Mohawk Industries, Inc. (MHK, NYSE)
Industry: Furnishings, Fixtures & Appliances
Annual report, fiscal year 2020



MOHAWK \( ^{®} $ 

2020 Annual Report
Home
ADVANTAGE






## TABLE OF CONTENTS

2 Letter to Shareholders

8 Global Ceramic

12 Flooring North America

16 Flooring Rest of World

20 ESG Performance

23 10-K Filing

63 Reconciliation of Non-GAAP Measures



During 2020, around the globe, the concept of home expanded beyond a place to live. Homes became workplaces, schools, gyms and sanctuaries. As the world’s largest provider of flooring, Mohawk Industries is humbled to help people reinvent their homes of all shapes and sizes through a comprehensive product portfolio that provides comfort, beauty, practicality and peace of mind.



## THE MOHAWK HOME
ADVANTAGE

Over the past three decades, Mohawk Industries has grown dramatically through 45 acquisitions and continuous re-investment in the business. Mohawk has established leading market positions in North America, Europe, Russia, Brazil, Australia and New Zealand, with sales in more than 170 countries around the world. The company's manufacturing footprint now extends to 18 countries, where production is geared to local market needs and includes the product categories illustrated here.

Sheet Vinyl
Blending advanced technology and unique design, Mohawk produces sheet vinyl with realistic visuals, deep textures and rich colors.

North America
Europe
Russia

Carpet
Mohawk’s carpets combine beautiful contemporary style with the luxurious softness and the superior stain protection of innovative fiber technology.

North America
Australia
New Zealand
Europe



Ceramic Floor & Wall Tile
Mohawk offers ceramic tile in
an industry-leading array of
shapes, sizes, colors and finishes
at every price point, providing
endless decorating options.

North America
Europe
Russia
South America



Laminate
With richly detailed surfaces and unique waterproof technology, Mohawk’s laminate flooring provides the beauty of wood or stone with convenience and easy maintenance.

North America
Europe
Russia
Australia
New Zealand
South America

Countertops
An extensive assortment of quartz, porcelain and natural stone options in countertops and slabs provides beautiful, durable and versatile surfaces.

North America
Europe
Russia

Wood
Mohawk pioneered
waterproof wood
flooring and
offers elegant
contemporary
visuals in popular
longer and
wider planks.

North America
Europe
Australia
New Zealand

Rugs
Mohawk’s area, bath and accent rugs give any room a fresh, new look through exceptional design and color.

North America

Luxury Vinyl Tile
In both rigid and flexible LVT,
Mohawk offers exceptional
visuals that replicate wood,
stone and porcelain while
delivering durability, easy
clean-up and waterproof
performance.

North America
Europe
Australia
New Zealand



# TO OUR
SHAREHOLDERS

Jeffrey S. Lorberbaum
Chairman and
Chief Executive Officer

In an extraordinary year, we successfully managed through the most disruptive market environment in our company’s history by aggressively enhancing our strategies, organization, cost structures and balance sheet. We saw the immediate benefit of these initiatives as we delivered record revenues in the second half of the year and increased operating income approximately 38% year over year for that same period. Our actions improved our 2020 results and laid the groundwork for Mohawk to capitalize on economic recovery and heightened interest in home improvements around the world.

## ESSENTIAL ACTIONS IN A GLOBAL CRISIS

In the first half of 2020, our results were decimated by the steepest sales decline in the history of our industry, when most of our customers and facilities operated either at a limited capacity or were completely shut down for varying amounts of time. To address rapidly changing conditions, we formed an enterprise-wide team focused on protecting the company in the face of these unprecedented challenges. We quickly implemented strategic initiatives to protect our people, support our customers and stabilize the business at that moment as well as strengthen it for the long term. As the pandemic spread, we responded by minimizing costs, lowering inventory levels, initiating restructuring actions and increasing our liquidity.

Even with the scale of our business, we execute actions rapidly. We took an aggressive approach to cost containment, limiting investments to only business-essential spending and protecting employees. We reduced every category from basic expenses to capital expenditures without sacrificing operational integrity or service to our customers.

As we aligned production with historically low demand, we initiated furloughs across the business. Orders were fulfilled from existing supplies to effectively leverage our inventories.






H1 vs. H2 2019 and 2020 Revenue Comparison in millions



H1 vs. H2 2019 and 2020 Operating Income Comparison in millions



We also began to implement restructuring initiatives to reduce structural cost, improve productivity and create a foundation for our future performance. We scaled our workforce to market conditions by streamlining processes and optimizing technology. We curtailed SG&A investments and promotional activities to protect our margins. We closed less-efficient operations, invested in equipment upgrades and rationalized lower-performing products and SKUs. The majority of these changes were in the U.S., where LVT growth has disrupted other product categories for several years.

## RAPID RESPONSE TO A REBOUND

In the second half of the year, residential flooring demand around the globe recovered significantly faster than our industry expected. People spent more time in their homes due to the pandemic and shifted disposable income from travel, entertainment and leisure activities to home improvement projects, particularly when their homes had to double as offices, schools and gyms. We benefited from our strength in all residential sales channels and from the differentiation of our products, which provided solutions to enhance comfort and style or to accommodate family needs for work and learning spaces. In most markets, home construction and existing home sales saw a boost as people sought larger dwellings or relocated from crowded cities to suburbs and small towns.

The office, hospitality, retail and aviation sectors have remained under pressure due to Covid, which kept commercial flooring demand depressed due to business investments being postponed or canceled. Consequently, we have maximized the production of our residential products while maintaining most of our commercial infrastructure for the eventual rebound.

As our sales accelerated, shipments exceeded production rates, which lowered our inventory and challenged service levels. Even as order rates increased, our manufacturing levels continued to be impacted by government restrictions, Covid-related disruptions and employee absenteeism across the organization. Across the business, we took actions to increase productivity and meet demand for new and legacy products.

## DELIVERING PRODUCT INNOVATION

With families investing in their homes, a key to sales is delivering value through products with enhanced style and performance features. As an example, while spending more time at home, consumers rediscovered the comfort and noise-dampening values of carpet. Our patterned carpets in a variety of colors and textures offer sophisticated and elegant looks for the home. We are reinvigorating our proprietary SmartStrand collections to support growth in the luxury carpet category. In addition to SmartStrand's superlative softness and stain resistance, we have added a revolutionary hypoallergenic backing that makes the products fully recyclable as well as easier to install.

We are also responding to consumer desires for healthier homes by introducing ceramic tile collections with built-in antimicrobial protection. We are extending the reach of our ceramic products with large-scale porcelain panels and outdoor pavers used for landscaping, both of which are building sales through new and existing channels.




During 2020, we maintained a strong financial position through both the decline and rebound of global markets.

Waterproof flooring is another key focus for today’s consumers. Accordingly, we are introducing groundbreaking technology in laminate and LVT collections to create watertight joints that provide protection for both the floor surface and subfloor.

We are also introducing a luxury wood flooring collection that has been in development for four years. This truly waterproof wood flooring features exclusive technologies that provide dramatically improved scratch, dent and wear resistance for today’s active households.

## INVESTING FOR GROWTH

Our premium laminate collections have earned renewed consumer attention as their superior visuals and waterproof performance make them a desirable alternative to both natural wood and LVT. Our plants are running at capacity to meet the exceptional demand. By the end of 2021, a new U.S. laminate production line with additional capabilities should be operational.

Our European and U.S. LVT category is delivering substantial sales growth. Our rigid collections have become increasingly popular with consumers seeking durable, low-maintenance floors, while the acoustic dampening properties of our flexible collections have made them valued in commercial spaces. In Europe, where our LVT manufacturing is now running seven days a week, the profitability of our operations improved due to increased volume and lower production costs. Engineers from our European LVT business are working with their U.S. counterparts to implement demonstrated improvements that increase output, reduce material cost and enhance the visuals and performance of our collections.

The investments we have made in our most recent acquisitions continue to expand their growth and profitability. Since acquiring Godfrey Hirst, our results in Australia and New Zealand have improved, thanks to refinements to our carpet and hard surface product offering, along with enhanced manufacturing assets and distribution capabilities. This year, we are upgrading a porcelain production line in Brazil to further strengthen our manufacturing and support sales growth.



Debt and Liquidity as of December 31, 2020

<table><tr><td colspan="2">TOTAL DEBT (millions)</td></tr><tr><td>Sept 2021 €300MM Note</td><td>$ 369</td></tr><tr><td>Jan 2022 €500MM Note</td><td>615</td></tr><tr><td>Feb 2023 USD Note</td><td>600</td></tr><tr><td>June 2027 €500MM Note</td><td>615</td></tr><tr><td>May 2030 USD Note</td><td>500</td></tr><tr><td>Finance Leases &amp; Other</td><td>46</td></tr><tr><td>Total Debt</td><td>2,745</td></tr><tr><td>Less: Cash \( ^{1} \)</td><td>(1,340)</td></tr><tr><td>Net Debt</td><td>$ 1,405</td></tr></table>

<table><tr><td colspan="2">LIQUIDITY (millions)</td></tr><tr><td>Cash \( ^{1} \)</td><td>$ 1,340</td></tr><tr><td>Available Revolving Credit Facilities \( ^{2} \)</td><td>1,799</td></tr><tr><td>Total Available Liquidity</td><td>$ 3,139</td></tr></table>

1 Cash includes investments in money market and mutual funds  
2 After Letters of Credit issuance of $0.8MM

Greenfield investments are also enhancing our results. Production volume at our Russian sheet vinyl plant has now reached a level where its margins are in line with our other businesses, and we are expanding sales to further optimize our results. Also in Russia, we are successfully ramping up our new premium sanitary ware manufacturing and will expand it further this year. The sanitary ware complements our ceramic tile collections and will enhance our product offering in our owned and franchised stores.

Our U.S. countertop business is increasing substantially, driven by growth in our quartz collections. Our quartz countertop plant’s production, costs and margins continue to improve our results, and we are increasing our mix with higher-value stylized products. We are investing significantly in SG&A to grow our carpet tile sales from the plant we launched in Europe, which is impacting its margins particularly as the commercial sector faces headwinds due to Covid-related reductions in demand.

## BENEFITING FROM FINANCIAL STRENGTH

During 2020, we maintained a strong financial position through both the decline and rebound of global markets. In the second quarter, we issued over $1 billion of new bonds, which allowed us to pay off short-term debt and prefund longer-term maturities. For the year, we generated record free cash flow of more than

## SAFETY & RESILIENCY IN
THE FACE OF ADVERSITY

## Our Covid Response

The talent and dedication of our people drive our success. In 2020, our associates persevered under unique challenges, supporting our customers through an unprecedented period while keeping one another safe.

During the pandemic, our emphasis on safety was enterprise wide, with best practices shared as new information emerged. We implemented temperature scans, contactless time clocks, deep cleaning, hand sanitizing stations and work from home options where practical. We tracked confirmed cases, tested contacts and contained the spread of the virus.

At the height of the protective health care equipment shortage, our rug operations produced medical gowns and face shields. We donated thousands of these gowns to regional hospitals, and we provided hand sanitizer and cleaning supplies to local school systems.

We also focused on the safety of our customers, with social distancing in our sales facilities, contactless pick up of orders and virtual conventions that highlighted new products and



resources. We have been inspired by the resilience and dedication of our customers, and we are committed to ensuring their ongoing success.

While the introduction of new Covid vaccines inspires optimism, we have maintained safety protocols and will continue to mitigate risk across our operations.



$1.3 billion and liquidity is now at $3.1 billion. Net debt leverage dropped to a historical low of 1.0x adjusted EBITDA at the end of 2020. From January 1, 2020 to March 16, 2021, we purchased 1.58 million shares of Mohawk stock for about $198 million as part of our stock repurchase plan. This strong financial position gives us the flexibility to pursue additional opportunities, including internal investments, acquisitions and stock purchases.

## CARRYING MOMENTUM INTO THE FUTURE

This year, we expect to benefit further from the actions we implemented throughout 2020 as well as from improving economic conditions, favorable government policies, low interest rates and greater consumer confidence. Around the world, we anticipate that the flooring business in residential remodeling and new construction will remain strong, while the rebound in commercial investments will require more time. Our commercial products have a higher margin than residential, so lower commercial sales will have some impact on our 2021 performance.

In the fourth quarter of 2020, our plants across the enterprise ran at high production levels, but we fell short of our anticipated inventory build. With consumer demand strong across product categories, we remain focused on optimizing production, increasing inventories, and achieving desired service levels. This year, we will benefit from last year’s cost reduction and restructuring initiatives. By the end of 2020, we had achieved approximately $50 million of our projected $100 to $110 million in anticipated savings from these initiatives. We continue to assess some of the planned restructuring projects based on changing market conditions. High-value, innovative products will also enhance our mix. All of our businesses are introducing new collections with features and benefits that will improve our margins and excite consumers who are eager to remodel their homes.

At this time, Covid-related issues around the world are disrupting some material supply streams, and we are managing through these shortages. In the U.S., businesses in most areas have

2020 Sales by Geography



2020 Sales by Segment



Flooring North America 38%
Global Ceramic 36%
Flooring Rest of World 26%



continued to operate without government restrictions. Lockdowns in Europe and Australia have had limited impact on the sales and installation of our products. We continue to mitigate Covid-related risks within our operations in all regions. We are experiencing inflationary pressures in materials, energy, labor and transportation around the world and have implemented price increases as necessary. Though we remain optimistic about the year ahead, our strategies and initiatives are flexible enough to adapt to potential economic changes. With significant momentum coming off record sales at the end of 2020, our highest annual free cash flow and a strong balance sheet, we are well positioned to take advantage of opportunities that will drive profitable growth for the business.

Mohawk’s history is distinguished by how we have proactively responded to challenging circumstances and then leveraged our actions to optimize our performance in the stronger periods that follow. In 2020, we took essential steps that steadied our company through the pandemic, and we are now poised to reap the benefits of those initiatives in 2021 and beyond. We appreciate your continued support of the business as we work to deliver the best possible returns for the near and long term.



Jeffrey S. Lorberbaum
Chairman and Chief Executive Officer




## WHERE WE HAVE A
Home Advantage

Mohawk's strengths include a wide array of products to meet consumer expectations in markets around the world. The Company operates three business segments: Global Ceramic, Flooring North America and Flooring Rest of the World. Each business is run with an entrepreneurial philosophy, which allows the management teams to deliver the products and service that differentiate them in their regions.




## THE GLOBAL
CERAMIC MARKET

Ndalilie

MARAZZI

AMERICAN OLEAN \( ^{®} \) 

eliane

EMILGROUP

RAGNO

KAIGROUP

KERAMA MARAZZI




## GROWTH POTENTIAL

Today, Mohawk is the worldwide leader in ceramic tile with a 2% share of the 136-billion-square-foot global market, meaning the segment has opportunities to grow in new products and geographies.

## MOHAWK KEY MARKETS



## 2020 SEGMENT HIGHLIGHTS

• Leveraged the flexibility of our operations to rapidly scale back and then ramp up production as consumer demand shifted in markets around the world

• Restructured assets, primarily in the U.S., by shuttering less efficient production and consolidating distribution points

• Delivered innovative new products such as click tile and antibacterial technology while introducing bold new looks in 3D wall tile, deeper grained wood surfaces and metallic glazes

• Strategically invested in growth opportunities, such as upgrading Brazilian assets to create higher value products and reduce costs and adding sanitary ware production in Russia to provide consumers with a full range of products to meet their remodeling needs

• Introduced new practices and programs that made ordering and picking up products easier and safer for employees and customers in a Covid environment

• Rationalized underperforming collections while improving inventory management




## A CONVERSATION WITH
CHRIS WELLBORN
President, Global Ceramic

President, Global Ceramic
President & Chief Operating Officer

Q: Your segment has a broad geographic footprint. How did you respond to the pandemic in each region and what was the result?

A: Across all of our regions, we took every precaution to keep our people healthy, implemented processes and systems to make it easier to do business with us and introduced contactless pick ups to protect our customers and employees. In each region, we significantly reduced costs in all aspects of the business. On both sides of the Atlantic, we realigned production to market demand in residential and commercial channels; and, in the U.S., we consolidated operations to optimize our most efficient assets and offer customers more options in our sales centers.

Government restrictions impacted our sales and operations in most geographies, with southern Europe and Mexico impacted the most. In every region, residential sales have recovered faster than commercial because the lingering impact of Covid has led to reduced or deferred business investments. In the second half of 2020, we achieved particularly strong sales growth in Russia, Mexico and Brazil as those economies rebounded and have more limited commercial sales.




Q: The pandemic led many people to remodel their homes. How are you inspiring consumers to select tile for their projects?

A: We have focused our latest product launches on beauty, performance and practicality. After a year dominated by the pandemic, consumers are looking for optimism in design, so we are introducing warm and bold colors as well as new shapes and sizes in wall tiles and mosaics to create playful, whimsical designs for happier homes.

We are introducing mix and match options with floor and wall tile, small sizes and mosaics, slabs and pavers coordinated for a complete product offering for residential and commercial projects. In terms of new features, we are introducing collections with built-in anti-microbial treatments to help families live safer and healthier.

Across the business, we are also upgrading our showrooms, brand websites and social media platforms to make it easier for both consumers and design professionals to identify the perfect products for their projects.

## Q: What are the most important new products in the Global Ceramic segment?

A: Around the world, we are delivering more sophisticated, value-added products for residential and commercial end use. We are expanding our offering of polished tiles, which have more intense color and a glossy shine that brings a luxurious feel to a space. Our Mexican operations are introducing upscale wall and mosaic collections with new glazing techniques and sophisticated structures to create beautiful, dynamic spaces with textural appeal. In Europe, we have invested in the next generation of printing technology as well as glaze and structure synchronization.

We are also placing greater emphasis on products that will grow our business. Our porcelain panels are increasingly being used as a premium countertop material, and we are expanding our quartz countertop business and adding sophisticated new designs.

We have taken a leading position in outdoor porcelain pavers in Europe and initiated sales of them to most of our markets. Based on that success, we are expanding the collection with thicker pavers. We have also introduced tiles for patios, pool areas and other outdoor spaces featuring our proprietary StepWise™ slip resistance technology. We have porcelain cladding for commercial buildings that offers excellent insulation value and durability. In the U.S., we have recently introduced porcelain roofing collections that can mimic the look of terra cotta, slate and wood shake shingles.

## Q: How does your worldwide footprint help you bring design and innovation to market?

A: Our global operations enable us to introduce new products worldwide in a very short time. Our product development teams share designs and technologies on an ongoing basis, and the products become part of our offering where they can drive sales and differentiate our collections. Having manufacturing assets in eight countries around the world allows us to quickly modify these new products to local tastes and capture a higher market share.




## FLOORING NORTH
AMERICA

MOHawk

Karastan

Mohawk Group
Commercial

PERGO

QUICK·STEP

ID DURKAN




## THE $27 BILLION+ U.S. FLOORING INDUSTRY



Industry Breakdown by Category

Carpet & Area Rugs 41%
LVT 17%
Ceramic 14%
Wood 13%
Stone 6%
Sheet Vinyl 5%
Laminate 3%
Other 1%

Source: Floor Covering Weekly

## GROWTH POTENTIAL

With residential remodeling and new home construction growing, the segment is launching the most comprehensive of new collections in its history to drive sales through unique style and unsurpassed performance.

## 2020 SEGMENT HIGHLIGHTS

• Following the steepest decline in market history in April, we rapidly escalated production after the lockdown ended, and new construction and residential remodeling drove sales growth

• Increased LVT output as sales grew and implemented enhanced processes and product features previously proven in our Belgian operations

• Maximized laminate capacity when sales expanded quickly in the second half of the year as our unique waterproof collections generated exceptional consumer demand

• Grew residential carpet sales as consumer appreciation for cozy and noise-dampening home décor was amplified by families spending more time at home

• Enhanced rug sales through a broad product offering that appealed to consumers seeking fast and affordable ways to update their homes during the pandemic

• Developed premium waterproof wood collections with industry-leading scratch, dent and wear resistance








# A CONVERSATION WITH
PAUL DE COCK

President, Flooring NA

Q: The pandemic defined 2020 for most businesses and industries. How did the Flooring North America team adapt?

A: In addition to prioritizing workplace safety, we supported our customers through webinars and online content that focused on managing through the pandemic and how to access government assistance. We even transformed facilities with sewing equipment into production centers for medical gowns and masks.

After the market collapsed in the second quarter, our inventories were very low because we expected a slow recovery. Instead, the market rapidly rebounded as people started remodeling and moved to larger homes. We were prepared.

Our 2020 collections were ready to fully launch as lockdowns went into place, and our new merchandising was packaged and ready to ship when specialty retailers reopened. We creatively managed inventory and scheduled production to deliver goods for our customers.

When common carriers were not able to absorb the rapid expansion of volume, our supply chain and transportation network ensured our flooring was shipping reliably, enabling retailers and contractors to satisfy their customers. As we responded better to the disruption than most of our competition, our sales grew in the second half.




Sustainability continues to be a differentiator for your business. What is your strategy there?

We invest in developing sustainable products and processes to do what’s right for people, our planet and our profitability. Many of the restructuring actions we have taken reduce water and energy consumption and lower material waste. We believe what’s good for the environment is good for our business. The actions we take today benefit our company and our world tomorrow.

## Q: You mentioned the importance of having the right products available for consumers. What's in the pipeline for 2021?

During 2020, our product development team never slowed down. We reinvigorated all of our product lines, which has resulted in one of the largest residential launches in our history this year.

We have fully overhauled our proprietary, super-soft SmartStrand line, and we are releasing carpet collections that are hypoallergenic and totally recyclable, utilizing patented backing technology that makes them faster and easier to install.

For all our hard surface products, we are adding revolutionary waterproof technology, which will protect against water damage all the way to the subfloor. We have introduced the first truly waterproof wood flooring, which also features unsurpassed scratch, dent and wear resistance.

We make a difference for our customers every time a salesperson tells a consumer: “You will not believe how great this product is!” Innovation drives excitement; excitement drives sales.

## Q: LVT remains a fast-growing and rapidly evolving category in your market. What is your LVT strategy?

Our LVT strategy is no different than our other product strategies: we create value through differentiation and unique benefits. To bring superior products to market, we opted to produce LVT domestically rather than rely entirely on imports like most of our competitors. Engineers from our European operations have helped us reformulate LVT body composition and adjust our equipment to increase output.

Our manufactured collections include market-leading design and features, with more realistic visuals and greater scratch, dent and fading resistance. We are also leveraging the value of our well-known brands to reinforce confidence in our products with the consumer. We supplement our manufactured offering with targeted collections sourced from around the world, which ensures that we provide a comprehensive array of products at every price point.

## Q: How are your restructuring initiatives progressing?

We had begun restructuring initiatives on many levels before the pandemic emerged. We identified ways to consolidate operations to reduce overhead while maintaining capacity to serve our customers. We also invested in advanced technology to replace older, less efficient equipment.

We have creative engineers who have made countless enhancements to our processes to increase speeds and outputs, as we work to normalize our inventory levels following the unique circumstances of 2020.

With advanced information technology, we analyze detailed data in real time to react faster to problems and improve our execution. This has enhanced our raw material utilization, reduced our process variation and lowered waste. We have also improved our planning strategies to increase yields and productivity through fewer changes and longer production runs.




## FLOORING REST OF
THE WORLD

QUICK-STEP \( ^{®} \) 
PERGO

UNILIN

moduleo \( ^{®} \) 

leoline \( ^{®} \) 

ivc COMMERCIAL

Godfrey Hirst

Feltex




## GROWTH POTENTIAL

By strategically expanding the segment's geographic reach and product offering through acquisitions and internal investments, Mohawk has created growth opportunities around the world.



## 2020 SEGMENT HIGHLIGHTS

• Successfully adapted our operations to evolving markets in multiple regions with wide-ranging government responses to the pandemic

• Maximized our laminate production to meet rapid escalation of demand for our naturalistic waterproof collections, which had strong consumer DIY appeal during the lockdown

• Improved production levels, efficiencies and costs of our LVT production, which supported expanded sales of our flexible and rigid collections

• Leveraged increased production at our new sheet vinyl plant in Russia to meet expanding consumer demand in Europe and satisfy growth of our Russian business

• Delivered solid sales growth in Australia and New Zealand through new soft and hard surface collections that captured consumer interest amid growing demand

• Completed the consolidation of wood flooring operations in Malaysia, reducing costs and improving output as demand increased




## A CONVERSATION WITH
BERNARD THIERS

President, Flooring ROW

## Q: Your business was among the laminate pioneers in Europe. How have you reinvigorated the product category for today’s consumers?

A: Our Quick-Step brand has always been the innovation leader in laminate. We invented the click installation system and pioneered embossed-in-register products, among many other breakthroughs. Our patented invention of a water-resistant laminate combined with a pressed bevel was a game changer five years ago. Our collections now feature unprecedented visuals that make them virtually indistinguishable from wood and offer true protection against water damage, even to the subfloor. This new laminate category is taking market share around the world as an alternative to both wood and LVT.



## Q: Luxury vinyl tile remains a growing category in Europe. How have the visuals and features in your collections differentiated you among LVT providers?

A: Our company offers differentiated and innovative products in all categories. We recently introduced the world’s first watertight LVT. This means that water cannot penetrate through the joints to the subfloor, which is quite often a problem with regular LVT products. But, as you should expect from us, we are also adding much better-looking structures, bevels and designs than traditional LVT. The combination of these features offers a superior product to the consumer. As our operations have improved, we have been able to shift from optimizing production to introducing value-added premium products that distinguish us in the marketplace, just as we have done with other products. LVT remains a profitable category, and our margins will expand with improved mix and more efficient production.




## Q: How has the sheet vinyl plant in Russia progressed?

A: We built the greenfield plant next to one of our two ceramic tile facilities in Russia. This has provided a tremendous advantage in hiring excellent people and implementing the project. We finalized the plant ontime and within budget, and we had a smooth start-up. We have successfully expanded our customer relationships with industry-leading products and service. The plant’s scale has grown sufficiently to yield margins in line with the rest of our business. We are very pleased with the plant’s evolution and the excellent sales and operational teams that will further enhance our results.

## Q: Over the past few years, you’ve diversified your business model with company-operated distribution. How has that benefited you and your customers?

A: Historically, we worked with independent distributors. They have played an important role in building our business. As our products became an increasingly large part of their sales, we agreed that integrating the businesses could bring greater value to our customers by enhancing our capabilities and service. Once they were a part of our organization, we increased the focus on our premium brands and leveraged our operational expertise to improve their processes. It also allows us to integrate the supply chain, resulting in faster service and lower working capital.

## Q: Your strategy is to offer products with added value. How do you achieve that in your wood panel business?

A: Our panel business is closely connected with our flooring business. The technology behind adding melamine facing onto boards is the same as our laminate flooring technology. The innovations of flooring spill over to our panels, allowing us to offer unique designs and surface textures to our customers. Our strategy is to reduce our participation in non-finished boards and sell more and more decorative panels with added value. The unique features we offer are very attractive for the architect and designer community and will make us top-of-mind on projects.
Q: How does your insulation business fit within the group, and what are the opportunities in this business?

A: Our group manufactures products for the building industry, and the Unilin brand is well known with builders and architects. Because of regulations around energy conservation in construction and remodeling, insulation is a strong growth category, and our polyurethane product is the fastest-growing category within the insulation business. We have 40 years of experience in the category and are recognized as one of the industry leaders. We operate five plants that are geographically spread over Western Europe, allowing us to offer excellent service to our customers. We expect future strong growth for this category.

## Q: After the Godfrey Hirst acquisition in 2018, you began to integrate existing hard surface distribution businesses in Australia and New Zealand. How have the soft and hard surface businesses delivered growth for you in that region?

A: Godfrey Hirst has a dominant residential retail position in both countries. Their focus was on carpet, since they have large operations there. Mohawk had already built a leading position and expertise in hard surface flooring. The combination of their retail connections and our hard surface flooring products is a win for us and our customers, and the sales growth of our hard surface flooring in both countries shows that it works.




## BELIEVE
IN BETTER

• Deliver better value to our customers through products that support recycling, reuse and repurposing of materials

• Be better stewards of our planet through processes that lower our consumption of natural resources and reduce our environmental footprint
• Ensure a better quality of life for our communities by partnering with non-profits that truly make a difference

• Create better opportunities for our people and their families through good jobs and programs that support professional development and personal well-being

## BETTER NUMBERS

We believe that doing what's right for our planet and the people with whom we share it is also essential for running a business. Ensuring the long-term success of Mohawk Industries aligns with our commitment to sustainable products and processes, which help us deliver numbers like these:



6.5 BILLION
POUNDS
OF WASTE
RECYCLED
ANNUALLY



7 BILLION
PLASTIC
BOTTLES
RECYCLED
ANNUALLY



50
PLANTS
CERTIFIED
ZERO WASTE
TO LANDFILL



500+
PRODUCT
COLLECTIONS
WITH RECYCLED
CONTENT



## COMMITTED TO ENVIRONMENTAL
STEWARDSHIP AND SOCIAL RESPONSIBILITY

Mohawk is committed to the sustainable use of natural resources, which includes reducing our water consumption by almost 450 million gallons over the past five years and producing green energy from wind, solar and biofuel sources.

Our use of recycled content extends to more than 500 product collections around the world, including our signature carpet and rugs made from recycled bottles. About 60 plastic water bottles yield a square yard of polyester carpet. We do much more than repurpose bottles, though. For example, each year we upcycle about 42 million pounds of tire into decorative crumb rubber mats. All of these actions collectively divert more than 6.5 billion pounds of material from waste streams annually.

We are also committed to sustaining our most valuable resource — our people. Our world-class safety initiatives continue to protect individuals at work, and our clinics and wellness coaching have helped thousands of people manage chronic medical conditions. For 15 straight years, Mohawk has been ranked in the Training Top 100, reflecting the learning and development programs that help our people fulfill their potential.





• Mohawk also offers the industry’s largest Red List-free product portfolio, as well as a Red List-free installation process.

• All carpet tiles made with our proprietary EcoFlex Matrix, EcoFlex NXT or EcoFlex NXT AIR backing have achieved Living Product Challenge Petal certification, an industry first.

• Our laminate and board production includes significant recycled wood content.

• The spray dryer at our Tennessee countertop plant is the first in the world to be powered by energy-efficient microturbine engines.

• Onsite wind farms at our plants now support up to 30% of the facilities' electricity consumption.

