The accompanying unaudited 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 and notes thereto, and the Company’s description of critical accounting policies, included in the Company’s 2016 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.

The Company has numerous investments outside the United States. The net assets of these subsidiaries are exposed to changes and volatility in currency exchange rates. The Company uses foreign currency denominated debt to hedge some of its non-U.S. net investments against adverse movements in exchange rates. The gains and losses on the Company's net investments in its non-U.S. operations are partially economically offset by gains and losses on its foreign currency borrowings. The Company designated its €500,000 2.00% Senior Notes borrowing as a net investment hedge ofagainst a portion of its European operations. For the threenine months ended April 1,September 30, 2017, the change in the U.S. dollar value of the Company's euro denominated debt was an increase of $6,781$64,684 ($4,23840,427 net of taxes), which is recorded in the foreign currency translation adjustment component of other comprehensive income (loss). The increase in the U.S. dollar value of the Company's debt partially offsets the euro-to-dollar translation of the Company's net investment in its European operations.

On January 20,April 4, 2017, the Company andcompleted its subsidiary, Marazzi Acquisitionpurchase of Emilceramica S.r.l entered into a share purchase agreement to acquire(“Emil”), a ceramic company in Italy for approximately €189,900, subject to certain adjustments set forth inItaly. The total value of the share purchase agreement.acquisition was $186,066. The Company anticipates product, sales and manufacturing synergies thatEmil acquisition will enhance itsthe Company's cost position and strengthen its combined brandsbrand and distribution.distribution in Europe. The acquisition was completed on April 4, 2017. The Company has not completed theacquisition's results and purchase price allocation have been included in the consolidated financial statements since the date of the acquisition. The Company's acquisition of Emil resulted in a preliminary goodwill allocation of $59,491, indefinite-lived tradename intangible asset of $16,196 and an intangible asset subject to amortization of $2,348. The goodwill is not expected to be deductible for this acquisition.

The Company incurs costs in connection with acquiring, integrating and restructuring acquisitions and in connection with its global cost-reduction/productivity initiatives. For example:

Restructuring, acquisition transaction and integration-related costs consisted of the following during the three and nine months ended April 1,September 30, 2017 and April 2,October 1, 2016:

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

    

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

The Company granted 153154 restricted stock units ("RSUs") at a weighted average grant-date fair value of $226.85$226.91 per unit for the threenine months ended April 1,September 30, 2017. The Company granted 182 RSUs at a weighted average grant-date fair value of $184.88 per unit for the threenine months ended April 2,October 1, 2016. The Company recognized stock-based compensation costs related to the issuance of RSUs of $9,465$7,177 ($5,7434,355 net of taxes) and $9,049$5,288 ($5,4913,209 net of taxes) for the three months ended April 1,September 30, 2017 and April 2,October 1, 2016, 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 $30,601 ($18,569 net of taxes) and $28,807 ($17,480 net of taxes) for the nine months ended September 30, 2017 and October 1, 2016, 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 $51,948$30,979 as of April 1,September 30, 2017, and will be recognized as expense over a weighted-average period of approximately 1.901.48 years. The Company also recognized stock-based compensation costs related to stock options of $2$6 ($14 net of taxes) and $10$34 ($621 net of taxes) for the threenine months ended April 1,September 30, 2017 and April 2,October 1, 2016, respectively, which has been allocated to cost of sales and selling, general and administrative expenses.

Basic earnings per common share is computed by dividing net earnings from continuing operations attributableavailable to Mohawk Industries, Inc.common stockholders by the weighted average number of common shares outstanding during each period. Diluted 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 earnings attributableavailable to Mohawk Industries, Inc.common stockholders and weighted average common shares outstanding for purposes of calculating basic and diluted earnings per share is as follows:

The Company has three reporting segments: the Global Ceramic segment, the Flooring NA segment and the Flooring ROW segment. The Global Ceramic segment designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone and other products, which it distributes primarily in North America, Europe and Russia through its network of regional distribution centers and Company-operated service centers using company-operated trucks, common carriers or rail transportation.centers. The segment’s product lines are sold through Company-operated service centers, independent distributors, home center retailers, tile and flooring retailers and contractors. The Flooring NA segment designs, manufactures, sources and markets its floor covering product lines, including carpets, rugs, carpet pad, hardwood, laminate and vinyl products, including LVT, which it distributes through its network of regional distribution centers and satellite warehouses using company-operated trucks, common carrier or rail transportation. The segment’s product lines are sold through various selling channels, including independent floor covering retailers, home centers, mass merchandisers, department stores, shop at home, buying groups, commercial dealers and commercial end users. The Flooring ROW segment designs, manufactures, sources, licenses and markets laminate, hardwood flooring, roofing elements, insulation boards, medium-density fiberboard, chipboards, other wood products, sheet vinyl and LVT, which it distributes primarily in Europe and Russia through various selling channels, which include retailers, independent distributors and home centers.

