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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.24pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.18pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.66pp
Lean +
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
harm+4
penalties+4
failure+3
adversely+3
claims+2
Positive rising
achieve+3
successfully+2
profitability+1
opportunities+1
innovation+1
Risk Factors (Item 1A)
8,321 words
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, results of operations, and prospects.
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 prolongeddeclines in the U.S. or global economies could have a material adverse effect on the Company’s business.
The Company derives a majority of its sales from residential and commercial construction and remodeling. During times of economic uncertainty or downturns, end consumers tend to reduce spending on home remodeling. Likewise, new home construction and the corresponding need for new flooring materials tends to slow during recessionary periods. In addition, the combination of high interest rates and inflation has impacted mortgage affordability and increased the cost of home projects, affecting demand for the Company’s products. Cyclical economic have caused, and could continue to cause, the industry to soften globally or in the local markets in which the Company operates. The Company cannot predict whether, when or to what degree elevated interest rates or inflation will further or decrease, and what effect such changes might have on repair and remodeling activities, new construction or product demand. A significant or in residential or commercial remodeling or new construction activity could have a material effect on the Company’s business, financial condition, results of operations, and prospects.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
unfavorable+6
restructuring+6
impairment+5
shutdowns+4
correction+2
Positive rising
favorable+9
gains+5
effective+3
benefit+2
opportunities+2
MD&A (Item 7)
6,769 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company’s financial condition and results of operations from management's perspective should be read in conjunction with the Consolidated Financial Statements and related Notes included in this report. The discussion in this Form 10-K includes a comparison of fiscal 2025 to fiscal 2024. This section also discusses fiscal 2024 and fiscal 2023 results, as the Company revised certain fiscal 2024 and fiscal 2023 items to correct for a misstatement in its financial statements discovered during the fourth quarter of fiscal 2025. The revisions ensure comparability across all periods reflected herein. In the aggregate, the correction of these errors impacted the 2023 and 2024 statement of operations by $9.5 million ($4.1 million was recorded to cost of sales and $5.4 million to other (income) and expense, net) and $3.0 million ($1.2 million was recorded to cost of sales and $1.8 million to other (income) and expense, net), respectively, and adjusted the retained earnings balance for the year ended December 31, 2022, by $29.6 million. For additional information, see Note 18, Immaterial Correction of Prior Period Financial Statements of the Notes to the Consolidated Financial Statements included in this report.
References to “Mohawk,” “the Company,” “we,” “our” and “us” refer to Mohawk Industries, Inc. and its consolidated subsidiaries as a whole, unless the context otherwise requires.
The Company faces intense competition in the flooring industry that could decrease demand for the Company’s products or force it to lower prices.
The floor covering industry is highly competitive. The Company faces competition from a number of manufacturers and independent distributors. The Company may also encounter competition from competitors introducing new products or technologies that better meet customers’ needs, whether through pricing, sustainability, quality, versatility or other characteristics. In addition, some of the Company’s competitors are located outside of the major markets in which the Company participates, and these competitors may benefit from lower input costs or state subsidies which allow them to sell their products for less than fair value. Price competition or overcapacity may limit the Company’s ability to raise prices for its products, may force the Company to reduce prices and may also result in reduced levels of demand for the Company’s products and cause the Company to lose market share. Competitors may also engage in unfair trade practices such as dumping or market distortion through customs duties evasion. 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.
To maintain the Company’s competitive position, the Company must continue to develop new products that meet changing consumer preferences and successfully market and commercialize its innovation, which may require substantial investments in the Company’s product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Any of these factors could have a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
Increased tariffs may increase the Company’s costs of goods sold and/or decrease consumer discretionary spending.
Current U.S. tariff policies have impacted certain of the Company’s sourcing and supply chain processes occurring outside the U.S. as well as certain vendors, suppliers, and customers located outside the U.S. Tariffs have increased, and may continue to increase, the Company’s cost of goods sold on imported products, which has resulted, and could in the future result in, lower gross margins on certain products. Raising prices to account for any such increase in costs of goods may negatively impact the competitiveness, and in turn market share, of the Company’s products. Alternatively, the Company, as a U.S.-based manufacturer, might not achieve the anticipated benefits from the tariffs, such as increased sales of products manufactured domestically. Furthermore, a broad-based increase in prices across the economy could further constrain consumer discretionary spending, which in turn could decrease demand for the Company’s products. The duration, magnitude and scope of any additional tariffs, trade restrictions, retaliatory or other measures are difficult to predict, including any related impacts to
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consumer demand, along with the extent (if any) to which the Company will be able to offset the impacts of such actions through mitigation efforts. These tariff actions, retaliatory measures, or other trade restrictions, could materially and adversely impact the Company’s business, financial condition, results of operations, and prospects.
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. The Company generates approximately 46% of its annual sales in countries outside of the U.S., and the Company continues to expand internationally through acquisitions, construction of new manufacturing operations and investments in existing ones. Currently, Flooring ROW has significant operations in Australia, Brazil, Europe, Malaysia, New Zealand and Russia, Global Ceramic has significant operations in Brazil, Europe, Mexico and Russia, and Flooring NA maintains LVT and carpet pad manufacturing operations in Mexico. The Company also sources raw materials and finished goods from multiple international locations.
The Company’s international sales, supply chain, operations and investments have been, and may in the future be, impacted by 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;
• 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 labor shortages;
• disruptions in the shipping of imported and exported products;
• government price controls;
• extended payment terms and the inability to collect accounts receivable;
• difficulties repatriating cash from non-U.S. subsidiaries;
• compliance with laws governing international relations and trade, including those U.S. and European Union laws that relate to sanctions and corruption; and
• supply chain disruption or price escalations for oil, natural gas and other raw materials due to regional conflict.
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, financial condition, results of operations, and prospects.
The Company faces risks and uncertainties associated with doing business in emerging markets.
The Company operates in emerging markets such as Brazil, eastern Europe, Malaysia, Mexico and Russia and is exposed to certain risks of doing business in potentially unstable regions. Compared to developed markets, these regions often present heightened operational, legal, economic and political risks. Market conditions and supporting political structures can change rapidly, 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;
• currency exchange volatility and restrictions on foreign exchange transactions;
• capital controls or limitations on repatriation of profits;
• volatile inflation;
• political instability;
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• exposure to sanctions or export control risks related to U.S., EU and other regulatory regimes;
• immature legal and banking systems;
• uncertainty with respect to title to real and personal property;
• weak intellectual property protection and enforcement;
• 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;
• high crime rates; and
• war and/or armed conflict.
