UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]

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

For the quarterly period ended October 1, 2022

OR 

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

For the transition period from            to      

Commission File Number 01-13697

 __________________________________________

MOHAWK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware			52-1604305
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
160 S. Industrial Blvd.	Calhoun	Georgia	30701
(Address of principal executive offices)			(Zip Code)

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

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

__________________________________________ 

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

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

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

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

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

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

The number of shares outstanding of the issuer’s common stock as of October 26, 2022, the latest practicable date, is as follows: 63,534,032 shares of common stock, $.01 par value.

MOHAWK INDUSTRIES, INC.

INDEX

		Page No
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of October 1, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three and nine months ended October 1, 2022 and October 2, 2021	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended October 1, 2022 and October 2, 2021	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended October 1, 2022 and October 2, 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) 

	October 1, 2022		December 31, 2021
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	326,971	268,895
Short-term investments	110,000		323,000
Receivables, net	2,003,261		1,839,985
Inventories	2,900,116		2,391,672
Prepaid expenses	495,226		394,649
Other current assets	18,755		20,156
Total current assets	5,854,329		5,238,357
Property, plant and equipment	9,342,898		9,250,587
Less: accumulated depreciation	4,818,362		4,613,722
Property, plant and equipment, net	4,524,536		4,636,865
Right of use operating lease assets	400,412		389,967
Goodwill	1,827,968		2,607,909
Tradenames	646,661		694,905
Other intangible assets subject to amortization, net	176,439		205,075
Deferred income taxes and other non-current assets	370,689		451,439
Total assets	$	13,801,034	14,224,517

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	1,542,139	624,503
Accounts payable and accrued expenses	2,256,097		2,217,418
Current operating lease liabilities	106,511		104,434
Total current liabilities	3,904,747		2,946,355
Deferred income taxes	430,888		495,521
Long-term debt, less current portion	1,019,984		1,700,282
Non-current operating lease liabilities	306,617		297,390
Other long-term liabilities	313,741		356,753
Total liabilities	5,975,977		5,796,301
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued	—		—
Common stock, $.01 par value; 150,000 shares authorized; 70,875 and 72,952 shares issued and outstanding in 2022 and 2021, respectively	709		729
Additional paid-in capital	1,925,894		1,911,131
Retained earnings	7,376,304		7,692,064
Accumulated other comprehensive loss	(1,268,663)		(966,952)
	8,034,244		8,636,972
Less: treasury stock at cost; 7,341 and 7,343 shares in 2022 and 2021, respectively	215,491		215,547
Total Mohawk Industries, Inc. stockholders’ equity	7,818,753		8,421,425
Nonredeemable noncontrolling interests	6,304		6,791
Total stockholders’ equity	7,825,057		8,428,216
Total liabilities and stockholders’ equity	$	13,801,034	14,224,517

See accompanying notes to condensed consolidated financial statements

3

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended			Nine Months Ended
	October 1, 2022		October 2, 2021	October 1, 2022	October 2, 2021
	(In thousands, except per share data)
Net sales	$	2,917,539	2,817,017	9,086,390	8,439,876
Cost of sales	2,203,878		1,979,702	6,697,404	5,908,585
Gross profit	713,661		837,315	2,388,986	2,531,291
Selling, general and administrative expenses	523,479		477,341	1,510,076	1,449,378
Impairment of goodwill and indefinite-lived intangibles	695,771		—	695,771	—
Operating (loss) income	(505,589)		359,974	183,139	1,081,913
Interest expense	13,797		14,948	37,337	45,083
Other (income) expense, net	(1,242)		21	(1,622)	(13,374)
(Loss) earnings before income taxes	(518,144)		345,005	147,424	1,050,204
Income tax expense	15,569		73,821	155,193	205,756
Net (loss) earnings including noncontrolling interests	(533,713)		271,184	(7,769)	844,448
Net earnings attributable to noncontrolling interests	256		206	440	378
Net (loss) earnings attributable to Mohawk Industries, Inc.	$	(533,969)	270,978	(8,209)	844,070
Basic (loss) earnings per share attributable to Mohawk Industries, Inc.
Basic (loss) earnings per share attributable to Mohawk Industries, Inc.	$	(8.40)	3.95	(0.13)	12.16
Weighted-average common shares outstanding—basic	63,534		68,541	63,923	69,389
Diluted (loss) earnings per share attributable to Mohawk Industries, Inc.
Diluted (loss) earnings per share attributable to Mohawk Industries, Inc.	$	(8.40)	3.93	(0.13)	12.11
Weighted-average common shares outstanding—diluted	63,534		68,864	63,923	69,683