The accounting policies for each operating segment are consistent with the Company’s policies for the consolidated financial statements. Amounts disclosed for each segment are prior to any elimination or consolidation entries. Corporate general and administrative expenses attributable to each segment are estimated and allocated accordingly. Segment performance is evaluated based on operating income.

The Company is involved in litigation from time to time in the regular course of its business. 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.

In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama (the “Water“Gadsden Water Board”) filed an individual complaint in the Circuit Court of Etowah County, Alabama against certain manufacturers, suppliers and users of chemicals containing perfluorinated compounds, including the Company. On October 26, 2016, the defendants removed the case to the United States District Court for the Northern District of Alabama, Middle Division, alleging diversity of citizenship and fraudulent joinder.  The Gadsden Water Board filed a motion to remand the case back to the state court and the defendants have opposed the Gadsden Water Board’s motion.  The federal court recently granted Gadsden Water Board's motion for remand. On October 24, 2017, the Company appealed the federal court's determination that co-defendant Industrial Chemicals, Inc. ("ICI") was properly joined as a party to the case. ICI's presence in the case deprives the federal court of jurisdiction over the case.

In May, 2017, the Water Works and Sewer Board of the Town of Centre, Alabama (the “Centre Water Board”) filed a very similar complaint to the Gadsden Water Board complaint in the Circuit Court of Cherokee County. On June 19, 2017, the defendants removed this case to the United States District Court for the Northern District of Alabama, Middle Division, again alleging diversity of citizenship and fraudulent joinder. The Centre Water Board filed a motion to remand the case back to state court. The defendants opposed the Centre Water Board’s motion, and the parties await a ruling from the federal court on the motion to remand.

The Company has never manufactured perfluorinated compounds, but purchased them for use in the manufacture of its carpets prior to 2007.  The Gadsden and Centre Water Board isBoards are not alleging that chemical levels in the Company’s wastewater discharge exceeded legal limits.  Instead, the Gadsden and Centre Water Board isBoards are seeking lost profits based on allegations that itstheir customers decreased water purchases, as well as reimbursement for the cost of a filter and punitive damages.

The Company intends to pursue all available defenses related to this matter.these matters.  The Company does not believe that the ultimate outcomeoutcomes of this casethese cases will have a material adverse effect on its financial condition, but there can be no assurances at this stage that the outcomeoutcomes will not have a material adverse effect on the Company’s results of operations, liquidity or cash flows in a given period.  Furthermore, the Company cannot predict whether any additional civil or regulatory actions against it may arise from the allegations in this matter.

In January 2012, the Company received a €23,789 assessment from the Belgian tax authority related to its year ended December 31, 2008, asserting that the Company had understated its Belgian taxable income for that year. The Company filed a formal protest in the first quarter of 2012 refuting the Belgian tax authority's position. The Belgian tax authority set aside the assessment in the third quarter of 2012 and refunded all related deposits, including interest income of €1,583 earned on such deposits. However, on October 23, 2012, the Belgian tax authority notified the Company of its intent to increase the Company's taxable income for the year ended December 31, 2008 under a revised theory. On December 28, 2012, the Belgian tax authority issued assessments for the years ended December 31, 2005 and December 31, 2009, in the amounts of €46,135 and €35,567, respectively, including penalties, but excluding interest. The Company filed a formal protest during the first quarter of 2013 relating to the new assessments. In September 2013, the Belgian tax authority denied the Company's protests, and the Company has brought these two years before the Court of First Appeal in Bruges. In December 2013, the Belgian tax authority issued additional assessments related to the years ended December 31, 2006, 2007, and 2010, in the amounts of €38,817, €39,635, and €43,117, respectively, including penalties, but excluding interest. The Company filed formal protests during the first quarter of 2014, refuting the Belgian tax authority's position for each of the years assessed. In the quarter ended June 28, 2014, the Company received a formal assessment for the year ended December 31, 2008, totaling €30,131, against which the Company also submitted its formal protest. All 4 additional years were brought before the Court of First Appeal in November 2014. In January of 2015, the Company met with the Court of First Appeal in Bruges and agreed with the Belgian tax authorities to consolidate and argue the issues regarding the years 2005 and 2009, and apply the ruling to all of the open years (to the extent there are no additional facts/procedural arguments in the other years). In May 2017, the statute of limitation was extended to include the calendar year 2011.

On January 27, 2016, the Court of First Appeal in Bruges, Belgium ruled in favor of the Company with respect to the calendar years ending December 31, 2005 and December 31, 2009. On March 9, 2016, the Belgian tax authority lodged its Notification of Appeal with the Ghent Court of Appeal.

The Company disagrees with the views of the Belgian tax authority on this matter and will persist in its vigorous defense. Nevertheless, on May 24, 2016, the tax collector representing the Belgian tax authorities imposed a lien on the Company's properties in Wielsbeke (Ooigemstraat and Breestraat), Oostrozebeke (Ingelmunstersteenweg) and Desselgem (Waregemstraat) included in the Flooring ROW segment. The purpose of the lien is to provide security for payment should the Belgian tax authority prevail on its appeal. The lien does not interfere with the Company's operations at these properties.