Changes in any one or a combination of these factors could have a material adverse effect on the Company’s business, financial condition, results of operations, and prospects. Given the volatility in the current global economic climate and geopolitical events around the world, including the Russian military actions in Ukraine and ongoing conflicts in the Middle East and elsewhere, it is difficult for the Company to predict the complete impact of the foregoing matters on its business, financial condition, results of operations, and prospects.
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 Company is exposed to currency exchange rate fluctuations. International sales have represented a significant percentage of the Company’s total sales, with approximately 46% of annual sales generated by international operations. The Company also maintains manufacturing facilities in 18 countries outside the U.S. The Company expects that a significant amount of its future sales will continue to come from outside the U.S. The Company is also exposed to currency exchange rate fluctuations through its purchase of raw materials, component parts and sourced goods from suppliers in multiple countries. The Company experiences currency-related gains and losses where sales or purchases are denominated in currencies other than the functional currency. In addition, the results of the Company’s foreign subsidiaries are translated into U.S. dollars from the local currency for consolidated reporting. The Company may not be able to manage its currency translation risks effectively, 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.
The Company faces risks and uncertainties related to its operations in Russia.
The Company maintains operations in Russia through its Global Ceramic and Flooring ROW reporting segments. The Company continues to face legal, regulatory, financial, operational and reputational risks due to its Russian operations. Specifically, U.S. and European Union sanctions and export controls restrict certain financial transactions and limit the transfer of certain technology, equipment and goods classified as “dual use.” Such export controls create complexity in the Company’s supply chain and the sourcing of certain materials and equipment required to continue operations, and violations of such sanctions and export controls could result in severepenalties, fines and reputational harm. In addition, certain Russian laws, such as those related to economic sanctions and data privacy, may conflict with U.S. and European Union regulations. Failure to comply with these varying laws could lead to penalties, fines and reputational harm, and increased compliance and diligence costs resulting from these risks could materially adversely affect the Company’s business. As of December 31, 2025, the Company’s Russian operations accounted for 5% of the Company’s net sales and approximately 7% of the Company’s total assets. Additionally, the Company’s Russian operations are subject to capital controls and currency volatility, both of which have impacted, and may continue to impact, profitability and ability to repatriate cash. Further, sanctions and related banking restrictions have limited, and may continue to limit, the Company’s ability to process payments or repatriate profits from Russia. As of December 31, 2025, 30% of the Company’s cash and cash equivalents are held in Russia, and generated interest income of approximately $30 million in 2025. In addition, the Company continues to face operational risks specific to Russia. As a result of the ongoing military actions between Russia and Ukraine, the Company has experienced and may continue to experience supply chain disruption and price increases of raw materials and spare parts needed in the Company’s Russian operations. The Company’s Russian operations are also subject to potential asset seizure, nationalization, expropriation or forceddivestiture under Russian government policies. The Company continues to monitor the potential impacts on its business and the ancillary impacts that the conflict may have on its other global operations. While the extent of the conflict’s impact on the Company cannot be predicted, any of the foregoing factors could materially and adversely impact the Company’s business, financial condition, results of operations, and prospects.
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Business and Operational Risks
The Company may be unable to predict changing consumer preferences and demand effectively.
The Company operates in a market sector where demand is strongly influenced by rapidly changing consumer preferences. Shifts in consumer trends can occur rapidly due to evolving market conditions, technological innovation, competitive offerings, or macroeconomic factors. The Company may be unable to accurately anticipate changes in consumer preferences as to product design, product category and technical features, as well as changes in purchasing behavior and overall demand for its products and services. Failure to predict these changes or respond effectively could result in a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
In periods of rising costs, the Company may be unable to pass increases in raw materials, labor, energy and fuel-related costs on to its customers.
The supply and prices of raw materials, labor, energy and fuel-related costs, including those related to oil and natural gas, are subject to market conditions and are impacted by many factors beyond the Company’s control, including geopolitical conflict, pandemics, labor shortages, weather conditions, natural disasters, governmental programs, regulations and trade and tariff policies, inflation and increased demand, among other factors. 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, financial condition, results of operations, and prospects have been and may be materially affected.
The Company may be unable to obtain raw materials or sourced product on a timely basis.
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 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 businesses and panels business; and glass fiber, plasticizers, and PVC resins, which are used in the Company’s sheet vinyl and luxury vinyl tile businesses. In addition to raw materials, the Company sources some finished goods. For certain raw materials and sourced products, the Company is dependent on one or a small number of suppliers. A material temporary or long-term adverse change in the Company’s relationship with such a supplier, the financial condition of such a supplier or such a 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 ongoing geopolitical conflict. 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 could disrupt the Company’s operations, which could have a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
The Company’s business operations could suffer significant losses from climate change, 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 or other unexpected events. Specifically, altered weather conditions associated with climate change may impact the Company’s ability to operate certain manufacturing facilities and could also limit general residential or commercial construction activity, which in turn could adversely impact consumer demand for the Company’s products. The Company could incur uninsuredlosses 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, financial condition, results of operations, and prospects.
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 $480 million of capital investments in 2026. While the Company believes that many of its past capital investments have been successful, there
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is no guarantee that the return on investment from the Company’s recent or future capital expenditures 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, 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 business, financial condition, results of operations, and prospects.
The long-term performance of the Company’s business relies on its ability to attract, develop and retain talented personnel.
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 business, financial condition, results of operations, and prospects.
The Company may be unable to maintain its patent licensing revenues.
The profit margins of certain of the Company’s businesses, particularly Flooring ROW, depend in part upon the Company’s ability to obtain, maintain and license proprietary technology used in the Company’s principal product families. To protect and monetize these innovations, the Company has filed and continues to file patents covering a wide range of product features and associated manufacturing methods. These patents not only safeguard the Company’s competitive position but also generate recurring patent license revenues. However, patents have a finite validity period, so the current revenue-producing patents will expire over time. The failure to continue to develop and secure alternative patents and revenues to replace expired or invalidated patents in the future could have a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
The Company may experience certain risks associated with acquisitions, joint ventures and strategic investments.
The Company has historically grown its business through a combination of organic growth and acquisitions. Growth through acquisitions involves risks, including challenges in identifying suitable opportunities, negotiating favorable terms, and completing transactions on a timely basis. Even once an acquisition is successfully executed, the Company may encounter difficulties integrating an acquired business, including realizing anticipated synergies or cost savings. 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. In addition, economic conditions may fluctuate in the various regions and markets where newly acquired companies operate, which may present foreign exchange and operational risks to the Company. Additional challenges related to the Company’s acquisition strategy include:
• aligning operational processes;
• manufacturing and selling different types of products through different distribution channels;
• conducting business from various locations;
• maintaining executive offices in different locations;
• managing complex reporting requirements;
• maintaining different operating systems and software on different computer hardware; and
• retaining key personnel.
