NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
1. General
Interim Reporting
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto, and the Company’s description of critical accounting policies, included in the Company’s
2018
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Results for interim periods are not necessarily indicative of the results for the year.
Hedges of Net Investments in Non-U.S. Operations
The Company has numerous investments outside the United States. The net assets of these subsidiaries are exposed to changes and volatility in currency exchange rates. The Company uses foreign currency denominated debt to hedge its non-U.S. net investments against adverse movements in exchange rates. The gains and losses on the Company’s net investments in its non-U.S. operations are economically offset by losses and gains on its foreign currency borrowings. The Company designated its
€500,000
2.00%
Senior Notes borrowing as a net investment hedge of a portion of its European operations. For the
six months ended
June 29, 2019
and
June 30, 2018
, the change in the U.S. dollar value of the Company’s euro denominated debt was
a decrease
of
$3,578
(
$2,718
net of taxes) and
a decrease
of
$15,984
(
$11,288
net of taxes), respectively, which is recorded in the foreign currency translation adjustment component of accumulated other comprehensive income (loss). The change in the U.S. dollar value of the Company’s debt partially offsets the euro-to-dollar translation of the Company’s net investment in its European operations.
Recent Accounting Pronouncements - Recently Adopted
In February 2016, the FASB issued a new standard ASU 2016-02,
Leases
, and subsequently issued additional ASUs amending this ASU (collectively ASC 842,
Leases
). ASC 842 was issued to increase transparency and comparability among organizations by requiring the recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the provisions of ASC 842 on January 1, 2019 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.
The adoption of ASC 842 had a material impact on the Company’s condensed consolidated balance sheets, but did not have a material impact on our condensed consolidated statements of operations or cashflow. The most significant impact was the recognition of ROU assets of
$328,169
and lease liabilities for operating leases of
$332,286
at January 1, 2019, based on the present value of the future minimum rental payments for existing operating leases. The difference in the balances is due to deferred rent, tenant incentive allowances and prepaid amounts taken into account for adoption. Our accounting for finance leases remained substantially unchanged, See Note 10 - Leases.
On January 1, 2019, the Company adopted the new accounting standard, ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
. The standard permits entities to reclassify, to retained earnings, the one-time income tax effects stranded in accumulated other comprehensive income arising from the change in the U.S. federal corporate tax rate as a result of the Tax Cuts and Jobs Act of 2017. The effect of adopting the new standard was not material.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
On January 1, 2018, the Company adopted the new accounting standard, ASC 606,
Revenue from Contracts with Customers
and all the related amendments (“ASC 606”) and applied the provisions of the standard to all contracts using the modified retrospective method. The cumulative effect of adopting the new revenue standard was immaterial and no adjustment has been recorded to the opening balance of retained earnings. Prior year information has not been restated and continues to be reported under the accounting standards in effect for those periods.
Substantially all of the Company’s revenue continues to be recognized at a point in time when the product is either shipped or received from the Company’s facilities and control of the product is transferred to the customer. The Company reviewed all of its revenue product categories under ASC 606 and the only changes identified were that an immaterial amount of revenue from intellectual property (“IP”) contracts results in earlier recognition of revenue, new controls and processes designed to meet the requirements of the standard were implemented, and the required new disclosures are presented in
Note 3, Revenue from Contracts with Customers. The adoption of ASC 606 did not have a material impact on the amounts reported in the Company’s consolidated financial position, results of operations or cash flows.
On January 1, 2018, the Company adopted the new accounting standard, ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.
The effect of adopting the new standard was not material.
On January 1, 2018, the Company adopted the new accounting standard, ASU 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business.
The effect of adopting the new standard was not material.
Recent Accounting Pronouncements - Effective in Future Years
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and other (Topic 350): Simplifying the test for goodwill impairment.
The amendments remove the second step of the current goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This guidance is effective for impairment tests in fiscal years beginning after December 15, 2019.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
and in November 2018 issued ASU 2018-19, which amended the standard. The standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This standard is effective for the Company on January 1, 2020. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing the impact.
2. Acquisitions
2019 Acquisitions
On
January 31, 2019
, the Company acquired a hard surface flooring distribution company based in the Netherlands for
$72,001
, resulting in a preliminary goodwill allocation of
$45,931
. The results have been included in the Flooring Rest of the World (“Flooring ROW”) segment and are not material to the Company’s consolidated results of operations.
