Company Quick10K Filing
Mohawk Industries
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 73 $10,545
10-Q 2019-11-01 Quarter: 2019-09-28
10-Q 2019-08-02 Quarter: 2019-06-29
10-Q 2019-05-03 Quarter: 2019-03-30
10-K 2019-02-28 Annual: 2018-12-31
10-Q 2018-11-02 Quarter: 2018-09-29
10-Q 2018-08-03 Quarter: 2018-06-30
10-Q 2018-05-04 Quarter: 2018-03-31
10-K 2018-02-28 Annual: 2017-12-31
10-Q 2017-11-03 Quarter: 2017-09-30
10-Q 2017-08-04 Quarter: 2017-07-01
10-Q 2017-05-05 Quarter: 2017-04-01
10-K 2017-02-27 Annual: 2016-12-31
10-Q 2016-11-10 Quarter: 2016-10-01
10-Q 2016-08-05 Quarter: 2016-07-02
10-Q 2016-05-06 Quarter: 2016-04-02
10-K 2016-02-29 Annual: 2015-12-31
10-Q 2015-11-09 Quarter: 2015-10-03
10-Q 2015-08-07 Quarter: 2015-07-04
10-Q 2015-05-08 Quarter: 2015-04-04
10-K 2015-02-27 Annual: 2014-12-31
10-Q 2014-11-03 Quarter: 2014-09-27
10-Q 2014-08-04 Quarter: 2014-06-28
10-Q 2014-05-05 Quarter: 2014-03-29
10-K 2014-02-28 Annual: 2013-12-31
10-Q 2013-11-04 Quarter: 2013-09-28
10-Q 2013-08-07 Quarter: 2013-06-29
10-Q 2013-05-06 Quarter: 2013-03-30
10-K 2013-02-27 Annual: 2012-12-31
10-Q 2012-11-02 Quarter: 2012-09-29
10-Q 2012-08-03 Quarter: 2012-06-30
10-Q 2012-05-04 Quarter: 2012-03-31
10-K 2012-02-29 Annual: 2011-12-31
10-Q 2011-11-04 Quarter: 2011-10-01
10-Q 2011-08-05 Quarter: 2011-07-02
10-Q 2011-05-06 Quarter: 2011-04-02
10-K 2011-03-01 Annual: 2010-12-31
10-Q 2010-11-05 Quarter: 2010-10-02
10-Q 2010-08-06 Quarter: 2010-07-03
10-Q 2010-05-03 Quarter: 2010-04-03
10-K 2010-02-26 Annual: 2009-12-31
8-K 2019-10-24 Earnings, Exhibits
8-K 2019-10-18 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-08-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-25 Earnings, Exhibits
8-K 2019-05-23 Shareholder Vote
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-03-12 Officers, Regulation FD, Exhibits
8-K 2019-02-19 Amend Bylaw, Exhibits
8-K 2019-02-07 Earnings, Exhibits
8-K 2019-01-15 Officers, Exhibits
8-K 2018-11-27 Officers, Regulation FD, Exhibits
8-K 2018-11-12 Officers, Exhibits
8-K 2018-10-25 Earnings, Other Events, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-24 Officers, Shareholder Vote
8-K 2018-05-18 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-14 Enter Agreement, Exhibits
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-08 Earnings, Exhibits
MHK 2019-09-28
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 mhk201910q3exhibit311.htm
EX-31.2 mhk201910q3exhibit312.htm
EX-32.1 mhk201910q3exhibit321.htm
EX-32.2 mhk201910q3exhibit322.htm
EX-95.1 mhk201910q3exhibit951.htm

