Mohawk Industries Inc.
05/01/2026 | Press release | Distributed by Public on 05/01/2026 11:08
Quarterly Report for Quarter Ending April 4, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company's financial condition and results of operations from management's perspective should be read in conjunction with the Company's unaudited condensed consolidated financial statements and related notes included in this report, as well as our audited consolidated financial statements for the year ended December 31, 2025, which are included in our Annual Report on Form 10-K for the year ended December 31, 2025.
References to "Mohawk," "the Company," "we," "our" and "us" refer to Mohawk Industries, Inc. and its consolidated subsidiaries as a whole, unless the context otherwise requires.
Business Summary
Mohawk is a significant supplier of every major flooring category with manufacturing operations in 19 countries and sales in approximately 180 countries. Based on its annual sales, the Company believes it is the world's largest flooring manufacturer. A majority of the Company's long-lived assets are located in the United States and Europe, which are also the Company's primary markets. Additionally, the Company maintains operations in Australia, Brazil, Malaysia, Mexico, New Zealand, Russia and other parts of the world. The Company is a leading provider of flooring for residential and commercial markets and has earned significant recognition for its innovation in design and performance as well as sustainable business practices.
Macroeconomic Conditions
While commercial demand remained stable through the first quarter of 2026, continued softness in U.S. housing turnover, sluggish new home construction and weak consumer confidence negatively affected the Company's markets. Housing turnover in the Company's major regions remained near historically low levels, driven by affordability challenges, elevated mortgage rates and home prices, and broader economic uncertainty. While the Company believes the ongoing housing shortage across its markets, along with elevated consumer savings, and stable employment conditions, may support greater participation in the housing market as consumer confidence improves, the ongoing impact of soft demand, inflationary pressures and elevated interest rates to the Company's business, financial condition, results of operations, and prospects cannot be determined at this time.
Over the last several quarters, the Company has implemented a number of restructuring actions and operational improvements intended to support sales performance, improve product mix, reduce its cost structure and enhance long-term competitiveness. Cumulatively, restructuring actions initiated since 2022 are expected to deliver annualized benefits of approximately $360 million. The Company believes these actions reflect its disciplined approach to capital allocation in the current environment. The Company remains focused on effectively managing near-term market conditions, pursuing profitable growth opportunities, and positioning the Company to benefit when housing activity recovers.
Tariffs Update
The Company continues to actively monitor trade policy and tariff announcements, including various executive orders issued by the current U.S. presidential administration. On February 20, 2026, the U.S. Supreme Court issued a ruling addressing the validity of certain tariffs implemented under the International Emergency Economic Powers Act ("IEEPA"). In March 2026, the U.S. Court of International Trade issued an additional ruling that importers that paid tariffs under IEEPA are due refunds. While the Company has paid tariffs on certain imported products and materials that were subject to these IEEPA-based duties, the nature, timing, and extent of any such refunds remains uncertain. The Company has taken steps to mitigate the implemented tariffs through managing inventory of sourced products, adjusting prices and optimizing its supply chain. The Company continues to monitor changing tariff levels and adjust its strategies to mitigate their impact as trade policy evolves. These tariff actions, retaliatory measures, or other trade restrictions could materially and adversely impact the Company's business, financial condition, results of operations, and prospects.
Geopolitical Conflicts
Due to its global footprint, Mohawk's business is sensitive to geopolitical conflicts. The ongoing conflicts in the Middle East region have resulted in higher energy prices, including for fuel, oil and natural gas, and have resulted in supply chain disruptions and increased transportation barriers that have adversely impacted the Company's cost of goods sold. Higher energy and fuel prices have also negatively affected consumer confidence, resulting in the deferral of discretionary projects and weakened market demand. In addition, the Company maintains operations in Russia through its Global Ceramic and Flooring ROW reporting segments. The Company continues to face legal, regulatory, financial, operational and reputational risks due to its Russian operations. For more information, please refer to Risk Factors, "The Company faces risks and uncertainties related to its operations in Russia" in Part I, Item 1A of the Company's Form 10-K for the year ended December 31, 2025.
Further escalation or continuation of conflicts in the Middle East, Russia, Ukraine, and elsewhere could result in additional supply chain disruptions, higher energy and raw material prices, increased transportation barriers and decreased market demand. The extent to which these conflicts may affect the Company's business, financial condition, results of operations and prospects cannot be predicted. More broadly, ongoing military conflicts may result in economic sanctions or embargoes, regional instability, geopolitical shifts, retaliatory actions (including the potential nationalization of foreign-owned businesses), increased tensions between the U.S. and countries in which the Company operates, and adverse impacts on the global economy, any of which could negatively affect the Company's business and results of operations.