• Even with 22 acquisitions since 2010, we have lowered waste-to-landfill intensity by 54% during that period.

• We’ve expanded our wellness support with Healthy Care Teams, which include medical providers, registered dieticians, behavioral support providers and coaches who help employees achieve their health goals.

• At the beginning of the Covid outbreak, Mohawk used its industrial sewing equipment to produce vitally needed medical gowns for healthcare providers.



## SENIOR
MANAGEMENT TEAM

Jeffrey S. Lorberbaum
Chairman and Chief Executive Officer

W. Christopher Wellborn
President and Chief Operating Officer
President — Global Ceramic

James F. Brunk
Chief Financial Officer

Steven H. Lee
Chief Accounting Officer and
Corporate Controller

R. David Patton
General Counsel and
Vice President — Business Strategy

Paul De Cock
President — Flooring North America

Bernard Thiers
President — Flooring Rest of World

## BOARD OF DIRECTORS

Filip Balcaen
Executive Chairman — Baltisse
Former Executive Chairman of IVC

Karen A. Smith Bogart PhD
President — Smith Bogart Consulting
Former Chairperson and President
Greater Asia — Eastman Kodak Company

Bruce C. Bruckmann
Managing Director — Bruckmann,
Rosser, Sherrill & Co., Inc.

John M. Engquist
Executive Chairman —
H&E Equipment Services, Inc.

Jeffrey S. Lorberbaum
Chairman and Chief Executive Officer —
Mohawk Industries, Inc.

Joseph A. Onorato
Former Chief Financial Officer —
Echlin, Inc.

William H. Runge III
Managing Director — Alvarez and Marsal

W. Christopher Wellborn
President and Chief Operating Officer —
President — Global Ceramic
Mohawk Industries, Inc.

On April 1, 2021, James F. Brunk was appointed as Mohawk’s chief financial officer after serving as the Company’s principal accounting officer and corporate controller since May 2009. During his fifteen years with Mohawk, Jim has developed a deep understanding of Mohawk’s complex global operations through his involvement in all aspects of the Company. His expertise in financial planning and analysis, mergers and acquisitions, accounting and investor relations will positively influence our performance. Jim will lead a finance team comprised of talented experts in many disciplines, focused both on protecting and delivering results for the business.






## FORM 10-K



# United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K

[Mark One]

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

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

(State or other jurisdiction of incorporation or organization)

52-1604305

160 S. Industrial Blvd., Calhoun, Georgia
(Address of principal executive offices)

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

30701

(Zip Code)

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

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 2021

New York Stock Exchange

2.000% Senior Notes due 2022

New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑

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 ☑ 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 such files]. Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K [§229.405 of this chapter] is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. □

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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Emerging growth company ☐ Smaller Reporting Company ☐

Non-accelerated filer ☐ Accelerated filer ☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

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

The aggregate market value of the Common Stock of the Registrant held by non-affiliates [excludes beneficial owners of more than 10% of the Common Stock] of the Registrant (57,880,506 shares) on June 26, 2020 (the last business day of the Registrant's most recently completed fiscal second quarter) was $5,539,743,229. The aggregate market value was computed by reference to the closing price of the Common Stock on such date.

Number of shares of Common Stock outstanding as of February 22, 2021: 70,226,354 shares of Common Stock, $.01 par value. Mohawk Industries, Inc. common stock trades on the New York Stock Exchange under symbol MHK.



## Table of Contents

Part I
ITEM 1. Business 2
ITEM 1A. Risk Factors 8
ITEM 1B. Unresolved Staff Comments 14
ITEM 2. Properties 14
ITEM 3. Legal Proceedings 14
ITEM 4. Mine Safety Disclosures 14
Part II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 15
ITEM 6. Selected Financial Data 16
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 24
ITEM 8. Consolidated Financial Statements and Supplementary Data 25
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 58
ITEM 9A. Controls and Procedures 58
ITEM 9B. Other Information 59
Part III
ITEM 10. Directors, Executive Officers and Corporate Governance 59
ITEM 11. Executive Compensation 59
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 59
ITEM 13. Certain Relationships and Related Transactions, and Director Independence 59
ITEM 14. Principal Accounting Fees and Services 59
Part IV
ITEM 15. Exhibits, Financial Statement Schedules 60



## ITEM 1. BUSINESS

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

## General

Mohawk is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company’s vertically integrated manufacturing and distribution processes provide competitive advantages in carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (“LVT”) and sheet vinyl flooring. The Company’s industry-leading innovation develops products and technologies that differentiate its brands in the marketplace and satisfy all flooring-related modeling and new construction requirements. The Company’s brands are among the most recognized in the industry and include American Olean \( ^{®} \) , Daltile \( ^{®} \) , Durkan \( ^{®} \) , Eliane \( ^{®} \) , Flettex \( ^{®} \) , Godfrey Hirst \( ^{®} \) , IVC \( ^{®} \) , Karastan \( ^{®} \) , Marazzi \( ^{®} \) , Mohawk \( ^{®} \) , Pergo \( ^{®} \) , Quick-Step \( ^{®} \)  and Unilin \( ^{®} \) . During the past two decades, the Company has transformed its business from an American carpet manufacturer into the world’s largest flooring company with operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia, United Kingdom and the United States. The Company had annual net sales in 2020 of 9.6 billion. Approximately 60% of this amount was generated by sales in the United States and approximately 40% was generated by sales outside the United States. The Company has three reporting segments, Global Ceramic, Flooring North America (“Flooring NA”) and Flooring Rest of the World (“Flooring ROW”) with their 2020 net sales representing 36%, 38% and 26%, respectively, of the Company’s total revenue. Selected financial information for the three segments, geographic net sales and the location of long-lived assets are set forth in Note 18-Segment Reporting.

The Global Ceramic Segment designs, manufactures, sources, distributes and markets a broad line of ceramic, porcelain and natural stone tile products used for floor and wall applications in residential and commercial channels for both remodeling and new construction. In addition, the Global Ceramic Segment manufactures, sources and distributes other products, including natural stone, quartz and porcelain slab countertops, as well as installation materials. The Global Ceramic Segment markets and distributes its products under various brands, including the following: American Olean, Daltile, Eliane, EmilGroup \( ^{®} \) , KAI \( ^{®} \) , Kerama Marazzi, Marazzi and Ragno \( ^{®} \) . The Segment sells its products through company-owned and franchised operations, independent distributors, home centers, floor covering retailers, ceramic specialists, commercial contractors and commercial end users. The Global Ceramic Segment operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile and countertops. The Flooring NA Segment designs, manufactures, sources and distributes a broad range of floor covering products in a variety of colors, textures and patterns for both residential and commercial remodeling and new construction channels. The Segment’s product lines include broadloom carpet, carpet tile, rugs and mats, carpet pad, laminate, medium-density fiberboard (“MDF”), wood flooring, LVT and sheet vinyl. The Flooring NA Segment markets and distributes its flooring products under various brands, including the following: Aladdin Commercial \( ^{®} \) , Durkan, IVC, Karastan, Mohawk, Mohawk Group \( ^{®} \) , Mohawk Home \( ^{®} \) , Pergo, Portico \( ^{®} \)  and Quick-Step. The Segment sells its products through floor covering retailers, distributors, home centers, mass merchants, department stores, e-commerce retailers, shop at home, buying groups, builders, commercial contractors and commercial end users.

The Flooring ROW Segment designs, manufactures, sources and distributes a wide variety of laminate, LVT and sheet vinyl, wood flooring, broadloom carpet and carpet tile collections used in the residential and commercial markets for both remodeling and new construction. In addition, the Flooring ROW Segment manufactures roofing panels, insulation boards, mezzanine flooring, MDF and chipboards primarily for the European market. The Segment also licenses certain patents related to flooring manufacturing throughout the world. The Segment markets and distributes its products under various brands, including the following: Balterio \( ^{®} \) , Flettex, Godfrey Hirst, Hycraft \( ^{®} \) , IVC, Leoline \( ^{®} \) , Moduleo \( ^{®} \) , Pergo, Quick-Step, Unilin and Xtratherm \( ^{®} \) . The Segment sells its products through floor covering retailers, wholesalers, company-operated distributors independent distributors and home centers.

## Business Strategy

Mohawk’s business strategy provides a consistent vision for the organization and focuses employees around the globe on key priorities. The strategy is cascaded down through the organization with an emphasis on five key points:

- Optimizing the Company’s position as the industry’s preferred provider by delivering exceptional value to customers;

• Treating employees fairly to retain the best organization;

• Driving innovation in all aspects of the business;

- Taking reasonable, well considered risks to grow the business; and

• Enhancing the communities in which the Company operates.

The Mohawk business strategy provides continuity for the Company’s operating principles and ensures a focus on exceeding customer expectations.



## Strengths

## Market Position

Mohawk’s fashionable and innovative products, successful participation in all sales channels, creative marketing programs and extensive sales resources have enabled the Company to build market leadership positions in multiple geographies, primarily North America, Brazil, Europe, Russia and Australasia, as well as to export products to more than 170 countries. In North America, Mohawk’s largest marketplace, the Company has leveraged its brands, broad offering and award-winning merchandising to build strong positions across all product categories. In Europe and Russia, similar advantages have supported market leadership in ceramic tile, premium laminate and sheet vinyl. The Company also has established a strong position in the fast-growing LVT market in the U.S. and Europe following the 2015 acquisition of IVC and subsequent investments to expand production. The 2018 acquisition of Godfrey Hirst provided the Company with the largest market position in carpet in Australasia to complement the leading hard surface presence that the Company had grown through its earlier acquisitions of national distributors in both Australia and New Zealand. In 2018, the Company acquired Eliane, a leading ceramic tile manufacturer in Brazil, the world’s third largest ceramic market. The Eliane brand is highly regarded for innovative design and strength in high-end porcelain floor and wall tile. The Company believes Eliane is Brazil’s largest ceramic tile exporter.

## Product Innovation

Mohawk drives performance through innovation and process improvements across all product categories. In ceramic, this includes proprietary Reveal Imaging \( ^{®} \)  printing that replicates the appearance of other surfaces, such as long planks with the visuals and texture of natural wood as well as tiles that mimic natural stone, cement, textiles and other alternatives. The Company has patented an innovative new Clic-Fit \( ^{™} \)  installation technology for its Revo-Tile \( ^{™} \)  collection that significantly reduces the time and cost to install ceramic tile flooring. Given the frequent use of ceramic tile in kitchens and baths, the Company has also introduced numerous collections featuring antimicrobial treatment that becomes a permanent part of the product. In Italy and Russia, the Company manufactures large-scale porcelain slabs that replicate the look of stone but are harder and more durable. The slabs are being sold in the European and North American markets and are used for floors, walls and countertops. In the U.S., the Company manufactures quartz countertops that along with its stone and porcelain slabs, provide customers with a comprehensive array of surface options. In carpet, the Company introduced the unique Air.o \( ^{™} \)  unified soft surface collection that integrates a polyester pad into tufted carpet, offering consumers a hypoallergenic and moisture-resistant alternative to traditional carpet. The Company has also launched an innovative carpet backing called Recover \( ^{™} \)  that is hypoallergenic, latex and VOC free and is easier to install and seam. The Company’s exclusive fiber technologies include the proprietary bio-based SmartStrand \( ^{®} \)  and its brand extensions that represented the first super-soft stain-resistant products on the market as well as the patented Continuum \( ^{™} \)  process that adds bulk and softness to polyester fiber, differentiating the Company’s products in this fast-growing component of the carpet market. These fiber advantages have been extended into the Company’s rug production, as well, adding luxurious feel and performance enhancements to the Company’s design leadership. In laminate, the Company’s patented Uniclic \( ^{®} \)  installation technology revolutionized the category and has been extended into the LVT and wood categories, as well. The Company continues to deliver new innovations such as unique HydroSeal \( ^{™} \)  water-resistance that has extended the laminate category into kitchens and baths, more realistic visuals with GenuEdge \( ^{®} \)  pressed bevel edges and surface embossing in register that precisely recreates the appearance of wood. As consumer preference for water-proof flooring has increased, the Company has introduced a propriety technology called WetProtect \( ^{™} \)  that makes the joints of installed laminate and LVT water tight and prevents liquid spills from reaching the subfloor. This technology has been uniquely applied to wood flooring with UltraWood \( ^{™} \) , which also features an advanced waterproof finish in addition to improved scratch, wear and dent resistance. The Company’s vinyl offerings reflect significant investments in leading-edge technology that yield incredibly realistic reproductions of stone, wood and other materials with embossed finishes that create more realistic visuals. To complement the beauty of its LVT collections, the Company has also enhanced the performance of its premium rigid products with a solid stone-plastic composite core and an enhanced lacquer finish to provide a dent proof, scratch resistant surface that can withstand today’s active family homes.

## Operational Excellence

Mohawk’s highly efficient manufacturing and distribution assets serve as the foundation for successful growth. By leveraging continuous process improvement and automation, the Company’s operations drive innovation, quality and value. Through its commitment to sustainability practices, the Company has also optimized natural resources and raw materials. The Company has invested to expand capacity, introduce differentiated new products and improve efficiencies. In particular, the Company’s capital investments have improved recently acquired businesses by upgrading their product offerings, expanding their distribution and improving their productivity. For fifteen years, Mohawk’s training and development programs have been ranked among the best by Training magazine, and Forbes has designated Mohawk as one of the Best Large U.S. Employers.

## Sustainability

The Company believes that it is the industry leader in sustainable products and processes. The Company’s extensive use of recycled content in its products includes the use of more than 7 billion plastic bottles [2019] to create polyester carpet fiber and more than 42 million pounds of tires to produce decorative crumb rubber mats. In all, the Company diverts more than 6.5 billion pounds of waste from landfills each year, with 50 of the Company’s manufacturing sites internally certified as Zero Process Waste to Landfill facilities. The Company’s commitment to sustainability extends beyond its products to resource utilization, including a 513-million-gallon reduction in water use since 2015, lower greenhouse gas emissions and increased energy efficiency. The Company also produces energy through solar panels, windmills and a waste-to-energy program using scrap material. The Company’s commitment to safety and wellness helps to retain a talented workforce. The Company currently operates 19 on-site, near-site or virtual Healthy Life Centers to assist employees with management of chronic conditions as well as the treatment of acute illness. The Company’s annual sustainability report details these and other initiatives and may be accessed at http://www.mohawksustainability.com.



## Sales and Distribution

## Global Ceramic Segment

The Global Ceramic Segment designs, markets, manufactures, distributes and sources a broad line of ceramic tile, porcelain tile and natural stone products, including natural stone, quartz and porcelain slab countertops. Products are distributed through various channels, including independent distributors, home centers, Company-operated service centers and stores, ceramic tile specialists, commercial contractors and directly to commercial end users. The business is organized with dedicated sales forces to address the specific customer needs of each distribution channel.

The Company provides customers with one of the ceramic tile industry’s broadest product lines—a complete selection of glazed floor tile, glazed wall tile, mosaic tile, porcelain tile, quarry tile, porcelain landscaping pavers, porcelain roofing, stone products, porcelain slab countertops, quartz countertops and installation products. In addition to products manufactured by the Company’s ceramic tile business, the Company also sources products from other manufacturers to enhance its product offering.

The Global Ceramic Segment markets its products under the American Olean, Daltile, Eliane, EmilGroup, KAI, Kerama Marazzi, Marazzi and Ragno brand names. These brands are supported by a fully integrated marketing program, displays, merchandising boards, literature, catalogs and websites. Innovative design, quality and response to changes in customer preference enhance recognition in the marketplace. The Company is focused on sales growth opportunities through innovative products and programs in both the residential and commercial channels for both remodeling and new construction.

The Global Ceramic Segment utilizes various distribution methods including regional distribution centers, service centers, direct shipping and customer pick-up from manufacturing facilities. The Segment’s sales forces are organized by product type and sales channels in order to best serve each type of customer. The Company believes its distribution methods for the Global Ceramic Segment provide high-quality customer service and enhance its ability to plan and manage inventory requirements.

## Flooring NA Segment

Through its Flooring NA Segment, the Company designs, markets, manufactures, distributes and sources broadroom carpet, carpet tile, carpet pad, rugs, laminate, LVT, sheet vinyl and wood flooring in a broad range of colors, textures and patterns. The Flooring NA Segment positions product lines in all price ranges and emphasizes quality, style, performance and service. The Flooring NA Segment markets and distributes its product lines to independent distributors, floor covering retailers, home centers, mass merchandisers, department stores, e-commerce retailers, shop at home, buying groups, commercial contractors and commercial end users. Some products are also marketed through private labeling programs. Sales to customers focused on residential products represent a significant portion of the total industry and the majority of the Segment’s sales.

The Company has positioned its brand names across all price ranges. IVC, Karastan, Mohawk, Mohawk Home, Pergo, Portico and Quick-Step are positioned to sell in the residential flooring markets. Aladdin Commercial and Mohawk Group are positioned to sell in the commercial market, which is made up of corporate office space, educational facilities, institutional facilities, healthcare/assisted living facilities and retail space. The Company also sells into the commercial hospitality space (hotels, restaurants, gaming facilities, etc.) under its Durkan brand.

The Segment’s sales forces are generally organized by sales channels to best serve each type of customer. Product delivery to independent dealers is facilitated predominantly on Mohawk trucks operating from a strategically positioned national network of warehouses and cross-docks that receive inbound product directly from the Company’s manufacturing operations.

## Flooring ROW Segment

The Flooring ROW Segment designs, manufactures, markets, licenses, distributes and sources laminate, LVT, sheet vinyl, wood flooring, broadloom carpet and carpet tile. It also designs and manufactures flooring panels, insulation boards, MDF and chipboards. Products are sold through separate distribution channels, consisting of retailers, independent distributors, company-operated distributors, wholesalers, home centers, commercial contractors and commercial end users. The business is organized to address the specific customer needs of each distribution channel.

The Flooring ROW Segment markets and sells laminate, LVT sheet vinyl, broadloom carpet, carpet tile and wood under the Balterio, Feltex, Godfrey Hirst, Hycraft, IVC, Leonine, Moduleo, Pergo and Quick-Step brands. The Flooring ROW Segment also sells private label laminate, wood and vinyl flooring products. The Company believes Quick-Step and Pergo are leading brand names in the European flooring industry, and that Godfrey Hirst and Feltex are leading brand names in the Australasian flooring market. In addition, the Flooring ROW Segment markets and sells insulation boards, roof panels, MDF and chipboards in Europe under the Unilin and Xtratherm brands. The Segment also licenses its intellectual property to flooring manufacturers throughout the world.

The Company uses regional distribution centers and direct shipping from manufacturing facilities to provide high-quality customer service and enhance the Company’s ability to plan and manage inventory requirements.

## Advertising and Promotion

The Company’s brands are among the best known and most widely distributed in the industry. The Company vigorously supports the value and name recognition of its brands through traditional advertising channels, including numerous trade publications and unique promotional events that highlight product design and performance, as well as social media initiatives and Internet-based advertising. The Company has invested significantly in websites that educate consumers about the Company’s products, helping them to make informed decisions about purchases, and that identify local retailers that offer the Company’s collections. The Company offers its customers the award-winning Omnify™, an Internet platform that automatically syncs updated product and sales information between the Company and its U.S. aligned retailer websites, ensuring that consumers have access to the most accurate and timely information.



In North America, the Company actively supports well known programs as Susan G. Komen \( ^{®} \)  (breast cancer research), Habitat for Humanity \( ^{®} \)  (housing for low income families), HomeAid \( ^{®} \)  (housing for homeless families) and Operation Finally Home \( ^{®} \)  (housing for disabled veterans), which include marketing partnerships that showcase the Company’s products and highlight its corporate values. The Company also sponsors a European cycling team to promote its Quick-Step brand through logo placements and use of the team in its advertising and point-of-sale displays.

The Company introduces new products, merchandising and marketing campaigns through participation in regional, national and international trade shows as well as at exclusive dealer conventions. The Company supports sales with its retail customers through cooperative advertising programs that extend the reach of the Company’s promotion as well as with innovative merchandising displays that highlight the Company’s differentiated products and provide samples to consumers. The cost of providing merchandising displays, product samples and point of sale promotional marketing, is partially recovered by the purchase of these items by the Company’s customers.

## Manufacturing and Operations

## Global Ceramic Segment

The Company’s ceramic tile manufacturing operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile and quartz countertops. The Company believes that its manufacturing organization’s leading-edge technology offers competitive advantages due to its ability to create a differentiated product line consisting of one of the industry’s broadest offerings of colors, textures and finishes, as well as the industry’s largest offering of trim and decorative pieces. In addition, the Global Ceramic Segment also sources a portion of its collections to enhance its product offerings. The Global Ceramic Segment continues to invest in equipment that utilizes the latest technologies, which supports the Company’s efforts to increase manufacturing capacity, improve efficiency, meet the growing demand for its innovative products and develop new capabilities.

## Flooring NA Segment

The Company’s carpet and rug manufacturing operations are vertically integrated and include the extrusion of triexta, nylon, polyester and polypropylene resins, as well as recycled post-consumer plastics, into fiber. The Flooring NA Segment is also vertically integrated in yarn processing, carpet backing manufacturing, tufting, weaving, dyeing, coating and finishing.

The Segment is also vertically integrated with significant manufacturing assets that produce laminate flooring, high density fiber board, wood flooring, fiberglass sheet vinyl and luxury vinyl tile. The Flooring NA Segment continues to invest in capital projects, such as the expansion of the Company’s North American LVT and premium laminate manufacturing capacity. Other investments in state-of-the-art equipment support market growth, increase manufacturing efficiency and improve overall cost competitiveness.

## Flooring ROW Segment

The Company’s laminate and vinyl flooring manufacturing operations in Europe are vertically integrated. The Company believes its Flooring ROW Segment has advanced equipment that results in competitive manufacturing in terms of cost and flexibility. In addition, the Flooring ROW Segment has significant manufacturing capability for wood flooring, LVT and sheet vinyl. The 2018 acquisition of Godfrey Hirst established vertically integrated broadloom carpet and carpet tile operations in Australia and New Zealand, including the production of wool yarn. The Flooring ROW Segment is also vertically integrated in carpet manufacturing, including tufting, weaving, dyeing, coating and finishing.

The Flooring ROW Segment continues to invest in capital expenditures, such as LVT and laminate expansions, as well as new carpet tile and sheet vinyl plants in Europe and Russia, respectively, utilizing the latest advances in technologies to increase manufacturing capacity, improve efficiency and develop new capabilities including state-of-the-art, fully integrated production that will leverage the Company’s proven record of bringing innovative and high-quality products to its markets. The manufacturing facilities for roofing panels, insulation boards, MDF and chipboards in the Flooring ROW Segment are all configured for cost-efficient manufacturing and production flexibility and are competitive in the European market.

## Inputs and Suppliers

## Global Ceramic Segment

The principal raw materials used in the production of ceramic tile are clay, talc, feldspar, industrial minerals and glazes. The Company has long-term clay mining rights in North America, Russia, Bulgaria and Brazil that satisfy a portion of its clay requirements for producing tile. The Company also purchases a number of different grades of clay for the manufacture of its tile. Glazes are used on a significant percentage of manufactured tiles. Glazes consist of frit (ground glass), zircon, stains and other materials, with frit being the largest component. The Company manufactures a significant amount of its frit requirements. The Company believes that there is an adequate supply of all grades of clay, talc and industrial minerals that are readily available from a number of independent sources. If these suppliers were unable to satisfy the Company’s requirements, the Company believes that alternative supply arrangements would be available.

## Flooring NA Segment

The principal raw materials used in the production of carpet and rugs are polypropylene, polyester, triexta, nylon, caprolactam, recycled post-consumer plastics, synthetic backing materials, latex and various dyes and chemicals, the majority of which are petroleum based. The Company uses wood chips, wood veneers, lumber, paper and resins in its production of laminate and wood products. In its vinyl flooring operations, the Company uses glass fiber, plasticizers and polyvinyl chloride (PVC) resins. Major raw materials used in the Company’s manufacturing process are available from independent sources, and the Company obtains most of its raw materials from major suppliers that provide inputs to each major product category. If these suppliers were unable to satisfy the requirements, the Company



believes that alternative supply arrangements would be available. Although the market for raw materials is sensitive to temporary disruptions, the North American flooring industry has not experienced a significant shortage of raw materials in recent years.

## Flooring ROW Segment

The principal raw materials used in the production of boards, laminate and wood flooring are wood, paper and resins. The wood suppliers provide a variety of wood species, providing the Company with a cost-effective and secure supply of raw material. In its vinyl flooring operations, the Company uses glass fiber, plasticizers and PVC resins. Major raw materials used in the Company’s manufacturing process are available from independent sources, and the Company has long-standing relationships with a number of suppliers. The principal raw materials used in the production of broadband carpet and carpet tile are polypropylene, polyester, triexta, nylon, caprolactam, recycled post-consumer plastics, synthetic backing materials, latex and various dyes and chemicals, the majority of which are petroleum based. Although the market for raw materials is sensitive to temporary disruptions, the flooring industry has not experienced a significant shortage of raw materials in recent years. If these suppliers were unable to satisfy the requirements, the Company believes that alternative supply arrangements would be available.

## Industry and Competition

The Company is the largest flooring manufacturer in a fragmented industry composed of a wide variety of companies ranging from small, privately-held firms to large multinationals. In 2019, the U.S. floor covering industry reported $27.6 billion in sales, up approximately 1.1% over 2018's sales of $27.3 billion. In 2019, the primary categories of flooring in the U.S., based on sales, were carpet and rugs (41.0%), resilient (includes sheet vinyl and LVT) and rubber (23.2%), ceramic tile (14.1%), wood (13.0%), stone (5.5%) and laminate (3.2%). In 2019, the primary categories of flooring in the U.S., based on square feet, were carpet and rugs (46.4%), resilient (includes sheet vinyl and LVT) and rubber (27.3%), ceramic tile (14.2%), wood (6.7%), laminate (4.0%) and stone (1.4%). Each of these categories is influenced by the residential and commercial construction and residential and commercial remodeling end-use markets. These markets are influenced by many factors including changing consumer preferences, consumer confidence, spending for durable goods, interest rates, inflation, availability of credit, turnover in housing and the overall strength of the economy.

The principal methods of competition within the floor covering industry generally are product innovation, style, quality, price, performance technology and service. In each of the markets, price and market coverage are particularly important when competing among product lines. The Company actively seeks to differentiate its products in the marketplace by introducing innovative products with premium features that provide a superior value proposition. The Company’s investments in manufacturing technology, computer systems and distribution network, as well as the Company’s marketing strategies and resources, contribute to its ability to compete on the basis of performance, quality, style and service, rather than price.

## Global Ceramic Segment

Globally, the ceramic tile industry is significantly fragmented. Certain regions around the world have established sufficient capacity to allow them to meet domestic needs in addition to exporting product to other markets where their design and/or technical advantages may drive consumer preferences. Some mature markets have seen industry consolidation driven by mergers and acquisitions; however, most markets are comprised of many relatively small manufacturers all working with similar technologies, raw materials and designs. During 2019, the estimated global capacity for ceramic tile was 136 billion square feet—down slightly from the prior year primarily due to reduced production in China—with selling prices varying widely based on many factors, including supply within the market, materials used, size, shape and design. While the Company operates ceramic manufacturing facilities in eight countries, the Company has leveraged advantages in technology, design, brand recognition and marketing to extend exports of its products to approximately 150 countries. As a result of this global sales strategy, the Company faces competition in the ceramic tile market from a large number of foreign and domestic manufacturers, all of which compete for sales of ceramic tile to customers through multiple residential and commercial channels. The Company believes it is the largest manufacturer, distributor and marketer of ceramic tile in the world. The Company also believes it is the largest manufacturer, distributor and marketer of ceramic tile in specific markets, including the U.S., Europe and Russia, as well as maintaining leading positions in the Mexican and Brazilian markets. The Company has leveraged the advantages of its scale, product innovation and unique designs in these markets to solidify its leadership position, however the Company continues to face pressures in these markets from imported ceramic products as well as alternate flooring categories.

## Flooring NA Segment

The North American flooring industry is highly competitive, with an increasing variety of product categories, shifting consumer preferences and pressures from imported products, particularly in the rug and hard surface categories. Based on industry publications, in 2019, the U.S. flooring industry had carpet and rug sales in excess of $11.3 billion out of the overall $27.6 billion market. Based on its 2019 net sales, the Company believes it is the largest producer of rugs and the second largest producer of carpet in the world. The Company differentiates its carpet and rug products in the market place through proprietary fiber systems, state-of-the-art manufacturing technologies and unique styling as well as leveraging the strength of some of the oldest and best-known brands in the industry. The Company also believes it is the largest manufacturer and distributor of laminate flooring in the U.S. as well as one of the largest manufacturers and distributors of wood flooring. The Company’s leading position in laminate flooring is driven by the strength of its premium brands as well as technical innovations such as water resistance, realistic visuals, beveled edges, deeply embossed in register surfaces and patented installation technologies. The U.S. resilient industry is highly competitive, and according to industry publications, grew more than 18% in 2019. Based on industry publications, in 2019 LVT and sheet vinyl generated sales of $6.1 billion out of the $27.6 billion total



U.S. flooring market. The Company believes that it is one of the largest manufacturers and distributors of LVT and sheet vinyl in the U.S. The Company’s sheet vinyl operations produce fiberglass backed products, which have proven more popular with consumers in the past several years due to superior performance and durability.

## Flooring ROW Segment

The Company faces competition in the non-U.S. laminate, wood, LVT and sheet vinyl flooring business from a large number of domestic manufacturers as well as pressures from imports. The Company believes it is one of the largest manufacturers and distributors of laminate flooring in the world, with a focus on premium products, which the Company supplies under some of the best-known and most widely marketed brands in its regions. In addition, the Company believes it has a competitive advantage in its laminate flooring markets as a result of the Company's industry-leading water resistance, realistic visuals and embossed-in-register surfaces as well as patented installation technologies, all of which allow the Company to differentiate its products in the areas of design, performance, installation and assembly. In wood flooring, the Company has extended the strength of its well-known laminate brands and its installation technologies to add value to its wood collections. The Company faces competition in the non-U.S. vinyl flooring channel from a large number of domestic and foreign manufacturers, but believes it has a competitive advantage in its LVT and sheet vinyl markets due to industry-leading design, patented technologies, brand recognition and vertical integration. The Company has elevated the performance of its sheet vinyl collections and is now aggressively placing the product in commercial applications. After initially extending its geographic footprint by acquiring national hard surface distributors in Australia and New Zealand, the Company acquired Godfrey Hirst in 2018, making the Company the largest manufacturer of carpet in both countries. The Company has integrated its soft and hard surface businesses to provide a comprehensive offering to residential and commercial customers in the region. In Australia and New Zealand, the Company faces competition from a large number of domestic and foreign manufacturers, but believes it has a competitive advantage in its carpet and hard surface offering due to industry-leading design, patented technologies, brand recognition and vertical integration of manufacturing and distribution. Through the 2015 acquisition of Xratherm, the Company has extended its insulation panel business to the United Kingdom and Ireland while expanding sales in its core Benelux Region. The Company also expanded its European mezzanine flooring offering by acquiring German-based Berghof in 2018.

