UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]



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

For the quarterly period ended ~~March 28, 2020~~April 3, 2021



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

For the transition period from to

Commission File Number 01-13697

__________________________________________

MOHAWK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-1604305

(State or other jurisdiction of
incorporation or organization)

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

~~Delaware~~

~~52-1604305~~

~~(State or other jurisdiction of~~

~~incorporation or organization)~~

~~(I.R.S. Employer~~

~~Identification No.)~~

160 S. Industrial Blvd.

Calhoun

Georgia

30701

(Address of principal executive offices)

(Zip Code)

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

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

__________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

~~Large accelerated filer~~

~~Accelerated filer~~

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

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



Title of Each Class	Trading Symbol		Name of Each Exchange on Which Registered
Common Stock, $.01 par value	MHK		New York Stock Exchange
~~Floating Rate Notes due 2020~~		~~New York Stock Exchange~~
Floating Rate Notes due 2021		New York Stock Exchange
2.000% Senior Notes due 2022			New York Stock Exchange

The number of shares outstanding of the issuer’s common stock as of ~~May 1, 2020,~~April 28, 2021, the latest practicable date, is as follows: ~~71,184,454~~69,708,006 shares of common stock, $.01 par value.

Table of Contents

MOHAWK INDUSTRIES, INC.

INDEX


				Page No
Part I.		FINANCIAL INFORMATION

			~~Page No~~
~~Part I.~~Item 1.	~~FINANCIAL INFORMATION~~

~~Item 1.~~	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019~~2020		3

		Condensed Consolidated Statements of Operations for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~		4

		Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~		5

		Condensed Consolidated Statements of Cash Flows for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~		6

		Notes to Condensed Consolidated Financial Statements		7

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		3332

Item 4.		Controls and Procedures		3332

Part II.		OTHER INFORMATION

Item 1.		Legal Proceedings		3433

Item 1A.		Risk Factors		3534

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		3634

Item 3.		Defaults Upon Senior Securities		3634

Item 4.		Mine Safety Disclosures		3634

Item 5.		Other Information		3634

Item 6.		Exhibits		3835

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~(In thousands, except per share data)~~ (Unaudited)


	April 3, 2021		December 31, 2020
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	557,262	768,625
Short-term investments	782,267		571,741
Receivables, net	1,813,858		1,709,493
Inventories	1,996,628		1,913,020
Prepaid expenses	382,062		369,432

Other current assets	33,935		31,343
Total current assets	5,566,012		5,363,654
Property, plant and equipment	8,772,346		8,905,266
Less: accumulated depreciation	4,340,236		4,314,037
Property, plant and equipment, net	4,432,110		4,591,229
Right of use operating lease assets	337,767		323,138
Goodwill	2,594,727		2,650,831
Tradenames	706,708		727,268
Other intangible assets subject to amortization, net	215,138		224,339
Deferred income taxes and other non-current assets	437,611		447,292
	$	14,290,073	14,327,751

March 28,
2020 December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 263,086
134,785
Receivables, net 1,644,750
1,526,619
Inventories 2,195,434
2,282,328
Prepaid expenses 419,099
415,546
Other current assets 90,662
70,179
Total current assets 4,613,031
4,429,457
Property, plant and equipment 8,267,565
8,496,008
Less: accumulated depreciation 3,794,652
3,797,091
Property, plant and equipment, net 4,472,913
4,698,917
Right of use operating lease assets 331,329
323,003
Goodwill 2,519,979
2,570,027
Tradenames 678,903
702,732
Other intangible assets subject to amortization, net 225,120
226,147
Deferred income taxes and other non-current assets 415,667
436,397
$ 13,256,942
13,386,680


LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:						Current liabilities:
Short-term debt and current portion of long-term debt	$	1,210,525		1,051,498		Short-term debt and current portion of long-term debt	$	953,913	377,255
Accounts payable and accrued expenses	1,554,085			1,559,140		Accounts payable and accrued expenses	1,954,396		1,895,951
Current operating lease liabilities	106,673			101,945		Current operating lease liabilities	98,982		98,042
Total current liabilities	2,871,283			2,712,583		Total current liabilities	3,007,291		2,371,248
Deferred income taxes	480,035			473,886		Deferred income taxes	485,435		493,668
Long-term debt, less current portion	1,514,000			1,518,388		Long-term debt, less current portion	1,719,115		2,356,887
Non-current operating lease liabilities	238,830			228,155		Non-current operating lease liabilities	248,022		234,726
Other long-term liabilities	305,151			327,220		Other long-term liabilities	331,178		330,064
Total liabilities	5,409,299			5,260,232		Total liabilities	5,791,041		5,786,593
Commitments and contingencies (Note 17)						Commitments and contingencies (Note 17)	0		0

Stockholders’ equity:						Stockholders’ equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued	—			—
Common stock, $.01 par value; 150,000 shares authorized; 78,531 and 78,980 shares issued in 2020 and 2019, respectively	785			790
Preferred stock, $.01 par value; 60 shares authorized; 0 shares issued						Preferred stock, $.01 par value; 60 shares authorized; 0 shares issued	0		0
Common stock, $.01 par value; 150,000 shares authorized; 77,050 and 77,624 shares issued in 2021 and 2020, respectively						Common stock, $.01 par value; 150,000 shares authorized; 77,050 and 77,624 shares issued in 2021 and 2020, respectively	770		776
Additional paid-in capital	1,870,003			1,868,250		Additional paid-in capital	1,889,540		1,885,142
Retained earnings	7,274,085			7,232,337		Retained earnings	7,673,129		7,559,191
Accumulated other comprehensive loss	(1,087,852		)	(765,824	)	Accumulated other comprehensive loss	(855,455)		(695,145)
	8,057,021			8,335,553			8,707,984		8,749,964
Less: treasury stock at cost; 7,346 and 7,348 shares in 2020 and 2019, respectively	215,653			215,712
Less: treasury stock at cost; 7,343 and 7,346 shares in 2021 and 2020, respectively						Less: treasury stock at cost; 7,343 and 7,346 shares in 2021 and 2020, respectively	215,551		215,648
Total Mohawk Industries, Inc. stockholders’ equity	7,841,368			8,119,841		Total Mohawk Industries, Inc. stockholders’ equity	8,492,433		8,534,316
Nonredeemable noncontrolling interest	6,275			6,607
Nonredeemable noncontrolling interests						Nonredeemable noncontrolling interests	6,599		6,842
Total stockholders’ equity	7,847,643			8,126,448		Total stockholders’ equity	8,499,032		8,541,158
	$	13,256,942		13,386,680			$	14,290,073	14,327,751

See accompanying notes to condensed consolidated financial ~~statements.~~statements

See accompanying notes to condensed consolidated financial statements.

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

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 ~~2019~~2020 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Results for interim periods are not necessarily indicative of the results for the year.

Hedges of Net Investments in Non-U.S. Operations

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 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 economically offset by losses and gains on its foreign currency borrowings. The Company designated its €500,000 2.00% Senior Notes borrowing as a net investment hedge of a portion of its European operations. For the three months ended April 3, 2021 and March 28, 2020, ~~and March 30, 2019,~~ the change in the U.S. dollar value of the Company’s euro denominated debt was a decrease of ~~$3,182~~$27,047 ($~~2,417~~20,694 net of taxes) and a decrease of ~~$11,233~~$3,182 ($~~8,532~~2,417 net of taxes), respectively, which is recorded in the foreign currency translation adjustment component of accumulated other comprehensive income or (loss). The change 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.

Recent Accounting Pronouncements ~~- Recently Adopted~~

~~In June 2016, the FASB issues ASU 2016-13,~~
~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which was further amended by additional accounting standards updates issued by the FASB. The new standard replaced the incurred loss impairment methodology for recognizing credit losses with a new methodology that requires recognition of lifetime expected credit losses when a financial asset is originated or purchased, even if the risk of loss is remote. The new methodology (referred to as the current expected credit losses model, or "CECL") applies to most financial assets measured at amortized cost, including trade receivables, and requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses. The Company adopted the new standard on January 1, 2020 using a modified retrospective transition approach, with the cumulative impact being immaterial to the financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and other (Topic 350): Simplifying the test for goodwill impairment.~~ The amendments remove the second step of the current goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This guidance is effective for impairment tests in fiscal years beginning after December 15, 2019. The effect of adopting the new standard was not material.

~~Recent Accounting Pronouncements - Effective in Future Years~~

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which simplified the accounting for income taxes in several areas by removing certain exceptions and by clarifying and amending existing guidance applicable to accounting for income taxes. The ~~amendment is effective commencing in 2021 with early adoption permitted.~~Company adopted the new standard on January 1, 2021. The ~~Company is currently evaluating~~effect of adopting the ~~impact that the adoption of this accounting standards update will have on its consolidated financial statements.~~new standard was not material.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Acquisitions

~~2019~~2021 Acquisitions

During 2019, the Company acquired 2 hard surface flooring distribution companies based in the Netherlands and Czech Republic for $76,237, resulting in a preliminary goodwill allocation of $38,366 and intangible assets subject to amortization of $12,789. The results have been included in the Flooring ROW segment and are not material to the Company’s consolidated results of operations.

~~2018 Acquisitions~~

On November 16, 2018, the Company completed its purchase of Eliane S/A Revestimentos Ceramicos (“Eliane”), one of the largest ceramic tile companies in Brazil. Pursuant to the purchase agreement, the Company (i) acquired the entire issued share capital of Eliane and (ii) acquired $99,037 of net indebtedness of Eliane, with total cash consideration paid of $148,302. The Company’s acquisition of Eliane resulted in allocations of goodwill of $33,019, indefinite-lived tradename intangible assets of $32,238 and intangible assets subject to amortization of $5,818. The majority of the goodwill is deductible for tax purposes. The factors contributing to the recognition of the amount of goodwill include product, sales and manufacturing synergies. Eliane’s results of operations have been included in the consolidated financial statements since the date of acquisition in the Global Ceramic reporting segment.

On July 2, 2018, the Company completed its acquisition of Godfrey Hirst Group, the leading flooring company in Australia and New Zealand, further extending Mohawk’s global position. The total value of the acquisition was $400,894. The Company’s acquisition of Godfrey Hirst Group resulted in allocations of goodwill of $88,655, indefinite-lived tradename intangible assets of $58,671 and intangible assets subject to amortization of $43,635. The goodwill is deductible for tax purposes. The factors contributing to the recognition of the amount of goodwill include product, sales and manufacturing synergies. The Godfrey Hirst Group’s results have been included in the condensed consolidated financial statements since the date of acquisition in the Flooring NA and Flooring ROW segments.

During the first quarter of ~~2018,~~2021, the Company ~~completed the acquisition of 3 businesses~~made acquisitions in the Flooring ~~ROW~~Rest of the World segment for ~~$24,610, resulting in a goodwill allocation of $12,874 and intangibles subject to amortization of $7.~~$6,338.

~~Table of Contents~~

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

3. Revenue from Contracts with Customers

~~Revenue recognition and accounts receivable~~

The Company recognizes revenues when it satisfies performance obligations as evidenced by the transfer of control of the promised goods to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The nature of the promised goods are ceramic, stone, carpet, resilient, laminate, wood and other flooring products. Payment is typically received 90 days or less from the invoice date. The Company adjusts the amounts of revenue for expected cash discounts, sales allowances, returns, and claims, based upon historical experience. The Company adjusts accounts receivable for doubtful account allowances based upon relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, periodic evaluation of specific customer accounts, and the aging of accounts receivable. If the Company expects the financial condition of the Company’s customers to deteriorate based on current conditions or reasonable and supportable forecasts, additional allowances may be required.

Contract ~~liabilities~~Liabilities

The Company historically records contract liabilities when it receives payment prior to fulfilling a performance obligation. Contract liabilities related to revenues are recorded in accounts payable and accrued expenses on the accompanying condensed consolidating balance sheets. The Company had contract liabilities of ~~$29,268~~$47,908 and ~~$34,959~~$39,466 as of ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019,~~2020, respectively.

Performance ~~obligations~~Obligations

Substantially all of the Company’s revenue is recognized at a point in time when the product is either shipped or received from the Company’s facilities and control of the product is transferred to the customer. Accordingly, in any period, the Company does ~~not~~0t recognize a significant amount of revenue from performance obligations satisfied or partially satisfied in prior periods and the amount of such revenue recognized during the three months ended April 3, 2021 and March 28, 2020 was immaterial.

Costs to ~~obtain~~Obtain a ~~contract~~

Contract

The Company historically incurs certain incremental costs to obtain revenue contracts. These costs relate to marketing display structures and are capitalized when the amortization period is greater than one year, with the amount recorded in other assets on the accompanying condensed consolidated balance sheets. Capitalized costs to obtain contracts were ~~$66,965~~$54,544 and ~~$69,039~~$59,847 as of ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019,~~2020, respectively. ~~Amortization~~Straight-line amortization expense recognized during the three months ended April 3, 2021 and March 28, 2020 related to these capitalized costs ~~was $15,540.~~were $15,581 and $15,540 respectively.