2018 Acquisitions
On
November 16, 2018
, the Company completed its purchase of Eliane S/A Revestimentos Ceramicos (“Eliane”), one of the largest ceramic tile companies in Brazil. Pursuant to the purchase agreement, the Company (i) acquired the entire issued share capital of Eliane and (ii) acquired
$99,037
of net indebtedness of Eliane, with total cash consideration paid of $
148,741
. The Company’s acquisition of Eliane resulted in preliminary allocations of goodwill of $
16,932
, indefinite-lived tradename intangible assets of $
32,238
and intangible assets subject to amortization of $
5,818
. The goodwill is expected to be deductible for tax purposes. The purchase price allocation is preliminary until the Company obtains final information regarding these fair values. Eliane’s results of operations have been included in the consolidated financial statements since the date of acquisition in the Global Ceramic reporting segment.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
On
July 2, 2018
, the Company completed its acquisition of Godfrey Hirst Group, the leading flooring company in Australia and New Zealand, further extending Mohawk’s global position. The total value of the acquisition was
$400,894
. The Company’s acquisition of Godfrey Hirst Group resulted in allocations of goodwill of
$88,655
, indefinite-lived tradename intangible assets of
$58,671
and intangible assets subject to amortization of
$43,635
. The goodwill is deductible for tax purposes. The factors contributing to the recognition of the amount of goodwill include product, sales and manufacturing synergies. The Godfrey Hirst Group’s results have been included in the condensed consolidated financial statements since the date of acquisition in the Flooring NA and Flooring ROW segments.
During the first quarter of 2018, the Company completed the acquisition of
three
businesses in the Flooring ROW segment for
$24,610
, resulting in a goodwill allocation of
$12,874
and intangibles subject to amortization of
$7
.
2017 Acquisitions
On April 4, 2017, the Company completed its purchase of Emilceramica S.r.l (“Emil”), a ceramic company in Italy. The total value of the acquisition was
$186,099
. The Emil acquisition will enhance the Company’s cost position and strengthen its combined brand and distribution in Europe. The acquisition’s results and purchase price allocation have been included in the condensed consolidated financial statements since the date of the acquisition. The Company’s acquisition of Emil resulted in a goodwill allocation of
$59,491
, indefinite-lived tradename intangible asset of
$16,196
and an intangible asset subject to amortization of
$2,348
. The goodwill was not directly deductible for tax purposes. The Emil results are reflected in the Global Ceramic segment and the results of Emil’s operations are not material to the Company’s consolidated results of operations.
During the second quarter of 2017, the Company completed the acquisition of
two
businesses in the Global Ceramic segment for
$37,250
, resulting in a goodwill allocation of
$1,002
. The Company also completed the acquisition of a business in the Flooring NA segment for
$26,623
.
During the first quarter of 2017, the Company acquired certain assets of a distribution business in the Flooring ROW segment for
$1,407
, resulting in intangible assets subject to amortization of
$827
.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Revenue from Contracts with Customers
Revenue recognition and accounts receivable
The Company recognizes revenues when it satisfies performance obligations as evidenced by the transfer of control of the promised goods to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. The nature of the promised goods are ceramic, stone, carpet, resilient, laminate, wood and other flooring products. Payment is typically received 90 days or less from the invoice date. The Company adjusts the amounts of revenue for expected cash discounts, sales allowances, returns, and claims, based upon historical experience. The Company adjusts accounts receivable for doubtful account allowances based upon historical bad debt, claims experience, periodic evaluation of specific customer accounts, and the aging of accounts receivable. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Contract liabilities
The Company historically records contract liabilities when it receives payment prior to fulfilling a performance obligation. Contract liabilities related to revenues are recorded in accounts payable and accrued expenses on the accompanying condensed consolidating balance sheets. The Company had contract liabilities of
$37,685
and
$34,486
as of
June 29, 2019
and
January 1, 2019
, respectively.
Performance obligations
Substantially all of the Company’s revenue is recognized at a point in time when the product is either shipped or received from the Company’s facilities and control of the product is transferred to the customer. Accordingly, in any period, the Company does not recognize a significant amount of revenue from performance obligations satisfied or partially satisfied in prior periods and the amount of such revenue recognized during the
three and six months ended
June 29, 2019
was immaterial.