Mohawk Industries Earnings 2019-09-28

MHK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
MHK 10,545 13,806 5,985 10,021 2,728 782 1,488 13,478 27% 9.1 6%
WSM 5,365 3,870 2,748 5,805 2,133 352 635 5,544 37% 8.7 9%
LEG 5,182 5,002 3,763 4,758 943 291 607 7,256 20% 12.0 6%
TPX 4,028 3,047 2,741 2,834 1,178 125 385 5,635 42% 14.6 4%
HELE 3,491 1,703 667 1,586 648 171 228 3,794 41% 16.6 10%
FUL 2,481 4,033 2,857 2,926 815 140 336 4,453 28% 13.2 3%
BBBY 1,542 7,988 5,926 11,848 4,026 0 405 2,305 34% 5.7 0%
LZB 1,528 1,362 679 1,774 722 75 100 1,415 41% 14.2 6%
SNBR 1,217 796 953 1,609 981 75 162 1,215 61% 7.5 9%
CODI 949 2,370 1,369 1,733 584 109 227 1,869 34% 8.2 5%

Document
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Table of Contents

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 September 28, 2019
OR 
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.)
 
 
 
 
 
160 S. Industrial Blvd.
Calhoun
Georgia
 
30701
(Address of principal executive offices)
 
 
 
(Zip Code)
Registrant’s telephone number, including area code: (706629-7721
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
x
  
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 October 30, 2019, the latest practicable date, is as follows: 71,622,235 shares of common stock, $.01 par value.


Table of Contents

MOHAWK INDUSTRIES, INC.
INDEX
 
 
 
Page No
Part I.
 
 
 
 
Item 1.
 
 
 
 
 
Condensed Consolidated Balance Sheets as of September 28, 2019 and December 31, 2018
 
 
 
 
Condensed Consolidated Statements of Operations for the three and nine months ended September 28, 2019 and September 29, 2018
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 28, 2019 and September 29, 2018
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 28, 2019 and September 29, 2018
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.

2

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) 
 
September 28,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
111,303

 
119,050

Receivables, net
1,787,158

 
1,606,159

Inventories
2,337,952

 
2,287,615

Prepaid expenses
425,595

 
421,553

Other current assets
65,772

 
74,919

Total current assets
4,727,780

 
4,509,296

Property, plant and equipment
8,357,331

 
8,227,074

Less: accumulated depreciation
3,756,701

 
3,527,172

Property, plant and equipment, net
4,600,630

 
4,699,902

Right of use operating lease assets
334,083

 

Goodwill
2,519,214

 
2,520,966

Tradenames
689,788

 
707,380

Other intangible assets subject to amortization, net
227,165

 
254,430

Deferred income taxes and other non-current assets
294,102

 
407,149

 
$
13,392,762

 
13,099,123

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term debt and current portion of long-term debt
$
1,273,158

 
1,742,373

Accounts payable and accrued expenses
1,738,859

 
1,523,866

Current operating lease liabilities
102,682

 

Total current liabilities
3,114,699

 
3,266,239

Deferred income taxes
434,912

 
413,740

Long-term debt, less current portion
1,483,581

 
1,515,601

Non-current operating lease liabilities
238,560

 

Other long-term liabilities
355,731

 
463,484

Total liabilities
5,627,483

 
5,659,064

Commitments and contingencies (Note 17)

 

Stockholders’ equity:
 
 
 
Preferred stock, $.01 par value; 60 shares authorized; no shares issued

 

Common stock, $.01 par value; 150,000 shares authorized; 79,193 and 79,656 shares issued in 2019 and 2018, respectively
792

 
797

Additional paid-in capital
1,864,899

 
1,852,173

Retained earnings
6,991,076

 
6,588,197

Accumulated other comprehensive loss
(882,287
)
 
(791,608
)
 
7,974,480

 
7,649,559

Less: treasury stock at cost; 7,348 and 7,349 shares in 2019 and 2018, respectively
215,712