~~Practical expedients and policy elections~~

~~The Company elected the following practical expedients and policy elections:~~

~~Incremental costs of obtaining a contract is recorded as an expense when incurred in selling, general and administrative expenses if the amortization period is less than one year.~~

~~Shipping and handling activities performed after control has been transferred is accounted for as a fulfillment cost in cost of sales.~~

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Revenue Disaggregation

~~Revenue disaggregation~~

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the three months ended April 3, 2021 and March 28, ~~2020 and March 30, 2019:~~2020:

March 28, 2020 Global Ceramic segment Flooring NA segment Flooring ROW segment Total
Geographical Markets
United States $ 505,105
810,448
707
1,316,260
Europe 169,536
2,636
440,495
612,667
Russia 59,807
—
26,326
86,133
Other 114,002
35,246
121,455
270,703
$ 848,450
848,330
588,983
2,285,763

Product Categories
Ceramic & Stone $ 848,450
10,365
—
858,815
Carpet & Resilient —
683,713
191,295
875,008
Laminate & Wood —
154,252
198,810
353,062
Other ⁽¹⁾
—
—
198,878
198,878
$ 848,450
848,330
588,983
2,285,763

March 30, 2019 Global Ceramic segment Flooring NA segment Flooring ROW segment Total
Geographical Markets
United States $ 541,826
883,242
68
1,425,136
Europe 179,310
1,837
469,916
651,063
Russia 51,915
29
23,615
75,559
Other 125,301
36,872
128,559
290,732
$ 898,352
921,980
622,158
2,442,490

Product Categories
Ceramic & Stone $ 898,352
14,443
—
912,795
Carpet & Resilient —
735,424
190,929
926,353
Laminate & Wood —
172,113
210,201
382,314
Other ⁽¹⁾
—
—
221,028
221,028
$ 898,352
921,980
622,158
2,442,490


April 3, 2021	Global Ceramic segment		Flooring NA segment	Flooring ROW segment	Total
Geographical Markets
United States	$	534,547	936,098	2,419	1,473,064
Europe	207,500		330	558,138	765,968
Russia	62,018		30	27,657	89,705
Other	125,806		32,792	181,691	340,289
	$	929,871	969,250	769,905	2,669,026

Product Categories
Ceramic & Stone	$	927,459	8,322	0	935,781
Carpet & Resilient	2,412		772,079	247,724	1,022,215
Laminate & Wood	0		188,849	253,213	442,062
Other(1)	0		0	268,968	268,968
	$	929,871	969,250	769,905	2,669,026


March 28, 2020	Global Ceramic segment		Flooring NA segment	Flooring ROW segment	Total
Geographical Markets
United States	$	505,105	810,448	707	1,316,260
Europe	169,536		2,636	440,495	612,667
Russia	59,807		0	26,326	86,133
Other	114,002		35,246	121,455	270,703
	$	848,450	848,330	588,983	2,285,763

Product Categories
Ceramic & Stone	$	848,450	10,365	0	858,815
Carpet & Resilient	0		683,713	191,295	875,008
Laminate & Wood	0		154,252	198,810	353,062
Other(1)	0		0	198,878	198,878
	$	848,450	848,330	588,983	2,285,763

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

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Restructuring, ~~acquisition~~Acquisition and ~~integration-related costs~~Integration-Related Costs

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

•In connection with acquisition activity, the Company typically incurs costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and

•In connection with the Company’s cost-reduction/productivity initiatives, it typically incurs costs and charges associated with site closings and other facility rationalization actions including accelerated depreciation ("Asset write-downs") and workforce reductions.

Restructuring, acquisition transaction and integration-related costs consisted of the following during the three months ended April 3, 2021 and March 28, ~~2020 and March 30, 2019:~~2020:


	Three Months Ended
	April 3, 2021		March 28, 2020
Cost of sales
Restructuring costs	$	10,165	11,172

Acquisition integration-related costs	17		610
Restructuring and acquisition integration-related costs	$	10,182	11,782

Selling, general and administrative expenses
Restructuring costs	$	(90)	537
Acquisition transaction-related costs	849		(216)
Acquisition integration-related costs	243		575
Restructuring, acquisition transaction and integration-related costs	$	1,002	896

Three Months Ended
March 28, 2020 March 30, 2019
Cost of sales
Restructuring costs⁽¹⁾
$ 11,172
31,535
Acquisition integration-related costs 610
1,067
Restructuring and acquisition integration-related costs $ 11,782
32,602

Selling, general and administrative expenses
Restructuring costs ⁽¹⁾
$ 537
1,402
Acquisition transaction-related costs (216 ) 280
Acquisition integration-related costs 575
1,419
Restructuring, acquisition transaction and integration-related costs $ 896
3,101

(1) The restructuring costs for 2020 and 2019 primarily relate to the Company’s actions taken to lower its cost structure and improve efficiencies of manufacturing and distribution operations as well as actions related to the Company’s recent acquisitions.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The restructuring activity for the three months ended~~March 28, 2020~~ April 3, 2021 is as follows:


	Lease impairments		Asset write-downs	Severance	Other restructuring costs	Total
Balances as of December 31, 2020	$	0	0	11,576	729	12,305
Provision
Global Ceramic segment	0		960	0	312	1,272
Flooring NA segment	(37)		5,844	0	3,053	8,860
Flooring ROW segment	0		0	(464)	409	(55)
Corporate	0		0	(2)	0	(2)
Total provision	(37)		6,804	(466)	3,774	10,075
Cash payments	0		0	(2,795)	(3,930)	(6,725)
Non-cash items	37		(6,804)	(342)	(298)	(7,407)
Balances as of April 3, 2021	$	0	0	7,973	275	8,248

Provision amounts recorded in:
Cost of sales	$	0	6,751	(211)	3,625	10,165
Selling, general and administrative expenses	(37)		53	(255)	149	(90)
Total provision	$	(37)	6,804	(466)	3,774	10,075

Lease
impairments
Asset write-downs Severance
Other
restructuring
costs
Total
Balance as of December 31, 2019 $ 21
—
4,122
116
4,259
Provision - Flooring NA segment —
2,833
—
5,936
8,769
Provision - Flooring ROW segment —
1,605
281
993
2,879
Provision - Corporate —
—
61
—
61
Cash payments (8 ) —
(2,010 ) (3,757 ) (5,775 )
Non-cash items —
(4,438 ) (144 ) (3,140 ) (7,722 )
Balance as of March 28, 2020 $ 13
—
2,310
148
2,471

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

For publicly-traded investment securities, which consist of the Company’s money market, short-duration bond fund and managed income fund, fair value is determined on the basis of quoted market prices and, accordingly, such investments are classified as Level 1. The Company’s wholly-owned captive insurance company may also invest in the Company’s commercial paper. These short-term commercial paper investments are classified as trading securities and carried at fair value based upon the Level 2 fair value hierarchy.

Items Measured at Fair Value

The following table presents the items measured at fair value as of April 3, 2021 and December 31, 2020:


	Fair Value
	April 3, 2021		December 31, 2020
Cash and cash equivalents:
Money market fund (Level 1)	$	100,898	197,835
Short-term investments:
Short-term investments (Level 1) (1)	782,267		571,741

(1)The Company's short-term investments are in a short-duration bond fund and a managed income fund that are designed to deliver current income consistent with the preservation of capital through investing in high-and medium grade fixed income securities. The investments are readily convertible into cash.

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

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.6. Receivables, net

Receivables, net are as follows:


	At April 3, 2021		At December 31, 2020
Customers, trade	$	1,716,072	1,591,503
Income tax receivable	105,840		112,580
Other	78,371		89,092
	1,900,283		1,793,175
Less: allowance for discounts, claims and doubtful accounts(1)	86,425		83,682
Receivables, net	$	1,813,858	1,709,493

At March 28, 2020 At December 31, 2019
Customers, trade $ 1,611,525
1,491,592
Income tax receivable 9,098
8,428
Other 88,872
88,520
1,709,495
1,588,540
Less: allowance for discounts, claims and doubtful accounts⁽¹⁾
64,745
61,921
Receivables, net $ 1,644,750
1,526,619

⁽¹⁾The Company adopted the new standard, ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020 using a modified retrospective transition approach, with the cumulative impact being immaterial to the financial statements.

The components of inventories are as follows:


	At April 3, 2021		At December 31, 2020
Finished goods	$	1,447,879	1,372,234
Work in process	129,203		126,231
Raw materials	419,546		414,555
Total inventories	$	1,996,628	1,913,020

At March 28, 2020 At December 31, 2019
Finished goods $ 1,560,769
1,610,742
Work in process 136,581
144,639
Raw materials 498,084
526,947
Total inventories $ 2,195,434
2,282,328

7.8. Goodwill and ~~intangible assets~~Intangible Assets

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


	Global Ceramic segment		Flooring NA segment	Flooring ROW segment	Total
Balance as of December 31, 2020
Goodwill	$	1,579,491	874,198	1,524,567	3,978,256
Accumulated impairment losses	(531,930)		(343,054)	(452,441)	(1,327,425)
	1,047,561		531,144	1,072,126	2,650,831


Currency translation during the period	(11,876)		0	(44,228)	(56,104)

Balance as of April 3, 2021
Goodwill	1,567,615		874,198	1,480,339	3,922,152
Accumulated impairment losses	(531,930)		(343,054)	(452,441)	(1,327,425)
Balance as of April 3, 2021, net	$	1,035,685	531,144	1,027,898	2,594,727

Global Ceramic segment Flooring NA segment Flooring ROW segment Total
Balance as of December 31, 2019
Goodwill $ 1,583,576
874,198
1,439,678
3,897,452
Accumulated impairment losses (531,930 ) (343,054 ) (452,441 ) (1,327,425 )
1,051,646
531,144
987,237
2,570,027

Goodwill recognized during the period —
—
(9,642 ) (9,642 )
Currency translation during the period (23,930 ) —
(16,476 ) (40,406 )

Balance as of March 28, 2020
Goodwill 1,559,646
874,198
1,413,560
3,847,404
Accumulated impairment losses (531,930 ) (343,054 ) (452,441 ) (1,327,425 )
$ 1,027,716
531,144
961,119
2,519,979

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Intangible assets not subject to amortization:

Tradenames
Balance as of December 31, 2019 $ 702,732
Currency translation during the period (23,829 )
Balance as of March 28, 2020 $ 678,903


Gross carrying amounts:	Customer relationships		Patents	Other	Total
Balance as of December 31, 2020	$	699,795	273,570	6,945	980,310
Intangible assets acquired during the period	0		4,628	0	4,628
Currency translation during the period	(19,752)		(12,096)	(9)	(31,857)
Balance as of April 3, 2021	$	680,043	266,102	6,936	953,081

Accumulated amortization:	Customer relationships		Patents	Other	Total
Balance as of December 31, 2020	$	481,256	273,426	1,289	755,971
Amortization during the period	7,039		123	336	7,498
Currency translation during the period	(13,472)		(12,031)	(23)	(25,526)
Balance as of April 3, 2021	$	474,823	261,518	1,602	737,943

Intangible assets subject to amortization, net as of April 3, 2021	$	205,220	4,584	5,334	215,138

Gross carrying amounts: Customer
relationships Patents Other Total
Balance as of December 31, 2019 $ 645,206
249,100
6,631
900,937
Intangible assets recognized during the period 12,789
—
—
12,789
Currency translation during the period (9,387 ) (1,471 ) (204 ) (11,062 )
Balance as of March 28, 2020 $ 648,608
247,629
6,427
902,664

Accumulated amortization: Customer
relationships Patents Other Total
Balance as of December 31, 2019 $ 426,765
246,872
1,153
674,790
Amortization during the period 6,324
510
42
6,876
Currency translation during the period (2,670 ) (1,445 ) (7 ) (4,122 )
Balance as of March 28, 2020 $ 430,419
245,937
1,188
677,544

Intangible assets subject to amortization, net $ 218,189
1,692
5,239
225,120


	Three Months Ended
	April 3, 2021		March 28, 2020
Amortization expense	$	7,498	6,876

Three Months Ended
March 28,
2020 March 30,
2019
Amortization expense $ 6,876
6,729

Mohawk performs its annual testing of goodwill and indefinite lived intangibles in the fourth quarter of each year and no impairment was indicated for 2019. In 2019 the Company also concluded that in general, a decline in estimated after tax cash flows greater than approximately 19% to 39% or an increase of approximately 15% to 45% in WACC or a significant or prolonged decline in market capitalization could result in an additional indication of impairment.

As a result of the recent economic impact from COVID-19, the Company performed a qualitative assessment of whether the fair value of any of its reporting units or indefinite-lived intangible assets was more likely than not less than its carrying amount at March 28, 2020. The Company concluded neither goodwill nor any of its indefinite-lived intangible assets were impaired at March 28, 2020. However, while we have concluded that neither goodwill nor any of its indefinite-lived intangible assets were impaired during the quarter ended March 28, 2020, a prolonged pandemic could impact the Company’s assumptions utilized in the determination of the estimated fair values of the Company’s reporting units and indefinite-lived intangible assets significantly enough to trigger an impairment. Hence, the Company continues to monitor the economic impact of COVID-19 and may be required to reassess impairment of goodwill or indefinite-lived intangible assets in future interim periods.

~~8. Accounts payable and accrued expenses~~

Accounts payable and accrued expenses are as follows:


	At April 3, 2021		At December 31, 2020
Outstanding checks in excess of cash	$	4,530	5,672
Accounts payable, trade	1,064,785		1,016,897
Accrued expenses	587,876		566,052
Product warranties	55,024��		54,692
Accrued interest	22,460		30,403


Accrued compensation and benefits	219,721		222,235
Total accounts payable and accrued expenses	$	1,954,396	1,895,951

At March 28, 2020 At December 31, 2019
Outstanding checks in excess of cash $ 6,981
9,924
Accounts payable, trade 899,178
824,956
Accrued expenses 409,445
461,035
Product warranties 51,983
49,184
Accrued interest 6,856
21,050
Accrued compensation and benefits 179,642
192,991
Total accounts payable and accrued expenses $ 1,554,085
1,559,140

Table of Contents

9.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The changes in accumulated other comprehensive income (loss) by component for the three months ended ~~March 28, 2020~~April 3, 2021 are as follows:


	Foreign currency translation adjustments		Pensions, net of tax	Total
Balance as of December 31, 2020	$	(680,255)	(14,890)	(695,145)
Current period other comprehensive income (loss)	(160,407)		97	(160,310)

Balance as of April 3, 2021	$	(840,662)	(14,793)	(855,455)

Foreign currency translation adjustments Pensions, net of tax Total
Balance as of December 31, 2019 $ (753,108 ) (12,716 ) (765,824 )
Current period other comprehensive income (loss) (322,129 ) 101
(322,028 )
Balance as of March 28, 2020 $ (1,075,237 ) (12,615 ) (1,087,852 )

~~Table of Contents~~

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

Effective January 1, 2019 the Company adopted ASC 842, which requires recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet, based on the present value of the future minimum rental payments for existing operating leases. The Company adopted the provisions of ASC 842 on January 1, 2019 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.

The Company measures the ROU assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term.

As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s credit spread adjusted for current market factors and foreign currency rates. The Company also made a policy election to determine its incremental borrowing rate, at the initial application date, using the total lease term and the total minimum rental payments, as the Company believes this rate is more indicative of the implied financing cost.

The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for service centers, warehouses, showrooms, and machinery and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company enters into lease contracts ranging from 1 to 60 years with a majority of the Company’s lease terms ranging from 1 to 8 years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term from 3 to 10 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. An insignificant number of our leases include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Certain of our leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of our leases contain residual value guarantees and none of our agreements contain material restrictive covenants. Variable rent expenses consist primarily of maintenance, property taxes and charges based on usage.

~~We rent or sublease certain real estate to third parties. Our sublease portfolio consists mainly of operating leases.~~

~~Table of Contents~~

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

~~The components of lease costs are as follows:~~

~~Supplemental balance sheet information related to leases is as follows:~~

~~Table of Contents~~

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

~~Maturities of lease liabilities are as follows:~~

~~The Company had approximately $2,618 of leases that commenced after March 28, 2020 that created rights and obligations to the Company. These leases are not included in the above maturity schedule.~~

For additional information regarding the Company’s Commitments and Contingencies as of December 31, 2019 as disclosed for finance and operating leases, see Note 15 in its 2019 Annual Report filed on Form 10-K.