Costs to obtain a contract
The Company historically incurs certain incremental costs to obtain revenue contracts. These costs relate to marketing display structures and are capitalized when the amortization period is greater than one year, with the amount recorded in other assets on the accompanying condensed consolidated balance sheets. Capitalized costs to obtain contracts were
$67,900
and
$57,840
as of
June 29, 2019
and
January 1, 2019
, respectively. Amortization expense recognized during the
six months ended
June 29, 2019
related to these capitalized costs was
$27,410
.
Practical expedients and policy elections
The Company elected the following practical expedients and policy elections:
|
|
•
|
Incremental costs of obtaining a contract is recorded as an expense when incurred in selling, general and administrative expenses if the amortization period is less than
one year
.
|
|
|
•
|
Shipping and handling activities performed after control has been transferred is accounted for as a fulfillment cost in cost of sales.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Revenue disaggregation
The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the
three months ended
June 29, 2019
and
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29, 2019
|
Global Ceramic segment
|
|
Flooring NA segment
|
|
Flooring ROW segment
|
|
Total
|
Geographical Markets
|
|
|
|
|
|
|
|
United States
|
$
|
554,509
|
|
|
946,086
|
|
|
709
|
|
|
1,501,304
|
|
Europe
|
205,205
|
|
|
2,164
|
|
|
475,761
|
|
|
683,130
|
|
Russia
|
67,792
|
|
|
22
|
|
|
27,087
|
|
|
94,901
|
|
Other
|
130,525
|
|
|
35,167
|
|
|
139,458
|
|
|
305,150
|
|
|
$
|
958,031
|
|
|
983,439
|
|
|
643,015
|
|
|
2,584,485
|
|
|
|
|
|
|
|
|
|
Product Categories
|
|
|
|
|
|
|
|
Ceramic & Stone
|
$
|
958,031
|
|
|
13,915
|
|
|
—
|
|
|
971,946
|
|
Carpet & Resilient
|
—
|
|
|
808,402
|
|
|
201,519
|
|
|
1,009,921
|
|
Laminate & Wood
|
—
|
|
|
161,122
|
|
|
215,058
|
|
|
376,180
|
|
Other
(1)
|
—
|
|
|
—
|
|
|
226,438
|
|
|
226,438
|
|
|
$
|
958,031
|
|
|
983,439
|
|
|
643,015
|
|
|
2,584,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
Global Ceramic segment
|
|
Flooring NA segment
|
|
Flooring ROW segment
|
|
Total
|
Geographical Markets
|
|
|
|
|
|
|
|
United States
|
$
|
578,535
|
|
|
1,013,994
|
|
|
—
|
|
|
1,592,529
|
|
Europe
|
208,671
|
|
|
1,870
|
|
|
490,885
|
|
|
701,426
|
|
Russia
|
63,709
|
|
|
—
|
|
|
26,553
|
|
|
90,262
|
|
Other
|
78,382
|
|
|
41,706
|
|
|
72,709
|
|
|
192,797
|
|
|
$
|
929,297
|
|
|
1,057,570
|
|
|
590,147
|
|
|
2,577,014
|
|
|
|
|
|
|
|
|
|
Product Categories
|
|
|
|
|
|
|
|
Ceramic & Stone
|
$
|
929,297
|
|
|
18,178
|
|
|
—
|
|
|
947,475
|
|
Carpet & Resilient
|
—
|
|
|
859,179
|
|
|
132,578
|
|
|
991,757
|
|
Laminate & Wood
|
—
|
|
|
180,213
|
|
|
216,754
|
|
|
396,967
|
|
Other
(1)
|
—
|
|
|
—
|
|
|
240,815
|
|
|
240,815
|
|
|
$
|
929,297
|
|
|
1,057,570
|
|
|
590,147
|
|
|
2,577,014
|
|
(1)
Other includes roofing elements, insulation boards, chipboards and IP contracts.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the
six months ended
June 29, 2019
and
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29, 2019
|
Global Ceramic segment
|
|
Flooring NA segment
|
|
Flooring ROW segment
|
|
Total
|
Geographical Markets
|
|
|
|
|
|
|
|
United States
|
$
|
1,096,335
|
|
|
1,829,328
|
|
|
777
|
|
|
2,926,440
|
|
Europe
|
384,515
|
|
|
4,001
|
|
|
945,678
|
|
|
1,334,194
|
|
