Mohawk Industries Inc.
10/30/2026 | Press release | Distributed by Public on 10/30/2026 10:30
Quarterly Report for Quarter Ending October 3, 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 the Company's audited consolidated financial statements for the year ended December 31, 2025, which are included in the Company's 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 flooring and design surfaces 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 and design surfaces 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
The Company continued to experience soft demand during the third quarter of 2026, particularly in residential end markets. Elevated interest rates, housing affordability constraints, inflationary pressures and broader economic uncertainty contributed to continued softness in the U.S. and European housing markets, sluggish new home construction and cautious consumer spending. Although housing shortages, aging housing stock and record home equity levels may support increased housing and remodeling activity over time, the timing and magnitude of a market recovery remain uncertain. The continuing effects of soft demand, inflation and elevated interest rates on the Company's business, financial condition, results of operations, and prospects cannot be determined at this time.
The Company continues to implement productivity initiatives, restructuring actions and other operational improvements designed to improve its cost structure, enhance operational performance and strengthen its long-term competitiveness. Cumulatively, restructuring actions initiated since 2022 are expected to deliver annualized benefits of approximately $410 million. Together with pricing and product mix initiatives, these actions are intended to mitigate inflationary pressures, improve the Company's cost position, and support profitability in a soft demand environment. The Company remains focused on effectively managing near-term market conditions, pursuing profitable growth opportunities, generating cash and deploying capital with discipline, and positioning its businesses to benefit as housing activity recovers.
Tariffs Update
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") by the executive branch are not lawful. On March 4, 2026, the Court of International Trade (CIT) ordered U.S. Customs and Border Protection (CBP) to begin the refund process for all importers who were subject to IEEPA tariffs. On April 21, 2026, the Company began to submit requests for IEEPA tariff refund claims in the amount of $70.7 million, representing the IEEPA tariffs it identified as having been paid during the period such tariffs were active and eligible for refund.
Because of the uncertainty regarding the nature, timing, and extent of potential IEEPA tariff refunds, the Company elected to account for such refunds as gain contingencies, grounded in the original tariff cost recognition in accordance with ASC 450, Contingencies ("ASC 450"). As of October 3, 2026, the Company has received $67.0 million in IEEPA tariff
refunds. During the three and nine months ended October 3, 2026, the Company reduced cost of sales by $12.8 million and $62.0 million, respectively, effectively reversing the IEEPA tariff expense previously recognized in connection with inventory sold to customers since the tariffs were enacted in the first quarter of 2025, and reduced the carrying value of inventory and property, plant and equipment by $1.7 million and $3.4 million, respectively.
Since the invalidation of the IEEPA tariffs, the U.S. presidential administration has imposed additional tariffs affecting the Company, including temporary tariffs under Section 122 of the Trade Act of 1974 ("Section 122 tariffs"), which expired on July 24, 2026 and longer-term tariffs under Section 301 of the Trade Act of 1974 ("Section 301 tariffs"). The U.S. administration could take action to implement additional tariffs in the future. The administration's actions under the Section 122 tariffs and Section 301 tariffs have been, and continue to be, subject to legal challenges.
Notwithstanding the foregoing, uncertainty remains regarding the amount and timing of remaining IEEPA tariff refunds and the ongoing impact of the Section 122 and Section 301 tariffs, and any anticipated refunds may be delayed, reduced, or denied. The Company intends to seek recovery of its remaining IEEPA tariff refunds, including amounts subject to CAPE Phase 3 processing. In addition, certain aspects of the CIT's orders concerning IEEPA tariff refunds remain subject to appeal by the U.S. government and other related proceedings, which could affect the availability, amount or timing of the Company's remaining refunds.