~~Lease term and discount rate are as follows:~~

~~Supplemental cash flow information related to leases was as follows:~~

Amortization of Right of use operating lease assets ⁽¹⁾

⁽¹⁾ ~~Amortization of Right of use operating lease assets during the period is reflected in Other assets and prepaid expenses on the Condensed Consolidated Statements of Cash Flows.~~

~~Table of Contents~~

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

~~11. Stock-based compensation~~

The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the ~~options’ or other~~ awards’ estimated lives for fixed awards with ratable vesting provisions.

The Company granted ~~188~~173 restricted stock units ("RSUs") at a weighted average grant-date fair value of ~~$120.94~~$175.12 per unit for the three months ended ~~March 28, 2020.~~April 3, 2021. The Company granted ~~169~~188 RSUs ~~at a weighted average grant-date fair value of $137.71 per unit~~ for the three months ended March ~~30, 2019.~~28, 2020. The Company recognized stock-based compensation costs related to the issuance of RSUs of ~~$5,041~~$5,968 ($~~3,731~~4,416 net of taxes) and ~~$5,789~~$5,041 ($~~4,283~~3,731 net of taxes) for the three months ended April 3, 2021 and March 28, 2020, ~~and March 30, 2019,~~ 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 ~~$17,815~~$35,778 as of ~~March 28, 2020,~~April 3, 2021, and will be recognized as expense over a weighted-average period of approximately ~~2.27~~2.04 years. ~~The Company did not recognize any stock-based compensation costs related to stock options for the three months ended March 28, 2020 and March 30, 2019, respectively.~~

Other expense (income), net is as follows:


	Three Months Ended
	April 3, 2021		March 28, 2020
Foreign currency losses (gains), net	$	(1,186)	7,608


Dividend income	(2,227)		0
Unrealized and realized losses on short-term investments	1,683		0
All other, net	(497)		(1,929)
Total other expense (income), net	$	(2,227)	5,679

Three Months Ended
March 28,
2020 March 30,
2019
Foreign currency losses (gains), net $ 7,608
(1,110 )
All other, net (1,929 ) (2,626 )
Total other expense (income), net $ 5,679
(3,736 )

For the quarter ended ~~March 28, 2020,~~April 3, 2021, the Company recorded income tax expense of $67,690 on earnings before income taxes of $304,501 for an effective tax rate of 22.2%, as compared to an income tax expense of $26,668 on earnings before income taxes of $137,133, for an effective tax rate of 19.4%~~, as compared to an income tax expense of $37,018 on earnings before income taxes of $158,593, for an effective tax rate of 23.3%~~ for the quarter ended March ~~30, 2019.~~28, 2020. The difference in the effective tax rates for the comparative periods was ~~caused~~impacted by the Company's inability to use an estimated annual effective rate for the quarter ended March 28, 2020, and the geographical dispersion of profits and ~~losses and the inability of the Company to make a reliable estimate of its annual effective tax rate.~~losses.

In accordance with ASC 740-270, Interim Reporting, at the end of each interim period, the Company is required to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on an interim period. However, in certain circumstances where the Company is unable to make a reliable estimate of the annual effective tax rate, ASC 740-270 allows the actual effective tax rate for the interim period to be used. For the first quarter ended March 28, 2020, the Company calculated its effective rate for the interim period and applied that rate to the interim period results. The Company used this approach because it was unable to reasonably estimate its annual effective rate due to the variability of the rate as a result of small changes in forecasted income, fluctuations in annual pre-tax income and loss between quarters, and the effects of being taxed in multiple tax jurisdictions.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

14. Stockholders’ Equity

The following tables reflect the changes in stockholders’ equity for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~ (in thousands).


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















December 31, 2020		77,624	$	776	$	1,885,142	$	7,559,191	$	(695,145)	(7,346)	$	(215,648)	$	6,842	$	8,541,158
Shares issued under employee and director stock plans		113	1		(1,570)		—		—		3	97		—		(1,472)
Stock-based compensation expense		—	—		5,968		—		—		—	—		—		5,968

Repurchases of common stock		(687)	(7)		—		(122,869)		—		—	—		—		(122,876)


Net earnings attributable to noncontrolling interests		—	—		—		—		—		—	—		4		4
Currency translation adjustment on noncontrolling interests		—	—		—		—		—		—	—		(247)		(247)


Currency translation adjustment		—	—		—		—		(160,407)		—	—		—		(160,407)
Prior pension and post-retirement benefit service cost and actuarial gain		—	—		—		—		97		—	—		—		97

Net earnings		—	—		—		236,807		—		—	—		—		236,807
April 3, 2021		77,050	$	770	$	1,889,540	$	7,673,129	$	(855,455)	(7,343)	$	(215,551)	$	6,599	$	8,499,032

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

January 1, 2020 78,980
$ 790
$ 1,868,250
$ 7,232,337
$ (765,824 ) (7,348 ) $ (215,712 ) $ 6,607
$ 8,126,448
Shares issued under employee and director stock plans 130
1
(3,288 ) —
—
2
59
—
(3,228 )
Stock-based compensation expense —
—
5,041
—
—
—
—
—
5,041
Repurchases of common stock (579 ) (6 ) —
(68,635 ) —
—
—
—
(68,641 )
Noncontrolling earnings —
—
—
—
—
—
—
(49 ) (49 )
Currency translation adjustment on non-controlling interests —
—
—
—
—
—
—
(283 ) (283 )
Currency translation adjustment —
—
—
—
(322,129 ) —
—
—
(322,129 )
Prior pension and post-retirement benefit service cost and actuarial gain / loss —
—
—
—
101
—
—
—
101
CECL Adoption —
—
—
(131 ) —
—
—
—
(131 )
Net income —
—
—
110,514
—
—
—
—
110,514
March 28, 2020 78,531
$ 785
$ 1,870,003
$ 7,274,085
$ (1,087,852 ) (7,346 ) $ (215,653 ) $ 6,275
$ 7,847,643

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

January 1, 2019 79,656
$ 797
$ 1,852,173
$ 6,588,197
$ (791,608 ) (7,349 ) $ (215,745 ) $ 6,245
$ 7,440,059
Shares issued under employee and director stock plans 115
1
(4,478 ) —
—
—
29
—
(4,448 )
Stock-based compensation expense —
—
5,789
—
—
—
—
—
5,789
Noncontrolling earnings —
—
—
—
—
—
—
(10 ) (10 )
Currency translation adjustment on non-controlling interests —
—
—
—
—
—
—
9
9
Currency translation adjustment —
—
—
—
13,953
—
—
—
13,953
Prior pension and post-retirement benefit service cost and actuarial gain / loss —
—
—
—
108
—
—
—
108
Net income —
—
—
121,585
—
—
—
—
121,585
March 30, 2019 79,771
$ 798
$ 1,853,484
$ 6,709,782
$ (777,547 ) (7,349 ) $ (215,716 ) $ 6,244
$ 7,577,045


		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















December 31, 2019		78,980	$	790	$	1,868,250	$	7,232,337	$	(765,824)	(7,348)	$	(215,712)	$	6,607	$	8,126,448
Shares issued under employee and director stock plans		130	1		(3,288)		—		—		2	59		—		(3,228)
Stock-based compensation expense		—	—		5,041		—		—		—	—		—		5,041

Repurchases of common stock		(579)	(6)		—		(68,635)		—		—	—		—		(68,641)


Net (loss) attributable to noncontrolling interests		—	—		—		—		—		—	—		(49)		(49)
Currency translation adjustment on noncontrolling interests		—	—		—		—		—		—	—		(283)		(283)


Currency translation adjustment		—	—		—		—		(322,129)		—	—		—		(322,129)
Prior pension and post-retirement benefit service cost and actuarial gain		—	—		—		—		101		—	—		—		101
CECL adoption		—	—		—		(131)		—		—	—		—		(131)
Net earnings		—	—		—		110,514		—		—	—		—		110,514
March 28, 2020		78,531	$	785	$	1,870,003	$	7,274,085	$	(1,087,852)	(7,346)	$	(215,653)	$	6,275	$	7,847,643

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. Earnings ~~per share~~Per Share

Basic earnings per common share is computed by dividing net earnings available to 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 available to common stockholders and weighted-average common shares outstanding for purposes of calculating basic and diluted earnings per share is as follows:


	Three Months Ended				Three Months Ended
	March 28, 2020		March 30, 2019		April 3, 2021		March 28, 2020
Net earnings attributable to Mohawk Industries, Inc.	$	110,514	121,585	Net earnings attributable to Mohawk Industries, Inc.	$	236,807	110,514


Weighted-average common shares outstanding-basic and diluted:				Weighted-average common shares outstanding-basic and diluted:
Weighted-average common shares outstanding—basic	71,547		72,342	Weighted-average common shares outstanding—basic	70,179		71,547
Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net	230		304	Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net	295		230
Weighted-average common shares outstanding-diluted	71,777		72,646	Weighted-average common shares outstanding-diluted	70,474		71,777

Earnings per share attributable to Mohawk Industries, Inc.				Earnings per share attributable to Mohawk Industries, Inc.
Basic	$	1.54	1.68	Basic	$	3.37	1.54
Diluted	$	1.54	1.67	Diluted	$	3.36	1.54

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

16. Segment ~~reporting~~Reporting

The Company has 3 reporting segments: the Global Ceramic segment, the Flooring NANorth America ("Flooring NA") segment and the Flooring ~~ROW~~Rest of the World ("Flooring ROW") segment. The Global Ceramic segment designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone, quartz, porcelain slab countertops and other products, which it distributes primarily in North America, Europe, South America and Russia through its network of regional distribution centers and Company-operated service centers using ~~company-operated~~Company-operated trucks, common carriers or rail transportation. 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 resilient (includes sheet vinyl and LVT), and wood flooring, which it distributes through its network of regional distribution centers and satellite warehouses using ~~company-operated~~Company-operated trucks, common carrier or rail transportation. The segment’s product lines are sold through various selling channels, including independent floor covering retailers, distributors, home centers, mass merchandisers, department stores, shop at home, buying groups, commercial contractors and commercial end users. The Flooring ROW segment designs, manufactures, sources, licenses and markets laminate, ~~hardwood~~wood flooring, roofing elements, insulation boards, medium-density fiberboard (“MDF”), chipboards, other wood products, sheet vinyl and LVT, which it distributes primarily in Europe, Australia, New Zealand and Russia through various selling channels, which include retailers, Company-operated distributors, 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.

Segment information is as follows:


	Three Months Ended
	April 3, 2021		March 28, 2020
Net sales:
Global Ceramic segment	$	929,871	848,450
Flooring NA segment	969,250		848,330
Flooring ROW segment	769,905		588,983

Total	$	2,669,026	2,285,763

Operating income (loss)(1):
Global Ceramic segment	$	87,804	47,976
Flooring NA segment	81,298		36,206
Flooring ROW segment	159,306		75,816
Corporate and intersegment eliminations	(10,893)		(8,515)
Total	$	317,515	151,483

(1)During the second quarter of 2020, the Company revised the methodology it uses to estimate and allocate corporate general and administrative expenses to its operating segments to better align usage of corporate resources allocated to the Company segments. The updated allocation methodology had no impact on the Company’s consolidated statements of operations. This change was applied retrospectively, and segment operating income for all comparative periods has been updated to reflect this change.


	At April 3, 2021		At December 31, 2020
Assets:
Global Ceramic segment	$	5,161,660	5,250,069
Flooring NA segment	3,731,032		3,594,976
Flooring ROW segment	4,120,381		4,194,447
Corporate and intersegment eliminations	1,277,000		1,288,259
Total	$	14,290,073	14,327,751

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

~~Segment information is as follows:~~

Three Months Ended
March 28,
2020 March 30,
2019
Net sales:
Global Ceramic segment $ 848,450
898,352
Flooring NA segment 848,330
921,980
Flooring ROW segment 588,983
622,158
Intersegment sales —
—
Total $ 2,285,763
2,442,490

Operating income (loss):
Global Ceramic segment $ 49,089
84,335
Flooring NA segment 33,682
649
Flooring ROW segment 77,227
90,431
Corporate and intersegment eliminations (8,515 ) (10,085 )
Total $ 151,483
165,330

At March 28, 2020 At December 31, 2019
Assets:
Global Ceramic segment $ 5,237,631
5,419,896
Flooring NA segment 3,841,815
3,823,654
Flooring ROW segment 3,810,348
3,925,246
Corporate and intersegment eliminations 367,148
217,884
Total $ 13,256,942
13,386,680

17. Commitments and ~~contingencies~~Contingencies

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.

Perfluorinated Compounds (“PFCs”) Litigation

In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama (the “Gadsden Water Board”) filed an individual complaint in the Circuit Court of Etowah County, Alabama against certain manufacturers, suppliers, and users of chemicals containing specific PFCs, including the Company. In May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama (the “Centre Water Board”) filed a similar complaint in the Circuit Court of Cherokee County, Alabama. The Gadsden Water Board and the Centre Water Board both seek monetary damages and injunctive relief claiming that their water supplies contain excessive amounts of PFCs. Certain defendants, including the Company, filed dispositive motions in each case arguing that the Alabama state courts lack personal jurisdiction over them. These motions were denied. In June and September 2018, certain defendants, including the Company, petitioned the Alabama Supreme Court for Writs of Mandamus directing each lower court to enter an order granting the defendants’ dispositive motions on personal jurisdiction grounds. The Alabama Supreme Court denied the petitions on December 20, 2019. Certain defendants, including the Company, filed an Application for Rehearing with the Alabama Supreme Court asking the Court to reconsider its December 2019 decision. The Alabama Supreme Court denied the application for rehearing. On August 21, 2020, certain defendants, including the Company, petitioned the Supreme Court of the United States for review of the matter. On January 19, 2021, the Supreme Court denied the defendants’ petition for review.

In December 2019, the City of Rome, Georgia (“Rome”) filed a complaint in the Superior Court of Floyd County, Georgia that is similar to the Gadsden Water Board and Centre Water Board complaints, again seeking monetary damages and injunctive relief related to PFCs. Also in December 2019, Jarrod Johnson filed a putative class action in the Superior Court of Floyd County, Georgia purporting to represent all water subscribers with the Rome (Georgia) Water and Sewer Division and/or the Floyd County (Georgia) Water Department and seeking to recover, among other things, damages in the form of alleged increased rates and

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

surcharges incurred by ratepayers for the costs associated with eliminating certain PFCs from their drinking water. In January 2020, defendant 3M Company removed the class action to federal court. The Company has filed motions to dismiss in both of these cases. On December 17, 2020, the Superior Court of Floyd County denied the Company’s motion to dismiss in the Rome case.