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, financial condition, results of operations, and prospects.
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
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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.
The Company faces risks in identifying suitable acquisition candidates or partners for strategic investments.
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, to secure certain required governmental approvals necessary to consummate such strategic transactions 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, financial condition, results of operations, and prospects.
Regulatory and Legal Risks
The Company has been, and in the future may be, subject to costs, liabilities and other obligations under existing or new laws and regulations.
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 with which may require the Company to incur additional personnel-related, environmental, or other compliance-related costs on an ongoing basis.
In particular, the Company’s operations are subject to various environmental, social, and health and safety laws and regulations. For example, certain aspects of the Company’s operations and supply chain have become, and are expected to become, increasingly subject to federal, state, local and international laws, regulations and international treaties and industry standards related to climate change. Many governing bodies have introduced additional due diligence and disclosure requirements addressing sustainability that the Company expects will apply to its operations and supply chain in the coming years, such as California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Disclosure, and the European Union’s Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”). Although certain sustainability-related regulations and reporting obligations have been relaxed in some jurisdictions through legislation or by court order, sustained emphasis by the U.S., European Union and other governmental authorities on climate change and other environmental matters continues to create uncertainty. Numerous overlapping and sometimes conflicting regulations continue to evolve, and it is unclear which requirements will ultimately remain in effect following legislative or judicial review across multiple jurisdictions. This uncertainty is expected to result in ongoing compliance costs and may expose the Company to additional potential liabilities.
The extent of these costs and risks is difficult to predict and will depend, in large part, on the extent of final regulations and the ways in which those regulations are enforced. The applicable requirements under these laws are subject to amendment, the imposition of new or additional requirements, changing interpretations by agencies or courts, and uncertainty as to whether or how enforcement will occur. If these laws or regulations impose significant operational restrictions and compliance requirements on the Company, they could increase costs associated with the Company’s operations, including costs for raw materials, energy and transportation. The Company may also face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged impact of the Company’s operations on the environment. In addition, non-compliance with climate change treaties, regulations and disclosure requirements could also negatively impact the Company’s reputation and result in penalties or enforcement actions.
Furthermore, the Company is also subject to extended producer responsibility (“EPR”) regulations in jurisdictions such as California and New York. These laws impose significant obligations on producers and manufacturers involved in packaging or product distribution, including product take-back, recycling, and detailed reporting requirements. Compliance may increase operational complexity and result in higher administrative costs. For example, EPR regulations may require registration with producer responsibility organizations, payment of eco-modulated fees based on recyclability, and adherence to labeling and recordkeeping standards, with requirements varying across jurisdictions. Failure to comply with these evolving mandates may expose the Company to penalties, enforcement actions, and reputational harm.
In addition, the Company’s manufacturing facilities may become subject to further limitations on emissions due to public policy concerns regarding climate change or other environmental or health and safety concerns. Because the Company’s manufacturing processes use a significant amount of energy, especially natural gas, the imposition of greenhouse gas emissions
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limitations, such as a “cap-and-trade” system, could require the Company to increase its capital expenditures, use its cash to acquire emission credits or restructure its manufacturing operations.
Any of the above could result in a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
Failure to attain certain sustainability targets and goals could have a material adverse effect on the Company's business.
The Company has established strategies, goals and targets related to climate change and other sustainability matters. The Company’s ability to implement and achieve any such strategies, goals or targets depends on a number of factors, including, but not limited to, evolving regulatory standards, changes in carbon markets, consumer demand for low-carbon and sustainable products, technological developments, the conduct of third-party manufacturers and suppliers, climate change-related impacts, and raw material and supply chain disruptions. Actual or perceived failures or delays in implementing and achieving strategies, goals and targets related to climate change and other environmental matters could adversely affect the Company’s business, financial condition, results of operations, and prospects, and result in reputational harm and increased risk of litigation.
In addition, investor advocacy groups, certain institutional investors, investment funds, lenders, market participants, stockholders, customers, and other stakeholders have focused increasingly on sustainability practices of companies. These parties have placed increased importance on the implications of the social cost of their investments. If Mohawk’s sustainability practices do not meet investor, lender, or other industry stakeholder expectations and standards, which continue to evolve, the Company’s access to capital may be negatively impacted based on an assessment of Mohawk’s sustainability strategies and practices. These limitations, in both the debt and equity markets, may materially negatively affect the Company’s ability to manage its liquidity, refinance existing debt, grow its businesses, and implement its strategies, as well as adversely impact the Company’s business, financial condition, results of operations, and prospects.
It is possible that investor advocacy groups, certain institutional investors, investment funds, lenders, market participants, stockholders, customers, and other stakeholders may not be satisfied with Mohawk’s sustainability practices or the speed of their adoption. In addition to the costs associated with the activities discussed above, the Company could also incur additional costs and require additional resources to monitor, report, and comply with various sustainability practices. Also, the Company’s failure, or perceived failure, to meet the standards set forth in its annual impact report could negatively impact its reputation, employee retention, and the willingness of customers and suppliers to do business with the Company.
The Company is exposed to litigation, claims and other legal proceedings relating to its products, operations and compliance with various laws and regulations.
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. Specifically, the Company is currently subject to claims related to per- and polyfluoroalkyl substances (“PFAS”), which are increasingly the focus of regulatory scrutiny and public concern. Alleged historical or current use of PFAS in the Company’s products or processes could result in lawsuits seeking damages, remediation costs, or injunctive relief. The Company is also subject to certain alleged personal injuryclaims related to exposure to silica dust that have been submitted against it or its subsidiaries. Such proceedings may involve substantial legal expenses, potential settlements or judgments, and reputational harm. For more information, please Note 15, Commitments and Contingencies, of the Consolidated Financial Statements.
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 successfullydefendagainst 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 claimsagainst 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 and sales of its products.
The Company may be unable to protect its intellectual property rights.
The Company relies on patent, trade secret and trademark protections in the U.S., the European Union and other jurisdictions, as well as confidentiality agreements with certain employees, to protect its intellectual property. The Company
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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 ultimately be granted.
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 granted by the applicable governmental authorities. The failure to obtain trademark registrations in the U.S. and other jurisdictions could limit the Company’s ability to protect its trademarks and impede its marketing efforts in those jurisdictions.
Despite the Company’s efforts, it may be unable to prevent competitors or other third parties from using its technology without authorization, independently developing similar technology or designing around the Company’s patents. Such unauthorized use or the development of comparable technologies could diminish or eliminate the Company’s competitive advantage and result in lost sales.