 
215,745

Total Mohawk Industries, Inc. stockholders’ equity
7,758,768

 
7,433,814

    Nonredeemable noncontrolling interest
6,511

 
6,245

          Total stockholders’ equity
7,765,279

 
7,440,059

 
$
13,392,762

 
13,099,123

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net sales
$
2,519,185

 
2,545,800

 
7,546,160

 
7,535,016

Cost of sales
1,827,494

 
1,825,367

 
5,492,924

 
5,343,336

Gross profit
691,691

 
720,433

 
2,053,236

 
2,191,680

Selling, general and administrative expenses
451,471

 
433,189

 
1,380,826

 
1,309,730

Operating income
240,220

 
287,244

 
672,410

 
881,950

Interest expense
9,316

 
9,025

 
30,310

 
24,416

Other expense, net
52,713

 
706

 
45,929

 
6,794

Earnings before income taxes
178,191

 
277,513

 
596,171

 
850,740

Income tax expense
22,522

 
49,487

 
116,273

 
215,928

Net earnings including noncontrolling interests
155,669

 
228,026

 
479,898

 
634,812

Net income attributable to noncontrolling interests
151

 
1,013

 
354

 
2,447

Net earnings attributable to Mohawk Industries, Inc.
$
155,518

 
227,013

 
479,544

 
632,365

 
 
 
 
 
 
 
 
Basic earnings per share attributable to Mohawk Industries, Inc.
 
 
 
 
 
 
 
Basic earnings per share attributable to Mohawk Industries, Inc.
$
2.16

 
3.03

 
6.63

 
8.46

Weighted-average common shares outstanding—basic
72,106

 
74,603

 
72,302

 
74,599

 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Mohawk Industries, Inc.
 
 
 
 
 
 
 
Diluted earnings per share attributable to Mohawk Industries, Inc.
$
2.15

 
3.02

 
6.61

 
8.42

Weighted-average common shares outstanding—diluted
72,392

 
74,945

 
72,578

 
74,977

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net earnings including noncontrolling interests
$
155,669

 
228,026

 
479,898

 
634,812

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments
(150,139
)
 
(33,671
)
 
(91,050
)
 
(147,628
)
Pension prior service cost and actuarial gain (loss), net of tax
216

 
68

 
283

 
291

Other comprehensive income (loss)
(149,923
)
 
(33,603
)
 
(90,767
)
 
(147,337
)
Comprehensive income
5,746

 
194,423

 
389,131

 
487,475

Comprehensive income (loss) attributable to noncontrolling interests
(7
)
 
656

 
266

 
962

Comprehensive income attributable to Mohawk Industries, Inc.
$
5,753

 
193,767

 
388,865

 
486,513

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 
Nine Months Ended
 
September 28, 2019
 
September 29, 2018
Cash flows from operating activities:
 
 
 
Net earnings
$
479,898

 
634,812

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
 
 
 
Restructuring
45,533

 
42,791

Depreciation and amortization
422,693

 
382,673

Deferred income taxes
9,303

 
75,694

(Gain) loss on disposal of property, plant and equipment
1,571

 
(1,253
)
Stock-based compensation expense
17,228

 
26,697

Impairment of net investment in a manufacturer and distributor of ceramic tile in China
65,172

 

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Receivables, net
(203,447
)
 
(180,830
)
Inventories
(60,477
)
 
(209,815
)
Other assets and prepaid expenses
(38,942
)
 
(68,122
)
Accounts payable and accrued expenses
250,637

 
190,090

Other liabilities
(11,083
)
 
1,748

Net cash provided by operating activities
978,086

 
894,485

Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(405,614
)
 
(642,949
)
Acquisitions, net of cash acquired
(76,847
)
 
(425,304
)
Purchases of short-term investments
(451,000
)
 
(526,096
)
Redemption of short-term investments
459,000

 
566,000

Net cash used in investing activities
(474,461
)
 
(1,028,349
)
Cash flows from financing activities:
 
 
 
Payments on Senior Credit Facilities
(465,811
)
 
(600,926
)
Proceeds from Senior Credit Facilities
419,957

 
554,408

Payments on Commercial Paper
(11,919,636
)
 
(12,119,516
)
Proceeds from Commercial Paper
11,540,489

 
11,976,223

Proceeds from Floating Rate Notes
331,325

 
353,648

Payments on Floating Rate Notes
(331,325
)
 