Russia
|
119,707
|
|
|
52
|
|
|
50,701
|
|
|
170,460
|
|
Other
|
255,826
|
|
|
72,038
|
|
|
268,017
|
|
|
595,881
|
|
|
$
|
1,856,383
|
|
|
1,905,419
|
|
|
1,265,173
|
|
|
5,026,975
|
|
|
|
|
|
|
|
|
|
Product Categories
|
|
|
|
|
|
|
|
Ceramic & Stone
|
$
|
1,856,383
|
|
|
28,358
|
|
|
—
|
|
|
1,884,741
|
|
Carpet & Resilient
|
—
|
|
|
1,543,826
|
|
|
392,448
|
|
|
1,936,274
|
|
Laminate & Wood
|
—
|
|
|
333,235
|
|
|
425,259
|
|
|
758,494
|
|
Other
(1)
|
—
|
|
|
—
|
|
|
447,466
|
|
|
447,466
|
|
|
$
|
1,856,383
|
|
|
1,905,419
|
|
|
1,265,173
|
|
|
5,026,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
Global Ceramic segment
|
|
Flooring NA segment
|
|
Flooring ROW segment
|
|
Total
|
Geographical Markets
|
|
|
|
|
|
|
|
United States
|
$
|
1,134,722
|
|
|
1,922,116
|
|
|
—
|
|
|
3,056,838
|
|
Europe
|
398,906
|
|
|
3,520
|
|
|
985,528
|
|
|
1,387,954
|
|
Russia
|
115,131
|
|
|
—
|
|
|
45,982
|
|
|
161,113
|
|
Other
|
157,086
|
|
|
82,292
|
|
|
143,933
|
|
|
383,311
|
|
|
$
|
1,805,845
|
|
|
2,007,928
|
|
|
1,175,443
|
|
|
4,989,216
|
|
|
|
|
|
|
|
|
|
Product Categories
|
|
|
|
|
|
|
|
Ceramic & Stone
|
$
|
1,805,845
|
|
|
35,721
|
|
|
—
|
|
|
1,841,566
|
|
Carpet & Resilient
|
—
|
|
|
1,614,725
|
|
|
261,589
|
|
|
1,876,314
|
|
Laminate & Wood
|
—
|
|
|
357,482
|
|
|
442,897
|
|
|
800,379
|
|
Other
(1)
|
—
|
|
|
—
|
|
|
470,957
|
|
|
470,957
|
|
|
$
|
1,805,845
|
|
|
2,007,928
|
|
|
1,175,443
|
|
|
4,989,216
|
|
(1)
Other includes roofing elements, insulation boards, chipboards and IP contracts.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Restructuring, acquisition and integration-related costs
The Company incurs costs in connection with acquiring, integrating and restructuring acquisitions and in connection with its global cost-reduction/productivity initiatives. For example:
|
|
•
|
In connection with acquisition activity, the Company typically incurs costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and
|
|
|
•
|
In connection with the Company’s cost-reduction/productivity initiatives, it typically incurs costs and charges associated with site closings and other facility rationalization actions and workforce reductions.
|
Restructuring, acquisition transaction and integration-related costs consisted of the following during the
three and six months ended
June 29, 2019
and
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 29, 2019
|
|
June 30, 2018
|
|
June 29, 2019
|
|
June 30, 2018
|
Cost of sales
|
|
|
|
|
|
|
|
Restructuring costs
(1)
|
$
|
4,379
|
|
|
9,331
|
|
|
35,913
|
|
|
23,421
|
|
Acquisition integration-related costs
|
1,488
|
|
|
2,687
|
|
|
2,556
|
|
|
3,095
|
|
Restructuring and acquisition integration-related costs
|
$
|
5,867
|
|
|
12,018
|
|
|
38,469
|
|
|
26,516
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
Restructuring costs
(1)
|
$
|
443
|
|
|
3,798
|
|
|
1,845
|
|
|
7,890
|
|
Acquisition transaction-related costs
|
637
|
|
|
63
|
|
|
917
|
|
|
63
|
|
Acquisition integration-related costs
|
1,988
|
|
|
163
|
|
|
3,407
|
|
|
3,677
|
|
Restructuring, acquisition transaction and integration-related costs
|
$
|
3,068
|
|
|
4,024
|
|
|
6,169
|
|
|
11,630
|
|
(1) The restructuring costs for
2019
and
2018
primarily relate to the Company’s actions taken to lower its cost structure and improve efficiencies of manufacturing and distribution operations as well as actions related to the Company’s recent acquisitions.