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

Putative Securities Class Action

~~The~~On January 3, 2020, the Company and certain of its ~~present and former~~ executive officers were named as defendants in a putative shareholder class action lawsuit filed in the United States District Court for the Northern District of ~~Georgia.~~Georgia (the "Securities Class Action"). The complaint alleges that defendants violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making materially false and misleading statements and that the officers are control persons under Section 20(a) of the Securities Exchange Act of 1934. The complaint is filed on behalf of shareholders who purchased shares of the Company’s common stock between April 28, 2017 and July 25, ~~2019.~~2019 (“Class Period”). On June 29, 2020, an amended complaint was filed in the Securities Class Action against Mohawk and its CEO Jeff Lorberbaum, based on the same claims and the same Class Period. The amended complaint alleges that the Company (1) engaged in fabricating revenues by attempting delivery to customers that were closed and recognizing these attempts as sales; (2) overproduced product to report higher operating margins and maintained significant inventory that was not salable; and (3) valued certain inventory improperly or improperly delivered inventory with knowledge that it was defective and customers would return it. On October 27, 2020, defendants filed a motion to dismiss the amended complaint. The Company ~~believes the claims are frivolous and~~ intends to vigorously defend ~~them vigorously.~~against the claims.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Government Subpoenas

As previously disclosed, on June 25, 2020, the Company received subpoenas issued by the U.S. Attorney’s Office for the Northern District of Georgia (the “USAO”) and the U.S. Securities and Exchange Commission (the “SEC”) relating to matters similar to the allegations of wrongdoing raised by the Securities Class Action. The Company’s Audit Committee, with the assistance of outside legal counsel, conducted a thorough internal investigation into these allegations. The Audit Committee has completed the investigation and concluded that the allegations of wrongdoing are without merit. The USAO and SEC investigations are ongoing, and the Company is cooperating fully with those authorities. The Company will continue to vigorously defend against the allegations of wrongdoing in the Securities Class Action and does not believe they have merit.

Delaware State Court Action

The Company and certain of its present and former executive officers were named as defendants in a putative state securities class action lawsuit filed in the Superior Court of the State of Delaware on January 30, 2020. The complaint alleges that defendants violated Sections 11 and 12 of the Securities Act of 1933. The complaint is filed on behalf of shareholders who purchased shares of the Company’s common stock in Mohawk Industries Retirement Plan 1 and Mohawk Industries Retirement Plan 2 between April 27, 2017 and July 25, 2019. On March 27, 2020, the Court granted a temporary stay of the litigation pending the earlier of either the close of fact discovery or the deadline to appeal the dismissal of the related ~~Putative~~ Securities Class Action pending in the United States District Court for the Northern District of Georgia. The stay may be lifted according to the terms set forth in the Court’s Order to Stay Litigation. The Company ~~believes the claims are frivolous and~~ intends to vigorously defend ~~them vigorously.~~against the claims.

Georgia State Court Investor Actions

The Company and certain of its present and former executive officers were named as defendants in certain investor actions, filed in the State Court of Fulton County of the State of Georgia on April 22, 2021 and April 23, 2021. NaN complaints brought on behalf of purported former Mohawk stockholders each allege that defendants defrauded the respective plaintiffs through false or misleading statements and thereby induced plaintiffs to purchase Company stock at artificially inflated prices. The allegations are similar to those of the Securities Class Action pending in the United States District Court for the Northern District of Georgia. The claims alleged include fraud, negligent misrepresentation, violations of the Georgia Securities Act, and violations of the Georgia Racketeering and Corrupt Organizations statute. Plaintiffs in the investor actions seek compensatory and punitive damages. The Company intends to vigorously defend against the claims.

Derivative Actions

The Company and certain of its executive officers and directors were named as defendants in certain derivative actions filed in the United States District Court for the Northern District of Georgia on May 18, 2020 and August 6, 2020, respectively (the “NDGA Derivative Actions”), and in the Superior Court of Gordon County of the State of Georgia on March 3, 2021 (the “Georgia Derivative Action”). The complaints allege that defendants breached their fiduciary duties to the Company by causing the Company to issue materially false and misleading statements. The complaints are filed on behalf of the Company and seek to remedy fiduciary duty breaches occurring from April 28, 2017 – July 25, 2019. On July 20, 2020, the court in the NDGA Derivative Actions granted a temporary stay of the litigation. Other shareholders of record have jointly moved to intervene in the derivative actions to stay the proceedings. The court in the NDGA Derivative Actions has not yet ruled on the motion to intervene. On October 21, 2020, the court entered an order consolidating the NDGA Derivative Actions and appointing Lead Counsel. The consolidated NDGA Derivative Actions will remain stayed pending the earlier of either the Securities Class Action defendants filing an answer to the operative complaint or the deadline to appeal the dismissal of the Securities Class Action. On April 8, 2021, the court in the Georgia Derivative Action granted a temporary stay of the litigation. The Georgia Derivative Action will likewise remain stayed pending the earlier of either the Securities Class Action defendants filing an answer to the operative complaint or the deadline to appeal the dismissal of the Securities Class Action. The Company intends to vigorously defend against the claims.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Belgian Tax Matter

Between 2012 and 2014, the Company received assessments from the Belgian tax authority for the calendar years 2005 through 2010 in the amounts of €46,135, €38,817, €39,635, €30,131, ~~€35,567~~€25,486 and €43,117 respectively, including penalties, but excluding interest. The Belgian tax authority denied the Company’s formal protests against these assessments and the Company brought all six years before the Court of First Appeal in Bruges. The Court of First Appeal in Bruges ruled in favor of the Company on January 27, 2016, with respect to the calendar years ending December 31, 2005 and December 31, 2009; and on June 13, 2018, the Court of First Appeal in Bruges ruled in favor of the Company with respect to the calendar years ending December 31, 2006, December 31, 2007, December 31, 2008 and December 31, 2010. The Belgian tax authority has lodged its Notification of Appeal for all six years with the Ghent Court of Appeal. On September 17, 2019, the Company pled its case to the Ghent Court of Special (Tax) Appeals and on October 1, 2019, the ~~Court~~court ruled in favor of the Company, re-confirming the rulings of the Court of First Appeals in Bruges with respect to the calendar years ending December 31, 2005 and December 31, 2009. On March 12, 2020, the Belgian tax authority filed another revised assessment for the calendar year ending December 31, 2009, with the Ghent Court.

In March 2019, the Company received assessments from the Belgian tax authority for tax years 2011 through 2017 ~~in the amount~~which were, as a result of €40,617, €39,732, €11,358, €23,919, €30,610, €93,145 and €79,933 respectively, including penalties, but excluding interest. The Company intends to file formal protests based on these assessments in a timely manner. The assessments are largely based on the same facts underlying the positive ~~rulings, which~~ruling of the ~~Belgian tax authority may appeal.~~Ghent Court of Appeal, cancelled in January 2020.

~~In January 2020, the Belgian tax authority canceled the tax assessments for the years ending December 31, 2011 through 2017, inclusively.~~ On March 10, 2020, a new notice of change was received for the year ending December 31, 2016, resulting in a tax assessment in the amount of €67,959, including penalties, but excluding interest, against which the Company ~~has~~ filed a protest on April 10, 2020. On December 22, 2020, a tax assessment for the year ending December 31, 2017, was received in the amount of €17,655, including penalties, but excluding interest, against which the Company will file a protest in 2021. These notices of change/tax assessments from the Belgian tax authority represent a change in position in which it intends to apply new rules applicable as of 2018 to the Company's open tax years going back to 2009.

On October 22, 2020, a notice of change was received by the Company’s licensing subsidiary in Luxembourg, against which the Company filed a protest. The notice covers the years ending December 31, 2013 to December 31, 2018 and is based on the same facts underlying the original actions that were unsuccessfully tried and appealed by the Belgian government. In December 2020, the Company received assessments for the years ending December 31, 2013 and 2017, in the amount of €45,466 and €65,152, respectively, including penalties, but excluding interest, against which the company filed a protest in 2021. In view of the allegations made against the Company’s licensing subsidiary in Luxembourg, the tax assessment received in the amount of €67,959 for the year ending December 31, 2016, was cancelled on January 27, 2021.

The Company continues to disagree with the views of the Belgian tax authority on ~~this matter~~all matters referenced above 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.

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General

The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses that are reasonably estimable. These contingencies are subject to significant uncertainties and ~~we are~~the Company is unable to estimate the amount or range of loss, if any, in excess of amounts accrued. The Company does not believe that the ultimate outcome of these actions will have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations, cash flows or liquidity in a given quarter or year.

The Company is subject to various federal, state, local and foreign environmental health and safety laws and regulations, including those governing air emissions, wastewater discharges, the use, storage, treatment, recycling and disposal of solid and hazardous materials and finished product, and the cleanup of contamination associated therewith. Because of the nature of the Company’s business, the Company has incurred, and will continue to incur, costs relating to compliance with such laws and regulations. The Company is involved in various proceedings relating to environmental matters and is currently engaged in environmental investigation, remediation and post-closure care programs at certain sites. The Company has provided accruals for such activities that it has determined to be both probable and reasonably estimable. The Company does not expect that the ultimate liability with respect to such activities will have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations, cash flows or liquidity in a given quarter or year.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

18. Debt

Senior Credit Facility

On October 18, 2019, the Company amended and restated its $1,800,000 senior credit facility, extending the maturity from March 26, 2022 to October 18, 2024 (as amended and restated, the “Senior Credit Facility”). The Senior Credit Facility marginally reduced the commitment fee and modified certain negative covenants to provide the Company with additional flexibility, including flexibility to make acquisitions and incur additional indebtedness. The ~~amendment~~restatement also renewed the Company’s option to extend the maturity of the Senior Credit Facility up to two times for an additional one-year period each.

At the Company’s election, revolving loans under the 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 ~~March 28, 2020)~~April 3, 2021), or (b) the higher of the Wells Fargo Bank, National Association prime rate, the Federal Funds rate plus 0.5%, or the Eurocurrency Rate (as defined in the Senior Credit Facility) rate plus 1.0%, plus an applicable margin ranging between 0.00% and 0.75% (0.125% as of ~~March 28, 2020)~~April 3, 2021). The Company also pays a commitment fee to the lenders under the Senior Credit Facility on the average amount by which the aggregate commitments of the lenders exceed utilization of the Senior Credit Facility ranging from 0.09% to 0.20% per annum (0.11% as of ~~March 28, 2020)~~April 3, 2021). 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 Senior Credit Facility are unsecured.

The Senior Credit Facility includes certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, subsidiary indebtedness, fundamental changes, 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. ~~However,~~The Senior Credit Facility originally required the Company to maintain a Consolidated Interest Coverage Ratio of at ~~the Company’s election upon the occurrence~~least 3.00 to 1.00 and a Consolidated Net Leverage Ratio of ~~certain material acquisitions, a step up~~no more than 3.75 to 1.00, each as of the ~~maximum permitted~~last day of any fiscal quarter. However, on May 7, 2020 the Company amended the Senior Credit Facility to temporarily increase the minimum Consolidated Net Leverage Ratio to ~~4.00~~4.75 to 1.00 and to increase the amount of certain adjustments to Net Income that are permitted to calculate the ratio. The relief provided by the amendment is in effect for the ~~four (4)~~ fiscal ~~quarter period of the Company commencing with~~quarters ending on September 26, 2020 through (and including) the fiscal quarter ~~during which said acquisition(s) closes.~~ending December 31, 2021.

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

In 2019, the Company paid financing costs of $2,264 in connection with the amendment and restatement of its Senior Credit Facility. These costs were deferred and, along with previously unamortized costs of $3,405 are being amortized over the term of the Senior Credit Facility.

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

As of ~~March 28,~~April 3, 2021 and December 31, 2020, amounts utilized under the Senior Credit Facility included ~~$565,245 of~~0 borrowings and ~~$22,787~~$787 of standby letters of credit related to various insurance contracts and foreign vendor commitments. The outstanding borrowings of ~~$305,900~~$2,940 under the ~~Company’s~~Company's U.S. and European commercial paper programs as of ~~March 28, 2020~~April 3, 2021 reduce the availability of the Senior Credit Facility. Including commercial paper borrowings, the Company has utilized ~~$893,932~~$3,727 under the Senior Credit Facility resulting in a total of ~~$906,068~~$1,796,273 available as of ~~March 28, 2020.~~April 3, 2021.

Commercial Paper

On February 28, 2014 and July 31, 2015, the Company established programs for the issuance of unsecured commercial paper in the United States and Eurozone capital markets, respectively. Commercial paper issued under the U.S. and European programs will have maturities ranging up to 397 and 183 days, respectively. None of the commercial paper notes may be voluntarily prepaid or redeemed by the Company and all rank pari passu with all of the Company’s other unsecured and unsubordinated indebtedness. To the extent that the Company issues European commercial paper notes through a subsidiary of the Company, the notes will be fully and unconditionally guaranteed by the Company.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company uses its 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 Senior Credit Facility) at any time.

The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of ~~March 28, 2020,~~April 3, 2021, there was ~~$60,300~~0 outstanding under the U.S. commercial paper program and the euro equivalent of ~~$245,600~~$2,940 outstanding under the European program. ~~The weighted-average interest rate and maturity period for~~As of December 31, 2020, there was 0 outstanding under the ~~U.S. program were 1.70% and 29 days, respectively. The~~both programs. As of April 3, 2021, the weighted-average interest rate and maturity period for the European program were ~~(0.26)~~(0.4)% and ~~23.4~~13.00 days, respectively. The COVID-19 crisis has recently impacted the commercial paper markets, both in the US and Europe, resulting in volatility in relation to supply and pricing. As stated previously, the Company’s commercial paper programs are backstopped by the Senior Credit Facility, which allows the Company to mitigate market disruptions using direct borrowings from the Senior Credit Facility.

Senior Notes

On ~~September 4, 2019,~~June 12, 2020, Mohawk Capital Finance S.A. (“("Mohawk ~~Finance”~~Finance"), an indirect wholly-owned finance subsidiary of the Company, completed the issuance and sale of €500,000 aggregate principal amount of 1.750% Senior Notes (“1.750% Senior Notes”) due June 12, 2027. The 1.750% Senior Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance's other existing and future senior unsecured indebtedness. The 1.750% Senior Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. Interest on the 1.750% Senior Notes is payable annually in cash on June 12 of each year, commencing on June 12, 2021. The Company paid financing costs of $4,400 in connection with the 1.750% Senior Notes. These costs were deferred and are being amortized over the term of the 1.750% Senior Notes.