In addition, in response to U.S. tariffs, Canada has imposed reciprocal tariffs on certain U.S.-origin goods imported into Canada, which have adversely affected the Company's business in Canada. Separately, effective August 15, 2026, the U.S. administration implemented safeguard tariffs on certain quartz surface products. While the Company manufactures a significant portion of its quartz surface products in the United States, certain quartz surface products imported by the Company are subject to these tariffs. The Company will continue to monitor developments in U.S. tariff policy, including responsive tariff measures imposed by U.S. trading partners, and assess the potential impacts on its results of operations, cash flows and financial condition.
Geopolitical Conflicts
Due to its global footprint, Mohawk's business is sensitive to geopolitical conflicts. 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 Annual Report in Form 10-K for the year ended December 31, 2025. In addition, ongoing conflicts in the Middle East region have resulted in increased fuel, oil and natural gas prices, supply chain disruptions, and increased transportation barriers, which in turn have adversely impacted the Company's cost of sales. Higher energy and fuel prices have also negatively affected consumer confidence, further contributing to deferred discretionary purchases and soft market conditions. The extent to which these geopolitical conflicts may continue to adversely affect the Company's business, financial condition, results of operations and prospects cannot be predicted. More broadly, ongoing military conflicts may result in further 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 of the Company's Form 10-K for the year ended December 31, 2025.
In 2026, the Company plans to invest approximately $445 million in capital expenditures focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance.
For the three months ended October 3, 2026, the net earnings attributable to the Company were $163.1 million compared to the net earnings attributable to the Company of $108.8 million for the three months ended September 27, 2025. The change was primarily attributable to increased productivity; improved price and mix and more shipping days, offset by lower volume, the unfavorable net impact of foreign exchange rates, higher input costs driven by the impact of inflation as well as a lower effective tax rate.
For the nine months ended October 3, 2026, the net earnings attributable to the Company were $476.4 million compared to the net earnings attributable to the Company of $327.9 million for the nine months ended September 27, 2025. The change was primarily attributable to increased productivity; improved price and mix, and more shipping days, offset by higher input costs driven by the impact of inflation.
Results of Operations
Quarter Ended October 3, 2026, as compared with Quarter Ended September 27, 2025
Net sales
Net sales for the three months ended October 3, 2026, were $2,786.0 million, reflecting an increase of $28.1 million, or 1.0%, from $2,757.9 million reported for the three months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $103 million and more shipping days for the quarter ended October 3, 2026, of approximately $38 million, partially offset by lower sales volume of approximately $105 million.
Global Ceramic-Net sales for the three months ended October 3, 2026, were $1,128.6 million, reflecting an increase of $23.9 million, or 2.2%, from $1,104.7 million reported for the three months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $26 million and more shipping days for the quarter ended October 3, 2026, of approximately $12 million, partially offset by lower sales volume of approximately $10 million.
Flooring NA-Net sales for the three months ended October 3, 2026, were $949.9 million, reflecting an increase of $13.1 million, or 1.4%, from $936.8 million reported for the three months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $24 million and more shipping days for the quarter ended October 3, 2026, of approximately $15 million, partially offset by lower sales volume of approximately $26 million.
Flooring ROW-Net sales for the three months ended October 3, 2026, were $707.5 million, reflecting a decrease of $8.9 million, or 1.2%, from $716.4 million for the three months ended September 27, 2025. The decrease was primarily attributable to lower sales volume of approximately $70 million, partially offset by the favorable net impact of price and product mix of approximately $53 million and more shipping days for the quarter ended October 3, 2026, of approximately $11 million.
Gross profit
Gross profit for the three months ended October 3, 2026, was $709.7 million, an increase of $54.8 million, or 8.4%, compared to gross profit of $654.9 million for the three months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $86 million; productivity gains of approximately $36 million, lower restructuring, acquisition and integration-related, and other costs of approximately $34 million and more shipping days for the quarter ended October 3, 2026, of approximately $12 million., partially offset by higher input costs of approximately $83 million which are net of tariff refunds and lower sales volume of approximately $32 million.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended October 3, 2026, were $522.0 million, an increase of $3.8 million, or 0.7%, compared to $518.2 million for the three months ended September 27, 2025. Selling, general and administrative expenses did not significantly change as a percentage of net sales for the three months ended October 3, 2026, compared to the three months ended September 27, 2025.
