Mohawk Industries Inc 10-Q for FY2022 Q3

Mohawk Industries Inc (MHK)

10-Q 2022-10-28 For: 2022-10-01

Added on April 09, 2026

About this 10-Q

Mohawk Industries Inc filed this 10-Q on October 28, 2022, covering the quarter ended October 1, 2022 (FY2022 Q3).

Headline figures

Quarter ended October 1, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.92B; up 3.6% from $2.82B a year earlier
Net loss: $533.97M; compared with net income of $270.98M a year earlier
Diluted EPS: -$8.40; compared with $3.93 a year earlier

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


		Page No
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

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

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

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

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

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47


	October 1, 2022		December 31, 2021
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	326,971	268,895
Short-term investments	110,000		323,000
Receivables, net	2,003,261		1,839,985
Inventories	2,900,116		2,391,672
Prepaid expenses	495,226		394,649

Other current assets	18,755		20,156
Total current assets	5,854,329		5,238,357
Property, plant and equipment	9,342,898		9,250,587
Less: accumulated depreciation	4,818,362		4,613,722
Property, plant and equipment, net	4,524,536		4,636,865
Right of use operating lease assets	400,412		389,967
Goodwill	1,827,968		2,607,909
Tradenames	646,661		694,905
Other intangible assets subject to amortization, net	176,439		205,075
Deferred income taxes and other non-current assets	370,689		451,439
Total assets	$	13,801,034	14,224,517



LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	1,542,139	624,503
Accounts payable and accrued expenses	2,256,097		2,217,418
Current operating lease liabilities	106,511		104,434
Total current liabilities	3,904,747		2,946,355
Deferred income taxes	430,888		495,521
Long-term debt, less current portion	1,019,984		1,700,282
Non-current operating lease liabilities	306,617		297,390
Other long-term liabilities	313,741		356,753
Total liabilities	5,975,977		5,796,301
Commitments and contingencies (Note 17)

Stockholders’ equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued	—		—
Common stock, $.01 par value; 150,000 shares authorized; 70,875 and 72,952 shares issued and outstanding in 2022 and 2021, respectively	709		729
Additional paid-in capital	1,925,894		1,911,131
Retained earnings	7,376,304		7,692,064
Accumulated other comprehensive loss	(1,268,663)		(966,952)
	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
Total Mohawk Industries, Inc. stockholders’ equity	7,818,753		8,421,425
Nonredeemable noncontrolling interests	6,304		6,791
Total stockholders’ equity	7,825,057		8,428,216
Total liabilities and stockholders’ equity	$	13,801,034	14,224,517


	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


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


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


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


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


	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


	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


	At October 1, 2022		At December 31, 2021


Short-term investments:

Commercial paper (Level 2)	$	110,000	323,000


	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


	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


	Tradenames
Balance as of December 31, 2021	$	694,905

Impairment charge	(7,257)
Currency translation during the period	(40,987)
Balance as of October 1, 2022	$	646,661


	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)


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


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


	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


	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)


		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


	At October 1, 2022		At December 31, 2021
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
Corporate and intersegment eliminations	407,035		576,040
Total	$	13,801,034	14,224,517


	At October 1, 2022			At December 31, 2021
	Fair Value		Carrying Value	Fair Value	Carrying Value
1.750% Senior Notes, payable June 12, 2027; interest payable annually	$	428,550	490,052	601,037	566,380
3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually	416,750		500,000	538,545	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	932,000		932,000	598,000	598,000
European commercial paper	—		—	15,859	15,859




Finance leases and other	47,081		47,081	53,163	53,163
Unamortized debt issuance costs	(7,010)		(7,010)	(8,617)	(8,617)
Total debt	2,415,337		2,562,123	2,413,617	2,324,785
Less current portion of long term-debt and commercial paper	1,540,105		1,542,139	624,503	624,503
Long-term debt, less current portion	$	875,232	1,019,984	1,789,114	1,700,282








Right of use assets obtained in exchange for lease obligations:
Operating leases	$	97,473	150,553
Finance leases	$	11,332	11,525


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


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.)
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						Interactive Data File


Additional Commitment Lender			Term A-1 Commitment
Bank of America, N.A.			$100,000,000.00
Total:			$100,000,000.00


1		I have reviewed this quarterly report on Form 10-Q of Mohawk Industries, Inc.;
2		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


/s/ Jeffrey S. Lorberbaum
Jeffrey S. Lorberbaum
Chairman and Chief Executive Officer


1			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.