Proceeds from other debt
7,355

 

Debt issuance costs
(757
)
 
(864
)
Purchase of Mohawk common stock
(76,671
)
 

Change in outstanding checks in excess of cash
(10,523
)
 
(2,242
)
Shares redeemed for taxes
(4,711
)
 
(9,188
)
Proceeds from stock transactions
1

 
2

Net cash (used in) provided by financing activities
(510,307
)
 
151,545

Effect of exchange rate changes on cash and cash equivalents
(1,065
)
 
(11,214
)
Net change in cash and cash equivalents
(7,747
)
 
6,467

Cash and cash equivalents, beginning of period
119,050

 
84,884

Cash and cash equivalents, end of period
$
111,303

 
91,351

 
 
 
 

See accompanying notes to condensed consolidated financial statements.

6

Table of Contents

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)

1. General

Interim Reporting

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 2018 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 nine months ended September 28, 2019 and September 29, 2018, the change in the U.S. dollar value of the Company’s euro denominated debt was a decrease of $25,102 ($19,067 net of taxes) and a decrease of $19,848 ($14,223 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 February 2016, the FASB issued a new standard ASU 2016-02, Leases, and subsequently issued additional ASUs amending this ASU (collectively ASC 842, Leases). ASC 842 was issued to increase transparency and comparability among organizations by requiring the recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from 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 adoption of ASC 842 had a material impact on the Company’s condensed consolidated balance sheets, but did not have a material impact on our condensed consolidated statements of operations or cashflow. The most significant impact was the recognition of ROU assets of $328,169 and lease liabilities for operating leases of $332,286 at January 1, 2019, based on the present value of the future minimum rental payments for existing operating leases. The difference in the balances is due to deferred rent, tenant incentive allowances and prepaid amounts taken into account for adoption. Our accounting for finance leases remained substantially unchanged, See Note 10 - Leases.

On January 1, 2019, the Company adopted the new accounting standard, ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard permits entities to reclassify, to retained earnings, the one-time income tax effects stranded in accumulated other comprehensive income arising from the change in the U.S. federal corporate tax rate as a result of the Tax Cuts and Jobs Act of 2017. The effect of adopting the new standard was not material.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


On January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers and all the related amendments (“ASC 606”) and applied the provisions of the standard to all contracts using the modified retrospective method. The cumulative effect of adopting the new revenue standard was immaterial and no adjustment has been recorded to the opening balance of retained earnings. Prior year information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Substantially all of the Company’s revenue continues to be 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. The Company reviewed all of its revenue product categories under ASC 606 and the only changes identified were that an immaterial amount of revenue from intellectual property (“IP”) contracts results in earlier recognition of revenue, new controls and processes designed to meet the requirements of the standard were implemented, and the required new disclosures are presented in Note 3, Revenue from Contracts with Customers. The adoption of ASC 606 did not have a material impact on the amounts reported in the Company’s consolidated financial position, results of operations or cash flows.

On January 1, 2018, the Company adopted the new accounting standard, ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The effect of adopting the new standard was not material.

On January 1, 2018, the Company adopted the new accounting standard, ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The effect of adopting the new standard was not material.

Recent Accounting Pronouncements - Effective in Future Years

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. Currently, the Company is assessing the impact of the new guidance. The Company does not expect the adoption of the guidance to have a significant impact on its financial statements.
    
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and in November 2018 issued ASU 2018-19, which amended the standard. The standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This standard is effective for the Company on January 1, 2020. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Currently, the Company is assessing the impact of the new guidance. The Company does not expect the adoption of the guidance to have a significant impact on its financial statements.

2. Acquisitions

2019 Acquisitions

On January 31, 2019, the Company acquired a hard surface flooring distribution company based in the Netherlands for $72,001, resulting in a preliminary goodwill allocation of $45,931. The results have been included in the Flooring Rest of the World (“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 $148,741. The Company’s acquisition of Eliane resulted in allocations of goodwill of $18,062, indefinite-lived tradename intangible assets of $32,238 and intangible assets subject to amortization of $5,818. The goodwill is expected to be deductible for tax purposes. Eliane’s results of operations have been included in the consolidated financial statements since the date of acquisition in the Global Ceramic reporting segment.