On May 14, 2020, the Company completed the issuance and sale of $500,000 aggregate principal amount of 3.625% Senior Notes (“3.625% Senior Notes”) due May 15, 2030. The 3.625% Senior Notes are senior unsecured obligations of the Company and rank pari passu with all of the Company’s existing and future unsecured indebtedness. Interest on the 3.625% Senior Notes is payable semi-annually in cash on May 15 and November 15 of each year, commencing on November 15, 2020. The Company paid financing costs of $5,476 in connection with the 3.625% Senior Notes. These costs were deferred and are being amortized over the term of the 3.625% Senior Notes.

On September 4, 2019, Mohawk Finance completed the issuance and sale of €300,000 aggregate principal amount of its Floating Rate Notes due September 4, 2021 (“2021 Floating Rate Notes”). The 2021 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2021 Floating Rate Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bear interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus 0.2% (but in no event shall the interest rate be less than zero). Interest on the 2021 Floating Rate Notes is payable quarterly on December 4, March 4, June 4, and September 4 of each year. Mohawk Finance received an issuance premium of €744 and paid financing cost of $754 in connection with the 2021 Floating Rate Notes. The issuance premium and financing costs have been deferred and are being amortized over the term of the 2021 Floating Rate Notes.

On May 18, 2018, Mohawk Finance completed the issuance and sale of €300,000 aggregate principal amount of its Floating Rate Notes due May 18, 2020 (“2020 Floating Rate Notes”). The 2020 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2020 Floating Rate Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bear interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus 0.3% (but in no event shall the interest rate be less than zero). Interest on the 2020 Floating Rate Notes is payable quarterly on August 18, November 18, February 18, and May 18 of each year. Mohawk Finance paid financing costs of $890 in connection with the 2020 Floating Rate Notes. These costs were ~~deferred and are being amortized over the term of the 2020 Floating Rate Notes.~~

On September 11, 2017, Mohawk Finance completed the issuance and sale of €300,000 aggregate principal amount of its Floating Rate Notes due September 11, 2019 (“2019 Floating Rate Notes”). The 2019 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and ranked pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The ~~2019~~2020 Floating Rate Notes were fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bore interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus 0.3% (but in no event would the interest rate be less than zero). Interest on the ~~2019~~2020 Floating Rate Notes was payable quarterly on ~~September 11, December 11, March 11,~~August 18, November 18, February 18, and ~~June 11~~May 18 of each year. Mohawk Finance paid financing costs of ~~$911~~$890 in connection with the ~~2019~~2020 Floating Rate Notes. These costs were deferred and amortized over the term of the ~~2019~~2020 Floating Rate Notes. On ~~September 11,~~

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

~~2019,~~May 18, 2020, the Company paid the remaining €300,000 outstanding principal of the ~~2019~~2020 Floating Rate Notes utilizing cash on hand and borrowings under its ~~European~~ commercial paper ~~program.~~programs.

On June 9, 2015, the Company issued €500,000 aggregate principal amount of 2.00% Senior Notes (“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, commencing on January 14, 2016. 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

As defined in the related agreements, the Company’s senior notes contain covenants, representations and warranties and events of default, subject to exceptions, and restrictions on the Company’s financial and business operations, including limitations on liens, restrictions on entering into sale and leaseback transactions, fundamental changes, and a provision allowing the holder of the notes to require repayment upon a change of control triggering event.

~~Term Loan Subsequent Event~~

On April 7, 2020, the Company entered into a credit agreement that provides for a $500,000 delayed draw term loan facility (the “Term Loan Facility”). On April 15, 2020, the Company borrowed the full amount on the Term Loan Facility, the proceeds of which may be used for funding working capital and general corporate purposes of the Company. The principal amount of the Term Loan Facility must be repaid in a single installment on April 6, 2021. The Company may prepay all or a portion of the Term Loan Facility from time to time, plus accrued and unpaid interest. The obligations of the Company and its subsidiaries in respect of the Term Loan Facility are unsecured. The Term Loan Facility is subject to the same affirmative and negative covenants that are applicable to the Senior Credit Facility.

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


	At April 3, 2021			At December 31, 2020
	Fair Value		Carrying Value	Fair Value	Carrying Value
1.750% Senior Notes, payable June 12, 2027; interest payable annually	$	629,780	587,959	635,664	615,006
3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually	540,305		500,000	561,890	500,000
3.85% Senior Notes, payable February 1, 2023; interest payable semi-annually	631,128		600,000	638,844	600,000
2.00% Senior Notes, payable January 14, 2022; interest payable annually	595,103		587,959	624,680	615,006


2021 Floating Rate Notes, payable September 04, 2021; interest payable quarterly	352,944		352,775	368,738	369,004

European commercial paper	2,940		2,940	0	0




Finance leases and other	51,848		51,848	46,302	46,302
Unamortized debt issuance costs	(10,453)		(10,453)	(11,176)	(11,176)
Total debt	2,793,595		2,673,028	2,864,942	2,734,142
Less current portion of long term debt and commercial paper	961,226		953,913	376,989	377,255
Long-term debt, less current portion	$	1,832,369	1,719,115	2,487,953	2,356,887

At March 28, 2020 At December 31, 2019
Fair Value
Carrying
Value
Fair Value
Carrying
Value
3.85% senior notes, payable February 1, 2023; interest payable semiannually $ 610,050
600,000
627,144
600,000
2.00% senior notes, payable January 14, 2022; interest payable annually 545,561
556,917
580,235
560,099
Floating Rate Notes, payable May 18, 2020, interest payable quarterly 334,173
334,150
336,066
336,059
Floating rate notes, payable September 04, 2021, interest payable quarterly 332,733
334,150
335,965
336,059
U.S. commercial paper 60,300
60,300
317,000
317,000
European commercial paper 245,600
245,600
376,946
376,946
Five-year senior secured credit facility, due October 18, 2024 565,245
565,245
16,803
16,803
Finance leases and other 30,877
30,877
30,049
30,049
Unamortized debt issuance costs (2,714 ) (2,714 ) (3,129 ) (3,129 )
Total debt 2,721,825
2,724,525
2,617,079
2,569,886
Less current portion of long-term debt and commercial paper 1,210,525
1,210,525
1,051,498
1,051,498
Long-term debt, less current portion $ 1,511,300
1,514,000
1,565,581
1,518,388

The fair values of the Company’s debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental cash flow information were as follows:


	Three Months Ended
	April 3, 2021		March 28, 2020
Net cash paid (received) during the periods for:
Interest	$	24,286	23,382
Income taxes	$	17,994	5,773

Supplemental schedule of non-cash investing and financing activities:
Unpaid property plant and equipment in accounts payable and accrued expenses	$	64,531	73,161

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

During the past two decades, the Company has grown significantly. Its current geographic breadth and diverse product offering are reflected in three reporting segments: Global Ceramic; Flooring ~~North America (“Flooring NA”);~~NA; and Flooring ~~Rest of the World (“Flooring ROW”).~~ROW. The Global Ceramic Segment designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone tile and other products including natural stone, quartz and porcelain slab countertops, which it distributes primarily in North America, Europe, Brazil and Russia through various selling channels, which include company-owned stores, independent distributors and home centers. The Flooring NA Segment designs, manufactures, sources and markets its floor covering products, including broadloom carpet, carpet tile, rugs, carpet cushion, laminate and vinyl products, including luxury vinyl tile (LVT) and sheet vinyl, and wood flooring, all of which it distributes through its network of regional distribution centers and satellite warehouses using Company-operated trucks, common carriers or rail transportation. The Segment’s product lines are sold through various channels, including independent floor covering retailers, independent distributors, home centers, mass merchandisers, department stores, shop at home, online retailers, buying groups, commercial contractors and commercial end users. The Flooring ROW Segment designs, manufactures, sources, licenses and markets laminate, vinyl products, including LVT and sheet vinyl, wood flooring, roofing panels, insulation boards, medium-density fiberboard (“MDF”) and chipboards, which it distributes primarily in Europe, Russia, Australia and New Zealand through various channels, including independent floor covering retailers, independent distributors, company-owned distributors, home centers, commercial contractors and commercial end users.

Mohawk is a significant supplier of every major flooring category with manufacturing operations in 18 nations and sales in more than 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 ~~significant~~ operations in the United Kingdom, Russia, Mexico, Australia, New Zealand, Brazil and other parts of the world. The Company is a leading provider of flooring for residential and commercial markets and has earned significant recognition for its innovation in design and performance as well as sustainability.

Due to its global footprint, Mohawk’s business is sensitive to macroeconomic events in the United States and abroad. The Company's markets and operations around the world continue to be impacted by the COVID-19 pandemic. While the near-term economic and financial impact of the COVID-19 pandemic is improving in its residential markets, the Company expects that fluctuating demand may continue across a number of its markets. During 2020, the Company completed actions prompted by the COVID-19 pandemic to enhance future performance including site closings, other facility and product rationalizations and workforce reductions. The Company anticipates these global actions are on target to deliver savings of approximately $100 to $110 million of which approximately $75 million was realized in 2020 and the first quarter of 2021, with costs of approximately $160 million in 2020 and the first quarter of 2021.

For the three months ended ~~March 28, 2020,~~April 3, 2021, net earnings attributable to the Company were ~~$110.5~~$236.8 million, or diluted earnings per share (“EPS”) of ~~$1.54,~~$3.36, compared to net earnings attributable to the Company of ~~$121.6~~$110.5 million, or diluted EPS of ~~$1.67~~$1.54 for the three months ended March ~~30, 2019.~~28, 2020. The change in EPS was primarily attributable to ~~productivity gains, lower inflation, and lower startup costs that were offset by~~ the ~~unfavorable~~favorable net impact of ~~lower~~higher volumes, productivity gains, the ~~unfavorable~~favorable net impact of price and product mix, ~~and costs~~the favorable impact due to ~~temporarily reducing production. Our~~fewer short-term manufacturing disruptions and the favorable net impact from foreign exchange rates, partially offset by higher inflation costs. The Company's operations and net earnings for the first quarter of 2021 did not reflect normal seasonality, and the Company's operations and net earnings for the first quarter of 2020 were affected by broader economic issues related to the COVID-19 pandemic. In particular, the Company experienced decreasing demand towards the end of the first quarter of 2020 and increased costs associated with short-term reductions in manufacturing output. The Company expects the COVID-19 pandemic to continue to impact normal seasonality trends in 2021, but the extent and duration of such impact cannot be predicted.

For the three months ended ~~March 28, 2020,~~April 3, 2021, the Company generated ~~$195.0~~$259.6 million of cash from operating activities. As of ~~March 28, 2020,~~April 3, 2021, the Company had cash and cash equivalents of ~~$263.1~~$557.3 million, of which ~~$118.5~~$205.8 million was in the United States and ~~$144.6~~$351.4 million was in foreign ~~countries. On April 7, 2020, the Company borrowed $500.0~~countries, in addition to $782.3 million ~~on its delayed draw term loan facility~~ in ~~order to support liquidity needs during the COVID-19 crisis.~~short-term investments.

~~COVID-19 Pandemic~~

~~Due to its large global footprint, Mohawk’s business is sensitive to macroeconomic events in the United States and abroad. While the near-term economic and financial impact~~

Also, the Company has experienced and may continue to experience plant closures resulting from lower demand, health-based concerns, and government mandated closures. The majority of our manufacturing and distribution facilities, though, continue to operate, to the extent supported by demand, in accordance with local health and safety guidance. In order to manage reduced short-term production needs, the Company has experienced, and may continue to initiate temporary furloughs and layoffs. The Company believes it has the experience and resources necessary to capitalize on opportunities that will arise once employees return to work around the world and macroeconomic conditions improve.

The Company is following the recommendations of local health authorities to minimize exposure risk for its employees, suppliers, customers and other stakeholders. The Company is currently implementing business continuity plans during the crisis and attempting to minimize the pandemic’s impact. For information on risk factors that could impact our results, please refer to “Risk Factors” in Part II, Item 1A of this Form 10-Q.

Results of Operations

Quarter Ended ~~March 28, 2020,~~April 3, 2021, as compared with Quarter Ended March ~~30, 2019~~28, 2020

Net sales for the three months ended ~~March 28, 2020~~April 3, 2021 were ~~$2,285.8~~$2,669.0 million, reflecting ~~a decrease~~an increase of ~~$156.7~~$383.2 million, or ~~6.4%~~16.8%, from the ~~$2,442.5~~$2,285.8 million reported for the three months ended March ~~30, 2019.~~28, 2020. The ~~decrease~~increase was primarily attributable to ~~lower~~higher volumes of approximately ~~$46~~$156 million, the ~~unfavorable~~favorable impact from ~~fewer~~extra shipping days in the first quarter of ~~2020~~2021 of approximately ~~$38~~$111 million, ~~unfavorable~~the favorable net impact from foreign exchange rates of approximately $64 million and the favorable net impact of price and product mix of approximately ~~$39 million and the unfavorable~~$52 million. The Company's net ~~impact from foreign exchange rates of approximately $34 million. Our~~ sales ~~globally~~ for the first quarter of 2021 did not reflect normal seasonality, and the first quarter of 2020 net sales were affected by broader economic ~~issues~~conditions related to the COVID-19 pandemic. In particular, the Company experienced decreasing demand towards the end of the ~~quarter.~~first quarter of 2020.

Global Ceramic segment—Net sales ~~decreased $49.9~~increased $81.4 million, or ~~5.6%~~9.6%, to $929.9 million for the three months ended April 3, 2021, compared to $848.5 million for the three months ended March 28, ~~2020, compared to $898.4 million for the three months ended March 30, 2019.~~2020. The ~~decrease~~increase was primarily attributable to ~~lower volumes of approximately $16 million,~~ the ~~unfavorable~~favorable impact from ~~fewer~~extra shipping days in the first quarter of ~~2020~~2021 of approximately ~~$15~~$34 million, ~~the unfavorable net impact from foreign exchange rates~~higher volumes of approximately ~~$13~~$23 million and the ~~unfavorable~~favorable net impact of price and product mix of approximately $6$23 million.

Flooring NA segment—Net sales ~~decreased $73.7~~increased $121.0 million, or ~~8.0%~~14.3%, to $969.3 million for the three months ended April 3, 2021, compared to $848.3 million for the three months ended March 28, ~~2020, compared to $922.0 million for the three months ended March 30, 2019.~~2020. The ~~decrease~~increase was primarily attributable to ~~lower~~higher volumes of approximately ~~$44~~$67 million, the ~~unfavorable~~favorable impact from ~~fewer~~extra shipping days in the first quarter of ~~2020~~2021 of approximately ~~$14~~$45 million and the ~~unfavorable~~favorable net impact of price and product mix of approximately ~~$16~~$9 million.