Liquidity and Capital Expenditures Overview
The Company believes it is well positioned with a strong balance sheet. Based on its current liquidity and available credit, the Company is in a position to finance internal investments, acquisitions and/or additional stock purchases and pay current debt as it becomes due. For information on risks that could impact the Company's results, please refer to Risk Factors in Part I, Item 1A in the Company's 2025 Annual Report filed on Form 10-K.
In 2026, the Company plans to invest approximately $480 million focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance.
For the three months ended April 4, 2026, the net earnings attributable to the Company were $117.1 million compared to the net earnings attributable to the Company of $72.6 million for the three months ended March 29, 2025. The change was primarily attributable to increased productivity, the favorable current year comparative impact of the order management system conversion, the tax benefit recognized, and more shipping days, partially offset by higher input costs and lower volume.
Results of Operations
Quarter Ended April 4, 2026, as compared with Quarter Ended March 29, 2025
Net sales
Net sales for the three months ended April 4, 2026 were $2,728.7 million, reflecting an increase of $202.9 million, or 8.0%, from $2,525.8 million reported for the three months ended March 29, 2025. The increase was primarily attributable to more shipping days for the quarter ended April 4, 2026, of approximately $143 million; the favorable net impact of foreign exchange rates of approximately $127 million and the $50 million favorable current year comparative impact of the order management system conversion, partially offset by lower sales volume of approximately $100 million and the unfavorable net impact of price and product mix of approximately $15 million.
Global Ceramic-Net sales for the three months ended April 4, 2026 were $1,097.4 million, reflecting an increase of $103.6 million, or 10.4%, from $993.8 million reported for the three months ended March 29, 2025. The increase was primarily attributable to the favorable net impact of foreign exchange rates of approximately $57 million; more shipping days for the quarter ended April 4, 2026, of approximately $49 million and the favorable net impact of price and product mix of approximately $18 million, partially offset by lower sales volume of approximately $15 million.
Flooring NA-Net sales for the three months ended April 4, 2026 were $880.0 million, reflecting an increase of $17.6 million, or 2.0%, from $862.4 million reported for the three months ended March 29, 2025. The increase was primarily attributable to more shipping days for the quarter ended April 4, 2026, of approximately $53 million and the $50 million favorable current year comparative impact of the order management system conversion, partially offset by lower sales volume of approximately $63 million and the unfavorable net impact of price and product mix of approximately $25 million.
Flooring ROW-Net sales for the three months ended April 4, 2026 were $751.3 million, reflecting an increase of $81.7 million, or 12.2%, from $669.6 million for the three months ended March 29, 2025. The increase was primarily attributable to the favorable net impact of foreign exchange rates of approximately $70 million and more shipping days for the quarter ended April 4, 2026, of approximately $41 million, partially offset by lower sales volume of approximately $22 million.
Gross profit
Gross profit for the three months ended April 4, 2026 was $641.9 million, an increase of $58.6 million, or 10.0%, compared to gross profit of $583.3 million for the three months ended March 29, 2025. The change was primarily attributable to productivity gains of approximately $32 million; the $25 million favorable current year comparative impact of the order management system conversion and the favorable net impact of foreign exchange rates of approximately $20 million; partially offset by higher input costs of approximately $28 million.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended April 4, 2026 were $530.1 million, an increase of $42.8 million compared to $487.3 million for the three months ended March 29, 2025. Selling, general and administrative expenses did not significantly change as a percentage of net sales for the three months ended April 4, 2026, compared to the three months ended March 29, 2025.
Operating income (loss)
Operating income for the three months ended April 4, 2026 was $111.8 million, reflecting an increase of $15.8 million, or 16.5%, compared to operating income of $96.0 million for the three months ended March 29, 2025. The increase in operating income was primarily attributable to productivity gains of approximately $36 million; the $30 million favorable current year comparative impact of the order management system conversion; partially offset by higher input costs of approximately $38 million; higher restructuring, acquisition and integration-related, and other costs of approximately $11 million.
Global Ceramic-Operating income was $51.2 million for the three months ended April 4, 2026, reflecting an increase of $9.4 million compared to operating income of $41.8 million for the three months ended March 29, 2025. The increase in operating income was primarily attributable to productivity gains of approximately $21 million and the favorable net impact of price and product mix of approximately $13 million; partially offset by higher input costs of approximately $30 million.