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Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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, the Company completed the acquisition of three businesses in the Flooring ROW segment for $24,610, resulting in a goodwill allocation of $12,874 and intangibles subject to amortization of $7.

2017 Acquisitions

On April 4, 2017, the Company completed its purchase of Emilceramica S.r.l (“Emil”), a ceramic company in Italy. The total value of the acquisition was $186,099. The Emil acquisition will enhance the Company’s cost position and strengthen its combined brand and distribution in Europe. The acquisition’s results and purchase price allocation have been included in the condensed consolidated financial statements since the date of the acquisition. The Company’s acquisition of Emil resulted in a goodwill allocation of $59,491, indefinite-lived tradename intangible asset of $16,196 and an intangible asset subject to amortization of $2,348. The goodwill was not directly deductible for tax purposes. The Emil results are reflected in the Global Ceramic segment and the results of Emil’s operations are not material to the Company’s consolidated results of operations.

During the second quarter of 2017, the Company completed the acquisition of two businesses in the Global Ceramic segment for $37,250, resulting in a goodwill allocation of $1,002. The Company also completed the acquisition of a business in the Flooring NA segment for $26,623.

During the first quarter of 2017, the Company acquired certain assets of a distribution business in the Flooring ROW segment for $1,407, resulting in intangible assets subject to amortization of $827.



9

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 historical bad debt, claims experience, periodic evaluation of specific customer accounts, and the aging of accounts receivable. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Contract 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 $39,284 and $34,486 as of September 28, 2019 and January 1, 2019, respectively.

Performance 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 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 and nine months ended September 28, 2019 was immaterial.

Costs to obtain a 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 $54,900 and $57,840 as of September 28, 2019 and January 1, 2019, respectively. Amortization expense recognized during the nine months ended September 28, 2019 related to these capitalized costs was $41,889.

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.


10

Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 September 28, 2019 and September 29, 2018:

September 28, 2019
Global Ceramic segment
 
Flooring NA segment
 
Flooring ROW segment
 
Total
Geographical Markets
 
 
 
 
 
 
 
United States
$
537,247

 
963,784

 
475

 
1,501,506

Europe
168,032

 
1,901

 
424,230

 
594,163

Russia
77,024

 
15

 
32,614

 
109,653

Other
134,119

 
36,208

 
143,536

 
313,863

 
$
916,422

 
1,001,908

 
600,855

 
2,519,185

 
 
 
 
 
 
 
 
Product Categories
 
 
 
 
 
 
 
Ceramic & Stone
$
916,422

 
13,570

 

 
929,992

Carpet & Resilient

 
816,190

 
193,941

 
1,010,131

Laminate & Wood

 
172,148

 
204,241

 
376,389

Other (1)

 

 
202,673

 
202,673

 
$
916,422

 
1,001,908

 
600,855

 
2,519,185



September 29, 2018
Global Ceramic segment
 
Flooring NA segment
 
Flooring ROW segment
 
Total
Geographical Markets
 
 
 
 
 
 
 
United States
$
565,616

 
998,488

 
421

 
1,564,525

Europe
175,026

 
1,217

 
438,585

 
614,828

Russia
68,113

 

 
27,435

 
95,548

Other
77,018

 
47,835

 
146,046

 
270,899

 
$
885,773

 
1,047,540

 
612,487

 
2,545,800

 
 
 
 
 
 
 
 
Product Categories
 
 
 
 
 
 
 
Ceramic & Stone
$
885,773

 
16,779

 

 
902,552

Carpet & Resilient

 
851,970

 
192,001

 
1,043,971

Laminate & Wood

 
178,791

 
200,499

 
379,290

Other (1)

 

 
219,987

 
219,987

 
$
885,773

 
1,047,540

 
612,487

 
2,545,800


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













11

Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)