## Patents and Trademarks

Intellectual property is important to the Company’s business and the Company relies on a combination of patent, copyright, trademark and trade secret laws to protect its interests.

The Company uses several trademarks that it considers important in the marketing of its products, including American Olean, Daltile, Durkan, EmilGroup, Fletx, Godfrey Hirst, IVC, Karastan, Leoline, Marazzi, Moduleo, Mohawk, Mohawk Group, Mohawk Home, Pergo, Quick-Step and Unilin. These trademarks reflect innovations in design, performance and installation, which represent competitive advantages and provide differentiation from competing brands in the market.

The Flooring ROW Segment owns a number of patent families in Europe and the U.S., some of which the Company licenses to manufacturers throughout the world. The Company continues to explore additional opportunities to generate revenue from its patent portfolio.

## Major Customers

During 2020, no single customer accounted for more than 10% of the Company’s total net sales, and the top 10 customers accounted for less than 20% of the Company’s total net sales. The Company believes the loss of one major customer would not have a material adverse effect on its business.

## Human Capital

The Company’s management team recognizes the importance of its employees to the Company’s overall long-term success. The Company continues to focus on the recruitment, development, safety, engagement, and retention of its employees. The health and safety of the Company’s employees during the COVID-19 pandemic have been particularly important. The safety procedures the Company has put in place to prevent workplace transfer of the virus include strict policies on quarantining, audits and enforcement of social distancing, temperature scans, masks and sanitization standards.

As of December 31, 2020, the Company employed approximately 42,000 persons, consisting of approximately 19,600 in North America, approximately 14,600 in Europe and Russia and approximately 7,800 in other countries. The majority of the Company’s European and Russian manufacturing employees are members of unions. Less than 1% of the Company’s U.S. employees are party to a collective bargaining agreement. Additionally, the Company has not experienced any major strikes or work stoppages in recent years. The Company believes that its relations with its employees are good.

## Available Information

The Company’s Internet address is https://www.mohawkind.com. The Company makes available the following reports its files on its website, free of charge, under the heading “Investors”:

• annual reports on Form 10-K;

• quarterly reports on Form 10-Q;

• current reports on Form 8-K; and

• amendments to the foregoing reports.

The foregoing reports are made available on the Company’s website as soon as practicable after they are filed with, or furnished to the Securities and Exchange Commission (“SEC”).



## ITEM 1A. RISK FACTORS

In addition to the other information provided in this Form 10-K, the following risk factors should be considered when evaluating an investment in shares of the Company’s Common Stock. If any of the events described in these risks were to occur, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

## Industry and Economic Risks

The floor covering industry is sensitive to changes in general economic conditions, such as consumer confidence, income and spending, corporate and government spending, interest rate levels, availability of credit and demand for housing. Significant or prolonged declines in the U.S. or global economies could have a material adverse effect on the Company’s business.

Downturns in the U.S. and global economies, including as a result of the COVID-19 pandemic, negatively impact the floor covering industry and the Company’s business. During times of economic uncertainty or decline, end consumers tend to spend less on remodeling their homes, which is how the Company derives a majority of its sales. Likewise, new home construction—and the corresponding need for new flooring materials—tends to slow down during recessionary periods. There may be downturns in the foreseeable future that could cause the industry to deteriorate globally or in the local markets in which the Company operates. A significant or prolonged decline in residential or commercial remodeling or new construction activity could have a material adverse effect on the Company’s business and results of operations.

The Company faces intense competition in the flooring industry that could decrease demand for the Company’s products or force it to lower prices, which could have a material adverse effect on the Company’s business.

The floor covering industry is highly competitive. The Company faces competition from a number of manufacturers and independent distributors. Some of the Company’s competition is from companies located outside of the United States, and these competitors may benefit from lower input costs or state subsidies. Also, trade tariffs may impact both the Company and its competitors in different and unpredictable ways. Maintaining the Company’s competitive position may require substantial investments in the Company’s product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Competitive pressures may also result in decreased demand for the Company’s products, force the Company to lower prices or prevent the Company from raising prices to keep up with inflation. Moreover, fluctuations in currency exchange rates and input costs may contribute to more attractive pricing for imports that compete with the Company’s products, which may put pressure on the Company’s pricing. Any of these factors could have a material adverse effect on the Company’s business.

## The COVID-19 pandemic has materially impacted our business, and will likely continue to impact our business in the future.

Mohawk generates sales in more than 170 countries and maintains manufacturing operations 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 continuing to evolve and difficult to measure, based on current visibility, the Company expects that it will continue to see fluctuating demand across a number of its markets. In particular, pent up demand for travel and entertainment may reduce consumer willingness to make investments in the Company’s products as health conditions improve. Also, the Company has experienced and may continue to experience plant closures or slowdowns in productivity 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 the Company’s products may significantly decrease. This reduced demand may lead to lower sales and intensified competitive pressures.

The Company 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. Although we believe that we can manage our exposure to these risks, there is no guarantee that we will be able to do so in the future. The Company continues to follow the recommendations of local health authorities to minimize exposure risk for its employees, suppliers, customers and other stakeholders. The Company has implemented business continuity plans during the crisis and is attempting to minimize the pandemic’s impact, but it may be unable to adequately respond to further outbreaks in particular geographies and its 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 the successful implementation of vaccination programs and the continued fiscal support currently provided by governments in the Company’s markets. Accordingly, the COVID-19 pandemic and the related global reaction could have a material adverse effect on the Company’s business, results of operations and financial condition.

To the extent the COVID-19 pandemic adversely affects our business, financial conditions and results of operations it may also have the effect of heightening many of the other risks described in this “Risk Factor” section.



## International Risks

The Company manufactures, sources and sells many products internationally and is exposed to risks associated with doing business globally.

The Company’s international activities are significant to its manufacturing capacity, revenues and profits; and the Company continues to expand internationally through the construction of new manufacturing operations and investments in existing ones. Currently, the Company’s Flooring ROW segment has significant operations in Europe, Russia, Brazil, Malaysia, Australia and New Zealand, and the Company’s Global Ceramic segment has significant operations in Brazil, Europe, Russia and Mexico. In addition, the Company sources raw materials and finished goods from multiple international locations.

The Company’s international sales, supply chain, operations and investments are subject to risks and uncertainties, including:

• changes in foreign country regulatory requirements;

- differing business practices associated with foreign operations;

- various import/export restrictions and the availability of required import/export licenses;

- imposition of foreign or domestic tariffs and other trade barriers;

• foreign currency exchange rate fluctuations;

• differing inflationary or deflationary market pressures;

- foreign country tax rules, regulations and other requirements, such as changes in tax rates and statutory and judicial interpretations in tax laws;

• differing labor laws and changes in those laws;

- work stoppages and disruptions in the shipping of imported and exported products;

• government price controls;

- extended payment terms and the inability to collect accounts receivable;

- potential difficulties repatriating cash from non-U.S. subsidiaries; and

- compliance with laws governing international relations, including those U.S. laws that relate to sanctions and corruption.

The Company cannot assure investors that it will succeed in developing and implementing policies and strategies to address the foregoing risks effectively in each location where the Company does business, and, therefore that the foregoing factors will not have a material adverse effect on the Company’s business.
The Company operates in emerging markets, including Brazil, eastern Europe, Malaysia, Mexico and Russia, and therefore has exposure to doing business in potentially unstable areas of the world.

Operations in emerging markets are subject to greater risk than more developed markets, including in some cases significant legal, economic and political risks. Market conditions and the political structures that support them are subject to rapid change in these economies, and the Company may not be able to react quickly enough to protect its assets and business operations. In particular, developing markets in which the Company operates may be characterized by one or more of the following:

- complex and conflicting laws and regulations, which may be inconsistently or arbitrarily enforced;

• high incidences of corruption in state regulatory agencies;

• volatile inflation;

• widespread poverty and resulting political instability;

- compliance with laws governing international relations, including U.S. laws that relate to sanctions and corruption;

• immature legal and banking systems;

- uncertainty with respect to title to real and personal property;

• underdeveloped infrastructure;

- heavy state control of natural resources and energy supplies;

• state ownership of transportation and supply chain assets;

- high protective tariffs and inefficient customs processes; and

• high crime rates.

Changes in any one or a combination of these factors could have a material adverse effect on the Company’s business.

Fluctuations in currency exchange rates may impact the Company’s financial condition and results of operations and may affect the comparability of results between the Company’s financial periods.

The results of the Company’s foreign subsidiaries are translated into U.S. dollars from the local currency for consolidated reporting. The exchange rates between some of these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. The Company may not be able to manage effectively its currency translation risks, and volatility in currency exchange rates may have a material adverse effect on the Company’s consolidated financial statements and affect comparability of the Company’s results between financial periods.



## Business and Operational Risks

The Company may be unable to predict customer preferences or demand accurately, or to respond to technological developments.

The Company operates in a market sector where demand is strongly influenced by rapidly changing customer preferences as to product design, product category and technical features. Failure to quickly and effectively respond to changing customer demand or technological developments could have a material adverse effect on the business.

In periods of rising costs, the Company may be unable to pass raw materials, labor, energy and fuel-related cost increases on to its customers, which could have a material adverse effect on the Company’s business.

The prices of raw materials, labor, energy and fuel-related costs vary significantly with market conditions. Although the Company generally 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 recovered. During such periods of time, the Company’s business may be materially adversely affected.

The Company may be unable to obtain raw materials or sourced product on a timely basis, which could have a material adverse effect on the Company’s business.

The principal raw materials used in the Company’s manufacturing operations include triexta, nylon, polypropylene, and polyester resins and fibers, which are used in the Company’s carpet and rug business; clay, talc, feldspar and glazes, including frit (ground glass), zircon and stains, which are used in the Company’s ceramic tile business; wood, paper and resins, which are used in the Company’s wood and laminate flooring business; and glass fiber, plasticizers, and pvc resins, which are used in the Company’s sheet vinyl and luxury vinyl tile business. In addition to raw materials, the Company sources finished goods. For certain raw materials and sourced products, the Company is dependent on one or a small number of suppliers. An adverse change in the Company’s relationship with such a supplier, the financial condition of such a supplier or such supplier’s ability to manufacture or deliver such raw materials or sourced products to the Company could lead to an interruption of supply or require the Company to purchase more expensive alternatives. Also, the Company’s ability to obtain raw materials or source products at reasonable costs may be impacted by tariffs, global trade uncertainties and international crises, such as the COVID-19 pandemic. While the Company continues to monitor the COVID-19 pandemic and government restrictions enacted to address the pandemic, the near-term impact on its supply chain is unpredictable. An extended interruption in the supply of sourced products or raw materials used in the Company’s business or in the supply of suitable substitute materials or products would disrupt the Company’s operations, which could have a material adverse effect on the Company’s business.
The Company makes significant capital investments in its business and such capital investments may not be successful or achieve their intended results.

The Company’s business requires significant capital investment to expand capacity to support its growth, introduce new products, enter new markets and improve operating efficiencies. The Company has historically made significant capital investments each year and will continue to make capital investments in future periods, including approximately $570-$590 million of capital investments in 2021. While the Company believes that many of its past capital investments have been successful, there is no guarantee that the return on investment from the Company’s recent or future capital projects will be sufficient to recover the expenses and opportunity costs associated with these projects. Furthermore, a meaningful portion of the Company’s capital investment is based on forecasted growth in its business, which is subject to uncertainty such as general economic trends, including as a result of the COVID-19 pandemic, increased competition and consumer preferences. If the Company does not accurately forecast its future capital investment needs, the Company could have excess capacity or insufficient capacity, either of which would negatively affect its revenues and profitability.

## The Company may experience certain risks associated with acquisitions, joint ventures and strategic investments.

The Company intends to grow its business through a combination of organic growth and acquisitions. Growth through acquisitions involves risks, many of which may continue to affect the Company after the acquisition. The Company cannot give assurance that an acquired company will achieve the levels of revenue, profitability and production that the Company expects. Acquisitions may require the issuance of additional securities or the incurrence of additional indebtedness, which may dilute the ownership interests of existing security holders or impose higher interest costs on the Company. Additional challenges related to the Company’s acquisition strategy include:

• maintaining executive offices in different locations;

- manufacturing and selling different types of products through different distribution channels;

• conducting business from various locations;

• maintaining different operating systems and software on different computer hardware; and

• retaining key employees.

Failure to successfully manage and integrate an acquisition with the Company’s existing operations could lead to the potential loss of customers of the acquired business, the potential loss of employees who may be vital to the new operations, the potential loss of business opportunities or other adverse consequences that could have a material adverse effect on the Company’s business. Even if integration occurs successfully, failure of the acquisition to achieve levels of anticipated sales growth, profitability, or otherwise perform as expected, may result in goodwill or other asset impairments or otherwise have a material adverse effect on the Company’s business. Finally, acquisition targets may be subject to material liabilities that are not properly identified in due diligence and that are not



covered by seller indemnification obligation or third-party insurance. The unknown liabilities of the Company’s acquisition targets may have a material adverse effect on the Company’s business.

In addition, the Company has made certain investments, including through joint ventures, in which the Company has a minority equity interest and lacks management and operational control. The controlling joint venture partner may have business interests, strategies or goals that are inconsistent with those of the Company. Business decisions or other actions or omissions of the controlling joint venture partner, or the joint venture company, may result in harm to the Company’s reputation or adversely affect the value of the Company’s investment in the joint venture.

A failure to identify suitable acquisition candidates or partners for strategic investments and to complete acquisitions could have a material adverse effect on the Company’s business.

As part of the Company’s business strategy, the Company intends to pursue a wide array of potential strategic transactions, including acquisitions of complementary businesses, as well as strategic investments and joint ventures. Although the Company regularly evaluates such opportunities, the Company may not be able to successfully identify suitable acquisition candidates or to obtain sufficient financing on acceptable terms to fund such strategic transactions, which may slow the Company’s growth and have a material adverse effect on the Company’s business.

The Company has been, and in the future may be, subject to costs, liabilities and other obligations under existing or new laws and regulations, which could have a material adverse effect on the Company’s business.

The Company is subject to increasingly numerous and complex laws, regulations and licensing requirements in each of the jurisdictions in which the Company conducts business. In addition, new laws and regulations may be enacted in the U.S. or abroad, the compliance of which may require the Company to incur additional personnel-related, environmental, or other costs on an ongoing basis.

In particular, the Company’s operations are subject to various environmental, health and safety laws and regulations, including those governing air emissions, wastewater discharges, and the use, storage, treatment, recycling and disposal of materials and finished product. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations of agencies or courts. The Company may incur material costs in order to comply with new or existing regulations, including fines and penalties and increased costs of its operations. For example, Extended Producer Responsibility laws place a shared responsibility for post-consumer product management on various entities involved in the supply chain, including producers and manufacturers. Expansion of Extended Producer Responsibility legislation in the jurisdictions where the Company operates could impose additional responsibility on the Company in relation to the ultimate treatment or disposal of its products, which could lead to an increase in total costs related to the Company’s products. Also, the Company’s manufacturing facilities may become subject to further limitations on the emission of “greenhouse gases” due to public policy concerns regarding climate change issues or other environmental or health and safety concerns. While the form of any additional regulations cannot be predicted, a “cap-and-trade” system similar to the system that applies to the Company’s businesses in the European Union could be adopted in the United States. The Company’s manufacturing processes use a significant amount of energy, especially natural gas. Any such “cap-and-trade” system or other limitations imposed on the emission of “greenhouse gases” could require the Company to increase its capital expenditures, use its cash to acquire emission credits or restructure its manufacturing operations, any of which could have a material adverse effect on its business.

The Company’s business operations could suffer significant losses from natural disasters, catastrophes, fire, pandemics or other unexpected events.

Many of the Company’s business activities involve substantial investments in manufacturing facilities and many products are produced at a limited number of locations. These facilities could be materially damaged by natural disasters, such as floods, tornados, hurricanes and earthquakes, or by fire, pandemics (including COVID-19) or other unexpected events. The Company could incur uninsured losses and liabilities arising from such events, including damage to its reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on its business.

The Company may be exposed to litigation, claims and other legal proceedings relating to its products, operations and compliance with various laws and regulations, which could have a material adverse effect on the Company’s business.

In the ordinary course of business, the Company is subject to a variety of product-related claims, lawsuits and legal proceedings, including those relating to product liability, product warranty, product recall, personal injury, and other matters. The Company is also subject to various claims related to its operations and its compliance with various corporate laws and regulations, including a putative securities class action and related matters described in Note 16, Commitments and Contingencies. A very large claim or several similar claims asserted by a large class of plaintiffs could have a material adverse effect on the Company’s business, if the Company is unable to successfully defend against or resolve these matters or if its insurance coverage is insufficient to satisfy any judgments against the Company or settlements relating to these matters. Although the Company has product liability insurance and other types of insurance, the policies may not provide coverage for certain claims against the Company or may not be sufficient to cover all possible liabilities. Further, the Company may not be able to maintain insurance at commercially acceptable premium levels. Moreover, adverse publicity arising from claims made against the Company, even if the claims are not successful, could adversely affect the Company’s reputation or the reputation and sales of its products.



The long-term performance of the Company’s business relies on its ability to attract, develop and retain talented management.

The Company’s ability to attract, develop and retain qualified and talented personnel in management, sales, marketing, product design, and operations, including in new international markets into which the Company may enter, is key to the Company’s overall success. The Company competes with multinational firms for these employees and invests resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect the Company’s competitive position and its operating results.

## The Company’s inability to maintain its patent licensing revenues could have a material adverse effect on the Company’s business.

The profit margins of certain of the Company’s businesses, particularly the Company’s Flooring ROW Segment, depend in part upon the Company’s ability to obtain, maintain and license proprietary technology used in the Company’s principal product families. The Company has filed and is continuing to file patents relating to many different aspects of the Company’s products and associated methods and is generating patent license revenues on these diverse patents; however, certain revenue-producing patents have expired or will expire. The failure to develop alternative revenues to replace expired or invalidated patents in the future could have a material adverse effect on the Company’s business.

## The Company’s inability to protect its intellectual property rights could have a material adverse effect on the Company’s business.

The Company relies, in part, on the patent, trade secret and trademark laws of the U.S., countries in the European Union and elsewhere, as well as confidentiality agreements with some of the Company’s employees, to protect that technology. The Company cannot assure investors that any patents owned by or issued to it will provide the Company with competitive advantages, that third parties will not challenge these patents, or that the Company’s pending patent applications will be approved.

Furthermore, despite the Company’s efforts, the Company may be unable to prevent competitors and/or third parties from using the Company’s technology without the Company’s authorization, independently developing technology that is similar to that of the Company or designing around the Company’s patents. The use of the Company’s technology or similar technology by others could reduce or eliminate any competitive advantage the Company has developed, cause the Company to lose sales or otherwise harm the Company’s business.

The Company has obtained and applied for numerous U.S. and foreign service marks and trademark registrations and will continue to evaluate the registration of additional service marks and trademarks, as appropriate. The Company cannot guarantee that any of the Company’s pending or future applications will be approved by the applicable governmental authorities. The failure to obtain trademark registrations in the U.S. and in other countries could limit the Company’s ability to protect its trademarks and impede its marketing efforts in those jurisdictions and could have a material effect on its business.
The Company generally requires third parties with access to the Company’s trade secrets to agree to keep such information confidential. While such measures are intended to protect the Company’s trade secrets, there can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that the Company’s confidential and proprietary information and technology will not be independently developed by or become otherwise known to third parties. In any of these circumstances, the Company’s competitiveness could be significantly impaired, which would limit the Company’s growth and future revenue.

## Third parties may claim that the Company infringed their intellectual property or proprietary rights, which could cause the Company to incur significant expenses or prevent the Company from selling its products.

In the past, third parties have claimed that certain technologies incorporated in the Company’s products infringe their patent rights. The Company cannot be certain that the Company’s products do not and will not infringe issued patents or other intellectual property rights of others.

The Company might be required to pay substantial damages (including punitive damages and attorney’s fees), discontinue the use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses authorizing the use of infringing technology. There can be no assurance that licenses for disputed technology or intellectual property rights would be available on reasonable commercial terms, if at all. In the event of a successful claim against the Company along with failure to develop or license a substitute technology, the Company’s business would be materially and adversely affected.

## Information Technology Risks

The Company relies on information systems in managing the Company’s operations and any system failure or deficiency of such systems may have an adverse effect on the Company’s business.

The Company’s businesses rely on sophisticated software applications to obtain, process, analyze and manage data. The Company relies on these systems to, among other things:

• facilitate the purchase, management, distribution, and payment for inventory items;

- manage and monitor the daily operations of the Company’s distribution network;

• receive, process and ship orders on a timely basis;

• manage accurate billing to and collections from customers;

- control logistics and quality control for the Company’s retail operations;

• manage financial reporting; and

• monitor point of sale activity.



The Company also relies on its computer hardware, software and network for the storage, delivery and transmission of data to the Company’s sales and distribution systems, and certain of the Company’s production processes are managed and conducted by computer.

Any event that causes interruptions to the input, retrieval and transmission of data or increase in the service time could disrupt the Company’s normal operations. There can be no assurance that the Company can effectively carry out its disaster recovery plan to handle the failure of its information systems, or that the Company will be able to restore its operational capacity within sufficient time to avoid material disruption to its business. The occurrence of any of these events could cause unanticipated disruptions in service, decreased customer service and customer satisfaction, harm to the Company’s reputation and loss or misappropriation of sensitive information, which could result in loss of customers, increased operating expenses and financial losses. Any such events could in turn have a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.

## The Company is subject to cybersecurity risks and expects to incur increasing costs in an effort to minimize those risks.

The Company’s business employs systems that allow for the secure storage and transmission of customers’, consumers’, vendors’, employees’ and its own sensitive and proprietary information. These systems may be subject to computer hacking, acts of vandalism or theft, malware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks. Any significant compromise or breach of the Company’s data security, whether external or internal, or misuse of customer, consumer, employee, supplier or Company data, could result in significant costs, lost sales, fines, lawsuits, and damage to the Company’s reputation. Furthermore, as cyber-attacks become more sophisticated, the Company expects to incur increasing costs to strengthen its systems from outside intrusions and to maintain insurance coverage related to the threat of such attacks. While the Company has implemented administrative and technical controls and has taken other preventive actions to reduce the risk of cyber incidents and protect its information technology, they may be insufficient to prevent, or respond to, physical and electronic break-ins, cyber-attacks or other security breaches to the Company’s systems.

In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to the Company’s business, compliance with those requirements could also result in additional costs to the Company. Any failure to comply with federal, state or international privacy-related or data protection laws and regulations could result in proceedings against the Company by government entities or others. In addition to reputational impacts, penalties could include significant legal liability.

## Financial and Liquidity Risks

Changes in the global economy could affect the Company’s overall availability and cost of credit.

A downturn in the U.S. or global economies could impact the Company’s ability to obtain financing in the future, including any financing necessary to refinance existing indebtedness.

Further, negative economic conditions may factor into the Company’s periodic credit ratings assessment by Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Financial Services, LLC (“S&P”) and Fitch, Inc. Any future changes in the credit rating agencies’ methodology in assessing the Company’s credit strength and any downgrades in the Company’s credit ratings could increase the cost of its existing credit and could adversely affect the cost of and ability to obtain additional credit in the future. The Company can provide no assurances that downgrades will not occur. The cost and availability of credit during uncertain economic times could have a material adverse effect on the Company’s financial condition.

If the Company were unable to meet certain covenants contained in its existing credit facilities, it may be required to repay borrowings under the credit facilities prior to their maturity and may lose access to the credit facilities for additional borrowings that may be necessary to fund its operations and growth strategy.

On October 18, 2019, the Company entered into a $1,800 million, senior revolving credit facility (the “Senior Credit Facility”) that provides for revolving credit, including limited amounts of credit in the form of letters of credit and swingline loans. Any outstanding borrowings under the Company’s U.S. and European commercial paper programs also reduce availability under the Senior Credit Facility. Including commercial paper borrowings, the Company has utilized approximately $0.8 million under the Senior Credit Facility resulting in a total of $1,799.2 million available as of December 31, 2020.

If the Company’s cash flow is worse than expected, the Company may need to refinance all or a portion of its indebtedness through a public and/or private debt offering or a new bank facility and may not be able to do so on terms acceptable to it, or at all. If the Company is unable to access debt markets at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption, or weakness in the Company’s businesses, the Company’s ability to finance its operations or repay existing debt obligations may be materially and adversely affected.

Additionally, the Company’s credit facilities include certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, indebtedness, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, payments and modifications of certain existing debt, future negative pledges, and changes in the nature of the Company’s business. In addition, the Senior Credit Facility requires the Company 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 4.75 to 1.0 through December 31, 2021 and 3.75 after December 31, 2021. A failure to comply with the obligations contained in the Company’s current or future credit facilities or indentures relating to its outstanding public debt could result in an event of default or an



acceleration of debt under other instruments that may contain cross-acceleration or cross-default provisions. The Company cannot be certain that it would have, or be able to obtain, sufficient funds to make these accelerated payments.

Declines in the Company’s business conditions may result in an impairment of the Company’s assets which could result in a material non-cash charge.

A significant or prolonged decrease in the Company’s market capitalization, including a decline in stock price, or a negative long-term performance outlook, could result in an impairment of its assets which results when the carrying value of the Company’s assets exceed their fair value.

## Negative tax consequences could materially and adversely affect the Company’s business.

The Company is subject to the tax laws of the many jurisdictions in which it operates. These tax laws are complex, and the manner in which they apply to the Company’s facts is sometimes open to interpretation. In calculating the provision for income taxes, the Company must make judgments about the application of these inherently complex tax laws. The Company’s domestic and international tax liabilities are largely dependent upon the distribution of profit before tax among these many jurisdictions. However, the Company’s provision for income taxes also includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions, including assessments of future earnings of the Company that could impact the valuation of its deferred tax assets. The Company’s future results of operations and tax liability could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of the Company, changes in tax legislation and rates, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns, and ongoing assessments of the Company’s tax exposures.

## Forward-Looking Information

Certain of the statements in this Form 10-K, particularly those anticipating future performance, business prospects, growth and operating strategies, and similar matters, and those that include the words "could", "should", "believes", "anticipates", "expects" and "estimates" or similar expressions constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; inflation and deflation in freight, raw material prices 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; integration of acquisitions; international operations; 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, regulatory and political changes in the jurisdictions in which the Company does business; and other risks identified in Mohawk's SEC reports and public announcements.

## ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

## ITEM 2. PROPERTIES

The Company owns and leases manufacturing and distribution facilities worldwide. The table below lists the primary owned and leased facilities at December 31, 2020. The Company owns its Corporate Headquarters in Calhoun, GA. The Company also owns and operates service centers and stores in the United States and Russia, none of which are individually material. The Company believes its existing facilities are suitable for its present needs.

<table><tr><td>Segment and Property Use</td><td>North America</td><td>Europe and Russia</td><td>Other</td><td>Total</td></tr><tr><td>GLOBAL CERAMIC</td><td></td><td></td><td></td><td></td></tr><tr><td>Manufacturing</td><td>8</td><td>11</td><td>2</td><td>21</td></tr><tr><td>Distribution/Warehouse</td><td>8</td><td>7</td><td>2</td><td>17</td></tr><tr><td>FLOORING NORTH AMERICA</td><td></td><td></td><td></td><td></td></tr><tr><td>Manufacturing</td><td>18</td><td>—</td><td>—</td><td>18</td></tr><tr><td>Distribution/Warehouse</td><td>11</td><td>—</td><td>—</td><td>11</td></tr><tr><td>FLOORING REST OF THE WORLD</td><td></td><td></td><td></td><td></td></tr><tr><td>Manufacturing</td><td>—</td><td>16</td><td>5</td><td>21</td></tr><tr><td>Distribution/Warehouse</td><td>—</td><td>3</td><td>—</td><td>3</td></tr><tr><td>TOTAL</td><td></td><td></td><td></td><td></td></tr><tr><td>Manufacturing</td><td>26</td><td>27</td><td>7</td><td>60</td></tr><tr><td>Distribution/Warehouse</td><td>19</td><td>10</td><td>2</td><td>31</td></tr></table>

## ITEM 3. LEGAL PROCEEDINGS

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

See Note 16. Commitments and Contingencies, and Note 15. Income Taxes, of the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K for a discussion of the Company’s legal proceedings.

## 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



## PART II

## ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

## Market for the Common Stock

The Company’s common stock, $0.01 par value per share (the “Common Stock”), is quoted on the New York Stock Exchange (“NYSE”) under the symbol “MHK.”

As of February 22, 2021, there were 222 holders of record of Common Stock. The Company has not paid or declared any cash dividends on shares of its Common Stock since completing its initial public offering. The payment of future cash dividends will be at the discretion of the Board of Directors and will depend upon the Company’s profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board of Directors.

## Issuer Purchases of Equity Securities

On October 26, 2020, after considering the Company’s liquidity position and strong cash flows, 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 (“2020 Share Repurchase Program”). This was incremental to the previously approved 2018 Share Repurchase Program. In the fourth quarter 2020, the Company purchased 120.0 million of its common stock, exhausting the 57.1 million remaining under the 2018 Program as of October 26, 2020, and utilizing 62.8 million under the 2020 Program. As of December 31, 2020, there remains 437.2 million authorized under the 2020 Program.

Under the Share Repurchase Programs, 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 Share Repurchase Programs and the Share Repurchase Programs may be suspended or discontinued at any time.

