MOHAWK INDUSTRIES INC

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto, which are included in this report, as well as our audited consolidated financial statements for the year ended December 31, 2023, which are included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

The following discussion and analysis of the Company’s financial condition and results of operations from management's perspective should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes included in this report, as well as our audited consolidated financial statements for the year ended December 31, 2024, which are included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

Mohawk is a significant supplier of every major flooring category with manufacturing operations in 19 nations and sales in approximately 170 countries. Based on its annual sales, the Company believes it is the world’s largest flooring manufacturer. A majority of the Company’s long-lived assets are located in the United States and Europe, which are also the Company’s primary markets. Additionally, the Company maintains operations in Australia, Brazil, Malaysia, Mexico, New Zealand, Russia and other parts of the world. The Company is a leading provider of flooring for residential and commercial markets and has earned significant recognition for its innovation in design and performance as well as sustainability.

Current wording

Mohawk is a significant supplier of every major flooring category with manufacturing operations in 19 countries and sales in approximately 180 countries. Based on its annual sales, the Company believes it is the world’s largest flooring manufacturer. A majority of the Company’s long-lived assets are located in the United States and Europe, which are also the Company’s primary markets. Additionally, the Company maintains operations in Australia, Brazil, Malaysia, Mexico, New Zealand, Russia and other parts of the world. The Company is a leading provider of flooring for residential and commercial markets and has earned significant recognition for its innovation in design and performance as well as sustainable business practices.

Previous wording

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, including additional facility, assets and product rationalizations and workforce reductions to further reduce costs and prepare the business for the future. The Company anticipates these projects will deliver annual savings of approximately $115 million, with an estimated cost of approximately $130 million. Execution timelines will vary by project, with some savings extending into 2026.

Current wording

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. 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 that when completed 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, including additional facility, assets and product rationalizations and workforce reductions to further reduce costs and improve the business for the future. The Company anticipates that when completed, these projects will deliver annual savings of approximately $145 million, with an estimated cost of approximately $140 million. Execution timelines will vary by project, with some savings extending into 2026.

Previous wording

Due to its global footprint, Mohawk’s business is sensitive to geopolitical conflict, including the Russia-Ukraine conflict and conflicts in the Middle East. Since the first quarter of 2022, the Company has suspended new investments in Russia in response to ongoing Russian military actions in Ukraine, and 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. Increased restrictions on global trade could result in, among other things, increased volatility in foreign exchange rates and financial markets, supply chain disruptions, and decreased consumer discretionary spending, any of which may adversely affect the Company’s business and supply chain. While the Company has had success sourcing alternate suppliers of raw materials to counteract supply chain disruptions, the Company may be negatively impacted by additional supply chain disruption in the future caused by further escalation of geopolitical conflict. In addition, the Company may be impacted by global increases in the cost of natural gas, oil and oil-based raw materials and chemicals. The broader consequences of current ongoing military conflicts, which may include further economic sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory actions, including nationalization of foreign-owned businesses; increased tensions between the United States and countries in which the Company operates; and the extent of the conflict’s effect on the Company’s business and results of operations, as well as the global economy, cannot be predicted. In addition, a prolonged and more expansive conflict in the Middle East region could escalate oil and petroleum-based chemical prices as well as lead to the introduction of sanctions or transportation barriers, though the extent of the impact on the Company’s business and results of operations, as well as the global economy, cannot be predicted.

Current wording

Due to its global footprint, Mohawk’s business is sensitive to geopolitical conflict, including the Russia-Ukraine conflict and the ongoing conflicts in the Middle East. Since the first quarter of 2022, the Company has suspended new investments in Russia in response to ongoing Russian military actions in Ukraine. In addition, an escalation of conflict in the Middle East region could result in supply chain disruptions, decreased consumer demand and increased transportation barriers, though the extent of the impact on the Company’s business, financial condition, results of operations, and prospects cannot be predicted. The broader consequences of current ongoing military conflicts, which may include further economic sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory actions, including nationalization of foreign-owned businesses; increased tensions between the United States and countries in which the Company operates; and the extent of the conflict’s effect on the Company’s business and results of operations, as well as the global economy, cannot be predicted.

Previous wording

In 2024, the Company plans to invest approximately $450 million focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance.

Current wording

In 2025, the Company plans to invest approximately $530 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 September 28, 2024, the net earnings attributable to the Company were $162.0 million compared to the net loss attributable to the Company of $760.4 million for the three months ended September 30, 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles; productivity gains; lower legal settlements, reserves and fees; lower restructuring, acquisition and integration-related, and other costs and lower input costs, partially offset by the unfavorable net impact of price and product mix.

Current wording

For the three months ended March 29, 2025, the net earnings attributable to the Company were $72.6 million compared to the net earnings attributable to the Company of $105.0 million for the three months ended March 30, 2024. The change was primarily attributable to higher input costs; the impact of the order management system conversion; higher restructuring, acquisition and integration-related, and other costs and lower sales volume, partially offset by productivity gains and lower income tax expenses.