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.
Any of the above could result in a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
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 punitivedamages and attorneys’ 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, financial condition, results of operations, and prospects would be materially and adversely affected.
Information Technology Risks
The Company utilizes information systems within its own infrastructure as well as those provided by third-party service providers to manage its operations. Any failure, interruption, or deficiency in these systems could materially and adversely affect the Company’s business.
The Company’s businesses rely on its information systems, including its computer hardware, software and network, 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;
• monitor point of sale activity;
• store, deliver and transmit data to the Company’s sales and distribution systems; and
• manage and conduct certain production processes.
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Any event that causes interruptions to the input, retrieval and transmission of data or increase in the Company’s service time could disrupt the Company’s normal operations. Interruption, impediment or failure of the Company’s information systems has in the past caused, and in the future could cause, unanticipateddisruptions in service, decreased customer service and customer satisfaction and harm to the Company’s reputation, which could result in loss of customers, increased operating expenses and financial losses. There can be no assurance that the Company can effectively carry out its disaster recovery plan to handle the interruption or 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. In addition, there can be no assurance that the Company can effectively manage the resources necessary to sustain and protect an appropriate information system infrastructure, or effectively implement system upgrades in a timely manner.
The Company, both itself and through third-party service providers, collects and processes proprietary, personal, confidential and sensitive data, which may include information about customers, employees, suppliers, distributors and others. Some of this data is stored, accessible or transferred internationally. 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.
The Company also relies on third-party service providers for a variety of information technology services, and such partnerships could be sources of operational and data security risk to the Company. Examples include, but are not limited to, the following: disruptions in communication services provided by a third-party service provider, breakdowns or failures of a third-party service provider’s information systems; security breaches or cyber-attacks on a third-party service provider; capacity constraints; regulatory restrictions, fines, orders or other regulatory action causing reputational harm; failure of a third-party service provider to provide services for any reason; or poor performance of information technology services. In addition, the misappropriation, loss or misuse of customer, consumer, employee, supplier or Company data resulting from a failure of a third-party service provider could result in significant costs, lost sales, fines, lawsuits and damage to the Company’s reputation.
Any of the above could result in 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, both itself and through third-party service providers, employs information 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 information systems, whether external or internal, could result in the loss or misappropriation of sensitive data and 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.
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 system infrastructure, such controls and actions may be insufficient to prevent, or respond to, physical and electronic break-ins, cyber-attacks or other security breaches to the Company’s systems. There can be no assurance that the Company can effectively carry out its disaster recovery plan to address cyber-attacks or other security breaches to the Company’s systems, or that the Company will be able to restore its operational capacity within sufficient time to avoid material disruption to its business.
Furthermore, third-party service providers provide a number of key components necessary to the Company’s information systems. Any problems caused by these third-party service provider, including those resulting from cyber-attacks and security breaches, could adversely affect the Company’s information systems and its ability to conduct its business. Replacing these third-party service provider could also create significant delay and expense.
Any of the above could result in a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
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The Company is subject to risks related to artificial intelligence (“AI”) and emerging technologies.
The rapid development of new technologies such as artificial intelligence (“AI”) continues to transform the industry and markets within which the Company operates. The Company’s ability to remain competitive depends on its capacity to adapt to rapid technological changes and successfully integrate new technologies into its operations. Such initiatives may require substantial investment, could result in operational disruptions during implementation, and may not achieve anticipated benefits. There can also be no assurance that operational transitions related to new technology will occur smoothly, and any delays or failures could impair business continuity, reduce productivity, and negatively impact financial performance. The Company cannot guarantee that it will maintain competitive strengthagainst industry peers as technology continues to evolve.
The Company utilizes AI and machine learning technologies in various aspects of its operations, including production planning, predictive maintenance, quality control, and supply chain optimization. While these technologies offer significant benefits, they also present certain risks that could adversely affect the Company’s business. AI systems may produce inaccurate or biased outputs, fail to integrate effectively with existing processes, or experience technical malfunctions. Such issues could disrupt manufacturing operations, reduce efficiency, or lead to product quality concerns. Additionally, the Company’s reliance on AI-driven automation may increase vulnerability to cybersecurity threats, data breaches, or unauthorized access to proprietary information.
In addition, regulatory frameworks governing AI use are evolving rapidly. Future laws or regulations may impose restrictions, increase compliance costs, or limit certain applications of AI in manufacturing. Failure to comply with these requirements could result in penalties, reputational harm, or operational delays. The Company’s ability to manage these risks effectively may impair the Company’s ability to achieve anticipated benefits from AI technologies.
Any of the above could result in a material adverse effect on the Company’s business, financial condition, results of operations, and prospects.
Financial and Liquidity Risks
Adverse macroeconomic conditions could impact the Company’s access to credit and increase its borrowing costs.
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., Standard & Poor’s Financial Services, LLC 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 business, financial condition, results of operations, and prospects.
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 August 12, 2022, the Company entered into a fourth amendment (the “Amendment”) to its existing 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. The Amendment, among other things, increased the amount available under the Senior Credit Facility from $1,800 million to $1,950 million until October 18, 2024, after which the amount available under the Senior Credit Facility would decrease to $1,485 million. On August 5, 2024, the Company entered into a Lender Joinder Agreement, which increased commitments under the Senior Credit Facility by an additional $100 million until August 12, 2027, and further amended the Senior Credit Facility to permit the Company to increase the commitments under the Senior Credit Facility by an aggregate amount not to exceed $500 million. Any outstanding borrowings under the Company’s United States and European commercial paper programs also reduce availability under the Senior Credit Facility. Including commercial paper borrowings, the Company has utilized approximately $267 million under the Senior Credit Facility resulting in a total of $1,318 million available as of December 31, 2025.
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If the Company’s cash flow falls short of expectations, the Company may need to refinance all or a portion of its indebtedness through a public or private debt offering or by securing a new bank facility. However, there is no assurance that such refinancing could be completed on acceptable terms, or at all. Inability to access debt markets at competitive rates or in sufficient amounts, whether due to credit rating downgrades, market volatility, market disruption, or weakness in the Company’s businesses, could adversely and materially impact the Company’s ability to finance its operations or meet existing debt obligations.
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, as amended, requires the Company to maintain a Consolidated Interest Coverage Ratio of at least 3.5 to 1.0. 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 have in the past and may in the future result in an impairment of the Company’s assets, which in turn has resulted in and could result in future material non-cash charges.