On March 26, 2015, the Company amended and restated its 2013 Senior Credit Facility increasing its size from $1,000,000 to $1,800,000 and extending the maturity from September 25, 2018 to March 26, 2020 (as amended and restated, the "2015 Senior Credit Facility"). The 2015 Senior Credit Facility eliminated certain provisions in the 2013 Senior Credit Facility, including those that: (a) accelerated the maturity date to 90 days prior to the maturity of senior notes due in January 2016 if certain specified liquidity levels were not met; and (b) required that certain subsidiaries guarantee the Company's obligations if the Company’s credit ratings fell below investment grade. The 2015 Senior Credit Facility also modified certain negative covenants to provide the Company with additional flexibility, including flexibility to make acquisitions and incur additional indebtedness. On March 1, 2016, the Company amended the 2015 Senior Credit Facility to, among other things, carve out from the general limitation on subsidiary indebtedness with respect to the issuance of Euro-denominated commercial paper notes by subsidiaries. Additionally, at several points in 2016, the Company extended the maturity date of the 2015 Senior Credit Facility from March 26, 2020 to March 26, 2021. In Marchthe first half of 2017, the Company amended the 2015 Senior Credit Facility to extend the maturity date from March 26, 2021 to March 26, 2022 with respect to all but $75,000 of the total amount committed under the 2015 Senior Credit Facility. In April 2017, the Company extended the maturity for an additional $60,000 to March 26, 2022. Of the total amount committed under the 2015 Senior Credit Facility, $1,785,000 now matures on March 26, 2022, and $15,000 matures on March 26, 2021.

At the Company's election, revolving loans under the 2015 Senior Credit Facility bear interest at annual rates equal to either (a) LIBOR for 1, 2, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 1.00% and 1.75% (1.125% as of April 1,September 30, 2017), or (b) the higher of the Wells Fargo Bank, National Association prime rate, the Federal Funds rate plus 0.5%, or a monthly LIBOR rate plus 1.0%, plus an applicable margin ranging between 0.00% and 0.75% (0.125% as of April 1,September 30, 2017). The Company also pays a commitment fee to the lenders under the 2015 Senior Credit Facility on the average amount by which the aggregate commitments of the lenders' exceed utilization of the 2015 Senior Credit Facility ranging from 0.10% to 0.225% per annum (0.125% as of April 1,September 30, 2017). 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).

The obligations of the Company and its subsidiaries in respect of the 2015 Senior Credit Facility are unsecured.

The 2015 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, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, future negative pledges, and changes in the nature of the Company's business. The Company is also required to maintain a Consolidated Interest Coverage Ratio of at least 3.0 to 1.0 and a Consolidated Net Leverage Ratio of no more than 3.75 to 1.0, each as of the last day of any fiscal quarter. The limitations contain customary exceptions or, in certain cases, do not apply as long as the Company is in compliance with the financial ratio requirements and is not otherwise in default.

The 2015 Senior Credit Facility also contains customary representations and warranties and events of default, subject to customary grace periods.

The Company paid financing costs of $522$567 in connection with the extension of its 2015 Senior Credit Facility from March 26, 2021 to March 26, 2022. These costs were deferred and, along with unamortized costs of $6,873 are being amortized over the term of the 2015 Senior Credit Facility.

As of April 1,September 30, 2017, amounts utilized under the 2015 Senior Credit Facility included $38,615$18,055 of borrowings and $380$55,720 of standby letters of credit related to various insurance contracts and foreign vendor commitments. The outstanding borrowings of $1,458,328$1,150,352 under the Company's U.S. and European commercial paper programs as of April 1,September 30, 2017 reduce the availability of the 2015 Senior Credit Facility. Including commercial paper borrowings, the Company has utilized $1,497,323$1,224,127 under the 2015 Senior Credit Facility resulting in a total of $302,677$575,873 available as of April 1,September 30, 2017.

    

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 days 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 2015 Senior Credit Facility as a liquidity backstop for its commercial paper programs. Accordingly, the total amount outstanding under all of the Company's commercial paper programs may not exceed $1,800,000 (less any amounts drawn on the 2015 Credit Facility) at any time.

The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of April 1,September 30, 2017, there was $578,200$122,000 outstanding under the U.S. program, and the euro equivalent of $880,128$1,028,352 was outstanding under the European program. The weighted-average interest rate and maturity period for the U.S. program were 1.23%1.37% and 19.445.36 days, respectively. The weighted average interest rate and maturity period for the European program were (0.15)(0.19)% and 41.5925.32 days, respectively.

On June 9, 2015, the Company issued €500,000 aggregate principal amount of 2.00% Senior Notes due January 14, 2022. The 2.00% 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 2.00% Senior Notes is payable annually in cash on January 14 of each year. The Company paid financing costs of $4,218 in connection with the 2.00% Senior Notes. These costs were deferred and are being amortized over the term of the 2.00% Senior Notes.