Previous wording

For the nine months ended September 28, 2024, the Company generated $736.9 million of cash from operating activities. As of September 28, 2024, the Company had cash and cash equivalents of $424.0 million, of which $245.6 million was in the United States and $178.4 million was in foreign countries.

Current wording

For the three months ended March 29, 2025, the Company generated $3.7 million of cash from operating activities. As of March 29, 2025, the Company had cash and cash equivalents of $702.5 million, of which $458.8 million was in the United States and $243.7 million was in other countries.

Previous wording

Global Ceramic—Operating income was $215.3 million for the nine months ended September 28, 2024 compared to operating loss of $207.9 million for the nine months ended September 30, 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $425 million; productivity gains of approximately $50 million and lower input costs of approximately $50 million, partially offset by the unfavorable net impact of price and product mix of approximately $80 million.

Current wording

Net sales for the three months ended March 29, 2025, were $2,525.8 million compared to net sales of $2,679.4 million for the three months ended March 30, 2024. The change was primarily attributable to fewer shipping days for the quarter ended March 29, 2025, of approximately $78 million; the unfavorable net impact of foreign exchange rates of approximately $57 million and the impact of the order management system conversion of approximately $50 million, partially offset by the favorable net impact of price and product mix of approximately $31 million.

Previous wording

Global Ceramic—Net sales for the three months ended September 28, 2024 were $1,058.0 million compared to net sales of $1,091.7 million for the three months ended September 30, 2023. The change was primarily attributable to lower sales volume of approximately $18 million and the unfavorable net impact of foreign exchange rates of approximately $13 million.

Current wording

Global Ceramic—Net sales for the three months ended March 29, 2025, were $993.8 million compared to net sales of $1,044.8 million for the three months ended March 30, 2024. The change was primarily attributable to the unfavorable net impact of foreign exchange rates of approximately $36 million and fewer shipping days for the quarter ended March 29, 2025, of approximately $28 million, partially offset by the favorable net impact of price and product mix of approximately $23 million.

Previous wording

Flooring NA—Net sales for the three months ended September 28, 2024 were $974.0 million compared to net sales of $962.2 million for the three months ended September 30, 2023. The change was primarily attributable to higher sales volume of approximately $39 million, partially offset by the unfavorable net impact of price and product mix of approximately $27 million.

Current wording

Flooring NA—Net sales for the three months ended March 29, 2025, were $862.4 million compared to net sales of $900.2 million for the three months ended March 30, 2024. The change was primarily attributable to the impact of the order management system conversion of approximately $50 million and fewer shipping days for the quarter ended March 29, 2025, of approximately $28 million, partially offset by higher sales volume of approximately $25 million and the favorable net impact of price and product mix of approximately $17 million.

Previous wording

Flooring ROW—Net sales for the nine months ended September 28, 2024 were $2,148.6 million compared to net sales of $2,299.1 million for the nine months ended September 30, 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $189 million, partially offset by higher sales volume of approximately $41 million.

Current wording

Flooring ROW—Net sales for the three months ended March 29, 2025, were $669.6 million compared to net sales of $734.4 million for the three months ended March 30, 2024. The change was primarily attributable to fewer shipping days for the quarter ended March 29, 2025, of approximately $22 million; the unfavorable net impact of foreign exchange rates of approximately $21 million and lower sales volume of approximately $12 million.

Previous wording

Gross profit for the three months ended September 28, 2024 was $692.6 million compared to gross profit of $692.0 million for the three months ended September 30, 2023. The change was primarily attributable to productivity gains of approximately $33 million; lower input costs of approximately $25 million and lower restructuring, acquisition and integration-related, and other costs of approximately $24 million, partially offset by the unfavorable net impact of price and product mix of approximately $69 million. Gross profit did not significantly change as a percentage of net sales for the three months ended September 28, 2024 compared to the three month ended September 30, 2023.

Current wording

Gross profit for the three months ended March 29, 2025, was $583.3 million compared to gross profit of $649.5 million for the three months ended March 30, 2024. The change was primarily attributable to the higher input costs of approximately $30 million; order management system conversion of approximately $26 million; higher restructuring, acquisition and integration-related, and other costs of approximately $20 million and lower sales volume of approximately $12 million, partially offset by productivity gains of approximately $42 million.

Previous wording

Global Ceramic—Operating income was $83.4 million for the three months ended September 28, 2024 compared to operating loss of $355.2 million for the three months ended September 30, 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $425 million; productivity gains of approximately $22 million and lower restructuring, acquisition and integration-related, and other costs of approximately $10 million, partially offset by the unfavorable net impact of price and product mix of approximately $15 million.