Operating income (loss)
Operating income for the three months ended October 3, 2026, was $187.7 million, reflecting an increase of $51.0 million, or 37.3%, compared to operating income of $136.7 million for the three months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $85 million; lower restructuring, acquisition and integration-related, and other costs of approximately $56 million and productivity gains of
approximately $47 million, partially offset by higher input costs of approximately $104 million which are net of tariff refunds and lower sales volume of approximately $32 million.
Global Ceramic-Operating income was $65.6 million for the three months ended October 3, 2026, reflecting a decrease of $6.0 million, or 8.4%, compared to operating income of $71.6 million for the three months ended September 27, 2025. The decrease in operating income was primarily attributable to higher input costs of approximately $50 million which are net of tariff refunds and more shipping days for the three months ended October 3, 2026, of approximately $4 million, partially offset by productivity gains of approximately $22 million; the favorable net impact of price and product mix of approximately $19 million and lower restructuring, acquisition and integration-related, and other costs of approximately $10 million. .
Flooring NA-Operating income was $71.9 million for the three months ended October 3, 2026, reflecting an increase of $17.5 million, or 32%, compared to operating income of $54.4 million for the three months ended September 27, 2025. The increase was primarily attributable to productivity gains of approximately $24 million and the favorable net impact of price and product mix of approximately $15 million, partially offset by higher input costs of approximately $15 million which are net of tariff refunds.
Flooring ROW-Operating income was $66.0 million for the three months ended October 3, 2026, reflecting an increase of $22.2 million, or 51%, compared to operating income of $43.8 million for the three months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $51 million and lower restructuring, acquisition and integration-related, and other costs of approximately $16 million, partially offset by higher input costs of approximately $35 million and lower sales volume of approximately $14 million.
Interest expense
Interest expense was $1.6 million for the three months ended October 3, 2026, reflecting a decrease of $3.4 million, or 68%, compared to interest expense of $5.0 million for the three months ended September 27, 2025. The decrease was primarily attributable to cash flow generation, resulting in lower financing needs.
Other (income) expense, net
Other expense, net was $2.8 million for the three months ended October 3, 2026, compared to other expense, net of $(0.4) million for the three months ended September 27, 2025. Other (income) expense, net did not significantly change for the three months ended October 3, 2026, from the three months ended September 27, 2025.
Income tax expense
For the three months ended October 3, 2026, the Company recorded income tax expense of $20.1 million on earnings before income taxes of $183.3 million, for an effective tax rate of 11.0%. For the three months ended September 27, 2025, the Company recorded income tax expense of $23.3 million on earnings before income taxes of $132.1 million, for an effective tax rate of 17.6%. The decrease in the effective tax rate was primarily attributable to a decrease in unrecognized tax benefits during the three months ended October 3, 2026, and a non-recurring tax benefit recorded during the three months ended October 3, 2026, related to a U.S. tax election. These favorable impacts were partially offset by the Company's geographic dispersion of profits and losses for the respective periods.
Nine Months Ended October 3, 2026, as compared with Nine Months Ended September 27, 2025
Net sales
Net sales for the nine months ended October 3, 2026, were $8,506.1 million, reflecting an increase of $420.4 million, or 5.2%, from $8,085.7 million reported for the nine months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of foreign exchange rates of approximately $190 million; more shipping days for the nine months ended October 3, 2026, of approximately $168 million and the favorable net impact of price and product mix of approximately $155 million, partially offset by lower sales volume of approximately $129 million.