See accompanying notes to condensed consolidated financial statements.

4

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended			Nine Months Ended
	October 1, 2022		October 2, 2021	October 1, 2022	October 2, 2021
	(In thousands)
Net (loss) earnings including noncontrolling interests	$	(533,713)	271,184	(7,769)	844,448
Other comprehensive (loss) income:
Foreign currency translation adjustments	(254,002)		(91,318)	(302,384)	(178,077)
Prior pension and post-retirement benefit service cost and actuarial gain, net of tax	65		108	672	316
Other comprehensive (loss) income	(253,937)		(91,210)	(301,712)	(177,761)
Comprehensive (loss) income	(787,650)		179,974	(309,481)	666,687
Comprehensive (loss) income attributable to noncontrolling interests	(16)		107	439	88
Comprehensive (loss) income attributable to Mohawk Industries, Inc.	$	(787,634)	179,867	(309,920)	666,599

See accompanying notes to condensed consolidated financial statements.

5

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

	Nine Months Ended
	October 1, 2022		October 2, 2021
	(In thousands)
Cash flows from operating activities:
Net (loss) earnings including noncontrolling interests	$	(7,769)	844,448
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Restructuring	21,673		7,410
Impairment of goodwill and indefinite-lived intangibles	695,771		—
Depreciation and amortization	436,449		448,299
Deferred income taxes	(47,846)		(52,304)
Loss on disposal of property, plant and equipment	591		1,161
Stock-based compensation expense	17,488		19,411
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net	(267,546)		(275,952)
Inventories	(548,711)		(330,745)
Accounts payable and accrued expenses	162,841		381,634
Other assets and prepaid expenses	(41,678)		(23,860)
Other liabilities	6,172		77,233
Net cash provided by operating activities	427,435		1,096,735
Cash flows from investing activities:
Additions to property, plant and equipment	(430,084)		(375,179)
Acquisitions, net of cash acquired	(157,274)		(77,187)
Purchases of short-term investments	(2,233,000)		(778,239)
Redemption of short-term investments	2,446,000		1,344,574
Net cash (used in) provided by investing activities	(374,358)		113,969
Cash flows from financing activities:
Payments on Senior Credit Facilities	(5,000)		—
Proceeds from Senior Credit Facilities	5,000		—
Payments on commercial paper	(12,542,311)		(94,820)
Proceeds from commercial paper	12,866,175		94,605
Repayments on Senior Notes	—		(352,609)
Net payments of other financing activities	(16,061)		(7,874)
Debt issuance costs	(1,621)		—
Purchase of Mohawk common stock	(307,572)		(473,334)
Change in outstanding checks in excess of cash	(1,588)		(921)
Net cash used in financing activities	(2,978)		(834,953)
Effect of exchange rate changes on cash and cash equivalents	7,977		(16,349)
Net change in cash and cash equivalents	58,076		359,402
Cash and cash equivalents, beginning of period	268,895		768,625
Cash and cash equivalents, end of period	$	326,971	1,128,027

See accompanying notes to condensed consolidated financial statements.

6

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

1. General

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

Interim Reporting

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto, and the Company’s description of critical accounting policies, included in the Company’s 2021 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Results for interim periods are not necessarily indicative of the results for the year.