A significant or prolonged decrease in the Company’s market capitalization, including a decline in stock price, or a negative long-term performance outlook, has in the past resulted in and could in the future result in an impairment of its assets. An impairment occurs when the carrying value of the Company’s assets exceed their fair value. The Company tests the goodwill and intangible assets on its balance sheet for impairment on an annual basis, and also when events occur or circumstances change that indicate that the fair value of the reporting unit or intangible asset may be below its carrying amount. Determining fair value requires substantial judgment and is subject to inherent uncertainties, estimates, and assumptions. Indicators for potential impairment include declines in market conditions, weaker-than-expected financial performance trends for the Company’s reporting units, declines in projected revenue, sustained decreases in stock price, or increases in the market-based weighted average cost of capital (“WACC”), among other factors. The indicators could signal that the carrying value of the Company’s goodwill or indefinite-lived intangible assets may not be recoverable.
A significant or prolongeddeterioration in economic conditions, a further decline in the Company’s market capitalization or comparable company market multiples, a reduction in 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.
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 (loss) 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.
Certain countries in which the Company operates have enacted the Organization for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GLOBE”) and Transitional Country-by-Country Reporting (“CBCR”) Safe Harbor rules. The OECD’s GLOBE model rules, and supplemental published administrative guidance, provide a framework that ensures that multinational enterprises (“MNE(s)”) with revenue above €750 million pay a minimum level of tax of 15% on their profits arising in each jurisdiction where they operate.
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The framework includes an income inclusion rule (“IIR”) and an undertaxed payments rule (“UTPR”) that work together to ensure a minimum level of tax in each jurisdiction in which a MNE operates. Further, countries can enact their own qualified domestic minimum top up tax (“QDMTT”) in order to limit the application of an IIR or UTPR to their domestic income. IIRs and QDMTTs were effective for the Company beginning in 2024 in some, but not all, of the jurisdictions in which the Company operates. The UTPR became effective for the Company beginning in 2025, which could subject the Company’s worldwide profits to a minimum level of tax regardless of whether the country in which the Company earned the income has adopted the GLOBE rules. The Company expects to be able to satisfy the requirements of certain CBCR Safe Harbor rules in many jurisdictions from 2024-2026, limiting the impact of the GLOBE rules in the qualifying jurisdictions, and as such, the Company does not anticipate a material impact to its provision for income taxes in the near term. The Company continues to monitor the OECD’s guidance related to the GLOBE rules and related legislation in the countries in which the Company operates to assess their potential impact to the Company’s income tax position.
Business Summary
Mohawk is a significant supplier of every major flooring category with manufacturing operations in 19 countries and sales in approximately 180 countries. Based on its annual sales, the Company believes it is the world’s largest flooring manufacturer. A majority of the Company’s long-lived assets are located in the United States and Europe, which are also the Company’s primary markets. Additionally, the Company maintains operations in Australia, Brazil, Malaysia, Mexico, New Zealand, Russia and other parts of the world. The Company is a leading provider of flooring for residential and commercial markets and has earned significant recognition for its innovation in design and performance as well as sustainable business practices.
Macroeconomic Conditions
While commercial demand remained stable through 2025, continued softness in U.S. housing turnover and sluggish new home construction negatively affected the Company's volumes. Weak consumer confidence also contributed to deferred spending on major discretionary projects, including home renovation activities. Housing turnover in the Company's major regions remained near historically low levels, driven by affordability challenges and broader economic uncertainty. In the U.S., existing home sales for 2025 were flat compared to the prior year, although December sales improved year‑over‑year. U.S. mortgage rates have recently declined to their lowest levels since autumn 2022; likewise, interest rates in Europe have declined to their lowest levels since autumn 2022. The Company believes these conditions, along with elevated consumer savings, lower inflation and stable employment, may support greater participation in the housing market as consumer confidence improves. However, the ongoing impact of soft demand, inflationary pressures and elevated interest rates to the Company’s business, financial condition, results of operations, and prospects cannot be determined at this time.
In response to the challenging market conditions described above, the Company undertook a series of actions throughout 2025 designed to support sales performance and improve product mix in softer demand environments. These actions included the introduction of innovative products, targeted marketing initiatives, and promotional programs intended to stimulate activity in both residential and commercial channels. The Company's premium product launches provided differentiated design and performance attributes aimed at encouraging remodeling activity. In addition, the introduction of new commercial collections contributed to increased traction in new construction and commercial remodeling projects. The Company also implemented a number of restructuring actions and operational improvements intended to reduce its cost structure and enhance long‑term competitiveness. Recent initiatives to streamline overhead and exit higher‑cost assets are expected to generate approximately $30 million in annual savings upon completion. Cumulatively, restructuring actions initiated since 2022 are expected to deliver annualized benefits of approximately $365 million. Given the lack of improvement in the Company's end markets during 2025, the Company reduced capital expenditures to $440 million, representing a decline of approximately 30% compared with its depreciation levels. The Company believes these actions reflect its disciplined approach to capital allocation in the current environment. The Company remains focused on effectively managing near‑term market conditions, pursuing profitable growth opportunities, and positioning the Company to benefit when housing activity recovers.
Tariffs Update
The Company continues to actively monitor trade policy and tariff announcements, including various executive orders issued by the current U.S. presidential administration. The Company has taken steps to mitigate the implemented tariffs through managing inventory of sourced products, adjusting prices as the tariff trade policy evolves and optimizing its supply chain. The Company continues to monitor changing tariff levels and adjust its strategies to mitigate their impact as trade policy evolves. These tariff actions, retaliatory measures, or other trade restrictions could materially and adversely impact the Company’s
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business, financial condition, results of operations, and prospects. For more information, please refer to Risk Factors, “Increased tariffs may increase the Company’s costs of goods sold and/or decrease consumer discretionary spending” in Part I, Item 1A of this Form 10-K.
Geopolitical Conflict
Due to its global footprint, Mohawk’s business is sensitive to geopolitical conflict. The Company maintains operations in Russia through its Global Ceramic and Flooring ROW reporting segments. The Company continues to face legal, regulatory, financial, operational and reputational risks due to its Russian operations. For more information, please refer to Risk Factors , " The Company faces risks and uncertainties related to its operations in Russia " in Part I, Item 1A of this Form 10-K. In addition, escalation of conflict in the Middle East region and elsewhere could result in supply chain disruptions, higher energy and raw material prices, decreased consumer demand for the Company’s products and increased transportation barriers, though the extent of the impact on the Company’s business, financial condition, results of operations, and prospects cannot be predicted. The broader consequences of current ongoing military conflicts, which may include further economic sanctions, embargoes, regional instability, and geopolitical shifts; potential retaliatory actions, including nationalization of foreign-owned businesses; increased tensions between the United States and countries in which the Company operates; and the extent of the conflict’s effect on the Company’s business and results of operations, as well as the global economy, cannot be predicted.