Flooring ROW segment—Net sales ~~decreased $33.2~~increased $180.9 million, or ~~5.3%~~30.7%, to $769.9 million for the three months ended April 3, 2021, compared to $589.0 million for the three months ended March 28, ~~2020, compared to $622.2 million for the three months ended March 30, 2019.~~2020. The ~~decrease~~increase was primarily ~~due~~attributable to ~~the unfavorable impact from fewer shipping days in the first quarter of 2020~~higher volumes of approximately ~~$10~~$66 million, the ~~unfavorable~~favorable net impact from foreign exchange rates of approximately ~~$21~~$62 million, the favorable impact from extra shipping days in the first quarter of 2021 of approximately $32 million and the ~~unfavorable~~favorable net impact of price and product mix of approximately ~~$16 million, partially offset by higher sales volumes of approximately $14~~$20 million.

Gross profit for the three months ended ~~March 28, 2020~~April 3, 2021 was ~~$616.4~~$791.8 million ~~(27.0%~~(29.7% of net sales), ~~a decrease~~an increase of ~~$8.5~~$175.4 million or ~~1.4%~~28.5%, compared to gross profit of ~~$624.9~~$616.4 million ~~(25.6%~~(27.0% of net sales) for the three months ended March ~~30, 2019.~~28, 2020. As a percentage of net sales, gross profit increased ~~138~~270 basis points. The ~~decrease~~increase in gross profit dollars was primarily attributable to ~~the unfavorable net impact of lower~~higher volumes of approximately ~~$31~~$86 million, productivity gains of approximately $42 million, the ~~unfavorable~~favorable net impact of price and product mix of approximately ~~$28~~$29 million, ~~costs due to temporarily reducing production of approximately $22 million, and~~ the ~~unfavorable~~favorable net impact from foreign exchange rates of approximately $5$16 million and the favorable impact of approximately $16 million due to fewer short-term manufacturing disruptions, partially offset by ~~productivity gains of approximately $38 million, lower restructuring, acquisition and integration-related costs of approximately $27 million, and lower~~higher inflation of approximately ~~$12~~$15 million. As previously discussed, ~~our~~the Company's operations for the first quarter ~~were~~of 2021 did not reflect normal seasonality, and 2020 was affected by broader economic ~~issues~~conditions related to the COVID-19 pandemic. In particular, the Company experienced decreasing demand towards the end of the first quarter ~~and increased costs associated with short-term reductions in manufacturing output.~~of 2020.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended ~~March 28, 2020~~April 3, 2021 were ~~$465.0~~$474.3 million ~~(20.3%~~(17.8% of net sales), an increase of ~~$5.4~~$9.3 million compared to ~~$459.6~~$465.0 million ~~(18.8%~~(20.3% of net sales) for the three months ended March ~~30, 2019.~~28, 2020. As a percentage of net sales, selling, general and administrative expenses ~~increased 152~~decreased 250 basis points. The increase in selling, general and administrative expenses in dollars was primarily attributable to higher inflation of approximately ~~$11~~$10 million, the unfavorable net impact from foreign exchange rates of approximately $9 million and higher volumes of approximately $7 million, partially offset by productivity gains of approximately $14 million and the lower costs associated with investments in new product development ~~sales personnel,~~and marketing costs of $3 million.

Operating income for the three months ended April 3, 2021 was $317.5 million (11.9% of net sales) reflecting an increase of $166.0 million, or 109.6%, compared to operating income of $151.5 million (6.6% of net sales) for the three months ended March 28, 2020. The increase in operating income was primarily attributable to higher volumes of $79 million, approximately $56 million of productivity gains, the favorable net impact of price and ~~other, partially offset by~~product mix of approximately $29 million, the favorable impact of approximately $16 million due to fewer short-term manufacturing disruptions and the favorable net impact from foreign exchange rates of approximately ~~$6 million.~~

~~Operating income~~

~~Operating income for the three months ended March 28, 2020 was $151.5~~$7 million, ~~(6.6% of net sales) reflecting a decrease of $13.8 million, or 8.3%, compared to operating income of $165.3 million (6.8% of net sales) for the three months ended March 30,~~

2019. The decrease in operating income was primarily attributable to the unfavorable net impact due to lower volumes of approximately $34 million, the unfavorable net impact of price and product mix of approximately $28 million, costs due to temporarily reducing production of approximately $22 million, and approximately $12 million of costs associated with investments in new product development, sales personnel, marketing and other, partially offset by ~~productivity gains of approximately $36 million, lower restructuring, acquisition and integration-related costs of approximately $29 million, lower~~higher inflation of approximately ~~$8 million, and lower startup costs of approximately $8~~$25 million.

Global Ceramic segment—Operating income was ~~$49.1~~$87.8 million ~~(5.8%~~(9.4% of segment net sales) for the three months ended April 3, 2021 reflecting an increase of $39.8 million compared to operating income of $48.0 million (5.7% of segment net sales) for the three months ended March 28, 2020 reflecting a decrease of $35.2 million compared to operating income of $84.3 million (9.4% of segment net sales) for the three months ended March 30, 2019. The decrease in operating income was primarily attributable to the unfavorable net impact due of lower volumes of approximately $12 million, the unfavorable net impact of price and product mix of approximately $10 million, costs due to temporarily reducing production of approximately $15 million, partially offset by productivity gains of approximately $4 million.

~~Flooring NA segment~~—Operating income was $33.7 million (4.0% of segment net sales) for the three months ended March 28, 2020 reflecting an increase of $33.1 million compared to operating income of $0.6 million (0.1% of segment net sales) for the three months ended March 30, 2019.2020. The increase in operating income was primarily attributable to productivity gains of approximately $29 million, lower restructuring, acquisition and integration-related costs of approximately $23 million and lower inflation of approximately $7 million, partially offset by the unfavorable net impact due of lower volumes of approximately $19$20 million, the ~~unfavorable~~favorable net impact of price and product mix of approximately $5$11 million, higher volumes of approximately $9 million and ~~costs~~the favorable impact of approximately $7 million due to ~~temporarily reducing production~~fewer short-term manufacturing disruptions, partially offset by higher inflation of approximately $6$9 million.

Flooring ~~ROW~~NA segment—Operating income was ~~$77.2~~$81.3 million ~~(13.1%~~(8.4% of segment net sales) for the three months ended April 3, 2021 reflecting an increase of $45.1 million compared to operating income of $36.2 million (4.3% of segment net sales) for the three months ended March 28, ~~2020~~2020. The increase in operating income was primarily attributable to the higher volumes of approximately $28 million and productivity gains of approximately $23 million, partially offset by higher inflation of approximately $8 million.

Flooring ROW segment—Operating income was $159.3 million (20.7% of segment net sales) for the three months ended April 3, 2021 reflecting ~~a decrease~~an increase of ~~$13.2~~$83.5 million compared to operating income of ~~$90.4~~$75.8 million ~~(14.5%~~(12.9% of segment net sales) for the three months ended March ~~30, 2019.~~28, 2020. The ~~decrease~~increase in operating income was primarily attributable to higher volumes of $42 million, the ~~unfavorable~~favorable net impact of price and product mix of approximately $19 million, productivity gains of approximately $13 million ~~approximately $7 million of costs associated with investments in new product development, sales personnel,~~ and ~~marketing~~ the ~~unfavorable~~favorable net impact ~~due~~ of ~~lower volumes~~foreign exchange rates of approximately ~~$3 million, costs due to temporarily reducing production of approximately $2~~$9 million, partially offset by ~~lower~~higher inflation of approximately ~~$9 million, and productivity gains of approximately $3~~$5 million.

Interest expense was $15.2 million for the three months ended April 3, 2021, reflecting an increase of $6.5 million compared to interest expense of $8.7 million for the three months ended March 28, 2020. During the second quarter of 2020, ~~reflecting~~the Company issued new long-term debt to strengthen its liquidity position during the early months of the COVID-19 pandemic. The new debt issuance shifted the Company from a ~~decrease~~mix of ~~$1.8 million compared~~fixed and floating rate debt, with a lower average interest rate, to more fixed rate debt, which carries a higher average interest rate.

Other expense ~~of $10.5~~(income), net

Other income, net was $2.2 million for the three months ended ~~March 30, 2019. The decrease in interest expense was primarily due~~April 3, 2021, reflecting a favorable change of $7.9 million compared to ~~decreased borrowings.~~

~~Other expense (income), net~~

~~Other~~other expense, net ~~was~~of $5.7 million for the three months ended March 28, ~~2020, reflecting an unfavorable change of $9.4 million compared to other income, net of $3.7 million for the three months ended March 30, 2019.~~2020. The change was primarily attributable to ~~unfavorable~~the favorable net impact of foreign exchange rates ~~on transactions in the current year.~~and other miscellaneous items.

For the three months ended ~~March 28, 2020,~~April 3, 2021, the Company recorded income tax expense of $67.7 million on earnings before income taxes of $304.5 million, for an effective tax rate of 22.2%, as compared to an income tax expense of $26.7 million on earnings before income taxes of $137.1 million, for an effective tax rate of 19.4%~~, as compared to income tax expense of $37.0 million on earnings before income taxes of $158.6 million, for an effective tax rate of 23.3%~~ for the three months ended March ~~30, 2019.~~28, 2020. The difference in the effective tax rates for the comparative periods was ~~caused~~impacted by the Company's inability to use an estimated annual effective rate for the quarter ended March 28, 2020 and the geographical dispersion of profits and ~~losses and the inability~~losses.

Table of ~~the Company to make a reliable estimate of its annual effective tax rate.~~Contents

Table of Contents

Liquidity and Capital Resources

The Company’s primary capital requirements are for working capital, capital expenditures and acquisitions. The Company’s capital needs are met primarily through a combination of internally generated funds, commercial paper, bank credit lines, term and senior notes and credit terms from suppliers.

Management has and will continue to evaluate its liquidity needs and strategy regarding capital resources in light of the recent economic crisis caused by the COVID-19 pandemic. As discussed below, the Company borrowed $500.0 million under its newly-established delayed draw term loan facility in April 2020 to strengthen its short-term liquidity position. At the same time, the Company has unilaterally extended payment terms for its vendors during the crisis to offset delays in receivable collections. Due to reduced short-term demand, the Company has temporarily reduced production at certain plants and reduced headcount through furloughs and layoffs. Management believes these actions along with cash secured from increased borrowing will allow the Company to meet any needs stemming from short-term reductions in cash flows from operations.

Net cash provided by operating activities in the first three months of ~~2020~~2021 was ~~$195.0~~$259.6 million, compared to net cash provided by operating activities of ~~$170.1~~$195.0 million in the first three months of ~~2019.~~2020. The increase of ~~$24.8~~$64.6 million in ~~2020~~2021 was primarily attributable to higher net earnings partially offset by changes in working ~~capital partially offset by lower net earnings.~~capital.

Net cash used in investing activities in the first three months of ~~2020~~2021 was ~~$133.4~~$333.3 million compared to net cash used in investing activities of ~~$211.8~~$133.4 million in the first three months of ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~a decrease~~an increase in ~~acquisition costs~~the purchases of ~~$76.8 million. In an effort to manage liquidity during the COVID-19 crisis, management is reducing near-term capital expenditures and expects to reduce its spend for the remainder~~short term investments of ~~2020.~~$194.4 million (net of redemption of short-term investments).

Net cash ~~provided by~~used in financing activities in the first three months of ~~2020~~2021 was ~~$87.2~~$120.2 million compared to net cash provided by financing activities of ~~$26.8~~$87.2 million in the three months of ~~2019.~~2020. The ~~change~~cash used in ~~cash provided by~~ financing activities is primarily attributable to the ~~net~~lower proceeds from the Senior Credit Facility of ~~$585.3~~$547.7 million ~~partially offset by~~(net of repayments of $65.6 million), the lower net ~~pay down~~proceeds on commercial paper of ~~$464.8~~$387.8 million and more share repurchases of ~~$68.6~~$54.2 million.

As of ~~March 28, 2020,~~April 3, 2021, the Company had cash of ~~$263.1~~$557.3 million, of which ~~$144.6~~$351.4 million was held outside the United States. The Company plans to permanently reinvest the cash held outside the United States. In addition to its cash on hand, the Company also had short-term investments of $782.3 million as of April 3, 2021. 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 is continually ~~evaluating~~evaluates its projected needs ~~in light of the current crisis~~ and ~~the Company~~ may conduct additional debt financings, subject to market conditions, to increase its liquidity and to take advantage of attractive financing opportunities.

On October ~~25, 2018,~~26, 2020, the ~~Company announced that its~~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 share repurchase program does not obligate~~In the ~~Company to acquire any particular amount~~first quarter of ~~common stock, and it may be suspended or terminated at any time at~~2021, the Company’s discretion. The timing and amount of any purchases of common stock will be based on the Company’s liquidity, general business and market conditions and other factors, including alternative investment opportunities. The Company has purchased ~~a total of 3.7 million shares under the program for~~ an aggregate of ~~$442.9~~$122.9 million ~~through~~under the ~~first quarter. The Company is putting future purchases on hold until~~share repurchase program. As of April 3, 2021, there remains $314.3 million authorized under the ~~economic environment improves.~~program.

See Note 18. Debt, of the notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further discussion of the Company’s long-term debt. The Company may continue, from time to time, to retire its outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amount involved may be material.

~~Senior Credit Facility~~

On October 18, 2019, the Company amended and restated its $1,800.0 million senior credit facility, extending the maturity from March 26, 2022 to October 18, 2024 (as amended and restated, the “Senior Credit Facility”). The Senior Credit Facility marginally reduced the commitment fee and modified certain negative covenants to provide the Company with additional flexibility, including flexibility to make acquisitions and incur additional indebtedness. The amendment also renewed the Company’s option to extend the maturity of the Senior Credit Facility up to two times for an additional one-year period each.

ranging between 0.00% and 0.75% (0.125% as of March 28, 2020). The Company also pays a commitment fee to the lenders under the Senior Credit Facility on the average amount by which the aggregate commitments of the lenders exceed utilization of the Senior Credit Facility ranging from 0.09% to 0.20% per annum (0.11% as of March 28, 2020). 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 Senior Credit Facility are unsecured.~~

Table 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. However, at the Company’s election upon the occurrence of certain material acquisitions, a step up of the maximum permitted Consolidated Net Leverage Ratio to 4.00 to 1.00 for the four (4) fiscal quarter period of the Company commencing with the fiscal quarter during which said acquisition(s) closes.Contents

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

In 2019, the Company paid financing costs of $2.3 million in connection with the amendment and restatement of its Senior Credit Facility. These costs were deferred and, along with previously unamortized costs of $3.4 million are being amortized over the term of the Senior Credit Facility.