The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the nine months ended September 28, 2019 and September 29, 2018:

September 28, 2019
Global Ceramic segment
 
Flooring NA segment
 
Flooring ROW segment
 
Total
Geographical Markets
 
 
 
 
 
 
 
United States
$
1,633,583

 
2,793,110

 
1,252

 
4,427,945

Europe
552,546

 
5,902

 
1,369,908

 
1,928,356

Russia
196,731

 
66

 
83,315

 
280,112

Other
389,945

 
108,249

 
411,553

 
909,747

 
$
2,772,805

 
2,907,327

 
1,866,028

 
7,546,160

 
 
 
 
 
 
 
 
Product Categories
 
 
 
 
 
 
 
Ceramic & Stone
$
2,772,805

 
41,928

 

 
2,814,733

Carpet & Resilient

 
2,360,014

 
586,388

 
2,946,402

Laminate & Wood

 
505,385

 
629,500

 
1,134,885

Other (1)

 

 
650,140

 
650,140

 
$
2,772,805

 
2,907,327

 
1,866,028

 
7,546,160


September 29, 2018
Global Ceramic segment
 
Flooring NA segment
 
Flooring ROW segment
 
Total
Geographical Markets
 
 
 
 
 
 
 
United States
$
1,700,338

 
2,920,604

 
421

 
4,621,363

Europe
573,932

 
4,737

 
1,424,113

 
2,002,782

Russia
183,244

 

 
73,417

 
256,661

Other
234,104

 
130,127

 
289,979

 
654,210

 
$
2,691,618

 
3,055,468

 
1,787,930

 
7,535,016

 
 
 
 
 
 
 
 
Product Categories
 
 
 
 
 
 
 
Ceramic & Stone
$
2,691,618

 
52,500

 

 
2,744,118

Carpet & Resilient

 
2,466,695

 
453,597

 
2,920,292

Laminate & Wood

 
536,273

 
643,389

 
1,179,662

Other (1)

 

 
690,944

 
690,944

 
$
2,691,618

 
3,055,468

 
1,787,930

 
7,535,016


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


12

Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Restructuring, acquisition and 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 and workforce reductions.

Restructuring, acquisition transaction and integration-related costs consisted of the following during the three and nine months ended September 28, 2019 and September 29, 2018:

 
Three Months Ended
 
Nine Months Ended
 
September 28, 2019
 
September 29, 2018
 
September 28, 2019
 
September 29, 2018
Cost of sales
 
 
 
 
 
 
 
Restructuring costs (1)
$
7,284

 
10,004

 
43,197

 
33,425

Acquisition integration-related costs
180

 
198

 
2,736

 
3,293

  Restructuring and acquisition integration-related costs
$
7,464

 
10,202

 
45,933

 
36,718

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
 
 
 
Restructuring costs (1)
$
491

 
1,476

 
2,336

 
9,366

Acquisition transaction-related costs
413

 
3,032

 
1,330

 
3,095

Acquisition integration-related costs
1,147

 
5,180

 
4,554

 
8,857

  Restructuring, acquisition transaction and integration-related costs
$
2,051

 
9,688

 
8,220

 
21,318



(1) The restructuring costs for 2019 and 2018 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.

The restructuring activity for the nine months ended September 28, 2019 is as follows:
 
Lease
impairments
 
Asset write-downs
 
Severance
 
Other
restructuring
costs
 
Total
Balance as of December 31, 2018
$
397

 

 
7,866

 
250

 
8,513

Provision - Global Ceramic segment

 

 
4,879

 

 
4,879

Provision - Flooring NA segment

 
21,791

 
1,168

 
12,087

 
35,046

Provision - Flooring ROW segment

 
2,515

 
2,367

 
726

 
5,608

Cash payments
(361
)
 

 
(11,715
)
 
(12,702
)
 
(24,778
)
Non-cash items

 
(24,306
)
 
(130
)
 
(111
)
 
(24,547
)
Balance as of September 28, 2019
$
36