Liquidity and Capital Expenditures Overview
The Company believes it is well positioned with a strong balance sheet. Based on its current liquidity and available credit, the Company is in a position to finance internal investments, acquisitions and/or additional stock purchases and pay current debt as it becomes due. For information on risk that could impact the Company’s results, please refer to Risk Factors-Financial and Liquidity Risks in Part I, Item 1A of this Form 10-K.
In 2025, the Company invested approximately $440 million focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance. In 2026, the Company plans to invest approximately $480 million focused on completing capacity expansion projects and targeted initiatives that will drive cost reduction while improving operational performance.
Net earnings attributable to the Company were $369.9 million for 2025 compared to net earnings of $514.7 million for 2024. The change was primarily attributable to higher input costs; higher restructuring, acquisition and integration-related, and other costs; lower sales volume; the unfavorable impact of temporary plant shutdowns and the impact of the Flooring North America order management system conversion, partially offset by productivity gains.
For the year ended December 31, 2025, the Company generated $1,056.2 million of cash from operating activities. As of December 31, 2025, the Company had cash and cash equivalents of $856.1 million, of which $485.3 million was in the U.S. and $370.8 million was in other countries.
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Results of Operations
For the Years Ended December 31,
(In millions)
Statement of operations data:
Net sales
Cost of sales (1)
Gross profit
Selling, general and administrative expenses (2)
Impairment of goodwill and indefinite-lived intangibles
Operating income (loss)
Interest expense
Other (income) expense, net (3)
Earnings (loss) before income taxes
Income tax expense (4)
Net earnings (loss) including noncontrolling interests
Less: Net earnings attributable to noncontrolling interests
Net earnings (loss) attributable to Mohawk Industries, Inc.
(1) Cost of sales includes:
Restructuring, acquisition and integration-related charges and other costs
Step up of acquisition inventory
Other charges
(2) Selling, general and administrative expenses include:
Restructuring, acquisition and integration-related charges
Reserves and fees for Legal settlements,
Other charges
(3) Other (income) expense includes:
Release of indemnification asset
Other charges
(4) Income tax expense includes:
Foreign tax regulation change
Reversal of uncertain position - Income taxes
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Year Ended December 31, 2025, as Compared with Year Ended December 31, 2024
Net sales
Net sales for 2025 were $10,785.4 million compared to net sales of $10,836.9 million for 2024. The change was primarily attributable to lower sales volume of approximately $184 million; fewer shipping days for the twelve months ended December 31, 2025, of approximately $53 million and the impact of the order management system conversion of approximately $50 million, partially offset by the favorable net impact of foreign exchange rates of approximately $141 million and the favorable net impact of price and product mix of approximately $100 million.
Global Ceramic —Net sales for 2025 were $4,289.4 million compared to net sales of $4,226.6 million for 2024. The change was primarily attributable to the favorable net impact of price and product mix of approximately $125 million and the favorable net impact of foreign exchange rates of approximately $50 million, partially offset by lower sales volume of approximately $83 million and fewer shipping days for the twelve months ended December 31, 2025, of approximately $27 million.
Flooring NA —Net sales for 2025 were $3,638.5 million compared to net sales of $3,769.9 million for 2024. The change was primarily attributable to lower sales volume of approximately $109 million and the impact of the order management system conversion of approximately $50 million, partially offset by the favorable net impact of price and product mix of approximately $43 million.
Flooring ROW —Net sales for 2025 were $2,857.5 million compared to net sales of $2,840.4 million for 2024. The change was primarily attributable to the favorable net impact of foreign exchange rates of approximately $90 million, partially offset by the unfavorable net impact of price and product mix of approximately $68 million.
Quarterly net sales and the percentage changes in net sales by quarter for 2025 versus 2024 were as follows (dollars in millions):
Change
First quarter
Second quarter
Third quarter
Fourth quarter
Full year
Gross profit
Gross profit for 2025 was $2,574.7 million compared to gross profit of $2,686.5 million for 2024. The change was primarily attributable to higher input costs of approximately $135 million; lower sales volume of approximately $72 million; the unfavorable impact of temporary plant shutdowns of approximately $52 million; higher restructuring, acquisition and integration-related, and other costs of approximately $47 million and the impact of the order management system conversion of approximately $26 million, partially offset by productivity gains of approximately $188 million and the favorable net impact of foreign exchange rates of approximately $48 million.
Selling, general and administrative expenses
Selling, general and administrative expenses for 2025 were $2,065.0 million compared to $1,984.8 million for 2024. The change was primarily attributable to higher input costs of approximately $53 million; higher restructuring, acquisition and integration-related, and other costs of approximately $40 million and the unfavorable net impact of foreign exchange rates of approximately $26 million, partially offset by productivity gains of approximately $32 million.
Impairment of goodwill and indefinite-lived intangibles
Impairment of goodwill and indefinite-lived intangibles for 2025 was $19.9 million compared to $8.2 million for 2024. During the fourth quarter of 2024 and 2025, the Company compared the estimated fair values of its indefinite-lived intangible to their carrying values and determined that there was an impairment charge in Global Ceramic in 2024 and Flooring Rest of the
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World in 2025. See Note 7, Goodwill and Other Intangible Assets , 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 impairment charges.
Operating income (loss)
Operating income for 2025 was $489.8 million compared to operating income of $693.5 million for 2024. The change was primarily attributable to higher input costs of approximately $188 million; higher restructuring, acquisition and integration-related, and other costs of approximately $87 million; lower sales volume of approximately $69 million; the unfavorable impact of temporary plant shutdowns of approximately $52 million and the impact of the order management system conversion of approximately $30 million, partially offset by productivity gains of approximately $220 million.
Global Ceramic —Operating income was $266.7 million for 2025 compared to operating income of $249.5 million for 2024. The change was primarily attributable to productivity gains of approximately $84 million; the favorable net impact of price and product mix of approximately $56 million; the favorable net impact of foreign exchange rates of approximately $27 million and lower restructuring, acquisition and integration-related, and other costs of approximately $18 million, partially offset by higher input costs of approximately $107 million; lower sales volume of approximately $41 million.
Flooring NA —Operating income was $113.6 million for 2025 compared to operating income of $237.3 million for 2024. The change was primarily attributable to higher input costs of approximately $81 million; higher restructuring, acquisition and integration-related, and other costs of approximately $53 million; the unfavorable impact of temporary plant shutdowns of approximately $42 million and the impact of the order management system conversion of approximately $30 million, partially offset by productivity gains of approximately $112 million.