As of March 28, 2020, amounts utilized under the Senior Credit Facility included $565.2 million of borrowings and $22.8 million of standby letters of credit related to various insurance contracts and foreign vendor commitments. The outstanding borrowings of $305.9 million under the Company’s U.S. and European commercial paper programs as of March 28, 2020 reduce the availability of the 2019 Senior Credit Facility. Including commercial paper borrowings, the Company has utilized $893.9 million under the Senior Credit Facility resulting in a total of $906.1 million available as of March 28, 2020.

~~Commercial Paper~~

The Company uses its 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 Senior Credit Facility) at any time.

The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of March 28, 2020, there was $60.3 million outstanding under the U.S. commercial paper program, and the euro equivalent of $245.6 million under the European program. The weighted-average interest rate and maturity period for the U.S. program were 1.70% and 29 days, respectively. The weighted-average interest rate and maturity period for the European program were (0.26)% and 23.4 days, respectively. The COVID-19 crisis has recently impacted the commercial paper markets, both in the US and Europe, resulting in volatility in relation to supply and pricing. As stated previously, the Company’s commercial paper programs are backstopped by the Senior Credit Facility, which allows the Company to mitigate market disruptions using direct borrowings from the Senior Credit Facility.

~~Senior Notes~~

On September 4, 2019, Mohawk Finance completed the issuance and sale of €300.0 million aggregate principal amount of its Floating Rate Notes due September 4, 2021 (“2021 Floating Rate Notes”). The 2021 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2021 Floating Rate Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bear interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus 0.2% (but in no event shall the interest rate be less than zero). Interest on the 2021 Floating Rate Notes is payable quarterly on December 4, March 4, June 4, and September 4 of each year. Mohawk Finance received an issuance premium of €0.7 million and paid financing cost of $0.8 million in connection with the 2021 Floating Rate Notes. The issuance premium and financing costs have been deferred and are being amortized over the term of the 2021 Floating Rate Notes.

On May 18, 2018, Mohawk Finance completed the issuance and sale of €300.0 million aggregate principal amount of its Floating Rate Notes due May 18, 2020 (“2020 Floating Rate Notes”). The 2020 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2020 Floating Rate Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bear interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus 0.3% (but in no event shall the interest rate be less than zero). Interest on the 2020 Floating Rate Notes is payable quarterly on August 18, November 18, February 18, and May 18 of each year. Mohawk Finance paid financing costs of $0.9 million in connection with the 2020 Floating Rate Notes. These costs were deferred and are being amortized over the term of the 2020 Floating Rate Notes.

On September 11, 2017, Mohawk Finance completed the issuance and sale of €300.0 million aggregate principal amount of its Floating Rate Notes due September 11, 2019 (“2019 Floating Rate Notes”). The 2019 Floating Rate Notes were senior unsecured obligations of Mohawk Finance and ranked pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2019 Floating Rate Notes were fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bore interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus 0.3% (but in no event would the interest rate be less than zero). Interest on the 2019 Floating Rate Notes was payable quarterly on September 11, December 11, March 11, and June 11 of each year. Mohawk Finance paid financing costs of $0.9 million in connection with the 2019 Floating Rate Notes. These costs were deferred and amortized over the term of the 2019 Floating Rate Notes. On September 11, 2019, the Company paid the remaining €300.0 million outstanding principal of the 2019 Floating Rate Notes utilizing cash on hand and borrowings under its European commercial paper program.

On June 9, 2015, the Company issued €500.0 million aggregate principal amount of 2.00% Senior Notes due January 14, 2022 (“2.00% Senior Notes”). 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, commencing on January 14, 2016. 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 (“3.85% Senior Notes”). The 3.85% Senior Notes are senior unsecured obligations of the Company and rank pari passu with all of the Company’s existing and future unsecured indebtedness. Interest on the 3.85% 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.

~~Term Loan Subsequent Event~~

On April 7, 2020, the Company entered into a credit agreement that provides for a $500.0 million delayed draw term loan facility (the “Term Loan Facility”). On April 15, 2020, the Company borrowed the full amount on the Term Loan Facility, the proceeds of which may be used for funding working capital and general corporate purposes of the Company. The principal amount of the Term Loan Facility must be repaid in a single installment on April 6, 2021. The Company may prepay all or a portion of the Term Loan Facility from time to time, plus accrued and unpaid interest. The obligations of the Company and its subsidiaries in respect of the Term Loan Facility are unsecured. The Term Loan Facility is subject to the same affirmative and negative covenants that are applicable to the Senior Credit Facility.

Contractual Obligations

There have been no significant changes to the Company’s contractual obligations as disclosed in the Company’s ~~2019~~2020 Annual Report filed on Form 10-K except as described herein.

Critical Accounting Policies and Estimates

~~Refer to Note 1 - General, and Note 5 - Receivables, net within our Condensed Consolidated Financial Statements of this Form 10-Q for a discussion of the Company’s updated accounting policies on~~ ~~Measurement of Credit Losses on Financial Instruments~~. The Company’s critical accounting policies and estimates are described in its ~~2019~~2020 Annual Report filed on Form 10-K.

Recent Accounting Pronouncements

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

Impact of Inflation

Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses. The Company expects raw material prices, many of which are petroleum based, to fluctuate based upon worldwide supply and demand of commodities utilized in the Company’s production 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.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of ~~March 28, 2020.~~April 3, 2021.

Seasonality

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

The COVID-19 pandemic has created significant volatility in the global economy that has led to unpredictable economic activity and impacted the supply chain for raw materials and sourced finished goods. The Company expects the COVID-19 pandemic to continue to impact normal seasonality trends into 2021, but the extent and duration of such impact cannot be predicted. As such, the seasonality of the Company's 2021 results may also differ from historical experience.

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Forward-Looking Information

Certain of the statements in this Form 10-Q, particularly those anticipating future performance, business prospects, growth and operating strategies, and similar matters, and those that include the words “could,” “should,” “believes,” “anticipates,”

~~“expects”~~ “expects” and “estimates” or similar expressions constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; inflation and deflation in raw material prices, freight and other input costs; inflation and deflation in consumer markets; currency fluctuations; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; ~~ability to identify attractive acquisition targets; ability to successfully complete and integrate~~integration of acquisitions; international operations; ~~changes in foreign exchange rates;~~ introduction of new products; rationalization of operations; tax and tax reform, product and other claims; litigation; the risks and uncertainty related to the COVID-19 ~~pandemic;~~pandemic, regulatory and political changes in the jurisdictions in which the Company does business; and other risks identified in ~~Item 1A “Risk Factors” in the Company’s 2019 Annual Report on Form 10-K~~Mohawk’s SEC reports and ~~Part II, Item 1A “Risk Factors” in this periodic report on Form 10-Q.~~public announcements.

Table of Contents


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As of ~~March 28, 2020,~~April 3, 2021, approximately ~~43%~~87% of the Company’s debt portfolio was comprised of fixed-rate debt and ~~57%~~13% was floating-rate debt. A 1.0 percentage point increase in the interest rate of the floating-rate debt would have resulted in an increase in interest expense of ~~$3.8~~$0.9 million and $0.9 million for the three months ended ~~March 28, 2020.~~April 3, 2021.

There have been no significant changes to the Company’s exposure to market risk as disclosed in the Company’s ~~2019~~2020 Annual Report filed on Form 10-K.


~~Item 4.~~	~~Controls and Procedures~~

Item 4.Controls and Procedures

Based on an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), which have been designed to provide reasonable assurance that such controls and procedures will meet their objectives, as of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective at a reasonable assurance level for the period covered by this report.

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

Table of Contents

PART II. OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

Item 1.Legal Proceedings

The Company is involved in litigation from time to time in the regular course of its business. Except as noted ~~below,~~elsewhere in this report, there are no material legal proceedings pending or known by the Company to be contemplated to which the Company is a party or to which any of its property is subject.

~~Perfluorinated Compounds (“PFCs”) Litigation~~

~~In September 2016, the Water Works~~See Note 17. Commitments and ~~Sewer Board~~ Contingencies of the City of Gadsden, Alabama (the “Gadsden Water Board”) filed an individual complaint in the Circuit Court of Etowah County, Alabama against certain manufacturers, suppliers, and users of chemicals containing specific PFCs, including the Company. In May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama (the “Centre Water Board”) filed a similar complaint in the Circuit Court of Cherokee County, Alabama. The Gadsden Water Board and the Centre Water Board both seek monetary damages and injunctive relief claiming that their water supplies contain excessive amounts of PFCs. Certain defendants, including the Company, filed dispositive motions in each case arguing that the Alabama state courts lack personal jurisdiction over them. These motions were denied. In June and September 2018, certain defendants, including the Company, petitioned the Alabama Supreme Court for Writs of Mandamus directing each lower court to enter an order granting the defendants’ dispositive motions on personal jurisdiction grounds. The Alabama Supreme Court denied the petitions on December 20, 2019. Certain defendants, including the Company, filed an Application for Rehearing with the Alabama Supreme Court asking the Court to reconsider its December 2019 decision. The Alabama Supreme Court denied the application for rehearing.

~~In December 2019, the City of Rome, Georgia (“Rome”) filed a complaint in the Superior Court of Floyd County, Georgia that is similar~~notes to the ~~Gadsden Water Board and Centre Water Board complaints, again seeking monetary damages and injunctive relief related to PFCs. Also~~condensed consolidated financial statements included in ~~December 2019, Jarrod Johnson filed~~Part I, Item 1 of this Form 10-Q for a putative class action in the Superior Court of Floyd County, Georgia purporting to represent all water subscribers with the Rome (Georgia) Water and Sewer Division and/or the Floyd County (Georgia) Water Department and seeking to recover, among other things, damages in the form of alleged increased rates and surcharges incurred by ratepayers for the costs associated with eliminating certain PFCs from their drinking water. In January 2020, defendant 3M Company removed the class action to federal court. The Company has filed motions to dismiss in both of these cases.

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

~~Putative Securities Class Action~~

The Company and certain of its present and former executive officers were named as defendants in a putative shareholder class action lawsuit filed in the United States District Court for the Northern District of Georgia. The complaint alleges that defendants violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making materially false and misleading statements and that the officers are control persons under Section 20(a) of the Securities Exchange Act of 1934. The complaint is filed on behalf of shareholders who purchased sharesdiscussion of the Company’s ~~common stock between April 28, 2017 and July 25, 2019. The Company believes the claims are frivolous and intends to defend them vigorously.~~legal proceedings.

~~Delaware State Court Action~~

~~The Company and certain~~

Table of its present and former executive officers were named as defendants in a putative state securities class action lawsuit filed in the Superior Court of the State of Delaware on January 30, 2020. The complaint alleges that defendants violated Sections 11 and 12 of the Securities Act of 1933. The complaint is filed on behalf of shareholders who purchased shares of the Company’s common stock in Mohawk Industries Retirement Plan 1 and Mohawk Industries Retirement Plan 2 between April 27, 2017 and July 25, 2019. On March 27, 2020, the Court granted a temporary stay of the litigation pending the earlier of either the close of fact discovery or the deadline to appeal the dismissal of the related Putative Securities Class Action pending in the United States District Court for the Northern District of Georgia. The stay may be lifted according to the terms set forth in the Court’s Order to Stay Litigation. The Company believes the claims are frivolous and intends to defend them vigorously.Contents

~~Belgian Tax Matter~~

Between 2012 and 2014, the Company received assessments from the Belgian tax authority for the calendar years 2005 through 2010 in the amounts of €46.1 million, €38.8 million, €39.6 million, €30.1 million, €35.6 million and €43.1 million,

respectively, including penalties, but excluding interest. The Belgian tax authority denied the Company’s formal protests against these assessments and the Company brought all six years before the Court of First Appeal in Bruges. The Court of First Appeal in Bruges ruled in favor of the Company on January 27, 2016, with respect to the calendar years ending December 31, 2005 and December 31, 2009; and on June 13, 2018, the Court of First Appeal in Bruges ruled in favor of the Company with respect to the calendar years ending December 31, 2006, December 31, 2007, December 31, 2008 and December 31, 2010. The Belgian tax authority has lodged its Notification of Appeal for all six years with the Ghent Court of Appeal. On September 17, 2019, the company pled its case to the Ghent Court of Special (Tax) Appeals and on October 1, 2019, the Court ruled in favor of the Company, re-confirming the rulings of the Court of First Appeals in Bruges with respect to the calendar years ending December 31, 2005 and December 31, 2009. On March 12, 2020, the Belgian tax authority filed another revised assessment for the calendar year ending December 31, 2009, with the Ghent Court.

In March 2019, the Company received assessments from the Belgian tax authority for tax years 2011 through 2017 in the amount of €40.6 million, €39.7 million, €11.4 million, €23.9 million, €30.6 million, €93.1 million and €79.9 million respectively, including penalties, but excluding interest. The Company intends to file formal protests based on these assessments in a timely manner. The assessments are largely based on the same facts underlying the positive rulings, which the Belgian tax authority may appeal.

In January 2020, the Belgian tax authority canceled the tax assessments for the years ending December 31, 2011 through 2017, inclusively. On March 10, 2020, a new notice of change was received for the year ending December 31, 2016 against which the Company has filed a protest on April 10, 2020.

The Company continues to disagree 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.

~~General~~

The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses that are reasonably estimable. These contingencies are subject to significant uncertainties and we are unable to estimate the amount or range of loss, if any, in excess of amounts accrued. The Company does not believe that the ultimate outcome of these actions will have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations, cash flows or liquidity in a given quarter or year.


~~Item 1A.~~	~~Risk Factors~~

Item 1A.Risk Factors

~~Other than the risk factor listed below, there~~

There have been no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The risk factors disclosed in ~~our Annual Report on Form 10-K and the risk factor set forth below,~~these reports, in addition to the other information set forth in this report, could materially affect our business, financial condition or results.

~~The Company’s financial condition and results of operations for 2020 may be adversely impacted by the COVID-19 pandemic and the related downturn in economic conditions.~~

Mohawk generates sales in 170 countries and owns manufacturing plants in 18 countries. Due to its large global footprint, Mohawk’s business is sensitive to macroeconomic events in the United States and abroad. While the near-term economic and

financial impact of the COVID-19 pandemic is rapidly evolving and difficult to measure, based on current visibility, the Company expects that it will continue to see decreased near-term demand across a number of its markets. Also, the Company has experienced and may continue to experience plant closures resulting from lower demand, health-based concerns, and government mandated closures.

During economic downturns, including the current downturn resulting from the COVID-19 pandemic, demand for our products may significantly decrease. This reduced demand may lead to lower sales and intensified competitive pressures. Additionally, factors such as results differing from guidance, changes in sales and operating income, changes in our market valuations, performance results for the general retail industry, announcements by us or our industry peers or changes in analysts’ recommendations may cause volatility in the price of our common stock and our shareholder returns.