    

On January 31, 2013, the Company issued $600,000 aggregate principal amount of 3.85% Senior Notes due February 1, 2023. The 3.85% Senior Notes are senior unsecured obligations of the Company and rank pari passu with all the Company's existing and future unsecured indebtedness. Interest on the 3.85% Senior Notes is 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 amortized over the term of the 3.85% Senior Notes.

On January 17, 2006, the Company issued $900,000 aggregate principal amount of 6.125% Senior Notes due January 15, 2016. During 2014, the Company purchased for cash $254,445 aggregate principal amount of its outstanding 6.125% Senior Notes due January 15, 2016. On January 15, 2016, the Company paid the remaining $645,555 outstanding principal of its 6.125% Senior Notes (plus accrued but unpaid interest) utilizing cash on hand and borrowings under its U.S. commercial paper programprogram.

On December 19, 2012, the Company entered into a three-year on-balance sheet trade accounts receivable securitization agreement (the "Securitization Facility"). On September 11, 2014, the Company made certain modifications to its Securitization Facility, which modifications, among other things, increased the aggregate borrowings available under the facility from $300,000 to $500,000 and decreased the interest margins on certain borrowings. On December 10, 2015, the Company amended the terms of the Securitization Facility, reducing the applicable margin and extending the termination date from December 19, 2015 to December 19, 2016. The Company further amended the terms of the Securitization Facility on December 13, 2016, extending the termination date to December 19, 2017. The Company paid financing costs of $250 in connection with this extension. These costs were deferred and are being amortized over the remaining term of the Securitization Facility.

Under the terms of the Securitization Facility, certain subsidiaries of the Company sell at a discount certain of their trade accounts receivable (the “Receivables”) to Mohawk Factoring, LLC (“Factoring”) on a revolving basis. Factoring is a wholly owned, bankruptcy remote subsidiary of the Company, meaning that Factoring is a separate legal entity whose assets are available to satisfy the claims of the creditors of Factoring only, not the creditors of the Company or the Company’s other subsidiaries.  To fund such purchases, Factoring may borrow up to $500,000 based on the amount of eligible Receivables owned by Factoring, and Factoring has granted a security interest in all of such Receivables to the third-party lending group as collateral for such borrowings.  Amounts loaned to Factoring under the Securitization Facility bear interest at commercial paper interest rates, in the case of lenders that are commercial paper conduits, or LIBOR in the case of lenders that are not commercial paper conduits, in each case, plus an applicable margin of 0.70% per annum. Factoring also pays a commitment fee at a per annum rate of 0.30% on the unused amount of each lender’s commitment. At April 1,As of September 30, 2017, the amountthere were no amounts utilized under the Securitization Facility was $0.

The fair values and carrying values of our debt instruments are detailed as follows:

Mohawk Industries, Inc. (“Mohawk” or the “Company”) is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company's vertically integrated manufacturing and distribution processes provide competitive advantages in carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile ("LVT") and vinyl flooring. The Company's industry-leading innovation develops products and technologies that differentiate its brands in the marketplace and satisfy all flooring related remodeling and new construction requirements. The Company's brands are among the most recognized in the industry and include American Olean^®, Daltile^®, Durkan^®, IVC^®, Karastan^®, Marazzi^®, Mohawk^®, Pergo^®, Quick-Step^® and Unilin^®. The Company has transformed its business from an American carpet manufacturer into the world's largest flooring company with operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States. The Company had annual net sales in 2016 of $9.0 billion.

The Company is a significant participant in every major product category across the global flooring industry. In theDuring 2016, industry sales of tile, LVT, sheet vinyl, laminate and wood are growing faster thangrew while sales of carpet and rugs. Insiderugs were down primarily due to the shift to polyester in residential products which sell at lower average selling prices. However, in 2017 the industry has implemented multiple soft surface category, sales of polyester carpets are increasing, which decreases the average selling price in the soft surface category.increases to offset inflation leading to higher sales. The Company believes that it is well positioned in all product types to satisfy these changes in customer trends.

On April 4, 2017, the Company completed itsthe acquisition of a ceramic company in ItalyEmil for approximately €189.9$186.1 million. The Company also acquired three additional businesses during the second quarter of 2017 for approximately $63.9 million.

Net sales for the three months ended April 1,September 30, 2017 were $2,220.6$2,448.5 million, reflecting an increase of $48.6$154.4 million, or 2.2%6.7%, from the $2,172.0$2,294.1 million reported for the three months ended April 2,October 1, 2016. The increase was primarily attributable to higher sales volume of approximately $50$42 million, or 2%, which includes sales volume attributable to acquisitions of approximately $47 million, offset by a decrease in legacy sales volume of approximately $5 million, including the loss of patent revenue and the impact of the hurricanes during the quarter. Also contributing to the increase in sales was the favorable net impact of price and product mix of approximately $73 million, or 3%, and the net impact of favorable foreign exchange rates of approximately $40 million, or 2%.