Global Ceramic-Net sales for the nine months ended October 3, 2026, were $3,435.7 million, reflecting an increase of $216.4 million, or 6.7%, from $3,219.3 million reported for the nine months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of foreign exchange rates of approximately $98 million; more shipping days for the nine months ended October 3, 2026, of approximately $63 million and the favorable net impact of price and product mix of approximately $60 million.
Flooring NA-Net sales for the nine months ended October 3, 2026, were $2,806.0 million, reflecting an increase of $60.0 million, or 2.2%, from $2,746.0 million reported for the nine months ended September 27, 2025. The increase was primarily attributable to more shipping days for the nine months ended October 3, 2026, of approximately $53 million and the favorable current year comparative impact of the order management system conversion of $52 million, partially offset by lower sales volume of approximately $50 million.
Flooring ROW-Net sales for the nine months ended October 3, 2026, were $2,264.4 million, reflecting an increase of $144.0 million, or 6.8%, from $2,120.4 million reported for the nine months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of foreign exchange rates of approximately $93 million; the favorable net impact of price and product mix of approximately $92 million and more shipping days for the nine months ended October 3, 2026, of approximately $52 million, partially offset by lower sales volume of approximately $92 million.
Gross profit
Gross profit for the nine months ended October 3, 2026, was $2,146.8 million, an increase of $194.3 million, or 10.0%, compared to gross profit of $1,952.5 million for the nine months ended September 27, 2025. The increase in gross profit dollars was primarily attributable to the favorable net impact of price and product mix of approximately $148 million; productivity gains of approximately $100 million; more shipping days for the nine months ended October 3, 2026, of approximately $44 million; the favorable net impact of foreign exchange rates of approximately $28 million; lower restructuring, acquisition and integration-related, and other costs of approximately $26 million and the favorable current year comparative impact of the order management system conversion of $25 million, partially offset by higher input costs of approximately $131 million which are net of tariff refunds and lower sales volume of approximately $40 million.
Selling, general and administrative expenses
Selling, general and administrative expenses for the nine months ended October 3, 2026, were $1,593.5 million, an increase of $62.5 million, or 4.1%, compared to $1,531.0 million for the nine months ended September 27, 2025. Selling, general and administrative expenses did not significantly change as a percentage of net sales for the nine months ended October 3, 2026, compared to the nine months ended September 27, 2025.
Operating income
Operating income for the nine months ended October 3, 2026, was $553.3 million, reflecting an increase of $131.8 million, or 31.3%, compared to operating income of $421.5 million for the nine months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $147 million; productivity gains of approximately $126 million, lower restructuring, acquisition and integration-related, and other costs of approximately $43 million and more shipping days for the nine months ended October 3, 2026, of approximately $35 million,
partially offset by higher input costs of approximately $171 million which are net of tariff refunds; lower sales volume of approximately $42 million and higher costs associated with investments in new product development and marketing costs of approximately $20 million.
Global Ceramic-Operating income was $211.1 million for the nine months ended October 3, 2026, reflecting an increase of $9.6 million, or 4.8%, compared to operating income of $201.5 million for the nine months ended September 27, 2025. The increase was primarily attributable to productivity gains of approximately $64 million; the favorable net impact of price and product mix of approximately $45 million and lower restructuring, acquisition and integration-related, and other costs of approximately $11 million, partially offset by higher input costs of approximately $100 million which are net of tariff refunds and the unfavorable net impact of foreign exchange rates of approximately $9 million.
Flooring NA-Operating income was $173.4 million for the nine months ended October 3, 2026, reflecting an increase of $57.1 million, or 49.2%, compared to operating income of $116.3 million for the nine months ended September 27, 2025. The increase was primarily attributable to productivity gains of approximately $51 million; the favorable current year comparative impact of the order management system conversion of $24 million and the favorable net impact of price and product mix of approximately $15 million, partially offset by higher costs associated with investments in new product development and marketing costs of approximately $14 million, higher input costs of approximately $10 million which are net of tariff refunds.