<table><tr><td>Period</td><td>Total Number of Shares Purchased in Millions</td><td>Average Price Paid per Share</td><td>Total Number of Shares Purchased as Part of Publicly Announced Plan in Millions</td><td>Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan in Millions</td></tr><tr><td>September 28 through October 30, 2020</td><td>—</td><td>$ —</td><td>—</td><td>$557.1</td></tr><tr><td>November 2 through November 27, 2020</td><td>0.3</td><td>$120.43</td><td>0.3</td><td>$518.1</td></tr><tr><td>November 30 through December 31, 2020</td><td>0.6</td><td>$133.67</td><td>0.6</td><td>$437.2</td></tr><tr><td>Total</td><td>0.9</td><td>$129.05</td><td>0.9</td><td></td></tr></table>



The following table sets forth the selected financial data of the Company for the periods indicated which information is derived from the consolidated financial statements of the Company. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s consolidated financial statements and notes thereto included in Part II, Item 8 of this Form 10-K.

<table><tr><td>As of or for the Years Ended December 31,</td><td>2020</td><td>2019</td><td>2018[a]</td><td>2017</td><td>2016</td></tr><tr><td>(In thousands, except per share data)</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>STATEMENT OF OPERATIONS DATA:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net sales</td><td>$ 9,552,197</td><td>9,970,672</td><td>9,983,634</td><td>9,491,290</td><td>8,959,087</td></tr><tr><td>Cost of sales</td><td>7,121,507</td><td>7,294,629</td><td>7,145,564</td><td>6,494,876</td><td>6,146,262</td></tr><tr><td>Gross profit</td><td>2,430,690</td><td>2,676,043</td><td>2,838,070</td><td>2,996,414</td><td>2,812,825</td></tr><tr><td>Selling, general and administrative expenses</td><td>1,794,688</td><td>1,848,819</td><td>1,742,744</td><td>1,642,241</td><td>1,532,882</td></tr><tr><td>Operating income</td><td>636,002</td><td>827,224</td><td>1,095,326</td><td>1,354,173</td><td>1,279,943</td></tr><tr><td>Interest expense</td><td>52,379</td><td>41,272</td><td>38,827</td><td>31,111</td><td>40,547</td></tr><tr><td>Other expense (income), net</td><td>(751)</td><td>36,407</td><td>7,298</td><td>5,205</td><td>(1,729)</td></tr><tr><td>Earnings before income taxes</td><td>584,374</td><td>749,545</td><td>1,049,201</td><td>1,317,857</td><td>1,241,125</td></tr><tr><td>Income tax expense</td><td>68,647</td><td>4,974</td><td>184,346</td><td>343,165</td><td>307,559</td></tr><tr><td>Net earnings including noncontrolling interests</td><td>515,727</td><td>744,571</td><td>864,855</td><td>974,692</td><td>933,566</td></tr><tr><td>Less: Net earnings attributable to noncontrolling interests</td><td>132</td><td>360</td><td>3,151</td><td>3,054</td><td>3,204</td></tr><tr><td>Net earnings attributable to Mohawk Industries, Inc.</td><td>$ 515,595</td><td>744,211</td><td>861,704</td><td>971,638</td><td>930,362</td></tr><tr><td>Basic earnings from continuing operations per share</td><td>$ 7.24</td><td>10.34</td><td>11.53</td><td>13.07</td><td>12.55</td></tr><tr><td>Basic earnings per share attributable to Mohawk Industries, Inc.</td><td>$ 7.24</td><td>10.34</td><td>11.53</td><td>13.07</td><td>12.55</td></tr><tr><td>Diluted earnings from continuing operations per share</td><td>$ 7.22</td><td>10.30</td><td>11.47</td><td>12.98</td><td>12.48</td></tr><tr><td>Diluted earnings per share attributable to Mohawk Industries, Inc.</td><td>$ 7.22</td><td>10.30</td><td>11.47</td><td>12.98</td><td>12.48</td></tr><tr><td>BALANCE SHEET DATA:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Working capital</td><td>$ 2,992,406</td><td>1,716,874</td><td>1,243,057</td><td>1,417,612</td><td>753,192</td></tr><tr><td>Total assets</td><td>14,327,751</td><td>13,386,680</td><td>13,099,123</td><td>12,094,853</td><td>10,230,596</td></tr><tr><td>Long-term debt (including current portion)</td><td>2,734,142</td><td>2,569,886</td><td>3,257,974</td><td>2,763,578</td><td>2,511,485</td></tr><tr><td>Total stockholders&#x27; equity</td><td>8,541,158</td><td>8,126,448</td><td>7,440,059</td><td>7,067,009</td><td>5,783,487</td></tr></table>

(a) During 2018, the Company acquired Godfrey Hirst Group, Eliane S/A Revestimentos Ceramicos ("Eliane") and 3 businesses in Flooring ROW segment as discussed in Note 2 of the notes to consolidated financial statements included in Part II, Item 8 of this Form 10-K.



## Overview

The following discussion and analysis of the Company’s Results of Operations includes a comparison of fiscal 2020 to fiscal 2019. A similar discussion and analysis that compares fiscal 2019 to fiscal 2018 may be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the Company’s Form 10-K for the fiscal year ended December 31, 2019.

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”); and Flooring Rest of the World (“Flooring 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 operations in 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 current environment has placed unprecedented demands on the Company’s operations as the COVID-19 pandemic has caused disruptions to the Company’s markets and operations around the world. While the near-term economic and financial impact of the COVID-19 pandemic is improving in its residential markets, the Company expects that it will continue to see fluctuating demand across a number of its markets. In order to mitigate the impact of lower demand during the initial stages of the pandemic, the Company was able to utilize retention related tax credits and certain tax deferrals for employers where the Company has significant operations. During the year, the Company also completed actions prompted by the evolving health crisis to enhance future performance including site closings, other facility and product rationalizations and workforce reductions. The Company anticipates these global actions will deliver savings of approximately $100 to $110 million of which approximately $50 million was realized in 2020, with 2020 cost of $150 million.

The Company believes it has the experience and resources necessary to capitalize on opportunities that will arise as employees return to work around the world and macroeconomic conditions improve. The Company also believes it is well positioned with a strong balance sheet and limited debt. During 2020, the Company issued over $1 billion of long-term bonds to strengthen its ability to strategically invest and better position itself for the future. Finally, the Company is following the recommendations of local health authorities to minimize exposure risk for its employees, suppliers, customers and other stakeholders. For information on risk factors that could impact the Company’s results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.

In 2018, the Company completed five acquisitions: two that expanded the Company’s global footprint with leadership positions in major markets and three that extended the Company’s product offering and distribution in Europe. The Godfrey Hirst acquisition established the Company as the largest flooring manufacturer in Australia and New Zealand, with leading carpet and hard surface positions in both countries when combined with the Company’s existing regional flooring distribution business. Godfrey Hirst’s prestigious wool carpet collections are exported to numerous international markets and have been integrated into the U.S. soft surface product portfolio to expand sales. The acquisition of Brazil-based Eliane provided the Company with a leading ceramic tile position, the most appealing brand in one of the world’s largest ceramic tile markets and a gateway into the overall South American market as Eliane is Brazil’s largest ceramic exporter. The Company has made significant investments in both Godfrey Hirst and Eliane to upgrade product offerings, expand capacity and improve processes. The acquisition of Berghoef, a leading European mezzanine flooring company, created a leading position in a category that is rapidly expanding due to increased construction of e-commerce warehousing across the continent. The acquisition of Swiss and Italian hard surface distributors expanded the Company’s direct distribution of flooring sales in Europe, and two more hard surfaces distributors in The Netherlands and the Czech Republic were added in 2019.



In 2020, the Company invested $425.6 million in capital projects to introduce new product categories, enter new markets, expand capacity of constrained premium products and improve productivity. In 2021, the Company plans to invest approximately an additional $570-$590 million to complete existing projects and commence new initiatives. The Company plans to invest in cost reduction initiatives, upgrades in recent acquisitions and previously initiated expansion projects as well as maintenance across the businesses. The main investment areas include the Company’s recently acquired ceramic tile business in Brazil and the Godfrey Hirst Group in Australia and New Zealand where the Company is investing to upgrade its product offering and improve profitability; premium water-proof laminate in the U.S.; outdoor porcelain pavers manufacturing in Europe; and premium sanitary ware manufacturing in Russia.

Net earnings attributable to the Company were $515.6 million, or diluted EPS of $7.22 for 2020 compared to net earnings attributable to the Company of $744.2 million, or diluted EPS of $10.30 for 2019. The Company’s operations and net earnings for the period were unfavorably affected by disruptions caused by the COVID-19 pandemic. The change in EPS was primarily attributable to the unfavorable net impact of lower volumes, the unfavorable net impact of price and product mix, costs due to reducing production, higher restructuring, acquisition and integration-related costs, and costs associated with investments in new product development, partially offset by productivity gains and lower inflation costs.

For the year ended December 31, 2020, the Company generated $1,769.8 million of cash from operating activities. As of December 31, 2020, the Company had cash and cash equivalents of $768.6 million, of which $331.7 million was in the United States and $436.9 million was in foreign countries, in addition to $571.7 million in short-term investments. On May 14, 2020, the Company issued $500.0 million of 3.625% senior notes due May 15, 2030, which the Company used to pay off existing short-term debt. On June 12, 2020, a subsidiary of the Company issued €500.0 million of 1.750% senior notes due June 12, 2027, which the Company has used to strengthen its balance sheet in light of the COVID-19 pandemic.

## Results of Operations

Following are the results of operations for the last two years:

<table><tr><td>For the Years Ended December 31,</td><td>2020</td><td>2019</td></tr><tr><td>(In millions)</td><td></td><td></td></tr><tr><td>STATEMENT OF OPERATIONS DATA:</td><td></td><td></td></tr><tr><td>Net sales</td><td>$9,552.2</td><td>100.0%</td></tr><tr><td>Cost of sales(1)</td><td>7,121.5</td><td>74.6%</td></tr><tr><td>Gross profit</td><td>2,430.7</td><td>25.4%</td></tr><tr><td>Selling, general and administrative expenses(2)</td><td>1,794.7</td><td>18.8%</td></tr><tr><td>Operating income</td><td>636.0</td><td>6.7%</td></tr><tr><td>Interest expense(3)</td><td>52.4</td><td>0.5%</td></tr><tr><td>Other expense (income)(4)</td><td>(0.8)</td><td>0.0%</td></tr><tr><td>Earnings before income taxes</td><td>584.4</td><td>6.1%</td></tr><tr><td>Income tax expense(5)</td><td>68.6</td><td>0.7%</td></tr><tr><td>Net earnings including noncontrolling interests</td><td>515.7</td><td>5.4%</td></tr><tr><td>Less: Net earnings attributable to noncontrolling interests</td><td>0.1</td><td>—%</td></tr><tr><td>Net earnings attributable to Mohawk Industries, Inc.</td><td>$ 515.6</td><td>5.4%</td></tr><tr><td>(1) Cost of sales includes:</td><td></td><td></td></tr><tr><td>Restructuring, acquisition and integration-related charges</td><td>$ 102.4</td><td>1.1%</td></tr><tr><td>Acquisition inventory step-up</td><td>—</td><td>—%</td></tr><tr><td>Other</td><td>24.5</td><td>0.3%</td></tr><tr><td>(2) Selling, general and administrative expenses include:</td><td></td><td></td></tr><tr><td>Restructuring, acquisition and integration-related charges</td><td>26.5</td><td>0.3%</td></tr><tr><td>Reversal of uncertain tax position indemnification asset</td><td>—</td><td>0.0%</td></tr><tr><td>Other charges</td><td>10.1</td><td>0.1%</td></tr><tr><td>(3) Interest expense includes:</td><td></td><td></td></tr><tr><td>Deferred loan cost write-off</td><td>—</td><td>0.0%</td></tr><tr><td>(4) Other expense (income) includes:</td><td></td><td></td></tr><tr><td>Impairment of net investment in a manufacturer and distributor of Ceramic tile in China</td><td>—</td><td>0.0%</td></tr><tr><td>Reversal of uncertain tax position indemnification asset</td><td>(0.3)</td><td>—%</td></tr><tr><td>Other</td><td>3.6</td><td>—%</td></tr><tr><td>(5) Income tax expense (income) includes:</td><td></td><td></td></tr><tr><td>European Restructuring</td><td>—</td><td>0.0%</td></tr><tr><td>Reversal of uncertain tax position</td><td>0.3</td><td>—%</td></tr></table>



## Year Ended December 31, 2020,
as Compared with Year Ended
December 31, 2019

## Net sales

The Company’s global sales were affected by broader economic issues related to the COVID-19 pandemic resulting in decreased demand during the period. Net sales for 2020 were $9,552.2 million, reflecting a decrease of $418.5 million, or 4.2%, from the $9,970.7 million reported for 2019. The decrease was primarily attributable to the lower sales volume of approximately $240 million, the unfavorable net impact of price and product mix of approximately $119 million, and the unfavorable net impact from foreign exchange rates of approximately $59 million.

GLOBAL CERAMIC SEGMENT—Net sales decreased $198.3 million, or 5.5%, to $3,432.8 million for 2020, compared to $3,631.1 million for 2019. The decrease was primarily attributable to lower sales volume of approximately $89 million, the unfavorable net impact from foreign exchange rates of approximately $77 million, and the unfavorable net impact of price and product mix of approximately $33 million.

FLOORING NA SEGMENT—Net sales decreased $249.6 million, or 6.5%, to $3,594.1 million for 2020, compared to $3,843.7 million for 2019. The decrease was attributable to lower volumes of approximately $200 million, and the unfavorable net impact of price and product mix of approximately $49 million.

FLOORING ROW SEGMENT—Net sales increased $29.6 million, or 1.2%, to $2,525.4 million for 2020, compared to $2,495.8 million for 2019. The increase was primarily attributable to higher sales volume of approximately $49 million, and favorable net impact from foreign exchange rates of approximately $18 million, partially offset by the unfavorable net impact of price and product mix of approximately $37 million.

Quarterly net sales and the percentage changes in net sales by quarter for 2020 versus 2019 were as follows (dollars in millions):

<table><tr><td></td><td>2020</td><td>2019</td><td>Change</td></tr><tr><td>First quarter</td><td>$2,285.8</td><td>2,442.5</td><td>(6.4)%</td></tr><tr><td>Second quarter</td><td>2,049.8</td><td>2,584.5</td><td>(20.7)%</td></tr><tr><td>Third quarter</td><td>2,574.9</td><td>2,519.2</td><td>2.2%</td></tr><tr><td>Fourth quarter</td><td>2,641.8</td><td>2,424.5</td><td>9.0%</td></tr><tr><td>Total year</td><td>$9,552.2</td><td>9,970.7</td><td>(4.2)%</td></tr></table>

## Gross profit

The Company experienced increased costs associated with short-term reductions in manufacturing output in addition to decreased demand as a result of the disruptions caused by the COVID-19 pandemic. Gross profit for 2020 was $2,430.7 million (25.4% of net sales), a decrease of $245.3 million or 9.2%, compared to gross profit of $2,676.0 million (26.8% of net sales) for 2019. As a percentage of net sales, gross profit decreased 140 basis points. The decrease in gross profit dollars was primarily attributable to the lower sales volume of approximately $128 million, the unfavorable net impact of price and product mix of approximately $122 million, costs due to temporarily reduced production of approximately $116 million, the impact of restructuring, acquisition and integration-related costs of approximately $29 million, and the unfavorable net impact from foreign exchange rates of approximately $20 million, partially offset by productivity gain of approximately $88 million, lower inflation of approximately $75 million and approximately $9 million of lower startup cost.

## Selling, general and
administrative expenses

Selling, general and administrative expenses for 2020 were $1,794.7 million (18.8% of net sales), an decrease of $54.1 million or (2.9)% compared to $1,848.8 million (18.5% of net sales) for 2019. As a percentage of net sales, selling, general and administrative expenses increased 30 basis points. The decrease in selling, general and administrative expenses in dollars was primarily attributable to productivity gain of approximately $93 million, favorable foreign exchange rates of approximately $9 million, partially offset by the impact of restructuring, acquisition and integration-related costs of approximately $23 million, higher inflation costs of approximately $19 million, and approximately $10 million of costs associated with investments in new product development, sales personnel and marketing.

## Operating income

As previously discussed, the Company’s operations for the year were negatively impacted by disruptions from the COVID-19 pandemic resulting in decreased demand and increased costs associated with short-term reductions in manufacturing output. Operating income for 2020 was $636.0 million (6.7% of net sales) reflecting a decrease of $191.2 million, or 23.1%, compared to operating income of $827.2 million (8.3% of net sales) for 2019. The decrease in operating income was primarily attributable to approximately $133 million due to lower sales volume, the unfavorable net impact of price and product mix of approximately $122 million, approximately $116 million of costs due to temporarily reduced production, the impact of restructuring, acquisition and integration-related costs of approximately $52 million, and approximately $10 million of costs associated with investments in new product development, partially offset by higher productivity gain of approximately $180 million, lower inflation costs of approximately $56 million, and lower startup costs of approximately $15 million.



GLOBAL CERAMIC SEGMENT—Operating income was $167.7 million (4.9% of segment net sales) for 2020 reflecting a decrease of $167.9 million, or 50.0%, compared to operating income of $335.6 million (9.2% of segment net sales) for 2019. The decrease in operating income was primarily attributable to approximately $69 million of costs due to temporarily reduced production, the impact of restructuring, acquisition and integration-related costs of approximately $57 million, the unfavorable net impact of price and product mix of approximately $52 million, approximately $49 million due to lower sales volume, higher inflation costs of approximately $7 million, and approximately $5 million of costs associated with investments in new product development, sales personnel and marketing, partially offset by higher productivity gain of approximately $70 million.

FLOORING NA SEGMENT—Operating income was $147.4 million (4.1% of segment net sales) for 2020 reflecting a decrease of $30.2 million, or 17.0%, compared to operating income of $177.6 million (4.6% of segment net sales) for 2019. The decrease in operating income was primarily attributable to approximately $81 million in decreased sales volume, the unfavorable net impact of price and product mix of approximately $40 million, approximately $31 million of costs due to temporarily reduced production, partially offset by higher productivity gain of approximately $61 million, the impact of lower restructuring, acquisition and integration-related costs of approximately $29 million, lower inflation costs of approximately $28 million and lower startup costs of approximately $4 million.

FLOORING ROW SEGMENT—Operating income was $366.9 million (14.5% of segment net sales) for 2020 reflecting an increase of $13.2 million, or 3.7%, compared to operating income of $353.7 million (14.2% of segment net sales) for 2019. The increase in operating income was primarily attributable to higher productivity gain of approximately $48 million, lower inflation costs of approximately $38 million, partially offset by unfavorable net impact of price and product mix of approximately $30 million, the impact of restructuring, acquisition and integration-related costs of approximately $20 million, approximately $16 million of costs due to temporarily reduced production, and the unfavorable net impact from foreign exchange rates of approximately $9 million.

## Interest expense

Interest expense was $52.4 million for 2020, reflecting an increase of $11.1 million compared to interest expense of $41.3 million for 2019. During the second quarter of 2020, the Company issued new long-term debt to strengthen its liquidity position during the early months of the COVID pandemic. The new debt issuance shifted the Company from a mix of 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 (income)

Other income was $0.8 million for 2020, reflecting a favorable change of $37.2 million compared to other expense of $36.4 million for 2019. The change was primarily attributable to a net impairment charge of $59.9 million related to the Company’s net investment in a manufacturer and distributor of ceramic tile in China in 2019, partially offset by unfavorable FX and other miscellaneous items.

## Income tax expense

For 2020, the Company recorded income tax expense of $68.6 million on earnings before income taxes of $584.4 million for an effective tax rate of 11.7%, as compared to an income tax expense of $5.0 million on earnings before income taxes of $749.5 million, resulting in an effective tax rate of 0.7% for 2019. In 2020, the Company realized a $33.8 million carryback rate differential in the U.S. and had a $10.3 million tax benefit from a foreign exchange loss on previously taxed earnings distributed during the year. In 2019, the Company implemented select operational, administrative and financial restructurings that centralized certain business processes and intangible assets in various European jurisdictions into a new entity. This implementation resulted in a net tax benefit of $136.2 million. In both 2020 and 2019, the Company was favorably impacted by its geographic mix of earnings.

## 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. As of December 31, 2020, the Company had a total of $1,799.2 million available under its Senior Credit Facility. The Company also maintains local currency revolving lines of credit and other credit facilities to provide liquidity to its businesses around the world. None of such local facilities are material in amount.

Management has and will continue to evaluate its liquidity needs and strategy regarding capital resources as the economic crisis caused by the COVID-19 pandemic evolves. In the second quarter of 2020, the Company issued $500.0 million of 3.625% senior notes, and a subsidiary of the Company issued €500.0 million of 1.750% senior notes, with ten and seven-year terms, respectively. The Company has taken multiple actions including managing inventory and production capacity, and reduced headcount through furloughs and layoffs. Management believes these actions along with cash secured from increased borrowing and continuing operations will allow the Company to take advantage of new opportunities.

Net cash provided by operating activities for the year ended 2020 was $1,769.8 million, compared to net cash provided by operating activities of $1,418.8 million for the year ended 2019. This increase of $351.1 million was primarily attributable to changes in working capital, partially offset by lower net earnings. The increase in cash provided by operating activities for 2019 as compared to 2018 of $237.4 million was primarily attributable to changes in working capital, partially offset by lower net earnings.

Net cash used in investing activities for the year ended 2020 was $954.8 million compared to net cash used in investing activities of $616.0 million for the year ended 2019. The increase was primarily due to an increase in the purchases of short-term investments of $539.7 million (net of redemption of short-term investments), partially offset by reduced capital expenditures of $119.9 million and a decrease in acquisition costs of $81.1 million. Net cash used in investing activities for the year ended 2019 was $616.0 million compared to net cash used in investing activities of $1,332.2 million for the year ended 2018. The decrease was primarily due to a $487.9 million reduction in acquisitions and a $248.6 million reduction in capital expenditures.



Net cash used in financing activities for the year ended 2020 was $188.2 million compared to net cash used in financing activities of $789.9 million for the year ended 2019. The change in cash used in financing is primarily attributable to the proceeds from the Senior Notes of $735.3 million (net of repayments of $326.9 million), partially offset by the increase in purchases of the Company’s shares of $88.5 million. Net cash used in financing activities for the year ended 2019 was $789.9 million compared to net cash provided by financing activities of $198.0 million for the year ended 2018. The change in cash used in financing is primarily attributable to lower borrowings of commercial paper of $860.6 million.

On October 26, 2020, after considering the Company’s liquidity position and strong cash flows, 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. This was incremental to the previously approved 2018 Share Repurchase Program. In the fourth quarter 2020, the Company purchased 120.0 million of its common stock, exhausting the 57.1 million remaining under the 2018 Program as of October 26, 2020, and utilizing 62.8 million under the 2020 Program. As of December 31, 2020, there remains 437.2 million authorized under the 2020 Program.

As of December 31, 2020, the Company had cash of $768.6 million, of which $436.9 million was held outside the United States. In addition to its cash on hand, the Company also had short-term investments of $571.7 million as of December 31, 2020. The Company plans to permanently reinvest the cash held outside the United States. The Company believes that its cash and cash equivalents, and short-term investments on hand, cash generated from operations and availability under its Senior Credit Facility will be sufficient to meet its planned capital expenditure, further working capital investment and debt servicing requirements over the next twelve months.

See Note 10. Long-Term Debt, of the notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K 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 and commitments

The following is a summary of the Company’s future minimum payments under contractual obligations and commitments as of December 31, 2020 (in millions):

<table><tr><td></td><td>Total</td><td>2021</td><td>2022</td><td>2023</td><td>2024</td><td>2025</td><td>Thereafter</td></tr><tr><td>CONTRACTUAL OBLIGATIONS AND COMMITMENTS:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Long-term debt, including current maturities</td><td>$2,745.3</td><td>377.2</td><td>622.8</td><td>607.1</td><td>5.5</td><td>4.1</td><td>1,128.6</td></tr><tr><td>Interest payments on long-term debt and finance leases \( ^{(1)} \)</td><td>301.4</td><td>65.1</td><td>53.6</td><td>31.3</td><td>29.3</td><td>29.2</td><td>92.9</td></tr><tr><td>Operating leases</td><td>355.0</td><td>113.2</td><td>88.6</td><td>60.1</td><td>38.8</td><td>26.8</td><td>27.5</td></tr><tr><td>Purchase commitments \( ^{(2)} \)</td><td>412.7</td><td>167.8</td><td>48.0</td><td>21.9</td><td>21.9</td><td>21.9</td><td>131.2</td></tr><tr><td>Expected pension contributions \( ^{(3)} \)</td><td>3.1</td><td>3.1</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Uncertain tax positions \( ^{(4)} \)</td><td>3.6</td><td>3.6</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Guarantees \( ^{(5)} \)</td><td>45.2</td><td>22.3</td><td>5.7</td><td>4.3</td><td>4.3</td><td>4.3</td><td>4.3</td></tr><tr><td>Total</td><td>$3,866.3</td><td>752.3</td><td>818.7</td><td>724.7</td><td>99.8</td><td>86.3</td><td>1,384.5</td></tr></table>

(1) For fixed rate debt, the Company calculated interest based on the applicable rates and payment dates. For variable rate debt, the Company estimated average outstanding balances for the respective periods and applied interest rates in effect as of December 31, 2020 to these balances.

(2) Includes volume commitments for primarily raw material purchases.

(3) Includes the estimated pension contributions for 2021 only, as the Company is unable to estimate the pension contributions beyond 2021. The Company’s projected benefit obligation and plan assets as of December 31, 2020 were $86.7 million and $68.4 million, respectively. The projected benefit obligation liability has not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.

(4) Excludes $44.7 million of non-current accrued income tax liabilities and related interest and penalties for uncertain tax positions. These liabilities have not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.

(5) Includes bank guarantees and letters of credit.



## Critical Accounting Policies

In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles, the Company must make decisions which impact the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Such decisions include the selection of appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, the Company applies judgment based on its understanding and analysis of the relevant circumstances and historical experience. Actual amounts could differ from those estimated at the time the consolidated financial statements are prepared.

The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Some of those significant accounting policies require the Company to make subjective or complex judgments or estimates. Critical accounting estimates are defined as those that are both most important to the portrayal of a company’s financial condition and results and require management’s most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company believes the following accounting policies require it to use judgments and estimates in preparing its consolidated financial statements and represent critical accounting policies.

## • ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION.

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. A 10% change in the Company's allowance for discounts, returns, claims and doubtful accounts would have affected net earnings by approximately $7 million for the year ended December 31, 2020.
• INVENTORIES ARE STATED AT THE LOWER OF COST OR MARKET (NET REALIZABLE VALUE). Inventories are stated at the lower of cost or market (net realizable value). Cost has been determined using the first-in first-out method (“FIFO”). Costs included in inventory include raw materials, direct and indirect labor and employee benefits, depreciation, general manufacturing overhead and various other costs of manufacturing. Market, with respect to all inventories, is replacement cost or net realizable value. Inventories on hand are compared against anticipated future usage, which is a function of historical usage, anticipated future selling price, expected sales below cost, excessive quantities and an evaluation for obsolescence. Actual results could differ from assumptions used to value obsolete inventory, excessive inventory or inventory expected to be sold below cost, and a 10% change in the Company’s assumptions for excess or obsolete inventory would have affected net earnings by approximately $18 million for the year ended December 31, 2020.

• ACQUISITION ACCOUNTING. The fair value of the consideration the Company pays for each new acquisition is allocated to tangible assets and identifiable intangible assets, liabilities assumed, any noncontrolling interest in the acquired entity and goodwill. The accounting for acquisitions involves a considerable amount of judgment and estimate, including the fair value of certain forms of consideration; fair value of acquired intangible assets involving projections of future revenues and cash flows that are then either discounted at an estimated discount rate or measured at an estimated royalty rate; fair value of other acquired assets and assumed liabilities, including potential contingencies; and the useful lives of the acquired assets. The assumptions used are determined at the time of the acquisition in accordance with accepted valuation models. Projections are developed using internal forecasts, available industry and market data and estimates of long-term rates of growth for the business. The impact of prior or future acquisitions on the Company’s financial position or results of operations may be materially impacted by the change in or initial selection of assumptions and estimates. See Note 2, Acquisitions included in Part II, Item 8 of this Form 10-K for further discussion of business combination accounting valuation methodology and assumptions.

• GOODWILL AND OTHER INTANGIBLES. Goodwill is tested annually for impairment in the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment. The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgments and assumptions using the discounted cash flows and comparable company market valuation approaches. The Company has identified Global Ceramic, Flooring NA and Flooring ROW as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital (“WACC”), and comparable company market multiples. When developing these key



judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Should a significant or prolonged deterioration in economic conditions occur, such as declines in spending for new construction, remodeling and replacement activities; the inability to pass increases in the costs of raw materials and fuel on to customers; or a decline in comparable company market multiples, then key judgments and assumptions could be impacted. Generally, a decline in estimated after tax cash flows greater than approximately 10% to 33% or a percentage increase of approximately 7% to 38% in WACC or a significant or prolonged decline in market capitalization could result in an additional indication of impairment.

The impairment test for intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, WACC and the amount of expected future cash flows. These judgments and assumptions are subject to the variability discussed above.

The impairment evaluation for indefinite lived intangible assets, which for the Company are its trademarks, is conducted on the first day of the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The determination of fair value used in the impairment evaluation is based on discounted estimates of future sales projections attributable to ownership of the trademarks. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, WACC and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that are used in operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the trademarks. Estimated cash flows are sensitive to changes in the economy among other things.

The Company reviews its long-lived asset groups, which include intangible assets subject to amortization, which for the Company are its patents and customer relationships, for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated by these asset groups. If such asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.

The Company conducted its annual assessment of goodwill and indefinite lived intangibles on the first day of the fourth quarter and no impairment was indicated for 2020. While the Company has concluded that neither goodwill nor any of its indefinite-lived intangible assets were impaired during the year ended December 31, 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 the COVID-19 pandemic and may be required to reassess impairment of goodwill or indefinite-lived intangible assets in future interim periods.

- INCOME TAXES. The Company’s effective tax rate is based on its income, statutory tax rates and tax planning opportunities available in the jurisdictions in which it operates. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining the Company’s tax expense and in evaluating the Company’s tax positions. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in a future period. The Company evaluates the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates, including business forecasts and other projections of financial results over an extended period of time. In the event that the Company is not able to realize all or a portion of its deferred tax assets in the future, a valuation allowance is provided. The Company would recognize such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. For further information regarding the Company’s valuation allowances, see Note 15, Income Taxes included in Part II, Item 8 of this Form 10-K.