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

The Company has numerous investments outside the United States. The net assets of these subsidiaries are exposed to changes and volatility in currency exchange rates. The Company has in the past and might in the future use foreign currency denominated debt to hedge its non-U.S. net investments against adverse movements in exchange rates. In periods when the Company uses foreign currency denominated debt to hedge its non-U.S. net investments, 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. Changes in the U.S. dollar value of the Company’s euro denominated debt are recorded in the foreign currency translation adjustment component of accumulated other comprehensive income or (loss). In June 2015, the Company designated its €500,000 2.00% Senior Notes borrowing as a net investment hedge of a portion of its European operations. On October 19, 2021, the Company redeemed at par the 2.00% Senior Notes, originally due on January 14, 2022, and paid the remaining €500,000 outstanding principal of the 2.00% Senior Notes, plus any unpaid interest, utilizing cash on hand. In connection with this repayment, the Company dedesignated its €500,000 2.00% Senior Notes borrowing as a net investment hedge of a portion of its European operations. For the nine months ended October 2, 2021, the change in the U.S. dollar value of the Company’s euro denominated debt was a decrease of $35,363 ($27,056 net of taxes).

Recent Accounting Pronouncements

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 Company adopted the new standard on January 1, 2021. The effect of adopting the new standard was not material.

7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Acquisitions

2022 Acquisitions

On July 6, 2022, the Company completed its purchase of a Georgia-based manufacturer specializing in non-woven, needle-punch technology in the Flooring North America (“Flooring NA”) Segment for $146,409. The Company’s acquisition resulted in a preliminary goodwill allocation of $56,172, pending working capital adjustments, and intangible assets subject to amortization of $15,000. Approximately half of the goodwill is expected to be deductible for tax purposes. During the third quarter, the Company also completed an acquisition of a wood veneer plant in the Flooring Rest of the World (“Flooring ROW”) Segment for $13,806.

2021 Acquisitions

During the nine months ended October 2, 2021, the Company made acquisitions in the Flooring ROW Segment totaling $77,187, including the acquisition of an insulation manufacturer, on September 7, 2021 for $67,285. The Company’s acquisition resulted in a goodwill allocation of $31,319 and an intangible asset subject to amortization of $10,601. The goodwill is not expected to be deductible for tax purposes. The remaining acquisitions resulted in goodwill of $1,273 and intangible assets subject to amortization of $5,596.

3. Revenue from Contracts with Customers

Contract Liabilities

The Company 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 consolidated balance sheets. The Company had contract liabilities of $72,860 and $65,744 as of October 1, 2022 and December 31, 2021, respectively.

Performance Obligations

Substantially all of the Company’s revenue is recognized at a point in time when the product is either shipped or received from the Company’s facilities and control of the product is transferred to the customer. Accordingly, in any period, the Company does not recognize a significant amount of revenue from performance obligations satisfied or partially satisfied in prior periods and the amount of such revenue recognized during the three and nine months ended October 1, 2022 and October 2, 2021 was immaterial.

Costs to Obtain a Contract

The Company 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 $60,457 and $49,644 as of October 1, 2022 and December 31, 2021, respectively. Straight-line amortization expense recognized during the nine months ended October 1, 2022 and October 2, 2021 related to these capitalized costs were $38,394 and $44,042, respectively.

8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Revenue Disaggregation

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the three months ended October 1, 2022 and October 2, 2021:

October 1, 2022	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Geographical Markets
United States	$	614,460	1,056,596	3,784	1,674,840
Europe	201,217		2,079	495,291	698,587
Russia	113,195		—	49,001	162,196
Other	167,784		30,959	183,173	381,916
	$	1,096,656	1,089,634	731,249	2,917,539
Product Categories
Ceramic & Stone	$	1,089,593	9,642	—	1,099,235
Carpet & Resilient	7,063		842,069	220,320	1,069,452
Laminate & Wood	—		237,923	235,461	473,384
Other(1)	—		—	275,468	275,468
	$	1,096,656	1,089,634	731,249	2,917,539