Current wording

Global Ceramic—Operating income was $41.8 million for the three months ended March 29, 2025, compared to operating income of $48.8 million for the three months ended March 30, 2024. The change was primarily attributable to higher input costs of approximately $18 million and lower sales volume of approximately $10 million, partially offset by productivity gains of approximately $21 million.

Previous wording

Flooring ROW—Operating income was $67.8 million for the three months ended September 28, 2024 compared to operating loss of $159.6 million for the three months ended September 30, 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $235 million, partially offset by the unfavorable net impact of price and product mix of approximately $27 million.

Current wording

Flooring ROW—Operating income was $58.7 million for the three months ended March 29, 2025, compared to operating income of $70.9 million for the three months ended March 30, 2024. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $8 million.

Previous wording

Interest expense was $11.2 million for the three months ended September 28, 2024 compared to interest expense of $20.1 million for the three months ended September 30, 2023. The change was primarily attributable to strong cash flow and the resulting lower debt level.

Current wording

Interest expense was $6.4 million for the three months ended March 29, 2025, compared to interest expense of $14.9 million for the three months ended March 30, 2024. The change was primarily attributable to strong cash flow and prepayments of the U.S. and European portions of the Term Loan Facility during the three months ended March 30, 2024, resulting in lower debt.

Previous wording

Other income and expense, net was income of $0.7 million for the three months ended September 28, 2024 compared to other income of $8.5 million for the three months ended September 30, 2023. Other income and expense, net did not significantly change for the three months ended September 28, 2024 from the three months ended September 30, 2023.

Current wording

Other income and expense, net was income of $0.5 million for the three months ended March 29, 2025, compared to other income of $1.1 million for the three months ended March 30, 2024. Other income and expense, net did not significantly change for the three months ended March 29, 2025, from the three months ended March 30, 2024.

Previous wording

For the three months ended September 28, 2024, the Company recorded income tax expense of $39.8 million on earnings before income taxes of $201.8 million, for an effective tax rate of 19.7%. For the three months ended September 30, 2023, the Company recorded income tax expense of $15.0 million on loss before income taxes of $745.3 million, for an effective tax rate of (2.0)%. The increase in the effective tax rate was primarily driven by a shift from losses before income taxes to earnings before income taxes and the impairment of non-deductible goodwill during the three months ended September 30, 2023.

Current wording

For the three months ended March 29, 2025, the Company recorded income tax expense of $17.5 million on earnings before income taxes of $90.1 million, for an effective tax rate of 19.4%. For the three months ended March 30, 2024, the Company recorded income tax expense of $27.8 million on earnings before income taxes of $132.8 million, for an effective tax rate of 21.0%. The increase in the effective tax rate was primarily driven by a tax benefit related to a prior period adjustment to deferred taxes during the three months ended March 29, 2025, 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 nine months of 2024 was $736.9 million, compared to net cash provided by operating activities of $1,032.9 million in the first nine months of 2023. The change was primarily attributable to cash used for inventory and accounts receivable, partially offset by cash provided by higher net earnings and the change in accounts payable.

Current wording

Net cash provided by operating activities in the first three months of 2025 was $3.7 million, compared to net cash provided by operating activities of $183.7 million in the first three months of 2024. The change was primarily attributable to the change in accounts receivable; inventory and lower net earnings, partially offset by the change in accounts payable.

Previous wording

Net cash used in financing activities in the first nine months of 2024 was $651.6 million compared to net cash used in financing activities of $273.8 million in the first nine months of 2023. The change was primarily attributable to higher payments of term loan facility of $912.3 million, lower proceeds from Senior Notes of $600.0 million, higher share repurchase of $87.9 million and lower proceeds from Senior Credit Facility of $35.9 million (net of payments), partially offset by the higher proceeds from commercial paper of $1,239.3 million (net of payments).

Current wording

Net cash provided by financing activities in the first three months of 2025 was $90.8 million compared to net cash used in financing activities of $76.1 million in the first three months of 2024. The change was primarily attributable to payments of term loan facility of $912.3 million for the three months ended March 30 2024, partially offset by the lower proceeds from commercial paper of $787.3 million (net of payments) and higher share repurchase of $25.5 million.

Previous wording

As of September 28, 2024, the Company had cash of $424.0 million, of which $245.6 million was in the United States and $178.4 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 March 29, 2025, the Company had cash of $702.5 million, of which $458.8 million was in the United States and $243.7 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 September 28, 2024, there remained $141.4 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 March 29, 2025, there remained $42.3 million authorized under the 2022 Share Repurchase Program.

Previous wording

Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses. The Company expects raw material prices, many of which are petroleum-based, to fluctuate based upon worldwide supply and demand of commodities utilized in the Company’s production processes. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to its customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. In the past, the Company has often been able to enhance productivity and develop new product innovations to help offset increases in costs resulting from inflation in its operations.

Current wording

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 used in the Company’s production processes. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to its customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. In the past, the Company has often been able to enhance productivity and develop new product innovations to help offset increases in costs resulting from inflation in its operations.