In the ordinary course of business there is inherent uncertainty in quantifying the Company’s income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the Company’s evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information, as required by the provisions of the Financial Accounting Standards Board (“FASB”) FASB Accounting Standards Codification Topic (“ASC”) 740-10. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the consolidated financial statements. For further information regarding the Company’s uncertain tax positions, see Note 15, Income Taxes included in Part II, Item 8 of this Form 10-K.



- ENVIRONMENTAL AND LEGAL ACCRUALs. Environmental and legal accruals are estimates based on judgments made by the Company relating to ongoing environmental and legal proceedings, as disclosed in the Company’s consolidated financial statements. In determining whether a liability is probable and reasonably estimable, the Company consults with its internal experts. The Company believes that the amounts recorded in the accompanying financial statements are based on the best estimates and judgments available to it.

## Recent Accounting Pronouncements

See Note 1(y), “Summary of Significant Accounting Policies,” of the Company’s accompanying audited Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a description of recent accounting pronouncements including the dates, or expected dates of adoption, and effects, or expected effects, on the Company’s disclosures, results of operations and financial condition.

## 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.

## Seasonality

The Company is a calendar year-end company. With respect to its Global Ceramic segment, 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 the fourth 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 historically typically produces the highest net sales followed by moderate third and second quarters, and a weakest first quarter. For the segment’s operating income, generally, the second quarter shows the strongest earnings, followed by third and first quarters, and the fourth quarter shows weakest earnings.

The COVID-19 pandemic has created significant volatility in the global economy and has led to reduced economic activity, employment disruptions and supply chain constraints. The Company expects the impact of the COVID-19 pandemic to continue to impact normal seasonality trends into 2021, but the extent and duration of such impact cannot be predicted.

## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk is impacted by changes in foreign currency exchange rates, interest rates and certain commodity prices. Financial exposures to these risks are monitored as an integral part of the Company’s risk management program, which seeks to reduce the potentially adverse effect that the volatility of these markets may have on its operating results. The Company does not regularly engage in speculative transactions, nor does it regularly hold or issue financial instruments for trading purposes. Excluding the hedge of net investment discussed in Note 1(r) “Hedges of Net Investments in Non-U.S. Operations,” of the Company’s accompanying consolidated financial statements in Part II, Item 8 of this Form 10-K, the Company did not have any derivative contracts outstanding as of December 31, 2020 and 2019.

## Interest Rate Risk

As of December 31, 2020, approximately 87% of the Company’s debt portfolio was comprised of fixed-rate debt and 13% was floating-rate debt. The Company believes that probable near-term changes in interest rates would not materially affect its financial condition, results of operations or cash flows. The annual impact on interest expense of a one-percentage point interest rate change on the outstanding balance of the Company’s variable rate debt as of December 31, 2020 would be approximately $3 million or $0.04 to diluted EPS.

## Foreign Exchange Risk

As a result of being a global enterprise, there is exposure to market risks from changes in foreign currency exchange rates, which may adversely affect the operating results and financial condition of the Company. Principal foreign currency exposures relate primarily to the euro and to a lesser extent the Russian ruble, the Mexican peso, the Canadian dollar, the Australian dollar, the British pound and the Brazilian real.

The Company’s objective is to balance, where possible, non-functional currency denominated assets to non-functional currency denominated liabilities to have a natural hedge and minimize foreign exchange impacts. The Company enters into cross border transactions through importing and exporting goods to and from different countries and locations. These transactions generate foreign exchange risk as they create assets, liabilities and cash flows in currencies other than their functional currency. This also applies to services provided and other cross border agreements among subsidiaries.

The Company takes steps to minimize risks from foreign currency exchange rate fluctuations through normal operating and financing activities. The Company does not enter into any speculative positions with regard to derivative instruments.

Based on financial results for the year ended December 31, 2020, a hypothetical overall 10 percent change in the U.S. dollar against the euro would have resulted in a translational adjustment of approximately $41 million.



## ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

## INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm 25
Consolidated Balance Sheets as of December 31, 2020 and 2019 28
Consolidated Statements of Operations for the Years ended December 31, 2020, 2019, and 2018 29
Consolidated Statements of Comprehensive Income (Loss) for the Years ended December 31, 2020, 2019 and 2018 29
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years ended December 31, 2020, 2019 and 2018 31
Notes to Consolidated Financial Statements 32

## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

## TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
MOHAWK INDUSTRIES, INC.:

## Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Mohawk Industries, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2012) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

## Adoption of ASU 2016-02

As discussed in Notes 1 and 12 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASU 2016-02, Leases, and subsequently issued additional ASUs amending this ASU (collectively ASC 842, Leases).

## Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.



## Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

## Assessment of the carrying value of goodwill in the Flooring North America and Global Ceramic reporting units

As discussed in Note 8 to the consolidated financial statements, the goodwill balance as of December 31, 2020 was $2,650.8 million, of which $531.1 million and $1,047.6 million related to the Flooring North America reporting unit and the Global Ceramic reporting unit, respectively. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of goodwill might exceed the fair value of a reporting unit. The reporting units' operating income declined during 2020 due to disruptions caused by the COVID-19 pandemic, lower sales volumes and other operational and market conditions. These conditions indicated that there could be a higher risk of goodwill impairment.

We identified the assessment of the carrying value of goodwill in the Flooring North America and Global Ceramic reporting units as a critical audit matter. Specifically, the assessment of the Company’s forecasted sales growth rates, forecasted operating margins, discount rates, and selection of comparable company market multiples used in the Company’s fair value estimation of the reporting units required a higher degree of subjective auditor judgment and required the involvement of valuation professionals. Changes in these assumptions could have a significant impact on the fair value of the reporting units.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process including controls over the reasonableness of the assumptions listed above. We evaluated the Company’s forecasted sales growth rates and operating margins for each reporting unit, and compared the growth assumptions to the Company’s historical performance and to relevant market data. To assess the Company’s ability to estimate cash flows, including forecasted sales growth rates and operating margins, we compared the Company’s historical cash flow forecasts to actual results. We also performed sensitivity analyses over certain assumptions listed above to assess their impact on the Company’s determination that the fair value of the Flooring North America and Global Ceramic reporting units exceeded their carrying values. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the reporting units’ discount rates by comparing them to discount rates that were independently developed using publicly available market data for comparable companies and the Company’s selection of comparable company market multiples.

## Evaluation of the realizability of the deferred tax asset related to certain foreign intangible assets

As discussed in Note 15 to the consolidated financial statements, as of December 31, 2020, the Company had a $152.5 million deferred tax asset related to intangibles, which included a deferred tax asset related to amortization of the tax basis of certain intangible assets in a foreign entity.

The Company determined that projected future income of the entity will be sufficient to fully realize the deferred tax asset and accordingly has not recorded a valuation allowance. Assessments of future income could impact the valuation of deferred tax assets.

We identified the evaluation of the realizability of the deferred tax asset related to certain foreign intangible assets as a critical audit matter. A high degree of auditor judgment was required to evaluate the projected future income assumptions used in the Company’s long-term deferred tax asset recovery period. Specifically, subjective auditor judgment was required to assess the forecasted sales, operating margins, and other income. Changes to these assumptions could have a substantial impact on the realization of such deferred tax assets.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the deferred tax asset valuation allowance process, including controls over the assessment of the realizability of the deferred tax asset and development of the above noted assumptions for projected future income. We evaluated the Company’s projected future income by comparing the above noted assumptions to its historical performance and relevant market data. To assess the Company’s ability to estimate future income, we compared the historical forecasts for the intangible assets to actual results. We also performed sensitivity analyses over certain assumptions to assess their impact on the Company’s realizability assessment. We involved income tax professionals with specialized skills and knowledge who assisted in assessing the Company’s application of the relevant tax regulations. They also assisted in evaluating the tax planning strategies and the related impact of those strategies on the projected future income of the entity used in the realizability assessment.

## /s/ KPMG LLP

We have served as the Company’s auditor since 1990.
Atlanta, Georgia
February 24, 2021



TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
MOHAWK INDUSTRIES, INC.:

## Opinion on Internal Control
Over Financial Reporting

We have audited Mohawk Industries, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2021 expressed an unqualified opinion on those consolidated financial statements.

## Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

## Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP
Atlanta, Georgia
February 24, 2021



<table><tr><td>December 31,</td><td>2020</td><td>2019</td></tr><tr><td>(In thousands, except per share data)</td><td></td><td></td></tr><tr><td>ASSETS</td><td></td><td></td></tr><tr><td>CURRENT ASSETS:</td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 768,625</td><td>134,785</td></tr><tr><td>Short-term investments</td><td>571,741</td><td>42,500</td></tr><tr><td>Receivables, net</td><td>1,709,493</td><td>1,526,619</td></tr><tr><td>Inventories</td><td>1,913,020</td><td>2,282,328</td></tr><tr><td>Prepaid expenses</td><td>369,432</td><td>415,546</td></tr><tr><td>Other current assets</td><td>31,343</td><td>27,679</td></tr><tr><td>Total current assets</td><td>5,363,654</td><td>4,429,457</td></tr><tr><td>Property, plant and equipment, net</td><td>4,591,229</td><td>4,698,917</td></tr><tr><td>Right of use operating lease assets</td><td>323,138</td><td>323,003</td></tr><tr><td>Goodwill</td><td>2,650,831</td><td>2,570,027</td></tr><tr><td>Tradenames</td><td>727,268</td><td>702,732</td></tr><tr><td>Other intangible assets subject to amortization, net</td><td>224,339</td><td>226,147</td></tr><tr><td>Deferred income taxes and other non-current assets</td><td>447,292</td><td>436,397</td></tr><tr><td></td><td>$14,327,751</td><td>13,386,680</td></tr><tr><td>LIABILITIES AND STOCKHOLDERS&#x27; EQUITY</td><td></td><td></td></tr><tr><td>CURRENT LIABILITIES:</td><td></td><td></td></tr><tr><td>Short-term debt and current portion of long-term debt</td><td>$ 377,255</td><td>1,051,498</td></tr><tr><td>Accounts payable and accrued expenses</td><td>1,895,951</td><td>1,559,140</td></tr><tr><td>Current operating lease liabilities</td><td>98,042</td><td>101,945</td></tr><tr><td>Total current liabilities</td><td>2,371,248</td><td>2,712,583</td></tr><tr><td>Deferred income taxes</td><td>493,668</td><td>473,886</td></tr><tr><td>Long-term debt, less current portion</td><td>2,356,887</td><td>1,518,388</td></tr><tr><td>Non-current operating lease liabilities</td><td>234,726</td><td>228,155</td></tr><tr><td>Other long-term liabilities</td><td>330,064</td><td>327,220</td></tr><tr><td>Total liabilities</td><td>5,786,593</td><td>5,260,232</td></tr><tr><td>Commitments and contingencies (Note 16)</td><td></td><td></td></tr><tr><td>Stockholders&#x27; equity:</td><td></td><td></td></tr><tr><td>Preferred stock, \(.01 par value; 60 shares authorized; no shares issued</td><td>—</td><td>—</td></tr><tr><td>Common stock, $0.01 par value; 150,000 shares authorized; 77,624 and 78,980 shares issued in 2020 and 2019, respectively</td><td>776</td><td>790</td></tr><tr><td>Additional paid-in capital</td><td>1,885,142</td><td>1,868,250</td></tr><tr><td>Retained earnings</td><td>7,559,191</td><td>7,232,337</td></tr><tr><td>Accumulated other comprehensive loss</td><td>(695,145)</td><td>(765,824)</td></tr><tr><td></td><td>8,749,964</td><td>8,335,553</td></tr><tr><td>Less: treasury stock at cost; 7,346 and 7,348 shares in 2020 and 2019, respectively</td><td>215,648</td><td>215,712</td></tr><tr><td>Total Mohawk Industries, Inc. stockholders&#x27; equity</td><td>8,534,316</td><td>8,119,841</td></tr><tr><td>Nonredeemable noncontrolling interests</td><td>6,842</td><td>6,607</td></tr><tr><td>Total stockholders&#x27; equity</td><td>8,541,158</td><td>8,126,448</td></tr><tr><td></td><td>$14,327,751</td><td>13,386,680</td></tr></table>

See accompanying notes to consolidated financial statements.



MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<table><tr><td>Years ended December 31,</td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>(In thousands, except per share data)</td><td></td><td></td><td></td></tr><tr><td>Net sales</td><td>$9,552,197</td><td>9,970,672</td><td>9,983,634</td></tr><tr><td>Cost of sales</td><td>7,121,507</td><td>7,294,629</td><td>7,145,564</td></tr><tr><td>Gross profit</td><td>2,430,690</td><td>2,676,043</td><td>2,838,070</td></tr><tr><td>Selling, general and administrative expenses</td><td>1,794,688</td><td>1,848,819</td><td>1,742,744</td></tr><tr><td>Operating income</td><td>636,002</td><td>827,224</td><td>1,095,326</td></tr><tr><td>Interest expense</td><td>52,379</td><td>41,272</td><td>38,827</td></tr><tr><td>Other expense (income) net</td><td>(751)</td><td>36,407</td><td>7,298</td></tr><tr><td>Earnings before income taxes</td><td>584,374</td><td>749,545</td><td>1,049,201</td></tr><tr><td>Income tax expense</td><td>68,647</td><td>4,974</td><td>184,346</td></tr><tr><td>Net earnings including noncontrolling interests</td><td>515,727</td><td>744,571</td><td>864,855</td></tr><tr><td>Net earnings attributable to noncontrolling interests</td><td>132</td><td>360</td><td>3,151</td></tr><tr><td>Net earnings attributable to Mohawk Industries, Inc.</td><td>$ 515,595</td><td>744,211</td><td>861,704</td></tr><tr><td>Basic earnings per share attributable to Mohawk Industries, Inc.</td><td></td><td></td><td></td></tr><tr><td>Basic earnings per share attributable to Mohawk Industries, Inc.</td><td>$ 7.24</td><td>10.34</td><td>11.53</td></tr><tr><td>Weighted-average common shares outstanding—basic</td><td>71,214</td><td>71,986</td><td>74,413</td></tr><tr><td>Diluted earnings per share attributable to Mohawk Industries, Inc.</td><td></td><td></td><td></td></tr><tr><td>Diluted earnings per share attributable to Mohawk Industries, Inc.</td><td>$ 7.22</td><td>10.30</td><td>11.47</td></tr><tr><td>Weighted-average common shares outstanding—diluted</td><td>71,401</td><td>72,264</td><td>74,773</td></tr></table>

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

<table><tr><td>Years ended December 31,</td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>(In thousands)</td><td></td><td></td><td></td></tr><tr><td>Net earnings including noncontrolling interests</td><td>$515,727</td><td>744,571</td><td>864,855</td></tr><tr><td>Other comprehensive income (loss):</td><td></td><td></td><td></td></tr><tr><td>Foreign currency translation adjustments</td><td>72,956</td><td>28,996</td><td>(237,339)</td></tr><tr><td>Pension prior service cost and actuarial loss (gain), net of tax</td><td>(2,174)</td><td>(3,210)</td><td>1,094</td></tr><tr><td>Other comprehensive income (loss)</td><td>70,782</td><td>25,786</td><td>(236,245)</td></tr><tr><td>Comprehensive income</td><td>586,509</td><td>770,357</td><td>628,610</td></tr><tr><td>Comprehensive income (loss) attributable to noncontrolling interests</td><td>235</td><td>360</td><td>(13)</td></tr><tr><td>Comprehensive income attributable to Mohawk Industries, Inc.</td><td>$586,274</td><td>769,997</td><td>628,623</td></tr></table>

See accompanying notes to consolidated financial statements.



<table><tr><td rowspan="2">Years Ended December 31,</td><td rowspan="2">Redeemable Noncontrolling Interest</td><td colspan="9">Total Stockholders&#x27; Equity</td></tr><tr><td>Common Stock Shares</td><td>Amount</td><td>Additional Paid-in Capital</td><td>Retained Earnings</td><td>Accumulated Other Comprehensive Income (Loss)</td><td>Treasury Stock Shares</td><td>Amount</td><td>Nonredeemable Noncontrolling Interest</td><td>Total Stockholders&#x27; Equity</td></tr><tr><td>(In thousands)</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Balances at December 31, 2017</td><td>$29,463</td><td>81,771</td><td>$818</td><td>$1,828,131</td><td>$6,004,506</td><td>$(558,527)</td><td>(7,350)</td><td>$(215,766)</td><td>$7,847</td><td>$7,067,009</td></tr><tr><td>Shares issued under employee and director stock plans</td><td>—</td><td>191</td><td>2</td><td>(8,400)</td><td>—</td><td>—</td><td>1</td><td>21</td><td>—</td><td>(8,377)</td></tr><tr><td>Stock-based compensation expense</td><td>—</td><td>—</td><td>—</td><td>31,382</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>31,382</td></tr><tr><td>Repurchases of common stock</td><td>—</td><td>(2,306)</td><td>(23)</td><td>—</td><td>(274,121)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(274,144)</td></tr><tr><td>Accretion of redeemable noncontrolling interest</td><td>3,892</td><td>—</td><td>—</td><td>—</td><td>(3,892)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(3,892)</td></tr><tr><td>Net earnings attributable to noncontrolling interests</td><td>2,474</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>677</td><td>677</td></tr><tr><td>Purchase of redeemable noncontrolling interest and noncontrolling interest, net of taxes</td><td>(33,884)</td><td>—</td><td>—</td><td>1,060</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(1,060)</td><td>—</td></tr><tr><td>Currency translation adjustment on noncontrolling interests</td><td>(1,945)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(1,219)</td><td>(1,219)</td></tr><tr><td>Currency translation adjustment</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(234,175)</td><td>—</td><td>—</td><td>—</td><td>(234,175)</td></tr><tr><td>Prior pension and post-retirement benefit service cost and actuarial loss</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>1,094</td><td>—</td><td>—</td><td>—</td><td>1,094</td></tr><tr><td>Net earnings</td><td>—</td><td>—</td><td>—</td><td>—</td><td>861,704</td><td>—</td><td>—</td><td>—</td><td>—</td><td>861,704</td></tr><tr><td>Balances at December 31, 2018</td><td>—</td><td>79,656</td><td>797</td><td>1,852,173</td><td>6,588,197</td><td>(791,608)</td><td>(7,349)</td><td>(215,745)</td><td>6,245</td><td>7,440,059</td></tr><tr><td>Shares issued under employee and director stock plans</td><td>—</td><td>130</td><td>1</td><td>(7,543)</td><td>—</td><td>—</td><td>1</td><td>33</td><td>—</td><td>(7,509)</td></tr><tr><td>Stock-based compensation expense</td><td>—</td><td>—</td><td>—</td><td>23,620</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>23,620</td></tr><tr><td>Repurchases of common stock</td><td>—</td><td>(806)</td><td>(8)</td><td>—</td><td>(100,071)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(100,079)</td></tr><tr><td>Net earnings attributable to noncontrolling interests</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>360</td><td>360</td><td>360</td></tr><tr><td>Currency translation adjustment on noncontrolling interests</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>2</td><td>2</td><td>2</td></tr><tr><td>Currency translation adjustment</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>28,994</td><td>—</td><td>—</td><td>—</td><td>28,994</td></tr><tr><td>Prior pension and post-retirement benefit service cost and actuarial loss</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(3,210)</td><td>—</td><td>—</td><td>—</td><td>(3,210)</td></tr><tr><td>Net earnings</td><td>—</td><td>—</td><td>—</td><td>—</td><td>744,211</td><td>—</td><td>—</td><td>—</td><td>—</td><td>744,211</td></tr><tr><td>Balances at December 31, 2019</td><td>—</td><td>78,980</td><td>790</td><td>1,868,250</td><td>7,232,337</td><td>(765,824)</td><td>(7,348)</td><td>(215,712)</td><td>6,607</td><td>8,126,448</td></tr><tr><td>Shares issued under employee and director stock plans</td><td>—</td><td>152</td><td>1</td><td>(2,805)</td><td>—</td><td>—</td><td>2</td><td>64</td><td>—</td><td>(2,740)</td></tr><tr><td>Stock-based compensation expense</td><td>—</td><td>—</td><td>—</td><td>19,697</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>19,697</td></tr><tr><td>Repurchases of common stock</td><td>—</td><td>(1,508)</td><td>(15)</td><td>—</td><td>(188,610)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(188,625)</td></tr><tr><td>Net earnings attributable to noncontrolling interests</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>132</td><td>132</td><td>132</td></tr><tr><td>Currency translation adjustment on noncontrolling interests</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>103</td><td>103</td><td>103</td></tr><tr><td>Currency translation adjustment</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>72,853</td><td>—</td><td>—</td><td>—</td><td>72,853</td></tr><tr><td>Prior pension and post-retirement benefit service cost and actuarial gain</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(2,174)</td><td>—</td><td>—</td><td>—</td><td>(2,174)</td></tr><tr><td>CECL adoption</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(131)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(131)</td></tr><tr><td>Net earnings</td><td>—</td><td>—</td><td>—</td><td>—</td><td>515,595</td><td>—</td><td>—</td><td>—</td><td>—</td><td>515,595</td></tr><tr><td>Balances at December 31, 2020</td><td>$—</td><td>77,624</td><td>$776</td><td>$1,885,142</td><td>$7,559,191</td><td>$(695,145)</td><td>(7,346)</td><td>(215,648)</td><td>$6,842</td><td>$8,541,158</td></tr></table>

See accompanying notes to consolidated financial statements.



<table><tr><td>Years ended December 31,</td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>(In thousands)</td><td></td><td></td><td></td></tr><tr><td>CASH FLOWS FROM OPERATING ACTIVITIES:</td><td></td><td></td><td></td></tr><tr><td>Net earnings</td><td>$ 515,727</td><td>744,571</td><td>864,855</td></tr><tr><td>Adjustments to reconcile net earnings to net cash provided by operating activities:</td><td></td><td></td><td></td></tr><tr><td>Restructuring</td><td>103,695</td><td>90,341</td><td>58,991</td></tr><tr><td>Depreciation and amortization</td><td>607,507</td><td>576,452</td><td>521,765</td></tr><tr><td>Deferred income taxes</td><td>22,324</td><td>(107,842)</td><td>88,456</td></tr><tr><td>Loss (gain) on disposal of property, plant and equipment</td><td>6,296</td><td>1,608</td><td>(205)</td></tr><tr><td>Stock-based compensation expense</td><td>19,697</td><td>23,620</td><td>31,382</td></tr><tr><td>Impairment of net investment in a manufacturer and distributor of ceramic tile in China</td><td>—</td><td>59,906</td><td>—</td></tr><tr><td>Changes in operating assets and liabilities, net of effects of acquisitions:</td><td></td><td></td><td></td></tr><tr><td>Receivables, net</td><td>(54,977)</td><td>81,953</td><td>13,856</td></tr><tr><td>Inventories</td><td>357,516</td><td>7,212</td><td>(255,391)</td></tr><tr><td>Accounts payable and accrued expenses</td><td>255,466</td><td>(52,065)</td><td>(69,847)</td></tr><tr><td>Other assets and prepaid expenses</td><td>(55,084)</td><td>3,625</td><td>(79,482)</td></tr><tr><td>Other liabilities</td><td>(8,328)</td><td>(10,620)</td><td>6,964</td></tr><tr><td>Net cash provided by operating activities</td><td>1,769,839</td><td>1,418,761</td><td>1,181,344</td></tr><tr><td>CASH FLOWS FROM INVESTING ACTIVITIES:</td><td></td><td></td><td></td></tr><tr><td>Additions to property, plant and equipment</td><td>(425,557)</td><td>(545,462)</td><td>(794,110)</td></tr><tr><td>Acquisitions, net of cash acquired</td><td>—</td><td>(81,082)</td><td>(568,960)</td></tr><tr><td>Purchases of short-term investments</td><td>(1,187,891)</td><td>(581,500)</td><td>(664,133)</td></tr><tr><td>Redemption of short-term investments</td><td>658,650</td><td>592,000</td><td>695,000</td></tr><tr><td>Net cash used in investing activities</td><td>(954,798)</td><td>(616,044)</td><td>(1,332,203)</td></tr><tr><td>CASH FLOWS FROM FINANCING ACTIVITIES:</td><td></td><td></td><td></td></tr><tr><td>Payments on Senior Credit Facilities</td><td>(633,134)</td><td>(488,978)</td><td>(813,182)</td></tr><tr><td>Proceeds from Senior Credit Facilities</td><td>617,883</td><td>448,587</td><td>809,287</td></tr><tr><td>Payments on commercial paper</td><td>(4,890,991)</td><td>(15,168,820)</td><td>(16,756,404)</td></tr><tr><td>Proceeds from commercial paper</td><td>4,195,353</td><td>14,540,177</td><td>16,988,398</td></tr><tr><td>Proceeds from Floating Rate Notes</td><td>—</td><td>331,325</td><td>353,649</td></tr><tr><td>Payment on Floating Rate Notes</td><td>—</td><td>(331,325)</td><td>—</td></tr><tr><td>Proceeds from Senior Notes issuance</td><td>1,062,240</td><td>—</td><td>—</td></tr><tr><td>Repayments on Senior Notes</td><td>(326,904)</td><td>—</td><td>—</td></tr><tr><td>Proceeds from Term Loan Facility</td><td>500,000</td><td>—</td><td>—</td></tr><tr><td>Repayment on Term Loan Facility</td><td>(500,000)</td><td>—</td><td>—</td></tr><tr><td>Payments of other debt and financing costs</td><td>(4,799)</td><td>(4,294)</td><td>(69,569)</td></tr><tr><td>Debt issuance costs</td><td>(11,413)</td><td>(3,028)</td><td>(890)</td></tr><tr><td>Purchase of redeemable noncontrolling and noncontrolling interest</td><td>—</td><td>—</td><td>(34,944)</td></tr><tr><td>Purchase of Mohawk common stock</td><td>(188,625)</td><td>(100,080)</td><td>(274,144)</td></tr><tr><td>Change in outstanding checks in excess of cash</td><td>(4,256)</td><td>(4,664)</td><td>5,753</td></tr><tr><td>Shares redeemed for taxes</td><td>(3,539)</td><td>(8,777)</td><td>(9,925)</td></tr><tr><td>Net cash (used in) provided by financing activities</td><td>(188,185)</td><td>(789,877)</td><td>198,029</td></tr><tr><td>Effect of exchange rate changes on cash and cash equivalents</td><td>6,984</td><td>2,895</td><td>(13,004)</td></tr><tr><td>Net change in cash and cash equivalents</td><td>633,840</td><td>15,735</td><td>34,166</td></tr><tr><td>Cash and cash equivalents, beginning of year</td><td>134,785</td><td>119,050</td><td>84,884</td></tr><tr><td>Cash and cash equivalents, end of year</td><td>$ 768,625</td><td>134,785</td><td>119,050</td></tr></table>

See accompanying notes to consolidated financial statements.



YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 (IN THOUSANDS, EXCEPT PER SHARE DATA)

## (1) Summary of Significant Accounting Policies

## (a) Basis of Presentation

Mohawk Industries, Inc. (“Mohawk” or the “Company”), a term which includes the Company and its subsidiaries, is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company’s vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile (“LVT”) and sheet vinyl flooring.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

## (b) The COVID-19 Pandemic

During 2020, the Company 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. Although we believe that we can manage our exposure to these risks, there is no guarantee that we will be able to do so in the future. The Company continues to follow the recommendations of local health authorities to minimize exposure risk for its employees, suppliers, customers and other stakeholders. The Company has implemented business continuity plans during the crisis and is attempting to minimize the pandemic’s impact, but it may be unable to adequately respond to further outbreaks in particular geographies and its 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 the successful implementation of vaccination programs and the continued fiscal support currently provided by governments. Accordingly, the COVID-19 pandemic and the related global reaction could have a material adverse effect on the Company’s business, results of operations and financial condition.

## (c) Cash and Cash Equivalents

The Company considers investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2020, the Company had cash and cash equivalents of $768,625 of which $436,948 was held outside the United States. As of December 31, 2019, the Company had cash and cash equivalents of $134,785 of which $110,033 was held outside the United States.

## (d) Short-term Investments

The Company invests in high quality credit instruments. At December 31, 2020, such investments consisted of a short-duration bond fund and managed income fund. At December 31, 2019, amounts consisted solely of investments in the Company’s commercial paper by its wholly-owned captive insurance company. Such investments are not insured by the Federal Deposit Insurance Corporation.

The Company’s investment in the short-duration bond fund and managed income fund is classified as an equity security, recorded at fair value based on the closing market price of the security. The Company recognizes dividends, realized and unrealized gains and losses to other expense (income), net in the statement of operations.

## (e) Fair Value

Accounting principles generally accepted in the U.S. define fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.



## (f) Accounts Receivable and Revenue Recognition

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 (includes sheet vinyl and LVT), 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.

The Company accounts for incremental costs of obtaining a contract as an expense when incurred in selling, general and administrative expenses if the amortization period is less than one year.

The Company accounts for shipping and handling activities performed after control has been transferred as a fulfillment cost in cost of sales.

## (g) Inventories

The Company accounts for all inventories on the first-in, first-out (“FIFO”) method. Inventories are stated at the lower of cost or net realizable value. Cost has been determined using the FIFO method. Costs included in inventory include raw materials, direct and indirect labor and employee benefits, depreciation, general manufacturing overhead and various other costs of manufacturing. Inventories on hand are compared against anticipated future usage, which is a function of historical usage, anticipated future selling price, expected sales below cost, excessive quantities and an evaluation for obsolescence.

## (h) Property, Plant and Equipment

Property, plant and equipment are stated at cost, including capitalized interest. Depreciation is calculated on a straight-line basis over the estimated remaining useful lives, which are 15-40 years for buildings and improvements, 3-25 years for machinery and equipment, the shorter of the estimated useful life or lease term for leasehold improvements and 3-7 years for furniture and fixtures.

## (i) Accounting for Business Combinations

The Company accounts for business combinations under the acquisition method of accounting which requires it to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.

## (j) Goodwill and Other Intangible Assets

In accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 350, Intangibles-Goodwill and Other, the Company tests goodwill and other intangible assets with indefinite lives for impairment on an annual basis on the first day of the fourth quarter (or on an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value). The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment. The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management’s judgments and assumptions using the discounted cash flows and comparable company market valuation approaches. The Company has identified Global Ceramic, Flooring NA, and Flooring ROW as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital (“WACC”), and comparable company market multiples.