Flooring ROW —Operating income was $212.9 million for 2025 compared to operating income of $265.2 million for 2024. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $60 million.
Interest expense
Interest expense was $17.8 million for 2025 compared to interest expense of $48.5 million for 2024. The change was primarily attributable to strong cash flow and prepayments of the U.S. and European portions of the Term Loan Facility during the twelve months ended December 31, 2024, resulting in lower debt.
Other income and expense, net
Other expense was $3.3 million for 2025 compared to other expense of $2.0 million for 2024. Other income and expense, net did not significantly change for the twelve months ended December 31, 2025, from twelve months ended December 31, 2024.
Income tax expense
For 2025, the Company recorded income tax expense of $98.8 million on income before income taxes of $468.7 million for an effective tax rate of 21.1%, as compared to an income tax expense of $128.2 million on income before income taxes of $643.0 million, resulting in an effective tax rate of 19.9% for 2024. The increase in the effective tax rate was primarily driven by a larger increase in unrecognized tax benefits and amended returns during 2025, partially offset by a tax benefit related to a prior period adjustment to deferred taxes during 2025 and the Company’s geographic dispersion of profits and losses for the respective periods.
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Year Ended December 31, 2024, as Compared with Year Ended December 31, 2023
Net sales
Net sales for 2024 were $10,836.9 million compared to net sales of $11,135.1 million for 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $397 million and the unfavorable net impact of foreign exchange rates of approximately $68 million, partially offset by more shipping days for the year ended December 31, 2024 of approximately $92 million; higher sales volume attributable to acquisitions of approximately $48 million and higher sales volume of approximately $27 million.
Global Ceramic —Net sales for 2024 were $4,226.6 million compared to net sales of $4,300.1 million for 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $64 million; the unfavorable net impact of foreign exchange rates of approximately $64 million and lower sales volume of approximately $35 million, partially offset by higher sales volume attributable to acquisitions of approximately $48 million and more shipping days for the year ended December 31, 2024, of approximately $42 million.
Flooring NA —Net sales for 2024 were $3,769.9 million compared to net sales of $3,829.4 million for 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $126 million, partially offset by higher sales volume of approximately $37 million.
Flooring ROW —Net sales for 2024 were $2,840.4 million compared to net sales of $3,005.6 million for 2023. The change was primarily attributable to the unfavorable net impact of price and product mix of approximately $207 million.
Quarterly net sales and the percentage changes in net sales by quarter for 2024 versus 2023 were as follows (dollars in millions):
Change
First quarter
Second quarter
Third quarter
Fourth quarter
Full year
Gross profit
Gross profit for 2024 was $2,686.5 million compared to gross profit of $2,705.5 million for 2023. The change was primarily attributable to lower input costs of approximately $260 million; productivity gains of approximately $151 million, partially offset by the unfavorable net impact of price and product mix of approximately $382 million.
Selling, general and administrative expenses
Selling, general and administrative expenses for 2024 were $1,984.8 million compared to $2,119.7 million for 2023. The change was primarily attributable to lower legal settlements, reserves and fees of approximately $78 million.
Impairment of goodwill and indefinite-lived intangibles
Impairment of goodwill and indefinite-lived intangibles for 2024 was $8.2 million compared to $877.7 million for 2023. During the fourth quarter of 2024, the Company compared the estimated fair values of its indefinite-lived intangible to their carrying values and determined that there was an impairment charge in Global Ceramic. In 2023, the Company recorded impairment charges as a result of a decrease in the Company’s market capitalization,a higher WACC and macroeconomic conditions. See Note 7, Goodwill and Other Intangible Assets , of the notes to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Form 10-K for the fiscal year ended December 31, 2024, for further discussion of the Company’s impairment charges.
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Operating income (loss)
Operating income for 2024 was $693.5 million compared to operating loss of $291.9 million for 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $870 million; lower input costs of approximately $214 million; productivity gains of approximately $176 million; lower legal settlements, reserves and fees of approximately $78 million, partially offset by the unfavorable net impact of price and product mix of approximately $385 million.
Global Ceramic —Operating income was $249.5 million for 2024 compared to operating loss of $166.4 million for 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $419 million; productivity gains of approximately $67 million; lower input costs of approximately $50 million, partially offset by the unfavorable net impact of price and product mix of approximately $92 million.
Flooring NA —Operating income was $237.3 million for 2024 compared to operating loss of $61.3 million for 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $216 million; lower input costs of approximately $93 million; productivity gains of approximately $67 million, partially offset by the unfavorable net impact of price and product mix of approximately $109 million.
Flooring ROW —Operating income was $265.2 million for 2024 compared to operating income of $69.7 million for 2023. The change was primarily attributable to lower impairment charges to reduce the carrying amount of goodwill and indefinite-lived intangibles of approximately $235 million; lower input costs of approximately $80 million; productivity gains of approximately $41 million, partially offset by the unfavorable net impact of price and product mix of approximately $184 million.
Interest expense
Interest expense was $48.5 million for 2024 compared to interest expense of $77.5 million for 2023. The change was primarily attributable to strong cash flow and the resulting lower debt level.
Other income and expense, net
Other expense was $2.0 million for 2024 compared to other income of $5.4 million for 2023. Other income and expense, net did not significantly change for the twelve months ended December 31, 2024, from twelve months ended December 31, 2023.
Income tax expense
For 2024, the Company recorded income tax expense of $128.2 million on income before income taxes of $643.0 million for an effective tax rate of 19.9%, as compared to an income tax expense of $84.9 million on loss before income taxes of $364.0 million, resulting in an effective tax rate of (23.3)% for 2023. The change in the effective tax rate was primarily driven by a shift from a loss before income taxes to earnings before income taxes and a decrease in the impairment of non-deductible goodwill.
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, 2025, the Company had a total of $1,317.5 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.
Net cash provided by operating activities for the year ended December 31, 2025 was $1,056.2 million, compared to net cash provided by operating activities of $1,133.9 million for the year ended December 31, 2024. The change was primarily attributable to lower net earnings; the change in deferred income taxes, partially offset by the change in inventory; higher restructuring, and the change in accounts receivable.
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Net cash used in investing activities for the year ended December 31, 2025 was $441.9 million compared to net cash used in investing activities of $454.4 million for the year ended December 31, 2024. The net cash used in investing activities for the year ended December 31, 2025 did not significantly change from the net cash used in investing activities for the year ended December 31, 2024.