Gross profit for the three months ended April 1,September 30, 2017 was $680.4$783.3 million (30.6%(32.0% of net sales), an increase of $40.7$56.7 million or 6.4%7.8%, compared to gross profit of $639.7$726.6 million (29.5%(31.7% of net sales) for the three months ended April 2,October 1, 2016. As a percentage of net sales, gross profit increased 11030 basis points. The increase in gross profit dollars was primarily attributable to higher sales volume of approximately $14 million, savings from capital investments and cost reduction initiatives of approximately $36$40 million, and the favorable net impact of price and product mix of approximately $63 million, the net impact of favorable foreign exchange rates of approximately $10 million, higher sales volumes of approximately $4 million, and the favorable impact of lower restructuring, acquisition and integration-related, and other costs of approximately $5 million, partially offset by higher input costs of approximately $22$61 million, including increased material costs of approximately $11$47 million and costs associated with investments in expansion of production capacity of approximately $3 million.

Selling, general and administrative expenses for the three months ended April 1,September 30, 2017 were $405.6$403.2 million (18.3%(16.5% of net sales), an increase of $11.6$55.0 million compared to $394.0$348.3 million (18.1%(15.2% of net sales) for the three months ended April 2,October 1, 2016. As a percentage of net sales, selling, general and administrative expenses increased 20130 basis points. The increase in selling, general and administrative expenses in dollars was primarily attributable to the unfavorable impact of higher restructuring, acquisition and integration-related, and other costs of approximately $8$34 million, approximately $14 million of costs due to higher sales volume, approximately $6 million of costs associated with investments in new product development, sales personnel, and marketing, the net impact of unfavorable foreign exchange rates of approximately $5$6 million, and increased employee costs of costs due to higher sales volume,approximately $4 million, partially offset by savings from capital investments and cost reduction initiatives of approximately $5$9 million. Restructuring, acquisition and integration-related, and other costs were higher primarily due to the absence of approximately $90 million received related to a contract dispute, partially offset by the approximately $48 million charge related to the write-off of the Lees tradename that were recorded in the prior year.

Operating income for the three months ended April 1,September 30, 2017 was $274.8$380.1 million (12.4%(15.5% of net sales) reflecting an increase of $29.1$1.8 million, or 11.8%0.5%, compared to operating income of $245.7$378.3 million (11.3%(16.5% of net sales) for the three months ended April 2,October 1, 2016. The increase in operating income was primarily attributable to savings from capital investments and cost reduction initiatives of approximately $41$49 million, increased sales volumes of approximately $9 million and the favorable net impact of price and product mix of approximately $9$62 million, and the net impact of favorable exchange rates of approximately $4 million, partially offset by higher input costs of approximately $22$61 million, including increased material costs of approximately $11$47 million, and approximately $8$6 million of costs associated with investments in new product development, sales personnel, and marketing.marketing, the unfavorable impact of higher restructuring, acquisition and integration-related, and other costs of approximately $29 million, decreased sales volumes of approximately $9 million, primarily attributable to lower patent revenue, increased employee costs of approximately $4 million, and costs associated with investments in expansion of production capacity of approximately $3 million. Restructuring, acquisition and integration-related, and other costs were higher primarily due to the absence of approximately $90 million received related to a contract dispute, partially offset by the approximately $48 million charge related to the write-off of the Lees tradename that were recorded in the prior year.

Interest expense was $8.2$7.3 million for the three months ended April 1,September 30, 2017, reflecting a decrease of $4.1$2.2 million compared to interest expense of $12.3$9.4 million for the three months ended April 2,October 1, 2016. The decrease was primarily attributable to a shift in the Company's borrowings to lower interest rate instruments.

Other incomeexpense was $2.8$1.3 million for the three months ended April 1,September 30, 2017, reflecting a favorable change of $6.3$2.6 million compared to other expense of $3.4$3.8 million for the three months ended April 2,October 1, 2016. The change was primarily attributable to a charge for the release of an indemnification receivable in the prior year.

Net sales for the nine months ended September 30, 2017 were $7,122.2 million, reflecting an increase of $345.7 million, or 5.1%, from the $6,776.5 million reported for the nine months ended October 1, 2016. The increase was primarily attributable to higher sales volume of approximately $201 million, or 3%, which includes legacy sales volume of approximately $142 million and sales volume attributable to acquisitions of approximately $95 million, offset by the unfavorable impact of fewer shipping days of approximately $36 million. Also contributing to the increase in sales was the favorable net impact of price and product mix of approximately $135 million, or 2%, and the net impact of favorable foreign exchange rates of approximately $9 million.

Other expense was unchanged at $1.5 million for the nine months ended September 30, 2017 and October 1, 2016. The increased unfavorable impact of foreign exchange rates on transactions.transactions in the current year was offset by a charge for the release of an indemnification receivable in the prior year.