When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Should a significant or prolonged deterioration in economic conditions occur, such as continued declines in spending for new construction, remodeling and replacement activities; the inability to pass increases in the costs of raw materials and fuel on to customers; or a decline in comparable company market multiples, then key judgments and assumptions could be impacted.

The impairment evaluation for indefinite lived intangible assets, which for the Company are its trademarks, is conducted on the first day of the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The impairment tests for indefinite lived intangible assets may be completed through an assessment of qualitative factors to determine the existence of events or circumstances that would indicate that it is not more likely than not that the fair value of these assets is less than their carrying amounts. If the qualitative assessment indicates it is not more likely than not that the fair value of these assets is less than their carrying amount, a quantitative impairment test is not required. If a quantitative test is necessary, the Company estimates the fair value of the intangible asset and compares it to



its carrying amount. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company may also elect to bypass the qualitative assessment and perform a quantitative impairment test in any period. If the Company elects to perform a quantitative impairment test, it may resume the qualitative assessment in subsequent periods.

The determination of fair value used in the impairment evaluation is based on discounted estimates of future sales projections attributable to ownership of the trademarks. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, applicable discount rate and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the trademarks. Estimated cash flows are sensitive to changes in the economy among other things.

Intangible assets that do not have indefinite lives are amortized based on average lives, which range from 7-16 years.

## (k) Leases

The Company measures right of use (“ROU”) assets and lease 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 and expensed as incurred. 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 10 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 the Company’s leases include options to purchase the leased improvements are limited by the expected lease term.

## (l) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

## (m) Financial Instruments

The Company’s financial instruments consist primarily of short-term investments, receivables, accounts payable, accrued expenses and long-term debt. The carrying amounts of receivables, accounts payable and accrued expenses approximate their fair value because of the short-term maturity of such instruments. The Company has a wholly-owned captive insurance company that may periodically 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 level two fair value hierarchy. The carrying amount of the Company’s floating rate debt approximates its fair value based upon level two fair value hierarchy. Interest rates that are currently available to the Company for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of the Company’s long-term debt.

## (n) Advertising Costs and Vendor Consideration

Advertising and promotion expenses are charged to earnings during the period in which they are incurred. Advertising and promotion expenses included in selling, general, and administrative expenses were $105,974 in 2020, $130,207 in 2019 and $116,854 in 2018.

Vendor consideration, generally cash, is classified as a reduction of net sales, unless specific criteria are met regarding goods or services that the Company may receive in return for this consideration. The Company makes various payments to customers, including rebates, slotting fees, advertising allowances, buy-downs and co-op advertising. All of these payments reduce gross sales with the exception of co-op advertising. Co-op advertising expenses, classified as a selling, general



and administrative expense, were $16,087 in 2020, $11,418 in 2019 and $13,332 in 2018.

## (o) Product Warranties

The Company warrants certain qualitative attributes of its flooring products. The Company has recorded a provision for estimated warranty and related costs, based on historical experience and periodically adjusts these provisions to reflect actual experience.

## (p) Impairment of Long-Lived Assets

The Company reviews its long-lived asset groups, which include intangible assets such as patents and customer relationships subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated by these asset groups. If such asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.

## (q) Foreign Currency Translation

The Company’s subsidiaries that operate outside the United States generally use their local currency as the functional currency. The functional currency is translated into U.S. Dollars for balance sheet accounts using the month end rates in effect as of the balance sheet date and average exchange rate for revenue and expense accounts for each respective period. The translation adjustments are deferred as a separate component of stockholders’ equity, within accumulated other comprehensive income (loss). Gains or losses resulting from transactions denominated in foreign currencies are included in other income or expense, within the consolidated statements of operations.

## (r) 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 years ended December 31, 2020, December 31, 2019 and December 31, 2018 the change in the U.S. dollar value of the Company’s euro denominated debt was an increase of $54,907 [$41,708 net of taxes], a decrease of $12,049 [$9,153 net of taxes] and a decrease of $27,948 [$20,376 net of taxes], respectively, which is recorded in the foreign currency translation adjustment component of accumulated other comprehensive income (loss). The increase in the U.S. dollar value of the Company’s debt partially offsets the euro-to-dollar translation of the Company’s net investment in its European operations.

## (s) Earnings per Share (“EPS”)

Basic net earnings per share (“EPS”) is calculated using net earnings available to common stockholders divided by the weighted-average number of shares of common stock outstanding during the year. Diluted EPS is similar to basic EPS except that the weighted-average number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

Dilutive common stock options are included in the diluted EPS calculation using the treasury stock method. There were no common stock options and unvested restricted shares (units) that were excluded from the diluted EPS computation because the price was greater than the average market price of the common shares for the periods presented for 2020, 2019 and 2018.



Computations of basic and diluted earnings per share are presented in the following table:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Net earnings attributable to Mohawk Industries, Inc.</td><td>$515,595</td><td>744,211</td><td>861,704</td></tr><tr><td>Accretion of redeemable noncontrolling interest \( ^{[a]} \)</td><td>—</td><td>—</td><td>[3,892]</td></tr><tr><td>Net earnings available to common stockholders</td><td>$515,595</td><td>744,211</td><td>857,812</td></tr><tr><td>Weighted-average common shares outstanding-basic and diluted:</td><td></td><td></td><td></td></tr><tr><td>Weighted-average common shares outstanding—basic</td><td>71,214</td><td>71,986</td><td>74,413</td></tr><tr><td>Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net</td><td>187</td><td>278</td><td>360</td></tr><tr><td>Weighted-average common shares outstanding-diluted</td><td>71,401</td><td>72,264</td><td>74,773</td></tr><tr><td>Earnings per share attributable to Mohawk Industries, Inc.</td><td></td><td></td><td></td></tr><tr><td>Basic</td><td>$ 7.24</td><td>10.34</td><td>11.53</td></tr><tr><td>Diluted</td><td>$ 7.22</td><td>10.30</td><td>11.47</td></tr></table>

(a) Represents the accretion of the Company’s redeemable noncontrolling interest to redemption value. The holder put this option to the Company on December 20, 2018 for $33,884.

## (t) 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 ASC 718-10, "Stock Compensation." Compensation expense is generally recognized on a straight-line basis over the awards' estimated lives for fixed awards with ratable vesting provisions.

## (u) Employee Benefit Plans

The Company has 401(k) retirement savings plans (the "Mohawk Plan") open to substantially all U.S. and Puerto Rico based employees who have completed 60 days of eligible service. The Company contributes $.50 for every $1.00 of employee contributions up to a maximum of 6% of the employee's salary based upon each individual participant's election. Employee and employer contributions to the Mohawk Plan were $56,241 and $13,509 in 2020, $57,354 and $23,008 in 2019 and $55,796 and $22,689 in 2018, respectively.

The Company also has various pension plans covering employees in Belgium, France, and the Netherlands (the "Non-U.S. Plans") within the Flooring ROW segment. Benefits under the Non-U.S. Plans depend on compensation and years of service. The Non-U.S. Plans are funded in accordance with local regulations. The Company uses December 31 as the measurement date for its Non-U.S. Plans. The Company's projected benefit obligation and plan assets as of December 31, 2020 were $86,722 and $68,413, respectively. The Company's projected benefit obligation and plan assets as of December 31, 2019 were $73,510 and $60,040, respectively. As of December 31, 2020, the funded status of the Non-U.S. Plans was a liability of $18,309 of which $7,005 was recorded in accumulated other comprehensive income, for a net liability of $11,304 recorded in other long-term liabilities within the consolidated balance sheets. As of December 31, 2019, the funded status of the Non-U.S. Plans was a liability of $13,470 of which $8,303 was recorded in accumulated other comprehensive income, for a net liability of $5,167 recorded in other long-term liabilities within the consolidated balance sheets.

## (v) Comprehensive Income (Loss)

Comprehensive income (loss) includes foreign currency translation of assets and liabilities of foreign subsidiaries, effects of exchange rate changes on intercompany balances of a long-term nature and pensions. The Company does not provide income taxes on currency translation adjustments, as earnings from foreign subsidiaries are considered to be indefinitely reinvested. The Company presents currency translation adjustments on noncontrolling interests separately from currency translation adjustments on controlling interests in accumulated other comprehensive income (loss) within stockholders' equity.



The changes in accumulated other comprehensive income (loss) by component, net of tax, for years ended December 31, 2020, 2019 and 2018 are as follows:

<table><tr><td></td><td>Foreign currency translation adjustments</td><td>Pensions and post-retirement benefits</td><td>Total</td></tr><tr><td>Balance as of December 31, 2017</td><td>$[547,927]</td><td>[10,600]</td><td>[558,527]</td></tr><tr><td>Current period other comprehensive income (loss) before reclassifications</td><td>[234,175]</td><td>1,094</td><td>[233,081]</td></tr><tr><td>Balance as of December 31, 2018</td><td>[782,102]</td><td>[9,506]</td><td>[791,608]</td></tr><tr><td>Current period other comprehensive income (loss) before reclassifications</td><td>28,994</td><td>[3,210]</td><td>25,784</td></tr><tr><td>Balance as of December 31, 2019</td><td>[753,108]</td><td>[12,716]</td><td>[765,824]</td></tr><tr><td>Current period other comprehensive income (loss) before reclassifications</td><td>72,853</td><td>[2,174]</td><td>70,679</td></tr><tr><td>Balance as of December 31, 2020</td><td>$(680,255)</td><td>(14,890)</td><td>(695,145)</td></tr></table>

## (w) Self-Insurance Reserves

The Company is self-insured in the U.S. for various levels of general liability, automobile liability, workers' compensation and employee medical coverage. Insurance reserves are calculated on an undiscounted basis based on actual claim data and estimates of incurred but not reported claims developed utilizing historical claim trends. Projected settlements and incurred but not reported claims are estimated based on pending claims and historical trends and data. Though the Company does not expect them to do so, actual settlements and claims could differ materially from those estimated. Material differences in actual settlements and claims could have an adverse effect on the Company's results of operations and financial condition.

The Company has a wholly-owned captive insurance company, Mohawk Assurance Services, Inc. (“MAS”). MAS insures the retained portion of the Company’s U.S. general liability, automobile liability, and workers’ compensation exposures. In the fourth quarter of 2020, the Company also moved pandemic, terrorism and medical coverage to MAS.

## (x) Fiscal Year

The Company ends its fiscal year on December 31. Each of the first three quarters in the fiscal year ends on the Saturday nearest the calendar quarter end with a thirteen week fiscal quarter.

## (y) 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 January 1, 2021 for the Company. The Company evaluated the impact that this accounting standards update will have on its consolidated financial statements and does not expect the adoption of this guidance to have a significant impact to the financial statements.

## Recently Adopted

In June 2016, the FASB issued 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. The Company adopted the new standard in the fourth quarter of 2019. The effect of adopting the new standard was not material.

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 the Company’s 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. The Company’s accounting for finance leases remained substantially unchanged. See Note 12, 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.

## (2) Acquisitions

## 2019 Acquisitions

During 2019, the Company acquired two hard surface flooring distribution companies based in the Netherlands and the Czech Republic for $76,237, which resulted in allocations of goodwill 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, the Company completed the acquisition of three hard surface distribution businesses in the Flooring ROW segment for $24,610, resulting in a goodwill allocation of $12,874 and intangibles subject to amortization of $7.

## (3) Revenue from Contracts with Customers

## 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 $39,466 and $34,959 as of December 31, 2020 and December 31, 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 years ended December 31, 2020, 2019, and 2018 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 $59,847 and $69,039 as of December 31, 2020 and December 31, 2019, respectively. Straight-line amortization expense recognized during 2020 related to these capitalized costs was $68,201.



## Revenue disaggregation

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories during the years ended December 31, 2020, 2019 and 2018, respectively:

<table><tr><td>December 31, 2020</td><td>Global Ceramic segment</td><td>Flooring NA segment</td><td>Flooring ROW segment</td><td>Total</td></tr><tr><td>GEOGRAPHICAL MARKETS</td><td></td><td></td><td></td><td></td></tr><tr><td>United States</td><td>$2,050,470</td><td>3,477,556</td><td>2,381</td><td>5,530,407</td></tr><tr><td>Europe</td><td>699,715</td><td>1,506</td><td>1,785,549</td><td>2,486,770</td></tr><tr><td>Russia</td><td>262,846</td><td>50</td><td>122,934</td><td>385,830</td></tr><tr><td>Other</td><td>419,725</td><td>114,963</td><td>614,502</td><td>1,149,190</td></tr><tr><td>Total</td><td>$3,432,756</td><td>3,594,075</td><td>2,525,366</td><td>9,552,197</td></tr><tr><td>PRODUCT CATEGORIES</td><td></td><td></td><td></td><td></td></tr><tr><td>Ceramic &amp; Stone</td><td>$3,425,672</td><td>31,531</td><td>—</td><td>3,457,203</td></tr><tr><td>Carpet &amp; Resilient</td><td>7,084</td><td>2,871,050</td><td>857,754</td><td>3,735,888</td></tr><tr><td>Laminate &amp; Wood</td><td>—</td><td>691,494</td><td>847,473</td><td>1,538,967</td></tr><tr><td>Other \( ^{(1)} \)</td><td>—</td><td>—</td><td>820,139</td><td>820,139</td></tr><tr><td>Total</td><td>$3,432,756</td><td>3,594,075</td><td>2,525,366</td><td>9,552,197</td></tr><tr><td>December 31, 2019</td><td>Global Ceramic segment</td><td>Flooring NA segment</td><td>Flooring ROW segment</td><td>Total</td></tr><tr><td>GEOGRAPHICAL MARKETS</td><td></td><td></td><td></td><td></td></tr><tr><td>United States</td><td>$2,131,029</td><td>3,688,691</td><td>2,873</td><td>5,822,593</td></tr><tr><td>Europe</td><td>711,762</td><td>6,922</td><td>1,813,555</td><td>2,532,239</td></tr><tr><td>Russia</td><td>269,142</td><td>66</td><td>116,187</td><td>385,395</td></tr><tr><td>Other</td><td>519,209</td><td>148,035</td><td>563,201</td><td>1,230,445</td></tr><tr><td>Total</td><td>$3,631,142</td><td>3,843,714</td><td>2,495,816</td><td>9,970,672</td></tr><tr><td>PRODUCT CATEGORIES</td><td></td><td></td><td></td><td></td></tr><tr><td>Ceramic &amp; Stone</td><td>$3,631,142</td><td>55,503</td><td>—</td><td>3,686,645</td></tr><tr><td>Carpet &amp; Resilient</td><td>—</td><td>3,136,474</td><td>785,295</td><td>3,921,769</td></tr><tr><td>Laminate &amp; Wood</td><td>—</td><td>651,737</td><td>849,340</td><td>1,501,077</td></tr><tr><td>Other \( ^{(1)} \)</td><td>—</td><td>—</td><td>861,181</td><td>861,181</td></tr><tr><td>Total</td><td>$3,631,142</td><td>3,843,714</td><td>2,495,816</td><td>9,970,672</td></tr><tr><td>December 31, 2018</td><td>Global Ceramic segment</td><td>Flooring NA segment</td><td>Flooring ROW segment</td><td>Total</td></tr><tr><td>GEOGRAPHICAL MARKETS</td><td></td><td></td><td></td><td></td></tr><tr><td>United States</td><td>$2,251,233</td><td>3,851,267</td><td>1,289</td><td>6,103,789</td></tr><tr><td>Europe</td><td>714,315</td><td>6,487</td><td>1,861,890</td><td>2,582,692</td></tr><tr><td>Russia</td><td>245,867</td><td>2</td><td>103,351</td><td>349,220</td></tr><tr><td>Other</td><td>341,441</td><td>171,392</td><td>435,100</td><td>947,933</td></tr><tr><td>Total</td><td>$3,552,856</td><td>4,029,148</td><td>2,401,630</td><td>9,983,634</td></tr><tr><td>PRODUCT CATEGORIES</td><td></td><td></td><td></td><td></td></tr><tr><td>Ceramic &amp; Stone</td><td>$3,552,856</td><td>68,337</td><td>—</td><td>3,621,193</td></tr><tr><td>Carpet &amp; Resilient</td><td>—</td><td>3,258,029</td><td>645,669</td><td>3,903,698</td></tr><tr><td>Laminate &amp; Wood</td><td>—</td><td>702,782</td><td>850,250</td><td>1,553,032</td></tr><tr><td>Other \( ^{(1)} \)</td><td>—</td><td>—</td><td>905,711</td><td>905,711</td></tr><tr><td>Total</td><td>$3,552,856</td><td>4,029,148</td><td>2,401,630</td><td>9,983,634</td></tr></table>

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



## (4) Restructuring, Acquisition Transaction 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 including accelerated depreciation (“Asset write-downs”) and workforce reductions.

Restructuring, acquisition transaction and integration-related costs consisted of the following during the year ended December 31, 2020, 2019 and December 31, 2018, respectively (in thousands):

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>COST OF SALES</td><td></td><td></td><td></td></tr><tr><td>Restructuring costs \( ^{(1)} \)</td><td>101,230</td><td>84,844</td><td>43,733</td></tr><tr><td>Acquisition integration-related costs</td><td>1,153</td><td>3,458</td><td>3,330</td></tr><tr><td>Restructuring and acquisition integration-related costs</td><td>102,383</td><td>88,302</td><td>47,063</td></tr><tr><td>SELLING, GENERAL AND ADMINISTRATIVE EXPENSES</td><td></td><td></td><td></td></tr><tr><td>Restructuring costs \( ^{(1)} \)</td><td>24,127</td><td>5,497</td><td>15,259</td></tr><tr><td>Acquisition transaction-related costs</td><td>213</td><td>1,502</td><td>4,977</td></tr><tr><td>Acquisition integration-related costs</td><td>2,127</td><td>5,871</td><td>11,351</td></tr><tr><td>Restructuring, acquisition transaction and integration-related costs</td><td>26,467</td><td>12,870</td><td>31,587</td></tr></table>

(1) The restructuring costs for 2020, 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 Company currently estimates that it will incur additional restructuring costs of approximately $18,000 primarily related to accelerated depreciation and period closure costs mainly in its Flooring North America segment.



The restructuring activity for the years ended December 31, 2020 and 2019, respectively is as follows (in thousands):

<table><tr><td></td><td>Lease impairments</td><td>Asset write-downs</td><td>Severance</td><td>Other restructuring costs</td><td>Total</td></tr><tr><td>Balance as of December 31, 2018</td><td>$ 397</td><td>—</td><td>7,866</td><td>250</td><td>8,513</td></tr><tr><td>Provision</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>—</td><td>—</td><td>5,264</td><td>—</td><td>5,264</td></tr><tr><td>Flooring NA segment</td><td>—</td><td>37,820</td><td>2,617</td><td>33,975</td><td>74,412</td></tr><tr><td>Flooring ROW segment</td><td>—</td><td>3,936</td><td>4,615</td><td>2,099</td><td>10,650</td></tr><tr><td>Corporate</td><td>—</td><td>—</td><td>15</td><td>—</td><td>15</td></tr><tr><td>Total provision for the Year 2019</td><td>—</td><td>41,756</td><td>12,511</td><td>36,074</td><td>90,341</td></tr><tr><td>Cash payments</td><td>(376)</td><td>—</td><td>(16,113)</td><td>(19,165)</td><td>(35,654)</td></tr><tr><td>Non-cash items</td><td>—</td><td>(41,756)</td><td>(142)</td><td>(17,043)</td><td>(58,941)</td></tr><tr><td>Balance as of December 31, 2019</td><td>21</td><td>—</td><td>4,122</td><td>116</td><td>4,259</td></tr><tr><td>Provision</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>2,239</td><td>19,963</td><td>13,987</td><td>6,927</td><td>43,116</td></tr><tr><td>Flooring NA segment</td><td>227</td><td>32,902</td><td>4,660</td><td>13,809</td><td>51,598</td></tr><tr><td>Flooring ROW segment</td><td>—</td><td>12,913</td><td>5,746</td><td>6,391</td><td>25,050</td></tr><tr><td>Corporate</td><td>—</td><td>3,685</td><td>1,908</td><td>—</td><td>5,593</td></tr><tr><td>Total provision for the Year 2020</td><td>2,466</td><td>69,463</td><td>26,301</td><td>27,127</td><td>125,357</td></tr><tr><td>Cash payments</td><td>(21)</td><td>—</td><td>(20,001)</td><td>(18,425)</td><td>(38,447)</td></tr><tr><td>Non-cash items</td><td>(2,466)</td><td>(69,463)</td><td>1,154</td><td>(8,089)</td><td>(78,864)</td></tr><tr><td>Balance as of December 31, 2020</td><td>$ —</td><td>—</td><td>11,576</td><td>729</td><td>12,305</td></tr><tr><td>2019 provision amounts recorded in:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of sales</td><td>$ —</td><td>41,756</td><td>8,273</td><td>34,815</td><td>84,844</td></tr><tr><td>Selling, general and administrative expenses</td><td>—</td><td>—</td><td>4,238</td><td>1,259</td><td>5,497</td></tr><tr><td>Total provision for the Year 2019</td><td>$ —</td><td>41,756</td><td>12,511</td><td>36,074</td><td>90,341</td></tr><tr><td>2020 provision amounts recorded in:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Cost of sales</td><td>$ —</td><td>64,415</td><td>13,949</td><td>22,866</td><td>101,230</td></tr><tr><td>Selling, general and administrative expenses</td><td>2,466</td><td>5,048</td><td>12,352</td><td>4,261</td><td>24,127</td></tr><tr><td>Total provision for the Year 2020</td><td>$2,466</td><td>69,463</td><td>26,301</td><td>27,127</td><td>125,357</td></tr></table>

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



## (5) Fair Value

For publicly-traded investment securities, consisting 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 December 31, 2020 and December 31, 2019:

<table><tr><td></td><td>Fair Value
December 31, 2020</td><td>Fair Value
December 31, 2019</td></tr><tr><td>CASH AND CASH EQUIVALENTS:</td><td></td><td></td></tr><tr><td>Money market fund (Level 1)</td><td>$197,835</td><td>—</td></tr><tr><td>SHORT-TERM INVESTMENTS:</td><td></td><td></td></tr><tr><td>Short-term investments (Level 1) \( ^{(1)} \)</td><td>571,741</td><td>—</td></tr><tr><td>Commercial paper (Level 2)</td><td>—</td><td>42,500</td></tr></table>

(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 10—Long-Term Debt.

## (6) Receivables, net

<table><tr><td></td><td>December 31, 2020</td><td>December 31, 2019</td></tr><tr><td>Customers, trade</td><td>$1,591,503</td><td>1,491,592</td></tr><tr><td>Income tax receivable</td><td>112,580</td><td>8,428</td></tr><tr><td>Other</td><td>89,092</td><td>88,520</td></tr><tr><td></td><td>1,793,175</td><td>1,588,540</td></tr><tr><td>Less: allowance for discounts, returns, claims and doubtful accounts \( ^{(1)} \)</td><td>83,682</td><td>61,921</td></tr><tr><td>Receivables, net</td><td>$1,709,493</td><td>1,526,619</td></tr></table>

(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 following table reflects the activity of allowances for discounts, returns, claims and doubtful accounts for the years ended December 31:

<table><tr><td></td><td>Balance at beginning of year</td><td>Acquisitions</td><td>Additions charged to net sales or costs and expenses</td><td>Deductions \( ^{(1)} \)</td><td>Balance at end of year</td></tr><tr><td>2018</td><td>$86,103</td><td>4,240</td><td>317,716</td><td>333,341</td><td>74,718</td></tr><tr><td>2019</td><td>74,718</td><td>382</td><td>387,253</td><td>400,432</td><td>61,921</td></tr><tr><td>2020</td><td>61,921</td><td>—</td><td>384,403</td><td>362,642</td><td>83,682</td></tr></table>

(1) Represents charge-offs, net of recoveries.

## (7) Inventories

The components of inventories are as follows:

<table><tr><td></td><td>December 31, 2020</td><td>December 31, 2019</td></tr><tr><td>Finished goods</td><td>$1,372,234</td><td>1,610,742</td></tr><tr><td>Work in process</td><td>126,231</td><td>144,639</td></tr><tr><td>Raw materials</td><td>414,555</td><td>526,947</td></tr><tr><td>Total inventories</td><td>$1,913,020</td><td>2,282,328</td></tr></table>



## (8) Goodwill and Other Intangible Assets

The Company conducted its annual impairment assessment on the first day of the fourth quarter of 2020 and determined the fair values of its reporting units and trademarks exceeded their carrying values. As a result, no impairment was indicated.

The following table summarizes the components of intangible assets:

## Goodwill:

<table><tr><td></td><td>Global Ceramic</td><td>Flooring NA</td><td>Flooring ROW</td><td>Total</td></tr><tr><td>Balances as of December 31, 2018</td><td></td><td></td><td></td><td></td></tr><tr><td>Goodwill</td><td>$1,564,987</td><td>874,198</td><td>1,409,206</td><td>3,848,391</td></tr><tr><td>Accumulated impairment losses</td><td>(531,930)</td><td>(343,054)</td><td>(452,441)</td><td>(1,327,425)</td></tr><tr><td></td><td>1,033,057</td><td>531,144</td><td>956,765</td><td>2,520,966</td></tr><tr><td>Goodwill recognized during the period</td><td>13,197</td><td>—</td><td>49,619</td><td>62,816</td></tr><tr><td>Currency translation during the period</td><td>5,392</td><td>—</td><td>(19,147)</td><td>(13,755)</td></tr><tr><td>Balances as of December 31, 2019</td><td></td><td></td><td></td><td></td></tr><tr><td>Goodwill</td><td>1,583,576</td><td>874,198</td><td>1,439,678</td><td>3,897,452</td></tr><tr><td>Accumulated impairment losses</td><td>(531,930)</td><td>(343,054)</td><td>(452,441)</td><td>(1,327,425)</td></tr><tr><td></td><td>1,051,646</td><td>531,144</td><td>987,237</td><td>2,570,027</td></tr><tr><td>Goodwill recognized during the period</td><td>—</td><td>—</td><td>(9,642)</td><td>(9,642)</td></tr><tr><td>Currency translation during the period</td><td>(4,085)</td><td>—</td><td>94,531</td><td>90,446</td></tr><tr><td>Balances as of December 31, 2020</td><td></td><td></td><td></td><td></td></tr><tr><td>Goodwill</td><td>1,579,491</td><td>874,198</td><td>1,524,567</td><td>3,978,256</td></tr><tr><td>Accumulated impairment losses</td><td>(531,930)</td><td>(343,054)</td><td>(452,441)</td><td>(1,327,425)</td></tr><tr><td></td><td>$1,047,561</td><td>531,144</td><td>1,072,126</td><td>2,650,831</td></tr></table>

## Intangible assets:

<table><tr><td></td><td>Tradenames</td></tr><tr><td>INDEFINITE LIFE ASSETS NOT SUBJECT TO AMORTIZATION:</td><td></td></tr><tr><td>Balance as of December 31, 2018</td><td>$707,380</td></tr><tr><td>Intangible assets acquired during the year \( ^{(1)} \)</td><td>(874)</td></tr><tr><td>Currency translation during the year</td><td>(3,774)</td></tr><tr><td>Balance as of December 31, 2019</td><td>702,732</td></tr><tr><td>Currency translation during the year</td><td>24,536</td></tr><tr><td>Balance as of December 31, 2020</td><td>$727,268</td></tr></table>

(1) Includes adjustments on previously acquired intangible assets.

<table><tr><td></td><td>Customer relationships</td><td>Patents</td><td>Other</td><td>Total</td></tr><tr><td>INTANGIBLE ASSETS SUBJECT TO AMORTIZATION:</td><td></td><td></td><td></td><td></td></tr><tr><td>Balances as of December 31, 2018</td><td>$244,628</td><td>4,495</td><td>5,307</td><td>254,430</td></tr><tr><td>Intangible assets acquired during the year</td><td>2,092</td><td>—</td><td>—</td><td>2,092</td></tr><tr><td>Amortization during the year</td><td>(25,527)</td><td>(2,156)</td><td>70</td><td>(27,613)</td></tr><tr><td>Currency translation during the year</td><td>(2,752)</td><td>(111)</td><td>101</td><td>(2,762)</td></tr><tr><td>Balances as of December 31, 2019</td><td>218,441</td><td>2,228</td><td>5,478</td><td>226,147</td></tr><tr><td>Intangible assets acquired during the year</td><td>12,789</td><td>—</td><td>—</td><td>12,789</td></tr><tr><td>Amortization during the year</td><td>(26,612)</td><td>(2,195)</td><td>(84)</td><td>(28,891)</td></tr><tr><td>Currency translation during the year</td><td>13,921</td><td>111</td><td>262</td><td>14,294</td></tr><tr><td>Balances as of December 31, 2020</td><td>$218,539</td><td>144</td><td>5,656</td><td>224,339</td></tr></table>



<table><tr><td rowspan="2"></td><td colspan="5">December 31, 2020</td></tr><tr><td>Cost</td><td>Acquisitions</td><td>Currency translation</td><td>Accumulated amortization</td><td>Net Value</td></tr><tr><td>Customer Relationships</td><td>$645,206</td><td>12,789</td><td>41,800</td><td>481,256</td><td>218,539</td></tr><tr><td>Patents</td><td>249,100</td><td>—</td><td>24,470</td><td>273,426</td><td>144</td></tr><tr><td>Other</td><td>6,631</td><td>—</td><td>314</td><td>1,289</td><td>5,656</td></tr><tr><td>Total</td><td>$900,937</td><td>12,789</td><td>66,584</td><td>755,971</td><td>224,339</td></tr></table>

<table><tr><td rowspan="2"></td><td colspan="5">December 31, 2019</td></tr><tr><td>Cost</td><td>Acquisitions</td><td>Currency translation</td><td>Accumulated amortization</td><td>Net Value</td></tr><tr><td>Customer Relationships</td><td>$651,014</td><td>2,092</td><td>(7,900)</td><td>426,765</td><td>218,441</td></tr><tr><td>Patents</td><td>254,483</td><td>—</td><td>(5,383)</td><td>246,872</td><td>2,228</td></tr><tr><td>Other</td><td>6,534</td><td>—</td><td>97</td><td>1,153</td><td>5,478</td></tr><tr><td>Total</td><td>$912,031</td><td>2,092</td><td>(13,186)</td><td>674,790</td><td>226,147</td></tr></table>

<table><tr><td>Years Ended December 31,</td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Amortization expense</td><td>$28,891</td><td>27,613</td><td>30,745</td></tr></table>

Estimated amortization expense for the years ending December 31 are as follows:

<table><tr><td>2021</td><td>$29,429</td></tr><tr><td>2022</td><td>28,634</td></tr><tr><td>2023</td><td>26,998</td></tr><tr><td>2024</td><td>26,264</td></tr><tr><td>2025</td><td>26,064</td></tr></table>

## (9) Property, Plant and Equipment

Following is a summary of property, plant and equipment:

<table><tr><td>December 31,</td><td>2020</td><td>2019</td></tr><tr><td>Land</td><td>$ 484,450</td><td>469,837</td></tr><tr><td>Buildings and improvements</td><td>1,856,859</td><td>1,790,781</td></tr><tr><td>Machinery and equipment</td><td>5,987,272</td><td>5,602,474</td></tr><tr><td>Furniture and fixtures</td><td>164,027</td><td>163,017</td></tr><tr><td>Leasehold improvements</td><td>103,172</td><td>103,755</td></tr><tr><td>Construction in progress</td><td>309,486</td><td>366,144</td></tr><tr><td></td><td>8,905,266</td><td>8,496,008</td></tr><tr><td>Less: accumulated depreciation</td><td>4,314,037</td><td>3,797,091</td></tr><tr><td>Net property, plant and equipment</td><td>$4,591,229</td><td>4,698,917</td></tr></table>

Additions to property, plant and equipment included capitalized interest of $6,362, $7,214 and $10,684 in 2020, 2019 and 2018, respectively. Depreciation expense was $574,095, $544,733 and $487,411 for 2020, 2019 and 2018, respectively. Included in property, plant and equipment are finance leases with a cost of $58,170 and $35,271 and accumulated depreciation of $12,498 and $5,664 as of December 31, 2020 and 2019, respectively.