The Company has already experienced certain disruptions to its business and further disruptions may occur that could materially affect the Company’s ability to obtain supplies, manufacture its products or deliver inventory in a timely manner. Future disruptions may result in lost revenue, additional costs or impairments to goodwill or other assets. The Company is following the recommendations of local health authorities to minimize exposure risk for its employees, suppliers, customers and other stakeholders. The Company is currently implementing business continuity plans during the crisis and attempting to minimize the pandemic’s impact, but we may be unable to adequately respond to further outbreaks in particular geographies and our operations may be materially impacted. The extent to which the COVID-19 pandemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the particular responses employed in various countries and regions. Accordingly, COVID-19 and the related global economic downturn could have a material adverse effect on the Company’s business, results of operations and financial condition.


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

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

On October ~~25, 2018,~~26, 2020, the ~~Company announced that its~~Company's Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million ~~in shares~~ of its common stock. Under the share repurchase ~~plan,~~program, the Company may purchase common stock in open market transactions, block or privately negotiated transactions, and may from time to time purchase shares pursuant to trading plans in accordance with Rules 10b5-1 or 10b-18 under the Exchange Act or by any combination of such methods. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, regulatory requirements, the market price of the Company’s stock and the availability of alternative investment opportunities. No time limit was set for completion of repurchases under the ~~new authorization~~share repurchase program and the share repurchase program may be suspended or discontinued at any time. The new program replaces any previously authorized share repurchase programs. The Company purchased a total of 3.7 million shares under the program for an aggregate of $442.9 million through the first quarter. The Company is putting future purchases on hold until the economic environment improves.

The following table provides information regarding share repurchase activity during the three months ended ~~March 28, 2020.~~April 3, 2021.


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
January 1 through February 6, 2021	0.1	$	136.46	0.1	$	427.6
February 7 through March 6, 2021	0.0	$	—	0.0	$	427.6
March 7 through April 3, 2021	0.6	$	183.61	0.6	$	314.3
Total	0.7	$	178.79	0.7

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
January 1 through February 1, 2020 0.0
$ —
0.0
$ 125.8
February 2 through February 29, 2020 0.2
$ 122.70
0.2
$ 104.1
March 1 through March 28, 2020 0.4
$ 116.82
0.4
$ 57.1
Total 0.6
$ 118.61
0.6


~~Item 3.~~	~~Defaults Upon Senior Securities~~

Item 3.Defaults Upon Senior Securities

None.


~~Item 4.~~	~~Mine Safety Disclosures~~

Item 4.Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report on Form 10-Q.


~~Item 5.~~	~~Other Information~~

Item 5.Other Information

None.

Table of Contents

Item 6.Exhibits


~~Item 6.~~No.			~~Exhibits~~

Description

~~No.~~31.1		~~Description~~

~~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.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MOHAWK INDUSTRIES, INC.

(Registrant)

Dated:

April 30, 2021

By:

~~MOHAWK INDUSTRIES, INC.~~

~~(Registrant)~~

~~Dated:~~

~~May 5, 2020~~

~~By:~~

/s/ Jeffrey S. Lorberbaum

JEFFREY S. LORBERBAUM

Chairman and Chief Executive Officer

(principal executive officer)

Dated:

~~May 5, 2020~~April 30, 2021

By:

/s/ ~~Frank H. Boykin~~James F. Brunk

~~FRANK H. BOYKIN~~JAMES F. BRUNK

Chief Financial Officer

(principal financial officer)

3936


							Three Months Ended
	Three Months Ended						April 3, 2021		March 28, 2020
	March 28, 2020			March 30, 2019			(In thousands)
Net earnings including noncontrolling interests	$	110,465		121,575		Net earnings including noncontrolling interests	$	236,811	110,465
Other comprehensive income (loss):						Other comprehensive income (loss):
Foreign currency translation adjustments	(322,411		)	13,962		Foreign currency translation adjustments	(160,654)		(322,411)
Pension prior service cost and actuarial gain, net of tax	101			108		Pension prior service cost and actuarial gain, net of tax	97		101
Other comprehensive income (loss)	(322,310		)	14,070
Other comprehensive (loss)						Other comprehensive (loss)	(160,557)		(322,310)
Comprehensive income (loss)	(211,845		)	135,645		Comprehensive income (loss)	76,254		(211,845)
Comprehensive (loss) attributable to noncontrolling interests	(332		)	(1	)	Comprehensive (loss) attributable to noncontrolling interests	(244)		(332)
Comprehensive income (loss) attributable to Mohawk Industries, Inc.	$	(211,513	)	135,646		Comprehensive income (loss) attributable to Mohawk Industries, Inc.	$	76,498	(211,513)


							Three Months Ended
	Three Months Ended						April 3, 2021		March 28, 2020
	March 28, 2020			March 30, 2019			(In thousands)
Cash flows from operating activities:						Cash flows from operating activities:
Net earnings	$	110,465		121,575
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Net earnings including noncontrolling interests						Net earnings including noncontrolling interests	$	236,811	110,465
Adjustments to reconcile net earnings to net cash provided by operating activities:						Adjustments to reconcile net earnings to net cash provided by operating activities:
Restructuring	11,709			32,937		Restructuring	4,256		11,709

Depreciation and amortization	145,516			137,291		Depreciation and amortization	151,216		145,516
Deferred income taxes	3,481			9,903		Deferred income taxes	3,740		3,481

Loss on disposal of property, plant and equipment	901			1,164		Loss on disposal of property, plant and equipment	2,522		901
Stock-based compensation expense	5,041			5,789		Stock-based compensation expense	5,968		5,041

Changes in operating assets and liabilities, net of effects of acquisitions:						Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net	(168,740		)	(142,518	)	Receivables, net	(138,764)		(168,740)

Inventories	24,284			(39,409	)	Inventories	(109,550)		24,284
Other assets and prepaid expenses	(26,573		)	(2,474	)	Other assets and prepaid expenses	(34,432)		(26,573)

Accounts payable and accrued expenses	66,175			71,199		Accounts payable and accrued expenses	122,748		66,175
Other liabilities	22,715			(25,320	)	Other liabilities	15,090		22,715
Net cash provided by operating activities	194,974			170,137		Net cash provided by operating activities	259,605		194,974
Cash flows from investing activities:						Cash flows from investing activities:
Additions to property, plant and equipment	(115,632		)	(136,948	)	Additions to property, plant and equipment	(114,735)		(115,632)
Acquisitions, net of cash acquired	—			(76,847	)	Acquisitions, net of cash acquired	(6,338)		0
Purchases of short-term investments	(183,300		)	(154,000	)	Purchases of short-term investments	(698,698)		(183,300)
Redemption of short-term investments	165,500			156,000		Redemption of short-term investments	486,489		165,500
Net cash used in investing activities	(133,432		)	(211,795	)	Net cash used in investing activities	(333,282)		(133,432)
Cash flows from financing activities:						Cash flows from financing activities:
Payments on Senior Credit Facilities	(65,661		)	(132,030	)	Payments on Senior Credit Facilities	0		(65,661)
Proceeds from Senior Credit Facilities	613,448			94,539		Proceeds from Senior Credit Facilities	0		613,448
Payments on Commercial Paper	(3,644,139		)	(3,815,406	)
Proceeds from Commercial Paper	3,259,341			3,895,455
Payments of other debt and financing costs	(808		)	(125	)
Payments on commercial paper						Payments on commercial paper	(32,633)		(3,644,139)
Proceeds from commercial paper						Proceeds from commercial paper	35,600		3,259,341

Net proceeds (payments) of other financing activities						Net proceeds (payments) of other financing activities	852		(4,203)

Purchase of Mohawk common stock	(68,640		)	—		Purchase of Mohawk common stock	(122,876)		(68,640)
Change in outstanding checks in excess of cash	(2,945		)	(10,965	)	Change in outstanding checks in excess of cash	(1,126)		(2,945)
Shares redeemed for taxes	(3,396		)	(4,669	)
Proceeds from stock transactions	1			1

Net cash (used in) provided by financing activities	87,201			26,800		Net cash (used in) provided by financing activities	(120,183)		87,201
Effect of exchange rate changes on cash and cash equivalents	(20,442		)	1,476		Effect of exchange rate changes on cash and cash equivalents	(17,503)		(20,442)
Net change in cash and cash equivalents	128,301			(13,382	)	Net change in cash and cash equivalents	(211,363)		128,301
Cash and cash equivalents, beginning of period	134,785			119,050		Cash and cash equivalents, beginning of period	768,625		134,785
Cash and cash equivalents, end of period	$	263,086		105,668		Cash and cash equivalents, end of period	$	557,262	263,086



	Three Months Ended March 28, 2020								Three Months Ended March 30, 2019
	Cost of Goods Sold			Selling, General and Administrative		Total			Cost of Goods Sold		Selling, General and Administrative		Total
Operating lease costs
Fixed	$	7,401		24,813		32,214			7,688		24,455		32,143
Short-term	2,641			3,805		6,446			1,439		2,909		4,348
Variable	2,269			8,126		10,395			2,278		5,200		7,478
Sub-leases	(97		)	(141	)	(238		)	(84	)	(133	)	(217	)
	$	12,214		36,603		48,817			11,321		32,431		43,752


	Three Months Ended March 28, 2020								Three Months Ended March 30, 2019
	Depreciation and Amortization			Interest		Total			Depreciation and Amortization		Interest		Total
Finance lease costs
Amortization of leased assets	$	1,254		—		1,254			432		—		432
Interest on lease liabilities	—			149		149			—		31		31
	$	1,254		149		1,403			432		31		463
Net lease costs						$	50,220						44,215



Year ending December 31,	Finance Leases		Operating Leases	Total
2020 (excluding the three months ended March 28, 2020)	$	4,339	89,915	94,254
2021	5,413		98,707	104,120
2022	5,062		71,624	76,686
2023	4,386		43,215	47,601
2024	3,109		26,043	29,152
Thereafter	11,223		42,024	53,247
Total lease payments	33,532		371,528	405,060
Less imputed interest	2,655		26,025
Present value, Total	$	30,877	345,503



	At March 28, 2020		At March 30, 2019
Weighted Average Remaining Lease Term
Operating Leases	4.44 years		4.16 years
Finance Leases	8.08 years		8.89 years

Weighted Average Discount Rate
Operating Leases	3.2	%	3.3	%
Finance Leases	1.4	%	2.1	%



	March 28, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	263,086	134,785
Receivables, net	1,644,750		1,526,619
Inventories	2,195,434		2,282,328
Prepaid expenses	419,099		415,546
Other current assets	90,662		70,179
Total current assets	4,613,031		4,429,457
Property, plant and equipment	8,267,565		8,496,008
Less: accumulated depreciation	3,794,652		3,797,091
Property, plant and equipment, net	4,472,913		4,698,917
Right of use operating lease assets	331,329		323,003
Goodwill	2,519,979		2,570,027
Tradenames	678,903		702,732
Other intangible assets subject to amortization, net	225,120		226,147
Deferred income taxes and other non-current assets	415,667		436,397
	$	13,256,942	13,386,680



March 30, 2019	Global Ceramic segment		Flooring NA segment	Flooring ROW segment	Total
Geographical Markets
United States	$	541,826	883,242	68	1,425,136
Europe	179,310		1,837	469,916	651,063
Russia	51,915		29	23,615	75,559
Other	125,301		36,872	128,559	290,732
	$	898,352	921,980	622,158	2,442,490

Product Categories
Ceramic & Stone	$	898,352	14,443	—	912,795
Carpet & Resilient	—		735,424	190,929	926,353
Laminate & Wood	—		172,113	210,201	382,314
Other ⁽¹⁾	—		—	221,028	221,028
	$	898,352	921,980	622,158	2,442,490



	Lease impairments			Asset write-downs		Severance		Other restructuring costs		Total
Balance as of December 31, 2019	$	21		—		4,122		116		4,259
Provision - Flooring NA segment	—			2,833		—		5,936		8,769
Provision - Flooring ROW segment	—			1,605		281		993		2,879
Provision - Corporate	—			—		61		—		61
Cash payments	(8		)	—		(2,010	)	(3,757	)	(5,775	)
Non-cash items	—			(4,438	)	(144	)	(3,140	)	(7,722	)
Balance as of March 28, 2020	$	13		—		2,310		148		2,471



	At March 28, 2020		At December 31, 2019
Customers, trade	$	1,611,525	1,491,592
Income tax receivable	9,098		8,428
Other	88,872		88,520
	1,709,495		1,588,540
Less: allowance for discounts, claims and doubtful accounts⁽¹⁾	64,745		61,921
Receivables, net	$	1,644,750	1,526,619



	Classification	At March 28, 2020			At December 31, 2019
Assets
Operating Leases
Right of use operating lease assets	Right of use operating lease assets	$	331,329		323,003
Finance Leases
Property, plant and equipment, gross	Property, plant and equipment	36,797			35,271
Accumulated depreciation	Accumulated depreciation	(6,725		)	(5,664	)
Property, plant and equipment, net	Property, plant and equipment, net	30,072			29,607
Total lease assets		$	361,401		352,610

Liabilities
Operating Leases
Other current	Current operating lease liabilities	$	106,673		101,945
Non-current	Non-current operating lease liabilities	238,830			228,155
Total operating liabilities		345,503			330,100
Finance Leases
Short-term debt	Short-term debt and current portion of long-term debt	5,266			4,835
Long-term debt	Long-term debt, less current portion	25,611			25,214
Total finance liabilities		30,877			30,049
Total lease liabilities		$	376,380		360,149



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

January 1, 2020	78,980		$	790		$	1,868,250		$	7,232,337		$	(765,824	)	(7,348	)	$	(215,712	)	$	6,607		$	8,126,448
Shares issued under employee and director stock plans	130		1			(3,288		)	—			—			2		59			—			(3,228		)
Stock-based compensation expense	—		—			5,041			—			—			—		—			—			5,041
Repurchases of common stock	(579	)	(6		)	—			(68,635		)	—			—		—			—			(68,641		)
Noncontrolling earnings	—		—			—			—			—			—		—			(49		)	(49		)
Currency translation adjustment on non-controlling interests	—		—			—			—			—			—		—			(283		)	(283		)
Currency translation adjustment	—		—			—			—			(322,129		)	—		—			—			(322,129		)
Prior pension and post-retirement benefit service cost and actuarial gain / loss	—		—			—			—			101			—		—			—			101
CECL Adoption	—		—			—			(131		)	—			—		—			—			(131		)
Net income	—		—			—			110,514			—			—		—			—			110,514
March 28, 2020	78,531		$	785		$	1,870,003		$	7,274,085		$	(1,087,852	)	(7,346	)	$	(215,653	)	$	6,275		$	7,847,643


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