For the threenine months ended April 1,September 30, 2017, the Company recorded income tax expense of $68.4$251.6 million on earnings before income taxes of $269.4$985.4 million for an effective tax rate of 25.4%25.5%, as compared to an income tax expense of $57.8$242.1 million on earnings before income taxes of $229.9$941.1 million, for an effective tax rate of 25.1%25.7% for the threenine months ended April 2,October 1, 2016. The difference in the effective tax rate for the comparative period is due to the geographic dispersion of earnings and losses for the periods.

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. At April 1,As of September 30, 2017, the Company had a total of $802,677$575.9 million available under its 2015 Senior Credit Facility and $500.0 million under its Securitization Facility.

Net cash provided by operating activities in the first threenine months of 2017 was $165.9$874.2 million, compared to net cash provided by operating activities of $151.9$1,000.3 million in the first threenine months of 2016. The increasedecrease of $14.0$126.1 million in 2017 was primarily attributable to higher earnings during the first three months of 2017 when compared to the prior year. The increase in earnings was partially offset by changes in working capital. These changes in working capital reflect normal fluctuations relative to the timing and nature of these transactions.

Net cash used in investing activities in the first threenine months of 2017 was $202.1$905.4 million compared to net cash used in investing activities of $140.8$460.8 million in the first threenine months of 2016. CapitalThe increase was primarily due to acquisitions in the current year of $250.8 million. Also, capital expenditures increased by $60.4$193.9 million to $201.3$654.6 million in the current year. The Company continues to invest to optimize sales and profit growth this year and beyond with product expansion and cost reduction projects in the business. Capital spending during the remainder of 2017 is expected to exceed $550$200 million, resulting in the full year spending being in excess of $750approximately $900 million.

Net cash provided byused in financing activities in the first threenine months of 2017 was $90.9$23.3 million compared to net cash used in financing activities of $0.2$516.9 million in the threenine months of 2016. The change in cash provided byused in financing is primarily attributable to the issuance and sale of $357.6 million in Floating Rate Notes in the current year and the repayment of senior notes of $646$645.6 million in the prior year, partially offset by decreased borrowings in the current year.

At the Company's election, revolving loans under the 2015 Senior Credit Facility bear interest at annual rates equal to either (a) LIBOR for 1, 2, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 1.00% and 1.75% (1.125% as of April 1,September 30, 2017), or (b) the higher of the Wells Fargo Bank, National Association prime rate, the Federal Funds rate plus 0.5%, or a monthly LIBOR rate plus 1.0%, plus an applicable margin ranging between 0.00% and 0.75% (0.125% as of April 1,September 30, 2017). The Company also pays a commitment fee to the lenders under the 2015 Senior Credit Facility on the average amount by which the aggregate commitments of the lenders' exceed utilization of the 2015 Senior Credit Facility ranging from 0.10% to 0.225% per annum (0.125% as of April 1,September 30, 2017). 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).

The obligations of the Company and its subsidiaries in respect of the 2015 Senior Credit Facility are unsecured.

The 2015 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, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, future negative pledges, and changes in the nature of the Company's business. The Company is also required to maintain a Consolidated Interest Coverage Ratio of at least 3.0 to 1.0 and a Consolidated Net Leverage Ratio of no more than 3.75 to 1.0, each as of the last day of any fiscal quarter. The limitations contain customary exceptions or, in certain cases, do not apply as long as the Company is in compliance with the financial ratio requirements and is not otherwise in default.

The 2015 Senior Credit Facility also contains customary representations and warranties and events of default, subject to customary grace periods.

The Company paid financing costs of $0.5$0.6 million in connection with the amendment and extension of its 2015 Senior Credit Facility from March 26, 2021 to March 26, 2022. These costs were deferred and, along with unamortized costs of $6.9 million are being amortized over the term of the 2015 Senior Credit Facility.

As of April 1,September 30, 2017, amounts utilized under the 2015 Senior Credit Facility included $38.6$18.1 million of borrowings and $0.4$55.7 million of standby letters of credit related to various insurance contracts and foreign vendor commitments. The outstanding borrowings of $1,458.3$1,150.4 million under the Company's U.S. and European commercial paper programs as of April 1,September 30, 2017 reduce the availability of the 2015 Senior Credit Facility. Including commercial paper borrowings, the Company has utilized $1,497.3$1,224.1 million under the 2015 Senior Credit Facility resulting in a total of $302.7$575.9 million available as of April 1,September 30, 2017.

    

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 days 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 2015 Senior Credit Facility as a liquidity backstop for its commercial paper programs. Accordingly, the total amount outstanding under all of the Company's commercial paper programs may not exceed $1,800.0 million (less any amounts drawn on the 2015 Credit Facility) at any time.

The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of April 1,September 30, 2017, there was $578.2$122.0 million outstanding under the U.S. program, and the euro equivalent of $880.1$1,028.4 million was outstanding under the European program. The weighted-average interest rate and maturity period for the U.S. program were 1.23%1.37% and 19.445.36 days, respectively. The weighted average interest rate and maturity period for the European program were (0.15)(0.19)% and 41.5925.32 days, respectively.