## (10) Long-Term 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 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 December 31, 2020), 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 December 31, 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 December 31, 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.

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 limitations contain customary exceptions or, in certain cases, do not apply as long as the Company is in compliance with the financial ratio requirements and is not otherwise in default. The Senior Credit Facility originally required the Company to maintain a Consolidated Interest Coverage Ratio of at least 3.00 to 1.00 and a Consolidated Net Leverage Ratio of no more than 3.75 to 1.00, each as of the 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 4.75 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 fiscal quarters ending on September 26, 2020 through (and including) the fiscal quarter 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.

As of December 31, 2020, amounts utilized under the Senior Credit Facility included zero borrowings and $787 of standby letters of credit related to various insurance contracts and foreign vendor commitments. Any outstanding borrowings under the Company’s U.S. and European commercial paper programs reduce availability under the Senior Credit Facility. The Company has utilized $787 under the Senior Credit Facility resulting in a total of $1,799,213 available as of December 31, 2020.

## 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.
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 December 31, 2020, there was zero outstanding under the U.S. commercial paper program and the European program.

## Senior Notes

On June 12, 2020, Mohawk Capital Finance S.A. (“Mohawk 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 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 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 2020 Floating Rate Notes was 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 amortized over the term of the 2020 Floating Rate Notes. On May 18, 2020, the Company paid the remaining €300,000 outstanding principal of the 2020 Floating Rate Notes utilizing cash on hand and borrowings under its commercial paper programs.

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 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 $911 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 €300,000 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 €500,000 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.
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

On April 7, 2020, the Company entered into a credit agreement that provided 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 could be used for funding working capital and general corporate purposes of the Company. The principal amount of the Term Loan Facility was to be repaid in a single installment on April 6, 2021. The Company could 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 were unsecured. The Term Loan Facility was subject to the same affirmative and negative covenants that are applicable to the Senior Credit Facility. The Company recorded financing costs of $1,088 in connection with the Term Loan Facility. On May 15, 2020, the Company prepaid the entire outstanding balance on the Term Loan Facility utilizing cash on hand and proceeds from the 3.625% Senior Notes and associated financing costs were written off in the quarter ending June 27, 2020.



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

<table><tr><td rowspan="2"></td><td colspan="3">At December 31, 2020</td><td colspan="2">At December 31, 2019</td></tr><tr><td>Fair Value</td><td>Carrying Value</td><td>Fair Value</td><td>Carrying Value</td><td></td></tr><tr><td>1.750% Senior Notes, payable June 12, 2027; interest payable annually</td><td>$ 635,664</td><td>615,006</td><td>—</td><td>—</td><td></td></tr><tr><td>3.625% Senior Notes, payable May 15, 2030; interest payable semi-annually</td><td>561,890</td><td>500,000</td><td>—</td><td>—</td><td></td></tr><tr><td>3.85% Senior Notes, payable February 1, 2023; interest payable semi-annually</td><td>638,844</td><td>600,000</td><td>627,144</td><td>600,000</td><td></td></tr><tr><td>2.00% Senior Notes, payable January 14, 2022; interest payable annually</td><td>624,680</td><td>615,006</td><td>580,235</td><td>560,099</td><td></td></tr><tr><td>2020 Floating Rate Notes, payable May 18, 2020; interest payable quarterly</td><td>—</td><td>—</td><td>336,066</td><td>336,059</td><td></td></tr><tr><td>2021 Floating Rate Notes, payable September 04, 2021; interest payable quarterly</td><td>368,738</td><td>369,004</td><td>335,965</td><td>336,059</td><td></td></tr><tr><td>U.S. commercial paper</td><td>—</td><td>—</td><td>317,000</td><td>317,000</td><td></td></tr><tr><td>European commercial paper</td><td>—</td><td>—</td><td>376,946</td><td>376,946</td><td></td></tr><tr><td>Five-year Senior unsecured Credit Facility, due October 18, 2024</td><td>—</td><td>—</td><td>16,803</td><td>16,803</td><td></td></tr><tr><td>Finance leases and other</td><td>46,302</td><td>46,302</td><td>30,049</td><td>30,049</td><td></td></tr><tr><td>Unamortized debt issuance costs</td><td>(11,176)</td><td>(11,176)</td><td>(3,129)</td><td>(3,129)</td><td></td></tr><tr><td>Total debt</td><td>2,864,942</td><td>2,734,142</td><td>2,617,079</td><td>2,569,886</td><td></td></tr><tr><td>Less current portion of long term debt and commercial paper</td><td>376,989</td><td>377,255</td><td>1,051,498</td><td>1,051,498</td><td></td></tr><tr><td>Long-term debt, less current portion</td><td>2,487,953</td><td>2,356,887</td><td>1,565,581</td><td>1,518,388</td><td></td></tr></table>

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.

The aggregate maturities of total debt as of December 31, 2020 are as follows \( ^{(1)} \) :

<table><tr><td>2021</td><td>$377,208</td></tr><tr><td>2022</td><td>622,832</td></tr><tr><td>2023</td><td>607,116</td></tr><tr><td>2024</td><td>5,459</td></tr><tr><td>2025</td><td>4,131</td></tr><tr><td>Thereafter</td><td>1,128,572</td></tr><tr><td></td><td>$2,745,318</td></tr></table>

(1) Debt maturity table excludes deferred loan costs.

## (11) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are as follows:

<table><tr><td>December 31,</td><td>2020</td><td>2019</td></tr><tr><td>Outstanding checks in excess of cash</td><td>$ 5,672</td><td>9,924</td></tr><tr><td>Accounts payable, trade</td><td>1,016,897</td><td>824,956</td></tr><tr><td>Accrued expenses</td><td>566,052</td><td>461,035</td></tr><tr><td>Product warranties</td><td>54,692</td><td>49,184</td></tr><tr><td>Accrued interest</td><td>30,403</td><td>21,050</td></tr><tr><td>Accrued compensation and benefits</td><td>222,235</td><td>192,991</td></tr><tr><td>Total accounts payable and accrued expenses</td><td>$1,895,951</td><td>1,559,140</td></tr></table>



## (12) Leases

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

The Company rents or subleases certain real estate to third parties. The Company’s sublease portfolio consists mainly of operating leases.

The components of lease costs for the twelve months ended December 31, 2020 and December 31, 2019 are as follows:

<table><tr><td rowspan="2"></td><td colspan="3">12 Months Ended December 31, 2020</td><td colspan="3">12 Months Ended December 31, 2019</td></tr><tr><td>Cost of Goods Sold</td><td>Selling General and Administrative</td><td>Total</td><td>Cost of Goods Sold</td><td>Selling, General and Administrative</td><td>Total</td></tr><tr><td>Operating lease costs</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Fixed</td><td>$25,067</td><td>102,504</td><td>127,571</td><td>30,002</td><td>97,988</td><td>127,990</td></tr><tr><td>Short-term</td><td>11,633</td><td>16,021</td><td>27,654</td><td>9,725</td><td>13,933</td><td>23,658</td></tr><tr><td>Variable</td><td>8,285</td><td>30,036</td><td>38,321</td><td>8,123</td><td>29,852</td><td>37,975</td></tr><tr><td>Sub-leases</td><td>(411)</td><td>(741)</td><td>(1,152)</td><td>(311)</td><td>(537)</td><td>(848)</td></tr><tr><td></td><td>$44,574</td><td>147,820</td><td>192,394</td><td>47,539</td><td>141,236</td><td>188,775</td></tr><tr><td></td><td colspan="3">12 Months Ended December 31, 2020</td><td colspan="3">12 Months Ended December 31, 2019</td></tr><tr><td></td><td>Depreciation and Amortization</td><td>Interest</td><td>Total</td><td>Depreciation and Amortization</td><td>Interest</td><td>Total</td></tr><tr><td>Finance lease costs</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Amortization of leased assets</td><td>$6,423</td><td>—</td><td>6,423</td><td>4,015</td><td>—</td><td>4,015</td></tr><tr><td>Interest on lease liabilities</td><td>—</td><td>690</td><td>690</td><td>—</td><td>491</td><td>491</td></tr><tr><td></td><td>$6,423</td><td>690</td><td>7,113</td><td>4,015</td><td>491</td><td>4,506</td></tr><tr><td>Net lease costs</td><td></td><td></td><td>$199,507</td><td></td><td></td><td>193,281</td></tr></table>

Rental expense under fixed operating leases was $143,513 in 2018.



Supplemental balance sheet information related to leases is as follows:

<table><tr><td></td><td>Classification</td><td>At December 31, 2020</td><td>At December 31, 2019</td></tr><tr><td>Assets</td><td></td><td></td><td></td></tr><tr><td>Operating Leases</td><td></td><td></td><td></td></tr><tr><td>Right of use operating lease assets</td><td>Right of use operating lease assets</td><td>$323,138</td><td>323,003</td></tr><tr><td>Finance Leases</td><td></td><td></td><td></td></tr><tr><td>Property, plant and equipment, gross</td><td>Property, plant and equipment</td><td>58,170</td><td>35,271</td></tr><tr><td>Accumulated depreciation</td><td>Accumulated depreciation</td><td>(12,498)</td><td>(5,664)</td></tr><tr><td>Property, plant and equipment, net</td><td>Property, plant and equipment, net</td><td>45,672</td><td>29,607</td></tr><tr><td>Total lease assets</td><td></td><td>$368,810</td><td>352,610</td></tr><tr><td>Liabilities</td><td></td><td></td><td></td></tr><tr><td>Operating Leases</td><td></td><td></td><td></td></tr><tr><td>Other current</td><td>Current operating lease liabilities</td><td>$ 98,042</td><td>101,945</td></tr><tr><td>Non-current</td><td>Non-current operating lease liabilities</td><td>234,726</td><td>228,155</td></tr><tr><td>Total operating liabilities</td><td></td><td>332,768</td><td>330,100</td></tr><tr><td>Finance Leases</td><td></td><td></td><td></td></tr><tr><td>Short-term debt</td><td>Short-term debt and current portion of long-term debt</td><td>8,025</td><td>4,835</td></tr><tr><td>Long-term debt</td><td>Long-term debt, less current portion</td><td>38,098</td><td>25,214</td></tr><tr><td>Total finance liabilities</td><td></td><td>46,123</td><td>30,049</td></tr><tr><td>Total lease liabilities</td><td></td><td>$378,891</td><td>360,149</td></tr></table>

Maturities of lease liabilities as of December 31, 2020 are as follows:

<table><tr><td>Year ending December 31,</td><td>Finance Leases</td><td>Operating Leases</td><td>Total</td></tr><tr><td>2021</td><td>$ 8,830</td><td>113,151</td><td>121,981</td></tr><tr><td>2022</td><td>8,399</td><td>88,607</td><td>97,006</td></tr><tr><td>2023</td><td>7,632</td><td>60,118</td><td>67,750</td></tr><tr><td>2024</td><td>5,870</td><td>38,785</td><td>44,655</td></tr><tr><td>2025</td><td>4,453</td><td>26,837</td><td>31,290</td></tr><tr><td>Thereafter</td><td>14,599</td><td>27,454</td><td>42,053</td></tr><tr><td>Total lease payments</td><td>49,783</td><td>354,952</td><td>404,735</td></tr><tr><td>Less imputed interest</td><td>3,660</td><td>22,184</td><td></td></tr><tr><td>Present value, Total</td><td>$46,123</td><td>332,768</td><td></td></tr></table>

The Company had approximately $12,375 of leases that commenced after December 31, 2020 that created rights and obligations to the Company. These leases are not included in the above maturity schedule.

Lease term and discount rate are as follows:

<table><tr><td></td><td>At December 31, 2020</td><td>At December 31, 2019</td></tr><tr><td>Weighted Average Remaining Lease Term</td><td></td><td></td></tr><tr><td>Operating Leases</td><td>4.5 years</td><td>4.3 years</td></tr><tr><td>Finance Leases</td><td>7.7 years</td><td>8.4 years</td></tr><tr><td>Weighted Average Discount Rate</td><td></td><td></td></tr><tr><td>Operating Leases</td><td>2.8%</td><td>3.3%</td></tr><tr><td>Finance Leases</td><td>1.4%</td><td>1.4%</td></tr></table>



Supplemental cash flow information related to leases was as follows:

<table><tr><td></td><td>12 Months Ended December 31, 2020</td><td>12 Months Ended December 31, 2019</td></tr><tr><td>Cash paid for amounts included in measurement of lease liabilities:</td><td></td><td></td></tr><tr><td>Operating cash flows from operating leases</td><td>$124,708</td><td>127,213</td></tr><tr><td>Operating cash flows from finance leases</td><td>690</td><td>349</td></tr><tr><td>Financing cash flows from finance leases</td><td>6,386</td><td>3,975</td></tr><tr><td>Right-of-use assets obtained in exchange for lease obligations:</td><td></td><td></td></tr><tr><td>Operating leases</td><td>110,036</td><td>133,959</td></tr><tr><td>Finance leases</td><td>18,248</td><td>20,464</td></tr><tr><td>Amortization:</td><td></td><td></td></tr><tr><td>Amortization of right of use operating lease assets \( ^{(1)} \)</td><td>113,898</td><td>109,884</td></tr></table>

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

## (13) Stock-Based Compensation

The Company recognized compensation expense for all share-based payments granted for the years ended December 31, 2020, 2019 and 2018 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.

Under the Company’s 2012 Incentive Plan (“2012 Plan”), the Company reserved up to a maximum of 3,200 shares of common stock for issuance upon the grant or exercise of stock options, restricted stock, restricted stock units (“RSUs”) and other types of awards, to directors and key employees through December 31, 2022. Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years with a 10-year contractual term. The grant date fair value of restricted stock and RSUs is equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years.

On May 19, 2017, the Company’s stockholders approved the 2017 Long-Term Incentive Plan (“2017 Plan”), which allows the Company to reserve up to a maximum of 3,000 shares of common stock for issuance upon the grant or exercise of awards under the 2017 Plan. No additional awards may be granted under the 2012 Plan after May 19, 2017.

## Restricted Stock Plans

A summary of the Company’s RSUs under the Company’s long-term incentive plans as of December 31, 2020, and changes during the year then ended is presented as follows:

<table><tr><td></td><td>Shares</td><td>Weighted average grant date fair value</td><td>Weighted average remaining contractual term (years)</td><td>Aggregate intrinsic value</td></tr><tr><td>Restricted Stock Units outstanding, December 31, 2019</td><td>362</td><td>$ 158.13</td><td></td><td></td></tr><tr><td>Granted</td><td>192</td><td>120.36</td><td></td><td></td></tr><tr><td>Released</td><td>[146]</td><td>203.05</td><td></td><td></td></tr><tr><td>Forfeited</td><td>[33]</td><td>140.69</td><td></td><td></td></tr><tr><td>Restricted Stock Units outstanding, December 31, 2020</td><td>375</td><td>$122.84</td><td>1.4</td><td>$52,822</td></tr><tr><td>Expected to vest as of December 31, 2020</td><td>361</td><td></td><td>1.4</td><td>$50,895</td></tr></table>

The Company recognized stock-based compensation costs related to the issuance of RSUs of $19,697 ($14,576, net of taxes), $23,620 ($17,479, net of taxes) and $31,382 ($24,436, net of taxes) for the years ended December 31, 2020, 2019 and 2018, respectively, which has been allocated to selling, general and administrative expenses. Pre-tax unrecognized compensation expense for unvested RSUs granted to employees, net of estimated forfeitures, was $17,706 as of December 31, 2020, and will be recognized as expense over a weighted-average period of approximately 1.60 years.



Additional information relating to the Company’s RSUs under the Company’s long-term incentive plans are as follows:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Restricted Stock Units outstanding, January 1</td><td>362</td><td>446</td><td>555</td></tr><tr><td>Granted</td><td>192</td><td>187</td><td>136</td></tr><tr><td>Released</td><td>(146)</td><td>(230)</td><td>(235)</td></tr><tr><td>Forfeited</td><td>(33)</td><td>(41)</td><td>(10)</td></tr><tr><td>Restricted Stock Units outstanding, December 31</td><td>375</td><td>362</td><td>446</td></tr><tr><td>Expected to vest as of December 31</td><td>361</td><td>356</td><td>440</td></tr></table>

During 2020, 2019 and 2018, a total of 1 shares were awarded each year to certain non-employee directors in lieu of cash for their annual retainers.

The Company has not granted stock options since the year ended December 31, 2012. At December 31, 2020, there were fully vested options to acquire 63 shares outstanding, with a weighted average remaining contractual term of less than one year.

## (14) Other Expense (Income)

Following is a summary of other expense (income):

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Foreign currency losses (gains), net</td><td>$ 7,815</td><td>(7,190)</td><td>9,613</td></tr><tr><td>Release of indemnification asset</td><td>—</td><td>(304)</td><td>4,606</td></tr><tr><td>Impairment of joint venture in Brazil</td><td>3,599</td><td>—</td><td>—</td></tr><tr><td>Dividend income</td><td>(2,976)</td><td>—</td><td>—</td></tr><tr><td>Impairment of net investment in a manufacturer and distributor of Ceramic tile in China \( ^{(1)} \)</td><td>—</td><td>59,906</td><td>—</td></tr><tr><td>All other, net</td><td>(9,189)</td><td>(16,005)</td><td>(6,921)</td></tr><tr><td>Total other expense (income), net</td><td>$ (751)</td><td>36,407</td><td>7,298</td></tr></table>

(1) During 2019, the Company determined that its net investment in a manufacturer and distributor of ceramic tile in China was impaired and therefore recorded a net impairment charge of $59,906.

## (15) Income Taxes

Following is a summary of earnings before income taxes for United States and foreign operations:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>United States</td><td>$ 94,829</td><td>163,764</td><td>387,564</td></tr><tr><td>Foreign</td><td>489,545</td><td>585,781</td><td>661,637</td></tr><tr><td>Earnings before income taxes</td><td>$584,374</td><td>749,545</td><td>1,049,201</td></tr></table>

Income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 consists of the following:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Current income taxes:</td><td></td><td></td><td></td></tr><tr><td>U.S. federal</td><td>$ (33,821)</td><td>19,936</td><td>22,700</td></tr><tr><td>State and local</td><td>7,794</td><td>12,659</td><td>14,521</td></tr><tr><td>Foreign</td><td>72,350</td><td>80,221</td><td>58,669</td></tr><tr><td>Total current</td><td>46,323</td><td>112,816</td><td>95,890</td></tr><tr><td>Deferred income taxes:</td><td></td><td></td><td></td></tr><tr><td>U.S. federal</td><td>14,533</td><td>11,993</td><td>54,983</td></tr><tr><td>State and local</td><td>112</td><td>15,371</td><td>19,076</td></tr><tr><td>Foreign</td><td>7,679</td><td>(135,206)</td><td>14,397</td></tr><tr><td>Total deferred</td><td>22,324</td><td>(107,842)</td><td>88,456</td></tr><tr><td>Total income tax expense</td><td>$ 68,647</td><td>4,974</td><td>184,346</td></tr></table>

The geographic dispersion of earnings and losses contributes to the annual changes in the Company’s effective tax rates. Approximately 16% of the Company’s current year earnings before income taxes was generated in the United States. The Company is also subject to taxation in other jurisdictions where it has operations, including Australia, Belgium, Brazil, Bulgaria, France, Ireland, Italy, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Russia, Spain, the United Kingdom and Ukraine. The effective tax rates that the Company accrues in these jurisdictions vary widely, but they are generally lower than the Company’s overall effective tax rate. The Company’s domestic effective tax rates for the years ended December 31, 2020, 2019 and 2018 were (12.0)%, 36.6%, and 28.7%, respectively, and its non-U.S. effective tax rates for the years ended December 31, 2020, 2019 and 2018 were 16.3%, (9.4)%, and 11.0%, respectively. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, historical loss carry-forwards, financing arrangements, and other factors. The Company’s effective tax rate has been and will continue to be impacted by the geographical dispersion of the Company’s earnings and losses. To the extent that domestic earnings increase while the foreign earnings remain flat or decrease, or increase at a lower rate, the Company’s effective tax rate will increase.



Income tax expense (benefit) attributable to earnings before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to earnings before income taxes as follows:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Income taxes at statutory rate</td><td>$122,719</td><td>157,404</td><td>220,332</td></tr><tr><td>State and local income taxes, net of federal income tax benefit</td><td>8,081</td><td>22,185</td><td>22,315</td></tr><tr><td>Foreign income taxes \( ^{[a]} \)</td><td>(57,898)</td><td>(17,276)</td><td>(39,915)</td></tr><tr><td>Change in valuation allowance</td><td>35,381</td><td>(21,975)</td><td>2,472</td></tr><tr><td>European Restructuring \( ^{[b]} \)</td><td>—</td><td>(136,194)</td><td>—</td></tr><tr><td>Loss on previously taxed earnings</td><td>(10,346)</td><td>—</td><td>—</td></tr><tr><td>Carryback rate differential \( ^{[c]} \)</td><td>(33,739)</td><td>—</td><td>—</td></tr><tr><td>Transition Tax</td><td>—</td><td>—</td><td>28,201</td></tr><tr><td>Transition tax planning initiatives</td><td>—</td><td>—</td><td>(18,706)</td></tr><tr><td>Tax contingencies and audit settlements, net</td><td>6,779</td><td>6,686</td><td>(31,874)</td></tr><tr><td>Other, net</td><td>(2,330)</td><td>(5,856)</td><td>1,521</td></tr><tr><td></td><td>$ 68,647</td><td>4,974</td><td>184,346</td></tr></table>

(a) Foreign income taxes include statutory rate differences, financing arrangements, withholding taxes, local income taxes, notional deductions, and other miscellaneous items.

(b) The Company implemented select operational, administrative and financial restructurings that centralized certain business processes and intangible assets in various European jurisdictions into a new entity.

(c) The CARES Act permits the Company to carry back its 2020 U.S. taxable loss to a tax year before the corporate income tax rate was lowered by the Tax Cuts and Jobs Act.

Continues On Page 53



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2020 and 2019 are presented below:

<table><tr><td></td><td>2020</td><td>2019</td></tr><tr><td>Deferred tax assets:</td><td></td><td></td></tr><tr><td>Accounts receivable</td><td>$ 14,384</td><td>7,063</td></tr><tr><td>Inventories</td><td>44,597</td><td>50,585</td></tr><tr><td>Employee benefits</td><td>39,526</td><td>36,068</td></tr><tr><td>Accrued expenses and other</td><td>103,892</td><td>67,638</td></tr><tr><td>Deductible state tax and interest benefit</td><td>4,042</td><td>3,665</td></tr><tr><td>Intangibles</td><td>152,499</td><td>146,953</td></tr><tr><td>Lease liabilities</td><td>91,359</td><td>86,717</td></tr><tr><td>Federal, foreign and state net operating losses and credits</td><td>433,822</td><td>376,375</td></tr><tr><td>Gross deferred tax assets</td><td>884,121</td><td>775,064</td></tr><tr><td>Valuation allowance</td><td>(267,838)</td><td>(232,196)</td></tr><tr><td>Net deferred tax assets</td><td>616,283</td><td>542,868</td></tr><tr><td>Deferred tax liabilities:</td><td></td><td></td></tr><tr><td>Inventories</td><td>(17,403)</td><td>(12,885)</td></tr><tr><td>Plant and equipment</td><td>(489,240)</td><td>(510,952)</td></tr><tr><td>Intangibles</td><td>(197,009)</td><td>(182,424)</td></tr><tr><td>Right of use assets</td><td>(87,351)</td><td>(83,271)</td></tr><tr><td>Prepaids</td><td>(56,140)</td><td>—</td></tr><tr><td>Other liabilities</td><td>(46,121)</td><td>(24,220)</td></tr><tr><td>Gross deferred tax liabilities</td><td>(893,264)</td><td>(813,752)</td></tr><tr><td>Net deferred tax liability</td><td>(276,981)</td><td>(270,884)</td></tr></table>

The Company evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing its forecasted taxable income using both historic and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. The valuation allowance as of December 31, 2020, and 2019 is $267,838 and $232,196, respectively. The valuation allowance as of December 31, 2020 relates to the net deferred tax assets of certain of the Company's foreign subsidiaries as well as certain state net operating losses and tax credits. The total change in the 2020 valuation allowance was an increase of $35,642 related to tax rate changes, foreign currency translation, and other activities. The total change in the 2019 valuation allowance was a decrease of $115,590, which includes $148,240 related to the tax liability resulting from the European Restructuring, with remaining $32,650 related to tax rate changes, foreign currency translation, and other activities.

Management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances, based upon the expected reversal of deferred tax liabilities and the level of historic and forecasted taxable income over periods in which the deferred tax assets are deductible.

As of December 31, 2020, the Company has state net operating loss carry forwards and state tax credits with potential tax benefits of $57,613, net of federal income tax benefit; these carry forwards expire over various periods based on taxing jurisdiction. A valuation allowance totaling $29,919 has been recorded against these state deferred tax assets as of December 31, 2020. In addition, as of December 31, 2020, the Company has credits and net operating loss carry forwards in the U.S. with potential tax benefits of $10,179 and in various foreign jurisdictions with potential tax benefits of $1,710,619. A valuation allowance of $5,881 and $232,038, respectively, has been recorded against these deferred tax assets as of December 31, 2020. As a result of the redemption of hybrid instruments in response to changes in global tax regimes, the Company has an ASC 740-10 liability of $1,344,589 for the full tax effected loss on the hybrid instrument in the Tax Uncertainties section below. This ASC 740-10-45 liability is recorded as a reduction to the related deferred tax asset in the financial statements as a result of management’s determination that it is not more likely than not that the benefit will be realized.

As of December 31, 2019, the Company had recognized $134,754 of income tax expense on foreign earnings of approximately $2,126,617. Due to the impact of the COVID-19 pandemic, the Company made a one-time distribution of $1,742,539 of previously taxed earnings during the current year to address short term liquidity needs in the US. The tax effects related to this distribution were not material to the Company’s income tax expense. Notwithstanding the one-time distribution and the new territorial tax regime created by the Tax Cuts and Jobs Act passed in 2017, the Company has no intentions or plans to repatriate additional foreign earnings and continues to assert that historical earnings of its foreign subsidiaries as of December 31, 2020 are permanently reinvested. Should the remaining earnings be distributed in the form of dividends in the future, the Company might be subject to withholding taxes (possibly offset by U.S. foreign tax credits) in various foreign jurisdictions, but the Company would not expect incremental U.S. federal or state taxes to be accrued on these previously taxed earnings.



## Tax Uncertainties

In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing jurisdictions. Accordingly, the Company accrues liabilities when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense (benefit). Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s consolidated financial position but could possibly be material to the Company’s consolidated results of operations or cash flow in any given quarter or annual period.

As of December 31, 2020, the Company’s gross amount of unrecognized tax benefits is $1,388,391, excluding interest and penalties. If the Company were to prevail on all uncertain tax positions, $33,144 of the unrecognized tax benefits would affect the Company’s effective tax rate, exclusive of any benefits related to interest and penalties.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

<table><tr><td></td><td>2020</td><td>2019</td></tr><tr><td>Balance as of January 1</td><td>$1,260,970</td><td>1,330,713</td></tr><tr><td>Additions based on tax positions related to the current year \( ^{a} \)</td><td>1,694</td><td>2,302</td></tr><tr><td>Additions for tax positions of acquired companies</td><td>—</td><td>2,094</td></tr><tr><td>Additions for tax positions of prior years</td><td>7,663</td><td>4,744</td></tr><tr><td>Transition tax planning initiatives</td><td>—</td><td>—</td></tr><tr><td>Reductions resulting from the lapse of the statute of limitations</td><td>(1,239)</td><td>(2,729)</td></tr><tr><td>Reductions due to Luxembourg tax rate change</td><td>—</td><td>(46,841)</td></tr><tr><td>Settlements with taxing authorities</td><td>(497)</td><td>(1,929)</td></tr><tr><td>Effects of foreign currency translation</td><td>119,800</td><td>(27,384)</td></tr><tr><td>Balance as of December 31</td><td>$1,388,391</td><td>1,260,970</td></tr></table>

(a) The tax effected loss was adjusted for tax rate and foreign currency translation changes in 2020, resulting in an updated balance of $1,344,589 as of December 31, 2019. This $1,344,589 of unrecognized benefit is presented as a reduction to the related deferred tax asset in the balance sheet.