Net cash used in financing activities for the year ended December 31, 2025 was $470.0 million compared to net cash used in financing activities of $629.5 million for the year ended December 31, 2024. The change was primarily attributable to prior year payments of term loan facility of $912.3 million; higher net proceeds from the Senior Credit Facility of $65.4 million, partially offset by the lower net proceeds from commercial paper of $821.1 million (year to date net repayment of $283.7 million in 2025 as compared to net proceeds of $537.3 million in 2024) and higher share repurchase of $13.0 million.
On July 24, 2025, the Company’s Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to $500 million of its common stock (the “2025 Share Repurchase Program”). On February 10, 2022, the Company’s Board of Directors approved a share repurchases authorization in the amount of $500 million (the “2022 Share Repurchase Program,” and together with the 2025 Share Repurchase Program, the “Share Repurchase Programs”). For the three months ended December 31, 2025, the Company purchased $40.7 million of its common stock under the Share Repurchase Programs. As of December 31, 2025, there remained $419.3 million authorized under the 2025 Share Repurchase Program. The 2022 Share Repurchase Program was completed in the quarter ended September 27, 2025.
As of December 31, 2025, the Company had cash of $856.1 million, of which $370.8 million was held outside the U.S. The Company plans to permanently reinvest the cash held outside the U.S. The Company believes that its cash and cash equivalents, cash generated from operations, and availability under its Senior Credit Facility will be sufficient to meet its planned capital expenditures, working capital investments and debt servicing requirements over the next twelve months.
On January 31, 2024, the Company prepaid the entirety of the USD portion of the Term Loan Facility, in the amount of $675.0 million. On February 16, 2024, the Company prepaid the entirety of the EUR portion of the Term Loan Facility, in the amount of €220 million.
See Note 9, 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.
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Index to Financial Statements
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, 2025 (in millions):
Contractual Obligations and Commitments:
Total
Thereafter
Long-term debt, including current maturities (1)
Interest payments on long-term debt and finance leases (2)
(2) 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, 2025 to these balances.
(3) Includes volume commitments, primarily for raw material purchases.
(4) Includes the estimated pension contributions for 2026 only, as the Company is unable to estimate the pension contributions beyond 2026. The Company’s projected benefit obligation and plan assets as of December 31, 2025, were $93.3 and $88.0, 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.
(5) Excludes $105.8 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.
(6) 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.
• 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
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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. In accordance with the provisions of the FASB ASC Topic 350, Intangibles-Goodwill and Other, the Company tests goodwill and other intangible assets with indefinite lives, which for the Company are tradenames, for impairment on an annual basis on the first day of the fourth quarter (or on an interim basis if a triggering event occurs that might reduce the fair value of the reporting unit below its carrying value). Such triggering events or circumstances could include a significant change in the business climate, legal factors, operating performance or trends, competition, or sale or disposition of a significant portion of a reporting unit.
In 2025, the Company did not perform impairment tests at an interim date as no triggering events or circumstances were identified that might reduce the fair value of the reporting unit below its carrying value.
The goodwill impairment tests are based on determining the fair value of the specified reporting units relying on management judgments 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. Indefinite-lived intangibles are recorded and tested for impairment at the asset level. 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”), capital expenditures and comparable company market multiples.
The Company has identified Global Ceramic, Flooring NA and Flooring ROW as its reporting units for the purposes of allocating and testing for impairment. The Company completed quantitative goodwill impairment tests for the Flooring NA and Flooring ROW reporting units in 2025. In determining the fair value of the reporting units, the Company used both an income approach and market approach to estimate the fair value of the reporting units, and with both approaches weighted equally when determining the estimated fair value. The Company engaged a third-party valuation specialist to assist in developing these estimated and valuation approaches.
• Under the income approach, estimated future discounted cash flows were used to estimate the fair value of the reporting unit. The income approach required the Company’s management to make certain market participant key assumptions such as growth rates, operating margins, and WACC and capital expenditures.
• Under the market approach, the Company estimated the fair value of a reporting unit based on market multiples of earnings for benchmark companies that have similar risks, participate in similar markets and compete with the Company directly.
• Valuation multiples were selected based on a financial benchmarking analysis that compared each reporting unit’s operating results with the comparable companies’ information. In addition to these financial considerations, qualitative factors such as variations in growth opportunities and overall risk among the benchmark companies were considered in the ultimate selection of the multiple.
In order to corroborate the estimated fair value conclusions of the Company’s reporting units, the Company combined the estimated fair values for all reporting units and performed a market capitalization reconciliation to assess the reasonableness of the implied control premium. The Company also compared its market capitalization to net book value of equity to assess the implied control premium for reasonableness. The Company also applied sensitivities to assumptions and inputs used in measuring the reporting unit’s fair value to address estimation uncertainty.
The Company has not made any material changes to the valuation methodology utilized to assess goodwill impairment since the date of its last annual impairment test, which is the first day of the fourth quarter of 2025.
The Company determined the fair value of each of its reporting units exceeded their respective carrying values as of the date of its last annual impairment test.
As of October 28, 2025, the fair value of the FNA reporting unit exceeded its carrying value by more than 15%, and the fair value of the Flooring ROW reporting unit exceeded its carrying value by less than 15%.
A 50 basis point increase to the discount rate used in the income approach valuation, assuming no changes to the market approach or other factors used in the impairment test, would reduce the estimated fair value of the Flooring ROW reporting unit by approximately $92 million, and the reporting unit's fair value would continue to exceed its carrying value by more than 8%.
The Company will continue to monitor the performance of the reporting units to ensure no interim indications of possible impairment have occurred before the next annual goodwill impairment assessment at the beginning of the fourth quarter of 2026.
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• Long-lived assets . 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.
• 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 14, 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”) Accounting Standards Codification (“ASC”) Topic 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 14, Income Taxes, included in Part II, Item 8 of this Form 10-K.
Recent Accounting Pronouncements
See Note 1, Summary of Significant Accounting Policies , of the Company’s accompanying Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for a description of recent accounting pronouncements and the potential impact on the Company’s financial statements and disclosures.
Impact of Inflation
Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses. The Company expects raw material prices, many of which are petroleum-based, to fluctuate based upon worldwide supply and demand of commodities used in the Company’s production processes. Although the Company attempts to pass on increases in raw material, labor, energy and fuel-related costs to its customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be fully recovered. In the past, the Company has often been able to enhance productivity and develop new product innovations to help offset increases in costs resulting from inflation in its operations.
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Seasonality
The Company is a calendar year-end company. Global Ceramic and Flooring NA typically have higher net sales in the second and third quarters. Flooring ROW typically has higher net sales in the first and second quarters. Because periods of economic downturn can affect the seasonality of each segment, sales for any one quarter are not necessarily indicative of the sales that may be achieved for any other quarter or for the full year.