On June 9, 2015, the Company issued €500.0 million aggregate principal amount of 2.00% Senior Notes due January 14, 2022. The 2.00% 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 2.00% Senior Notes is payable annually in cash on January 14 of each year. The Company paid financing costs of $4.2 million in connection with the 2.00% Senior Notes. These costs were deferred and are being amortized over the term of the 2.00% Senior Notes.

    

On January 31, 2013, the Company issued $600.0 million aggregate principal amount of 3.85% Senior Notes due February 1, 2023. The 3.85% Senior Notes are senior unsecured obligations of the Company and rank pari passu with all the Company's existing and future unsecured indebtedness. Interest on the 3.85% Senior Notes is payable semi-annually in cash on February 1 and August 1 of each year. The Company paid financing costs of $6.0 million in connection with the 3.85% Senior Notes. These costs were deferred and are being amortized over the term of the 3.85% Senior Notes.

On January 17, 2006, the Company issued $900.0 million aggregate principal amount of 6.125% Senior Notes due January 15, 2016. During 2014, the Company purchased for cash $254.4 million aggregate principal amount of its outstanding 6.125% Senior Notes due January 15, 2016. On January 15, 2016, the Company paid the remaining $645.6 million outstanding principal of its 6.125% Senior Notes (plus accrued but unpaid interest) utilizing cash on hand and borrowings under its U.S. commercial paper program.

On December 19, 2012, the Company entered into a three-year on-balance sheet trade accounts receivable securitization agreement (the "Securitization Facility"). On September 11, 2014, the Company made certain modifications to its Securitization Facility, which modifications, among other things, increased the aggregate borrowings available under the facility from $300.0 million to $500.0 million and decreased the interest margins on certain borrowings. On December 10, 2015, the Company amended the terms of the Securitization Facility, reducing the applicable margin and extending the termination date from December 19, 2015 to December 19, 2016. The Company further amended the terms of the Securitization Facility on December 13, 2016, extending the termination date to December 19, 2017. The Company paid financing costs of $0.3 million in connection with this extension. These costs were deferred and are being amortized over the remaining term of the Securitization Facility.

Under the terms of the Securitization Facility, certain subsidiaries of the Company sell at a discount certain of their trade accounts receivable (the “Receivables”) to Mohawk Factoring, LLC (“Factoring”) on a revolving basis. Factoring is a wholly owned, bankruptcy remote subsidiary of the Company, meaning that Factoring is a separate legal entity whose assets are available to satisfy the claims of the creditors of Factoring only, not the creditors of the Company or the Company’s other subsidiaries.  To fund such purchases, Factoring may borrow up to $500.0 million based on the amount of eligible Receivables owned by Factoring, and Factoring has granted a security interest in all of such Receivables to the third-party lending group as collateral for such borrowings.  Amounts loaned to Factoring under the Securitization Facility bear interest at commercial paper interest rates, in the case of lenders that are commercial paper conduits, or LIBOR in the case of lenders that are not commercial paper conduits, in each case, plus an applicable margin of 0.70% per annum. Factoring also pays a commitment fee at a per annum rate of 0.30% on the unused amount of each lender’s commitment. At April 1,As of September 30, 2017, the amountthere were no amounts utilized under the Securitization Facility was $0.0 million.Facility.

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.

As of April 1,September 30, 2017, the Company had cash of $188.4$84.5 million, of which $166.0$74.4 million was held outside the United States. While the Company’s plans are to permanently reinvest the cash held outside the United States, the estimated cost of repatriation

There have been no significant changes to the Company’s critical accounting policies and estimates during the period. The Company’s critical accounting policies and estimates are described in its 2016 Annual Report filed on Form 10-K.

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, 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.

The Company is a calendar year-end company. With respect to its Flooring NA and Global Ceramic segments, its results of operations for the first quarter tend to be the weakest followed by the fourth quarter. The second and third quarters typically produce higher net sales and operating income in these segments. These results are primarily due to consumer residential spending patterns which have historically decreased during the holiday season and the first two months following. The Flooring ROW segment’s second quarter typically produces the highest net sales and earnings followed by a moderate first and fourth quarter and a weaker third quarter.

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 and other input costs; inflation and deflation in consumer markets; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; ability to identify attractive acquisition targets; ability to successfully complete and integrate acquisitions; international operations; changes in foreign exchange rates; introduction of new products; rationalization of operations; tax, product and other claims; litigation; and other risks identified in Mohawk’s SEC reports and public announcements.

As of April 1,September 30, 2017, approximately 43%44% of the Company's debt portfolio was comprised of fixed-rate debt and 57%56% was floating-rate debt. A 1.0 percentage point changeincrease in the interest rate of the floating-rate debt would not have a material impact onresulted in an increase in interest expense of $3.8 million and $11.4 million for the Company's results of operations.three and nine months ended September 30, 2017, respectively. There have been no other significant changes to the Company’s exposure to market risk as disclosed in the Company’s 2016 Annual Report filed on Form 10-K.    