October 2, 2021	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Geographical Markets
United States	$	556,496	1,016,015	3,851	1,576,362
Europe	205,263		1,398	545,538	752,199
Russia	81,246		25	40,275	121,546
Other	155,439		33,015	178,456	366,910
	$	998,444	1,050,453	768,120	2,817,017
Product Categories
Ceramic & Stone	$	993,864	9,079	—	1,002,943
Carpet & Resilient	4,580		834,581	231,825	1,070,986
Laminate & Wood	—		206,793	250,307	457,100
Other(1)	—		—	285,988	285,988
	$	998,444	1,050,453	768,120	2,817,017

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

9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the nine months ended October 1, 2022 and October 2, 2021:

October 1, 2022	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Geographical Markets
United States	$	1,825,304	3,153,752	10,802	4,989,858
Europe	702,308		5,932	1,776,686	2,484,926
Russia	283,702		23	127,507	411,232
Other	508,668		101,375	590,331	1,200,374
	$	3,319,982	3,261,082	2,505,326	9,086,390
Product Categories
Ceramic & Stone	$	3,302,446	28,685	—	3,331,131
Carpet & Resilient	17,536		2,547,184	709,148	3,273,868
Laminate & Wood	—		685,213	836,756	1,521,969
Other (1)	—		—	959,422	959,422
	$	3,319,982	3,261,082	2,505,326	9,086,390

October 2, 2021	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Geographical Markets
United States	$	1,659,106	3,000,077	8,191	4,667,374
Europe	658,829		1,977	1,702,522	2,363,328
Russia	222,226		75	105,395	327,696
Other	427,657		98,763	555,058	1,081,478
	$	2,967,818	3,100,892	2,371,166	8,439,876
Product Categories
Ceramic & Stone	$	2,958,056	26,062	—	2,984,118
Carpet & Resilient	9,762		2,470,079	745,774	3,225,615
Laminate & Wood	—		604,751	776,690	1,381,441
Other (1)	—		—	848,702	848,702
	$	2,967,818	3,100,892	2,371,166	8,439,876

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

10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Restructuring, Acquisition and Integration-Related Costs

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

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

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

Restructuring, acquisition transaction and integration-related costs consisted of the following during the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended			Nine Months Ended
	October 1 2022		October 2 2021	October 1 2022	October 2 2021
Cost of sales
Restructuring costs	$	30,421	246	31,722	15,685
Acquisition integration-related costs	—		306	349	349
Restructuring and acquisition integration-related costs	$	30,421	552	32,071	16,034
Selling, general and administrative expenses
Restructuring costs	$	2,949	(89)	3,035	226
Acquisition transaction-related costs	481		184	1,508	1,928
Acquisition integration-related costs	687		426	1,741	849
Restructuring, acquisition transaction and integration-related costs	$	4,117	521	6,284	3,003

11

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The restructuring activity for the three months ended October 1, 2022 is as follows:

	Asset write-downs (gains on disposals)		Severance	Other restructuring costs	Total
Balances as of July 2, 2022	$	—	430	—	430
Restructuring costs
Global Ceramic Segment	—		3,366	—	3,366
Flooring NA Segment	15,193		870	3,726	19,789
Flooring ROW Segment	5,805		2,611	1,799	10,215
Total restructuring costs	20,998		6,847	5,525	33,370
Cash payments	—		(1,739)	(5,401)	(7,140)
Non-cash items	(20,998)		(34)	(124)	(21,156)
Balances as of October 1, 2022	$	—	5,504	—	5,504
Restructuring costs recorded in:
Cost of sales	$	20,998	3,924	5,499	30,421
Selling, general and administrative expenses	—		2,923	26	2,949
Total restructuring costs	$	20,998	6,847	5,525	33,370

The restructuring activity for the nine months ended October 1, 2022 is as follows:

