign exchange rates of approximately $11 million, partially offset by lower input costs of approximately $32 million and productivity gains of approximately $14 million.

Current wording

Global Ceramic—Operating income was $83.1 million for the three months ended June 29, 2024 compared to operating income of $84.0 million for the three months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $25 million and the unfavorable net impact of foreign exchange rates of approximately $10 million, partially offset by lower input costs of approximately $17 million and productivity gains of approximately $14 million.

Previous wording

Interest expense was $14.9 million for the three months ended March 30, 2024 compared to interest expense of $17.1 million for the three months ended April 1, 2023. The change was primarily attributable to several factors, including: lower overall debt and the prepayment of the Term Loans.

Current wording

Interest expense was $12.6 million for the three months ended June 29, 2024 compared to interest expense of $22.9 million for the three months ended July 1, 2023. The change was primarily attributable to strong cash flow and the resulting lower debt level.

Previous wording

Other income, net was $1.1 million for the three months ended March 30, 2024 compared to of $0.6 million for the three months ended April 1, 2023. Other income, net did not significantly change for the three months ended March 30, 2024 from the three months ended April 1, 2023.

Current wording

Other expense, net was $1.6 million for the three months ended June 29, 2024 compared to of $2.2 million for the three months ended July 1, 2023. Other expense, net did not significantly change for the three months ended June 29, 2024 from the three months ended July 1, 2023.

Previous wording

Net sales for the three months ended March 30, 2024 were $2,679.4 million compared to net sales of $2,806.2 million for the three months ended April 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $172 million, partially offset by higher sales volume attributable to acquisitions of approximately $48 million.

Current wording

Net sales for the six months ended June 29, 2024 were $5,480.7 million compared to net sales of $5,756.7 million for the six months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $300 million and the unfavorable net impact of foreign exchange rates of approximately $29 million, partially offset by higher sales volume attributable to acquisitions of approximately $48 million and higher legacy sales volume of approximately $19 million.

Previous wording

Flooring NA—Net sales for the three months ended March 30, 2024 were $900.2 million compared to net sales of $953.4 million for the three months ended April 1, 2023. The change was primarily attributable to lower legacy sales volume of approximately $31 million and the unfavorable net impact of price and product mix of approximately $23 million.

Current wording

Flooring NA—Net sales for the six months ended June 29, 2024 were $1,858.7 million compared to net sales of $1,955.1 million for the six months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $72 million and lower legacy sales volume of approximately $25 million.

Previous wording

Flooring ROW—Net sales for the three months ended March 30, 2024 were $734.4 million compared to net sales of $793.5 million for the three months ended April 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $107 million and fewer shipping days for the quarter ended March 30, 2024 of approximately $11 million, partially offset by higher legacy sales volume of approximately $60 million.

Current wording

Flooring ROW—Net sales for the six months ended June 29, 2024 were $1,461.6 million compared to net sales of $1,586.9 million for the six months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $163 million and the unfavorable net impact of foreign exchange rates of approximately $11 million, partially offset by higher legacy sales volume of approximately $60 million.

Previous wording

Flooring ROW—Operating income was $70.9 million for the three months ended March 30, 2024 compared to operating income of $75.2 million for the three months ended April 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $92 million, partially offset by lower input costs of approximately $48 million; lower restructuring, acquisition and integration-related, and other costs of approximately $22 million; higher sales volume of approximately $11 million and productivity gains of approximately $10 million.

Current wording

Flooring ROW—Operating income was $136.5 million for the six months ended June 29, 2024 compared to operating income of $162.2 million for the six months ended July 1, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $143 million, partially offset by lower input costs of approximately $78 million and productivity gains of approximately $25 million.

Previous wording

For the three months ended March 30, 2024, the Company recorded income tax expense of $27.8 million on a earnings before income taxes of $132.8 million, for an effective tax rate of 21.0%. For the three months ended April 1, 2023, the Company recorded income tax expense of $28.9 million on earnings before income taxes of $109.2 million, for an effective tax rate of 26.5%. The decrease in the effective tax rate was primarily driven by the Company’s geographic dispersion of profits and losses for the respective periods and the write-off of an income tax receivable no longer expected in the three months ended April 1, 2023.

Current wording

For the six months ended June 29, 2024, the Company recorded income tax expense of $70.1 million on earnings before income taxes of $332.6 million, for an effective tax rate of 21.1%. For the six months ended July 1, 2023, the Company recorded income tax expense of $55.7 million on earnings before income taxes of $237.2 million, for an effective tax rate of 23.5%. The change in the effective tax rate was primarily driven by a larger increase in unrecognized tax benefits and the write-off of an income tax receivable no longer expected during the six months ended July 1, 2023, partially offset by the Company’s geographic dispersion of profits and losses for the respective periods.

Previous wording

Net cash provided by operating activities in the first three months of 2024 was $183.7 million, compared to net cash provided by operating activities of $257.3 million in the first three months of 2023. The change was primarily attributable to the change in inventory and accounts receivable, partially offset by the change in accounts payable and higher net earnings.

Current wording

Net cash provided by operating activities in the first six months of 2024 was $417.3 million, compared to net cash provided by operating activities of $520.9 million in the first six months of 2023. The change was primarily attributable to the change in inventory and accounts receivable, partially offset by the change in accounts payable and higher net earnings.

Previous wording

Net cash used in investing activities in the first three months of 2024 was $86.8 million compared to net cash used in investing activities of $639.9 million in the first three months of 2023. The change was primarily attributable to the decrease in acquisition costs of $519.4 million and the decrease in capital expenditures of $41.7 million.

Current wording

Net cash used in investing activities in the first six months of 2024 was $178.2 million compared to net cash used in investing activities of $602.6 million in the first six months of 2023. The change was primarily attributable to the decrease in acquisition costs of $515.4 million and the decrease in capital expenditures of $67.0 million, partially offset by the decrease in the redemptions of short-term investments of $158.0 million (net of purchases of short-term investments)

Previous wording

Net cash used in financing activities in the first three months of 2024 was $76.1 million compared to net cash provided by financing activities of $451.0 million in the first three months of 2023. The change was primarily attributable to higher payments of term loan facility of $912.3 million and lower proceeds from Senior Credit Facility of $423.9 million (net of payments), partially offset by the higher proceeds from commercial paper of $801.9 million (net of borrowing).

Current wording

Net cash used in financing activities in the first six months of 2024 was $381.5 million compared to net cash provided by financing activities of $156.3 million in the first six months of 2023. The change was primarily attributable to higher payments of term loan facility of $912.3 million, higher share repurchase of $87.8 million and lower proceeds from Senior Credit Facility of $66.4 million (net of payments), partially offset by the higher proceeds from commercial paper of $517.0 million (net of borrowing).

Previous wording

As of March 30, 2024, the Company had cash of $658.5 million, of which $433.4 million was in the United States and $225.1 million was in foreign countries. 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.

Current wording

As of June 29, 2024, the Company had cash of $497.4 million, of which $283.5 million was in the United States and $213.9 million was in foreign countries. 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.

Previous wording

On February 10, 2022, the Company’s Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million of its common stock (the “2022 Share Repurchase Program”). As of March 30, 2024, there remained $229.2 million authorized under the 2022 Share Repurchase Program.

Current wording

On February 10, 2022, the Company’s Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million of its common stock (the “2022 Share Repurchase Program”). As of June 29, 2024, there remained $141.4 million authorized under the 2022 Share Repurchase Program.