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.

The Company is involved in litigation from time to time in the regular course of its business. 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.

In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama (the “Water“Gadsden Water Board”) filed an individual complaint in the Circuit Court of Etowah County, Alabama against certain manufacturers, suppliers and users of chemicals containing perfluorinated compounds, including the Company. On October 26, 2016, the defendants removed the case to the United States District Court for the Northern District of Alabama, Middle Division, alleging diversity of citizenship and fraudulent joinder.  The Gadsden Water Board filed a motion to remand the case back to the state court and the defendants have opposed the Gadsden Water Board’s motion.  The federal court recently granted Gadsden Water Board's motion for remand. On October 24, 2017, the Company appealed the federal court's determination that co-defendant Industrial Chemicals, Inc. ("ICI") was properly joined as a party to the case. ICI's presence in the case deprives the federal court of jurisdiction over the case.

In May, 2017, the Water Works and Sewer Board of the Town of Centre, Alabama (the “Centre Water Board”) filed a very similar complaint to the Gadsden Water Board complaint in the Circuit Court of Cherokee County. On June 19, 2017, the defendants removed this case to the United States District Court for the Northern District of Alabama, Middle Division, again alleging diversity of citizenship and fraudulent joinder. The Centre Water Board filed a motion to remand the case back to state court. The defendants opposed the Centre Water Board’s motion, and the parties await a ruling from the federal court on the motion to remand.

The Company has never manufactured perfluorinated compounds, but purchased them for use in the manufacture of its carpets prior to 2007.  The Gadsden and Centre Water Board isBoards are not alleging that chemical levels in the Company’s wastewater discharge exceeded legal limits.  Instead, the Gadsden and Centre Water Board isBoards are seeking lost profits based on allegations that itstheir customers decreased water purchases, as well as reimbursement for the cost of a filter and punitive damages.

The Company intends to pursue all available defenses related to this matter.these matters.  The Company does not believe that the ultimate outcomeoutcomes of this casethese cases will have a material adverse effect on its financial condition, but there can be no assurances at this stage that the outcomeoutcomes will not have a material adverse effect on the Company’s results of operations, liquidity or cash flows in a given period.  Furthermore, the Company cannot predict whether any additional civil or regulatory actions against it may arise from the allegations in this matter.

In January 2012, the Company received a €23.8 million assessment from the Belgian tax authority related to its year ended December 31, 2008, asserting that the Company had understated its Belgian taxable income for that year. The Company filed a formal protest in the first quarter of 2012 refuting the Belgian tax authority's position. The Belgian tax authority set aside the assessment in the third quarter of 2012 and refunded all related deposits, including interest income of €1.6 million earned on such deposits. However, on October 23, 2012, the Belgian tax authority notified the Company of its intent to increase the Company's taxable income for the year ended December 31, 2008 under a revised theory. On December 28, 2012, the Belgian tax authority issued assessments for the years ended December 31, 2005 and December 31, 2009, in the amounts of €46.1 million and €35.6 million, respectively, including penalties, but excluding interest. The Company filed a formal protest during the first quarter of 2013 relating to the new assessments. In September 2013, the Belgian tax authority denied the Company's protests, and the Company has brought these two years before the Court of First Appeal in Bruges. In December 2013, the Belgian tax authority issued additional assessments related to the years ended December 31, 2006, 2007, and 2010, in the amounts of €38.8 million, €39.6 million, and €43.1 million, respectively, including penalties, but excluding interest. The Company filed formal protests during the first quarter of 2014, refuting the Belgian tax authority's position for each of the years assessed. In the quarter ended June 28, 2014, the Company received a formal assessment for the year ended December 31, 2008, totaling €30.1 million, against which the Company also submitted its formal protest. All 4 additional years were brought before the Court of First Appeal in November 2014. In January of 2015, the Company met with the Court of First Appeal in Bruges and agreed with the Belgian tax authorities to consolidate and argue the issues regarding the years 2005 and 2009, and apply the ruling to all of the open years (to the extent there are no additional facts/procedural arguments in the other years). In May 2017, the statute of limitation was extended to include the calendar year 2011.

On January 27, 2016, the Court of First Appeal in Bruges, Belgium ruled in favor of the Company with respect to the calendar years ending December 31, 2005 and December 31, 2009. On March 9, 2016, the Belgian tax authority lodged its Notification of Appeal with the Ghent Court of Appeal.

The Company disagrees with the views of the Belgian tax authority on this matter and will persist in its vigorous defense. Nevertheless, on May 24, 2016, the tax collector representing the Belgian tax authorities imposed a lien on the Company's properties in Wielsbeke (Ooigemstraat and Breestraat), Oostrozebeke (Ingelmunstersteenweg) and Desselgem (Waregemstraat) included in the Flooring ROW segment. The purpose of the lien is to provide security for payment should the Belgian tax authority prevail on its appeal. The lien does not interfere with the Company's operations at these properties.