Flooring ROW-Operating income was $215.2 million for the nine months ended October 3, 2026, reflecting an increase of $46.9 million, or 27.8%, compared to operating income of $168.3 million for the nine months ended September 27, 2025. The increase was primarily attributable to the favorable net impact of price and product mix of approximately $87 million; more shipping days for the nine months ended October 3, 2026, of approximately $13 million; productivity gains of approximately $11 million and lower restructuring, acquisition and integration-related, and other costs of approximately $8 million, partially offset by higher input costs of approximately $52 million which are net of tariff refunds and lower sales volume of approximately $28 million.
Interest expense
Interest expense was $8.5 million for the nine months ended October 3, 2026, reflecting a decrease of $8.1 million, or 49%, compared to interest expense of $16.6 million for the nine months ended September 27, 2025. The decrease was primarily attributable to cash flow generation, resulting in lower financing needs.
Other (income) expense, net
Other expense, net was $4.7 million for the nine months ended October 3, 2026, reflecting an unfavorable change of $2.5 million compared to other expense, net of $2.2 million for the nine months ended September 27, 2025. Other expense, net did not significantly change for the nine months ended October 3, 2026, from the nine months ended September 27, 2025.
Income tax expense
For the nine months ended October 3, 2026, the Company recorded income tax expense of $63.6 million on earnings before income taxes of $540.1 million, for an effective tax rate of 11.8%. For the nine months ended September 27, 2025, the Company recorded income tax expense of $74.8 million on earnings before income taxes of $402.7 million for an effective tax rate of 18.6%. The decrease in the effective tax rate was primarily attributable to a decrease in unrecognized tax benefits during the nine months ended October 3, 2026 and tax benefits recognized during the nine months ended October 3, 2026, including (i) a one-time tax benefit associated with a legal entity restructuring initiative, (ii) tax credits issued by the Brazilian government related to prior years, (iii) a foreign tax credit benefit recorded in connection with a U.S. amended return and (iv) a non-recurring tax benefit related to a U.S. tax election. These favorable impacts were partially offset by the Company's geographic dispersion of profits and losses for the respective periods.
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 nine months ended October 3, 2026 was $897.8 million, compared to net cash provided by operating activities of $596.6 million in the nine months ended September 27, 2025. The change was primarily attributable to higher net earnings and the changes in accounts receivable and inventories.
Net cash used in investing activities in the nine months ended October 3, 2026 was $264.8 million compared to net cash used in investing activities of $245.6 million in the nine months ended September 27, 2025. The change was primarily attributable to the increase in capital expenditures of $25.9 million for the nine months ended October 3, 2026, compared to the nine months ended September 27, 2025.
Net cash used in financing activities in the nine months ended October 3, 2026 was $645.6 million compared to net cash used in financing activities of $532.4 million in the nine months ended September 27, 2025. The change was primarily attributable to higher share repurchases of $276.8 million and lower net proceeds on the Senior Credit Facility of $16.9 million as compared to the nine months ended September 27, 2025, offset by lower net repayments on Commercial Paper of $230.9 million in the nine months ended October 3, 2026 as compared to net repayments of $415.4 million in the nine months ended September 27, 2025.
As of October 3, 2026, the Company had cash of $816.8 million, of which $67.5 million was in the United States and $749.3 million was in foreign countries, including approximately 38% 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 believes that its cash and cash equivalents, cash generated from operations, and availability under its Senior Credit Facility will be sufficient to meet its planned capital expenditures, working capital investments and debt servicing requirements over the next twelve months. 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 "2025 Share Repurchase Program"). For the three months ended October 3, 2026, the Company purchased $261.3 million of its common stock under the 2025 Share Repurchase Program. As of October 3, 2026, there remained $34.4 million authorized under the 2025 Share Repurchase Program and as of October 20, 2026, the authorization was exhausted. On October 26, 2026, 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.
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 for 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 October 3, 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.
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