As of December 31, 2020 and 2019, the Company has $11,485 and $12,555, respectively, accrued for the payment of interest and penalties, excluding the federal tax benefit of interest deductions where applicable. During the years ended December 31, 2020, 2019 and 2018, the Company accrued interest and penalties through income tax expense of \([695], $5,368 and \([1,085], respectively.
The Company believes that its unrecognized tax benefits could decrease by $8,575 within the next twelve months. The Internal Revenue Service has completed its audit of the Company’s 2014 and 2015 tax years, therefore Federal income tax matters related to years prior to 2016 has been effectively settled. Various other state and foreign income tax returns are open to examination for various years.

## 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, €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 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 which were, as a result of the positive ruling of the Ghent Court of Appeal, cancelled in January 2020.

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 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 will file 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 will file 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 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.

## (16) Commitments and Contingencies

The Company had approximately $787 and $22,787 in standby letters of credit for various insurance contracts and commitments to foreign vendors as of December 31, 2020 and 2019, respectively that expire within two years.

The Company is involved in litigation from time to time in the regular course of its business. Except as noted below and in Note 15, Income Taxes Belgian Tax Matter, 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 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

On January 3, 2020, the Company and certain of its 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 "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 ("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 intends to vigorously defend against the claims.

## 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 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 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 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 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 has not yet ruled on the motion to intervene. On October 21, 2020, the Court entered an Order consolidating the derivative actions and appointing Lead Counsel. The consolidated action 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. The Company intends to vigorously defend against the claims.

## 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 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.

## (17) Consolidated Statements of Cash Flows Information

Supplemental disclosures of cash flow information are as follows:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Net cash paid (received) during the years for:</td><td></td><td></td><td></td></tr><tr><td>Interest</td><td>$ 44,584</td><td>45,241</td><td>46,186</td></tr><tr><td>Income taxes</td><td>$106,891</td><td>123,974</td><td>196,193</td></tr></table>

## Supplemental schedule of non-cash investing and financing activities:

<table><tr><td>Unpaid property plant and equipment in accounts payable and accrued expenses</td><td>$ 90,767</td><td>104,823</td><td>101,389</td></tr><tr><td>Fair value of net assets acquired in acquisition</td><td>$ —</td><td>107,290</td><td>831,760</td></tr><tr><td>Liabilities assumed in acquisition</td><td>—</td><td>(31,053)</td><td>(257,515)</td></tr><tr><td></td><td>$ —</td><td>76,237</td><td>574,245</td></tr></table>

## (18) Segment Reporting

The Company has three reporting segments: the Global Ceramic segment, the Flooring NA segment and the Flooring ROW segment. The Global Ceramic segment designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone, 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 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, laminate, 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 trucks, common carriers 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, 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. No single customer accounted for more than 10% of net sales for the years ended December 31, 2020, 2019 or 2018.

Segment information is as follows:

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Assets:</td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>$ 5,250,069</td><td>5,419,896</td><td>5,194,030</td></tr><tr><td>Flooring NA segment</td><td>3,594,976</td><td>3,823,654</td><td>3,938,639</td></tr><tr><td>Flooring ROW segment</td><td>4,194,447</td><td>3,925,246</td><td>3,666,617</td></tr><tr><td>Corporate and intersegment eliminations</td><td>1,288,259</td><td>217,884</td><td>299,837</td></tr><tr><td>Total</td><td>$14,327,751</td><td>13,386,680</td><td>13,099,123</td></tr></table>

<table><tr><td>Geographic net sales:</td><td></td><td></td><td></td></tr><tr><td>United States</td><td>$ 5,530,407</td><td>5,822,593</td><td>6,103,789</td></tr><tr><td>Europe</td><td>2,486,770</td><td>2,532,239</td><td>2,582,692</td></tr><tr><td>Russia</td><td>385,830</td><td>385,395</td><td>349,220</td></tr><tr><td>Other</td><td>1,149,190</td><td>1,230,445</td><td>947,933</td></tr><tr><td>Total</td><td>$ 9,552,197</td><td>9,970,672</td><td>9,983,634</td></tr></table>

<table><tr><td>Long-lived assets: \( ^{(1)} \)</td><td></td><td></td><td></td></tr><tr><td>United States</td><td>$ 3,303,197</td><td>3,391,676</td><td>3,485,046</td></tr><tr><td>Belgium</td><td>1,808,571</td><td>1,645,104</td><td>1,663,470</td></tr><tr><td>Other</td><td>2,130,292</td><td>2,232,164</td><td>2,072,353</td></tr><tr><td>Total</td><td>$ 7,242,060</td><td>7,268,944</td><td>7,220,869</td></tr></table>

<table><tr><td>Net sales by product categories:</td><td></td><td></td><td></td></tr><tr><td>Ceramic &amp; Stone</td><td>$ 3,457,203</td><td>3,686,645</td><td>3,621,193</td></tr><tr><td>Carpet &amp; Resilient</td><td>3,735,888</td><td>3,921,769</td><td>3,903,698</td></tr><tr><td>Laminate &amp; Wood</td><td>1,538,967</td><td>1,501,077</td><td>1,553,032</td></tr><tr><td>Other \( ^{(2)} \)</td><td>820,139</td><td>861,181</td><td>905,711</td></tr><tr><td>Total</td><td>$ 9,552,197</td><td>9,970,672</td><td>9,983,634</td></tr></table>

<table><tr><td>Net sales:</td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>$ 3,432,756</td><td>3,631,142</td><td>3,552,856</td></tr><tr><td>Flooring NA segment</td><td>3,594,075</td><td>3,843,714</td><td>4,029,148</td></tr><tr><td>Flooring ROW segment</td><td>2,525,366</td><td>2,495,816</td><td>2,401,630</td></tr><tr><td>Total</td><td>$ 9,552,197</td><td>9,970,672</td><td>9,983,634</td></tr></table>

[1] Long-lived assets are composed of property, plant and equipment—net, and goodwill.

[2] Other includes roofing elements, insulation boards, chipboards and IP contracts.

<table><tr><td></td><td>2020</td><td>2019</td><td>2018</td></tr><tr><td>Operating income (loss) \( ^{(1)} \) :</td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>$167,731</td><td>335,639</td><td>439,152</td></tr><tr><td>Flooring NA segment</td><td>147,442</td><td>177,566</td><td>356,842</td></tr><tr><td>Flooring ROW segment</td><td>366,934</td><td>353,666</td><td>340,642</td></tr><tr><td>Corporate and intersegment eliminations (41,310)</td><td>(46,105)</td><td>(39,647)</td><td></td></tr><tr><td>Total</td><td>$636,002</td><td>827,224</td><td>1,095,326</td></tr></table>

<table><tr><td>Depreciation and amortization:</td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>$215,488</td><td>211,679</td><td>189,904</td></tr><tr><td>Flooring NA segment</td><td>214,599</td><td>204,689</td><td>184,455</td></tr><tr><td>Flooring ROW segment</td><td>164,701</td><td>145,417</td><td>135,350</td></tr><tr><td>Corporate</td><td>12,719</td><td>14,667</td><td>12,056</td></tr><tr><td>Total</td><td>$607,507</td><td>576,452</td><td>521,765</td></tr></table>

<table><tr><td>Capital expenditures (excluding acquisitions):</td><td></td><td></td><td></td></tr><tr><td>Global Ceramic segment</td><td>$121,418</td><td>244,026</td><td>281,125</td></tr><tr><td>Flooring NA segment</td><td>186,179</td><td>148,820</td><td>262,676</td></tr><tr><td>Flooring ROW segment</td><td>113,378</td><td>147,118</td><td>232,949</td></tr><tr><td>Corporate</td><td>4,582</td><td>5,498</td><td>17,360</td></tr><tr><td>Total</td><td>$425,557</td><td>545,462</td><td>794,110</td></tr></table>

(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.



## (19) Quarterly Financial Data (Unaudited)

The supplemental quarterly financial data are as follows:

<table><tr><td>Quarters Ended</td><td>March 28, 2020</td><td>June 27, 2020</td><td>September 26, 2020</td><td>December 31, 2020</td></tr><tr><td>Net sales</td><td>$2,285,763</td><td>2,049,800</td><td>2,574,870</td><td>2,641,764</td></tr><tr><td>Gross profit</td><td>616,440</td><td>369,967</td><td>706,199</td><td>738,084</td></tr><tr><td>Net earnings (loss)</td><td>110,514</td><td>(48,257)</td><td>205,117</td><td>248,222</td></tr><tr><td>Basic earnings (loss) per share</td><td>1.54</td><td>(0.68)</td><td>2.88</td><td>3.50</td></tr><tr><td>Diluted earnings (loss) per share</td><td>1.54</td><td>(0.68)</td><td>2.87</td><td>3.49</td></tr><tr><td>Quarters Ended</td><td>March 30, 2019</td><td>June 29, 2019</td><td>September 28, 2019</td><td>December 31, 2019</td></tr><tr><td>Net sales</td><td>$2,442,490</td><td>2,584,485</td><td>2,519,185</td><td>2,424,512</td></tr><tr><td>Gross profit</td><td>624,927</td><td>736,618</td><td>691,691</td><td>622,807</td></tr><tr><td>Net earnings</td><td>121,585</td><td>202,441</td><td>155,518</td><td>264,667</td></tr><tr><td>Basic earnings per share</td><td>1.68</td><td>2.80</td><td>2.16</td><td>3.69</td></tr><tr><td>Diluted earnings per share</td><td>1.67</td><td>2.79</td><td>2.15</td><td>3.68</td></tr></table>

## ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

## Evaluation of Disclosure 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.

## Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company maintains internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, internal control over financial reporting determined to be effective provides only reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s internal control over financial reporting as of December 31, 2020. In conducting this evaluation, the Company used the framework set forth in the report titled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their audit report which is included herein.

## Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Limitations on the Effectiveness of Controls

The Company’s management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.



## Part III

## ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders under the following headings: “Election of Directors—Director, Director Nominee and Executive Officer Information,” “—Nominees for Director,” “—Continuing Directors,” “—Contractual Obligations with respect to the Election of Directors,” “—Executive Officers,” “—Meetings and Committees of the Board of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit Committee” and “Corporate Governance.” The Company has adopted the Mohawk Industries, Inc. Standards of Conduct and Ethics, which applies to all of its directors, officers and employees. The standards of conduct and ethics are publicly available on the Company’s website at http://www.mohawkind.com and will be made available in print to any stockholder who requests them without charge. If the Company makes any substantive amendments to the standards of conduct and ethics, or grants any waiver, including any implicit waiver, from a provision of the standards required by regulations of the Commission to apply to the Company’s chief executive officer, chief financial officer or chief accounting officer, the Company will disclose the nature of the amendment or waiver on its website. The Company may elect to also disclose the amendment or waiver in a report on Form 8-K filed with the SEC. The Company has adopted the Mohawk Industries, Inc. Board of Directors Corporate Governance Guidelines, which are publicly available on the Company’s website and will be made available to any stockholder who requests it.

## ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders under the following headings: “Compensation Discussion and Analysis,” “Executive Compensation—Summary Compensation Table,” “—Grants of Plan Based Awards,” “—Outstanding Equity Awards at Year End,” “—Option Exercises and Stock Vested,” “—Nonguolified Deferred Compensation,” “—Certain Relationships and Related Transactions,” “—Compensation Committee Interlocks and Insider Participation,” “—Compensation Committee Report” and “Director Compensation.”

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders under the following headings: “Executive Compensation—Equity Compensation Plan Information,” and “—Principal Stockholders of the Company.”

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders under the following heading: “Election of Directors—Meetings and Committees of the Board of Directors,” and “Executive Compensation—Certain Relationships and Related Transactions.”

## ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders under the following heading: “Audit Committee—Principal Accountant Fees and Services” and “Election of Directors—Meetings and Committees of the Board of Directors.”



## (a) 1. Consolidated Financial Statements

The Consolidated Financial Statements of Mohawk Industries, Inc. and subsidiaries listed in Part II, Item 8 of this Form 10-K are incorporated by reference into this item.

## 2. Consolidated Financial Statement Schedules

Schedules not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

## 3. Exhibits

The exhibit number for the exhibit as originally filed is included in parentheses at the end of the description.

<table><tr><td>Mohawk Exhibit Number</td><td>Description</td><td>Mohawk Exhibit Number</td><td>Description</td></tr><tr><td>*2.1</td><td>Agreement and Plan of Merger dated as of December 3, 1993 and amended as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin and certain Shareholders of Aladdin. [Incorporated herein by reference to Exhibit 2.1(a) in the Company&#x27;s Registration Statement on Form S-4, Registration No. 333-74220.]</td><td>*4.6</td><td>First Supplemental Indenture, dated as of September 11, 2017, by and among Mohawk Capital Finance S.A., as issuer, Mohawk Industries, Inc., as parent guarantor, U.S. Bank National Association, as trustee, initial registrar and transfer agent and Elavon Financial Services DAC, UK Branch, as initial paying agent and calculation agent. [incorporated herein by reference to Exhibit 4.2 to the Company&#x27;s Current Report on Form 8-K dated September 11, 2017.]</td></tr><tr><td>*3.1</td><td>Restated Certificate of Incorporation of Mohawk, as amended. [Incorporated herein by reference to Exhibit 3.1 in the Company&#x27;s Annual Report on Form 10-K for the fiscal year ended December 31, 1998.]</td><td>*4.7</td><td>Second Supplemental Indenture, dated as of May 18, 2018, by and among Mohawk Capital Finance S.A., as issuer, Mohawk Industries, Inc., as parent guarantor, U.S. Bank National Association, as trustee, registrar and transfer agent and Elavon Financial Services DAC, UK Branch, as paying agent and calculation agent. [incorporated herein by reference to Exhibit 4.2 to the Company&#x27;s Current Report on Form 8-K dated May 18, 2018.]</td></tr><tr><td>*3.2</td><td>Restated Bylaws of Mohawk. [Incorporated herein by reference to Exhibit 3.1 in the Company&#x27;s Report on Form 8-K dated February 19, 2019.]</td><td>*4.8</td><td>Third Supplemental Indenture, dated as of September 4, 2019, by and among Mohawk Capital Finance S.A., as issuer, Mohawk Industries, Inc., as parent guarantor, U.S. Bank National Association, as trustee, registrar and transfer agent and Elavon Financial Services DAC, as paying agent. [incorporated herein by reference to Exhibit 4.2 to the Company&#x27;s Current Report on Form 8-K dated May 18, 2018.]</td></tr><tr><td>*4.1</td><td>Indenture, dated as of January 31, 2013, by and between Mohawk Industries, Inc. and U.S. Bank National Association, as Trustee [Incorporated herein by reference to Exhibit 4.1 of the Company&#x27;s Current Report on Form 8-K dated January 31, 2013.]</td><td>*4.9</td><td>Fourth Supplemental Indenture, dated as of June 12, 2020, by and among Mohawk Capital Finance S.A., as issuer, Mohawk Industries, Inc., as parent guarantor, U.S. Bank National Association, as trustee, registrar and transfer agent and Elavon Financial Services DAC, as paying agent. [incorporated herein by reference to Exhibit 4.2 to the Company&#x27;s Current Report on Form 8-K filed on June 12, 2020.]</td></tr><tr><td>*4.2</td><td>First Supplemental Indenture, dated as of January 31, 2013, by and between Mohawk Industries, Inc. and U.S. Bank National Association, as Trustee [Incorporated herein by reference to Exhibit 4.2 of the Company&#x27;s Current Report on Form 8-K dated January 31, 2013.]</td><td>*10.1</td><td>Registration Rights Agreement by and among Mohawk and the former shareholders of Aladdin. [Incorporated herein by reference to Exhibit 10.32 of the Company&#x27;s Annual Report on Form 10-K [File No. 001-13697] for the fiscal year ended December 31, 1993.]</td></tr><tr><td>*4.3</td><td>Second Supplemental Indenture, dated as of June 9, 2015, by and among Mohawk Industries, Inc., as Issuer, U.S. Bank National Association, as Trustee, Elavon Financial Services Limited, UK Branch, as initial Paying Agent and Elavon Financial Services Limited, as initial Registrar [Incorporated herein by reference to Exhibit 4.2 of the Company&#x27;s Current Report on Form 8-K dated June 9, 2015.]</td><td>*10.2</td><td>Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of March 23, 1994 to the Registration Rights Agreement dated as of February 25, 1994 between Mohawk and those other persons who are signatories thereto. [Incorporated herein by reference to Exhibit 10.3 of the Company&#x27;s Quarterly Report on Form 10-Q [File No. 001-13697] for the quarter ended July 2, 1994.]</td></tr><tr><td>*4.4</td><td>Third Supplemental Indenture, dated as of May 14, 2020, by and between Mohawk Industries, Inc. and U.S. Bank National Association, as trustee. [Incorporated by reference to Exhibit 4.2 of the Company&#x27;s Current Report on Form 8-K filed on May 18, 2020.]</td><td>*10.1</td><td>Registration Rights Agreement by and among Mohawk and the former shareholders of Aladdin. [Incorporated herein by reference to Exhibit 10.32 of the Company&#x27;s Annual Report on Form 10-K [File No. 001-13697] for the fiscal year ended December 31, 1993.]</td></tr><tr><td>*4.5</td><td>Indenture, dated as of September 11, 2017, by and among Mohawk Capital Finance S.A., as issuer, Mohawk Industries, Inc., as parent guarantor and U.S. Bank National Association, as trustee. [incorporated herein by reference to Exhibit 4.1 to the Company&#x27;s Current Report on Form 8-K dated September 11, 2017.]</td><td>*10.2</td><td>Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of March 23, 1994 to the Registration Rights Agreement dated as of February 25, 1994 between Mohawk and those other persons who are signatories thereto. [Incorporated herein by reference to Exhibit 10.3 of the Company&#x27;s Quarterly Report on Form 10-Q [File No. 001-13697] for the quarter ended July 2, 1994.]</td></tr></table>



*10.3 Second Amended and Restated Credit Facility, dated October 18, 2019, by and among the Company and certain of its subsidiaries, as borrowers, Wells Fargo Bank, National Association, as administrative agent, swing line lender, and an L/C issuer, and the other lenders party thereto. (Incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated October 18, 2019.)

Exhibits Related to Executive Compensation Plans, Contracts and other Arrangements:

*10.4 First Amendment to Second Amended and Restated Credit Agreement, dated as of April 7, 2020, by and among the Company and certain of its subsidiaries, as borrowers, Wells Fargo Bank, National Association, as administrative agent, swing line lender, and an L/C issuer, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on April 13, 2020.)

*10.5 Second Amendment to Second Amended and Restated Credit Agreement, dated as of May 7, 2020, by and among the Company and certain of its subsidiaries, as borrowers, Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on May 7, 2020.)

*10.6 Credit Agreement, dated as of April 7, 2020, by and among the Company, as borrower, certain of its domestic subsidiaries, as guarantors, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on April 13, 2020.)

*10.7 First Amendment to Credit Agreement, dated as of May 7, 2020, by and among the Company, the guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on May 7, 2020.)

*10.8 Service Agreement dated December 18, 2018, by and between Mohawk International Services BVBA and Comm. V. "Bernard Thiers." (Incorporated by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.)

*10.9 Employment Agreement dated December 29, 2018, by and between Mohawk Carpet, LLC and Paul F. De Cock (Incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.)

*10.10 General Release and Separation Agreement, dated May 1, 2020, by and between Glenn Landau and Mohawk Industries, Inc. (Incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the period ended June 27, 2020.)

Mohawk
Exhibit
Number

*10.11 The Mohawk Industries, Inc. Senior Management Deferred Compensation Plan, as amended and restated as of January 1, 2015. (Incorporated herein by reference to Exhibit 10.19 in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2015.)

*10.12 Mohawk Industries, Inc. Non-Employee Director Stock Compensation Plan (Incorporated herein by reference to Exhibit 10.22 in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2017.)

*10.13 Mohawk Industries, Inc. 2007 Incentive Plan (Incorporated herein by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A (File No. 001-13697) filed with the Securities and Exchange Commission on April 9, 2007.)

*10.14 Mohawk Industries, Inc. 2012 Incentive Plan (incorporated herein by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A (File No. 001-13697) filed with the Securities and Exchange Commission on April 6, 2017.)

*10.15 Mohawk Industries, Inc. 2017 Incentive Plan (incorporated herein by reference to Annex B of the Company’s Definitive Proxy Statement on Schedule 14A (File No. 001-13697) filed with the Securities and Exchange Commission on April 6, 2017.)

21 Subsidiaries of the Registrant.

22 Subsidiary Guarantors.

23.1 Consent of Independent Registered Public Accounting Firm (KPMG LLP).

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.INS XBRL Instance Document

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

* Indicates exhibit incorporated by reference.



## SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By: /s/ JEFFREY S. LORBERBAUM
February 24, 2021
Jeffrey S. Lorberbaum,
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

<table><tr><td>February 24, 2021</td><td>/s/ JEFFREY S. LORBERBAUM</td><td>February 24, 2021</td><td>/s/ JOHN M. ENGQUIST</td></tr><tr><td></td><td>Jeffrey S. Lorberbaum,</td><td></td><td>John M. Engquist,</td></tr><tr><td></td><td>Chairman and Chief Executive Officer (principal executive officer)</td><td></td><td>Director</td></tr><tr><td>February 24, 2021</td><td>/s/ FRANK H. BOYKIN</td><td>February 24, 2021</td><td>/s/ JOSEPH A. ONORATO</td></tr><tr><td></td><td>Frank Boykin,</td><td></td><td>Joseph A. Onorato,</td></tr><tr><td></td><td>Chief Financial Officer (principal financial officer)</td><td></td><td>Director</td></tr><tr><td>February 24, 2021</td><td>/s/ JAMES F. BRUNK</td><td>February 24, 2021</td><td>/s/ WILLIAM H. RUNGE III</td></tr><tr><td></td><td>James F. Brunk,</td><td></td><td>William Henry Runge III</td></tr><tr><td></td><td>Senior Vice President and Corporate Controller (principal accounting officer)</td><td></td><td>Director</td></tr><tr><td>February 24, 2021</td><td>/s/ FILIP BALCAEN</td><td>February 24, 2021</td><td>/s/ KAREN A. SMITH BOGART</td></tr><tr><td></td><td>Filip Balcaen,</td><td></td><td>Karen A. Smith Bogart,</td></tr><tr><td></td><td>Director</td><td></td><td>Director</td></tr><tr><td>February 24, 2021</td><td>/s/ BRUCE C. BRUCKMANN</td><td>February 24, 2021</td><td>/s/ W. CHRISTOPHER WELLBORN</td></tr><tr><td></td><td>Bruce C. Bruckmann,</td><td></td><td>W. Christopher Wellborn,</td></tr><tr><td></td><td>Director</td><td></td><td>Director</td></tr></table>



## Reconciliation of Non-GAAP Measures

## LIQUIDITY

<table><tr><td></td><td>2016</td><td>2017</td><td>2018</td><td>2019</td><td>2020</td></tr><tr><td>Cash</td><td>$121,665</td><td>84,884</td><td>119,050</td><td>134,785</td><td>768,625</td></tr><tr><td>Short Term Investments</td><td>—</td><td>83,904</td><td>53,000</td><td>42,500</td><td>571,741</td></tr><tr><td>Total Cash and ST Investments</td><td>121,665</td><td>168,788</td><td>172,050</td><td>177,285</td><td>1,340,366</td></tr><tr><td>Availability under Senior Credit Facility</td><td>918,084</td><td>540,983</td><td>347,670</td><td>1,066,464</td><td>1,799,213</td></tr><tr><td>Total Liquidity</td><td>$1,039,749</td><td>709,771</td><td>519,720</td><td>1,243,749</td><td>3,139,579</td></tr></table>

## RECONCILIATION OF OPERATING INCOME TO EBITDA AND ADJUSTED EBITDA

<table><tr><td>For the Years Ended December 31,</td><td>2017</td><td>2018</td><td>2019</td><td>2020</td></tr><tr><td>Operating Income</td><td>1,354,173</td><td>1,095,326</td><td>827,224</td><td>636,002</td></tr><tr><td>Net earnings attributable to noncontrolling interest</td><td>(3,054)</td><td>(3,151)</td><td>(360)</td><td>(132)</td></tr><tr><td>Depreciation and amortization</td><td>446,672</td><td>521,765</td><td>576,452</td><td>607,507</td></tr><tr><td>Other income (expense), net</td><td>(5,205)</td><td>(7,298)</td><td>(36,407)</td><td>752</td></tr><tr><td>EBITDA</td><td>1,792,586</td><td>1,606,642</td><td>1,366,909</td><td>1,244,129</td></tr><tr><td>Restructuring, acquisition and integration-related and other costs</td><td>48,940</td><td>78,449</td><td>99,679</td><td>145,415</td></tr><tr><td>Acquisition purchase accounting, including inventory step-up</td><td>13,314</td><td>15,359</td><td>3,938</td><td>—</td></tr><tr><td>Release of indemnification asset</td><td>4,459</td><td>4,606</td><td>(56)</td><td>(262)</td></tr><tr><td>Impairment of net investment in a manufacturer and distributor of Ceramic tile in China</td><td>—</td><td>—</td><td>59,946</td><td>—</td></tr><tr><td>Adjusted EBITDA</td><td>1,859,299</td><td>1,705,056</td><td>1,530,416</td><td>1,389,282</td></tr></table>

## RECONCILIATION OF TOTAL DEBT TO NET DEBT LESS SHORT-TERM INVESTMENTS

<table><tr><td>Short-term debt and current portion of long-term debt</td><td>1,203,683</td><td>1,742,373</td><td>1,051,498</td><td>377,255</td></tr><tr><td>Long-term debt, less current portion</td><td>1,559,895</td><td>1,515,601</td><td>1,518,388</td><td>2,356,887</td></tr><tr><td>Less: Cash and cash equivalents</td><td>84,884</td><td>119,050</td><td>134,785</td><td>768,625</td></tr><tr><td>Net Debt</td><td>2,678,694</td><td>3,138,924</td><td>2,435,101</td><td>1,965,517</td></tr><tr><td>Less: Short-term investments</td><td>83,904</td><td>53,000</td><td>42,500</td><td>571,741</td></tr><tr><td>Net debt less short-term investments</td><td>2,594,790</td><td>3,085,924</td><td>2,392,601</td><td>1,393,776</td></tr><tr><td>Net Debt less short-term investments to Adjusted EBITDA</td><td>1.4</td><td>1.8</td><td>1.6</td><td>1.0</td></tr></table>

## FREE CASH FLOW

<table><tr><td>For the Years Ended December 31,</td><td>2016</td><td>2017</td><td>2018</td><td>2019</td><td>2020</td></tr><tr><td>Net cash provided by operating activities</td><td>1,345,289</td><td>1,193,595</td><td>1,181,344</td><td>1,418,761</td><td>$1,769,839</td></tr><tr><td>Less: Capital expenditures</td><td>672,125</td><td>905,998</td><td>794,110</td><td>545,462</td><td>425,557</td></tr><tr><td>Free cash flow</td><td>673,164</td><td>287,597</td><td>387,234</td><td>873,299</td><td>$1,344,282</td></tr></table>



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# SHAREHOLDER INFORMATION

CORPORATE HEADQUARTERS
P.O. Box 12069
160 South Industrial Boulevard
Calhoun, Georgia 30703
(706) 624-2246

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
Atlanta, Georgia

CORPORATE COUNSEL
Alston & Bird LLP
Atlanta, Georgia

TRANSFER AGENT AND REGISTRAR
American Stock Transfer and
Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
(972) 764-2720

## PUBLICATIONS

The Company’s Annual Report, Proxy Statement, Form 8-K, 10-K and 10-Q reports are available without charge and can be ordered via our stockholder communications service at (706) 624-2246 or via the Internet at mohawkind.com under Investors. Written requests should be sent to Shailesh Bettadapur at the Company’s headquarters address above.
PRODUCT INQUIRIES
For more information about Mohawk’s products, visit our websites: mohawkflooring.com
daltile.com
ivcfloors.com
marazzigroup.com
pergo.com
unilin.com
quick-step.com
godfreyhirst.com
eliane.com

INVESTOR/ANALYST CONTACT
For additional information about Mohawk, please contact Shailesh Bettadapur, VP of Investor Relations at (706) 624-2103 or at the Company’s headquarters address.

ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of
Mohawk Industries, Inc. will be held at the
time and location specified in our Notice of
Annual Meeting of Stockholders for 2021.

## COMPANY STOCK

Mohawk’s common stock is traded on the New York Stock Exchange under the symbol MHK.

## EQUAL OPPORTUNITY

Mohawk is an Equal Opportunity/Affirmative Action employer committed to attracting a diverse pool of applicants and sustaining an inclusive workforce.

## NYSE AFFIRMATION CERTIFICATIONS

As a listed company with the New York Stock Exchange (“NYSE”), Mohawk is subject to certain Corporate Governance standards as required by the NYSE and/or the Securities and Exchange Commission (“SEC”). Among other requirements, Mohawk’s CEO, as required by Section 303A.12(a) of the NYSE Listing Company Manual, must certify to the NYSE each year whether or not he is aware of any violations by the Company of NYSE Corporate Governance listing standards as of the date of the certification. On June 17, 2020, Mohawk’s CEO Jeffrey S. Lorberbaum submitted such a certification to the NYSE which stated that he was not aware of any violation by Mohawk of the NYSE Corporate Governance listing standards.

The Company has filed the certifications of its Chief Executive Officer and Chief Financial Officer required by Section 302 of Sarbanes-Oxley Act of 2002 as an exhibit to the Company’s Form 10-K for the year ended December 31, 2020.

## STOCK PERFORMANCE GRAPH

The following is a line graph comparing the yearly change in the Company’s cumulative total stockholder returns to those of the Standard & Poor’s 500 Index and a group of peer issuers beginning on December 31, 2015 and ending on December 31, 2020.

The peer group includes the following companies: Armstrong Flooring, Inc.; Dixie Group, Inc.; Interface, Inc.; Leggett & Platt, Inc.; MASCO Corporation and Stanley Black & Decker. Total return values were calculated based on cumulative total return, assuming the value of the investment in the Company’s Common Stock and in each index on December 31, 2015 was $100 and that all dividends were reinvested. The Company is not included in the peer group because management believes that, by excluding the Company, investors will have a more accurate view of the Company’s performance relative to peer companies.



● Mohawk Industries, Inc. ● S&P 500 Index—Total Returns ● Peer Group

● Peer Group + Mohawk Industries, Inc.



Design by Corporate Reports Inc., Atlanta, GA www.cricommunications.com




M
MOHAWK \( ^{®} $ 

160 South Industrial Boulevard
Calhoun, Georgia 30701
www.mohawkind.com