	Asset write-downs (gains on disposals)		Severance	Other restructuring costs	Total
Balances as of December 31, 2021	$	—	1,634	995	2,629
Restructuring costs
Global Ceramic Segment	—		3,366	—	3,366
Flooring NA Segment	15,107		870	3,677	19,654
Flooring ROW Segment	5,805		2,611	3,321	11,737
Total restructuring costs	20,912		6,847	6,998	34,757
Cash payments	—		(2,918)	(7,119)	(10,037)
Non-cash items	(20,912)		(59)	(874)	(21,845)
Balances as of October 1, 2022	$	—	5,504	—	5,504
Restructuring costs recorded in:
Cost of sales	$	20,912	3,924	6,886	31,722
Selling, general and administrative expenses	—		2,923	112	3,035
Total restructuring costs	$	20,912	6,847	6,998	34,757

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

12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Fair Value

The Company’s wholly-owned captive insurance company may 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:

	At October 1, 2022		At December 31, 2021
Short-term investments:
Commercial paper (Level 2)	$	110,000	323,000

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

6. Receivables, net

Receivables, net are as follows:

	At October 1, 2022		At December 31, 2021
Customers, trade	$	1,899,479	1,721,584
Income tax receivable	27,241		73,727
Other	148,283		117,823
	2,075,003		1,913,134
Less: allowance for discounts, claims and doubtful accounts	71,742		73,149
Receivables, net	$	2,003,261	1,839,985

7. Inventories

The components of inventories are as follows:

	At October 1, 2022		At December 31, 2021
Finished goods	$	2,025,754	1,677,707
Work in process	176,033		144,004
Raw materials	698,329		569,961
Total inventories	$	2,900,116	2,391,672

13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. Goodwill and Intangible Assets

The Company performs its annual testing of goodwill and indefinite-lived intangibles in the fourth quarter of each year. Between annual testing dates, the Company monitors factors such as its market capitalization, comparable company market multiples and macroeconomic conditions to identify conditions that 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.

The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgements and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy 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 judgements and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital ("WACC") and comparable company market multiples.

As a result of a decrease in the Company’s market capitalization, comparable company market multiples, projected future cash flows and an increase in the WACC due to increases in the risk free rate and applicable risk premiums, the Company determined that a triggering event occurred requiring goodwill impairment testing for each of its reporting units as of October 1, 2022. The impairment test indicated a pre-tax, non-cash goodwill impairment charge related to the Global Ceramic reporting unit of $688,514 ($679,664 net of tax) which the Company recorded during the three months ended October 1, 2022. The Company concluded goodwill of its other reporting units was not impaired at October 1, 2022.

The Company compared the estimated fair values of its indefinite-lived intangibles to their carrying values and determined that there were impairments of $7,257 ($5,939 net of tax) in the Flooring ROW and Flooring NA reporting units during the three months ended October 1, 2022.

A significant or prolonged deterioration in economic conditions, continued increases in the costs of raw materials and energy combined with an inability to pass these costs on to customers, a further decline in the Company’s market capitalization or comparable company market multiples, projected future cash flows, or increases in the WACC, could impact the Company’s assumptions and require a reassessment of goodwill or indefinite-lived intangible assets for impairment in future periods. The excess of fair value over carrying value for the Flooring ROW reporting unit was approximately 20% and the excess of fair value over carrying value for the Flooring NA reporting unit was less than 5% as of October 1, 2022. Future declines in estimated after tax cash flows, increases in the WACC or a decline in market capitalization could result in an additional indication of impairment in one or more of the Company’s reporting units.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill:

	Global Ceramic Segment		Flooring NA Segment	Flooring ROW Segment	Total
Balance as of December 31, 2021
Goodwill	$	1,563,267	874,198	1,497,869	3,935,334
Accumulated impairment losses	(531,930)		(343,054)	(452,441)	(1,327,425)
Balance as of December 31, 2021, net	1,031,337		531,144	1,045,428	2,607,909
Goodwill adjustments related to acquisitions	—		—	(2,722)	(2,722)