Flooring NA-Operating income was $3.8 million for the three months ended April 4, 2026, reflecting a decrease of $5.5 million compared to operating income of $9.3 million for the three months ended March 29, 2025. The decrease in operating income was primarily attributable to higher restructuring, acquisition and integration-related, and other costs of approximately $15 million; higher input costs of approximately $13 million; partially offset by the $30 million favorable current year comparative impact of the order management system conversion.
Flooring ROW-Operating income was $70.5 million for the three months ended April 4, 2026, reflecting an increase of $11.8 million compared to operating income of $58.7 million for the three months ended March 29, 2025. The increase in operating income was primarily attributable to productivity gains; lower input costs, partially offset by the unfavorable net impact of price and product mix.
Interest expense
Interest expense was $2.4 million for the three months ended April 4, 2026, reflecting a decrease of $4.0 million compared to interest expense of $6.4 million for the three months ended March 29, 2025. The decrease was primarily attributable to cash flow generation resulting in lower financing needs.
Other (income) expense, net
Other expense, net was $1.2 million for the three months ended April 4, 2026 compared to other income, net of $0.5 million for the three months ended March 29, 2025. Other income and expense, net did not significantly change for the three months ended April 4, 2026, from the three months ended March 29, 2025.
Income tax expense
For the three months ended April 4, 2026, the Company recorded income tax benefit of $8.9 million on earnings before income taxes of $108.2 million, for an effective tax rate of (8.2)%. For the three months ended March 29, 2025, the Company recorded income tax expense of $17.5 million on earnings before income taxes of $90.1 million, for an effective tax rate of 19.4%. The decrease in the effective tax rate was primarily attributable to tax benefits recognized during the three months ended April 4, 2026, including (i) a one-time U.S. tax benefit associated with a legal entity restructuring initiative, (ii) tax credits issued by the Brazilian government related to prior years, and (iii) a foreign tax credit benefit recorded in connection with a U.S. amended return. These favorable impacts were partially offset by the Company's geographic dispersion of profits and losses for the respective periods and a non-recurring benefit recorded during the three months ended March 29, 2025 related to a prior period adjustment to deferred taxes.
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.
Net cash provided by operating activities in the first three months of 2026 was $110.1 million, compared to net cash provided by operating activities of $3.7 million in the first three months of 2025. The change was primarily attributable to the change in accounts receivable; higher net earnings; change in accounts payable and change in inventories.
Net cash used in investing activities in the first three months of 2026 was $102.3 million compared to net cash used in investing activities of $89.1 million in the first three months of 2025. The change was primarily attributable to the increase in capital expenditures of $13.2 million for the three months ended April 4, 2026, compared to the three months ended March 29, 2025.
Net cash provided by financing activities in the first three months of 2026 was $11.8 million compared to net cash provided by financing activities of $90.8 million in the first three months of 2025. The change was primarily attributable to lower net proceeds from commercial paper of $35.0 million (year to date net proceeds of $92.5 million in the first three months of 2026 as compared to net proceeds of $127.5 million in the first three months of 2025) and higher share repurchases of $39.2 million.
As of April 4, 2026, the Company had cash of $872.3 million, of which $491.6 million was in the United States and $380.7 million was in foreign countries, including approximately 30% of the Company's cash and cash equivalents held in Russia. 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 plans to permanently reinvest the cash held outside the United States. The Company continually evaluates its projected needs and may conduct additional debt financings, subject to market conditions, to increase its liquidity and to take advantage of attractive financing opportunities.
On July 24, 2025, the Company's Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million of its common stock (the "Share Repurchase Program"). For the three months ended April 4, 2026, the Company purchased $64.3 million of its common stock under the Share Repurchase Program. As of April 4, 2026, there remained $355.0 million authorized under the Share Repurchase Program.
See Note 16, 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.
Contractual Obligations
There have been no significant changes to the Company's contractual obligations as disclosed in the Company's 2025 Annual Report filed on Form 10-K except as described herein.
Critical Accounting Policies and Estimates
There have been no significant changes to the Company's critical accounting policies and estimates during the period. The Company's critical accounting policies are described in its 2025 Annual Report filed on Form 10-K.
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 used in the Company's production processes. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to its customers, the Company's ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company's products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. In the past, the Company has often been able to enhance productivity and develop new product innovations to help offset increases in costs resulting from inflation in its operations.
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet arrangements as of April 4, 2026.
Seasonality
The Company is a calendar year-end company. Global Ceramic and Flooring NA typically have higher net sales in the second and third quarters. Flooring ROW typically has higher net sales in the second and fourth quarters. Because periods of economic downturn can affect the seasonality of each segment, sales for any one quarter are not necessarily indicative of the sales that may be achieved for any other quarter or for the full year.
Mohawk Industries Inc. published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 17:08 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]