The restructuring activity for the
six months ended
June 29, 2019
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
impairments
|
|
Asset write-downs
|
|
Severance
|
|
Other
restructuring
costs
|
|
Total
|
Balance as of December 31, 2018
|
$
|
397
|
|
|
—
|
|
|
7,866
|
|
|
250
|
|
|
8,513
|
|
Provision - Global Ceramic segment
|
—
|
|
|
—
|
|
|
4,879
|
|
|
—
|
|
|
4,879
|
|
Provision - Flooring NA segment
|
—
|
|
|
21,791
|
|
|
1,127
|
|
|
8,032
|
|
|
30,950
|
|
Provision - Flooring ROW segment
|
—
|
|
|
86
|
|
|
1,843
|
|
|
—
|
|
|
1,929
|
|
Cash payments
|
(173
|
)
|
|
—
|
|
|
(8,688
|
)
|
|
(7,921
|
)
|
|
(16,782
|
)
|
Non-cash items
|
—
|
|
|
(21,877
|
)
|
|
(13
|
)
|
|
(111
|
)
|
|
(22,001
|
)
|
Balance as of June 29, 2019
|
$
|
224
|
|
|
—
|
|
|
7,014
|
|
|
250
|
|
|
7,488
|
|
The Company expects the remaining severance and other restructuring costs to be paid over the next 12 months.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Receivables, net
Receivables, net are as follows:
|
|
|
|
|
|
|
|
|
At June 29, 2019
|
|
At December 31, 2018
|
Customers, trade
|
$
|
1,793,551
|
|
|
1,562,284
|
|
Income tax receivable
|
17,414
|
|
|
17,217
|
|
Other
|
81,291
|
|
|
101,376
|
|
|
1,892,256
|
|
|
1,680,877
|
|
Less: allowance for discounts, claims and doubtful accounts
|
72,782
|
|
|
74,718
|
|
Receivables, net
|
$
|
1,819,474
|
|
|
1,606,159
|
|
6. Inventories
The components of inventories are as follows:
|
|
|
|
|
|
|
|
|
At June 29, 2019
|
|
At December 31, 2018
|
Finished goods
|
$
|
1,656,916
|
|
|
1,582,112
|
|
Work in process
|
154,961
|
|
|
165,616
|
|
Raw materials
|
555,754
|
|
|
539,887
|
|
Total inventories
|
$
|
2,367,631
|
|
|
2,287,615
|
|
7. Goodwill and intangible assets
The components of goodwill and other intangible assets are as follows:
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Ceramic segment
|
|
Flooring NA segment
|
|
Flooring ROW segment
|
|
Total
|
Balance as of December 31, 2018
|
|
|
|
|
|
|
|
Goodwill
|
$
|
1,564,987
|
|
|
874,198
|
|
|
1,409,206
|
|
|
3,848,391
|
|
Accumulated impairment losses
|
(531,930
|
)
|
|
(343,054
|
)
|
|
(452,441
|
)
|
|
(1,327,425
|
)
|
|
1,033,057
|
|
|
531,144
|
|
|
956,765
|
|
|
2,520,966
|
|
|
|
|
|
|
|
|
|
Goodwill recognized during the period
|
(2,889
|
)
|
|
—
|
|
|
47,543
|
|
|
44,654
|
|
Currency translation during the period
|
5,879
|
|
|
—
|
|
|
(5,797
|
)
|
|
82
|
|
|
|
|
|
|
|
|
|
Balance as of June 29, 2019
|
|
|
|
|
|
|
|
Goodwill
|
1,567,977
|
|
|
874,198
|
|
|
1,450,952
|
|
|
3,893,127
|
|
Accumulated impairment losses
|
(531,930
|
)
|
|
(343,054
|
)
|
|
(452,441
|
)
|
|
(1,327,425
|
)
|
|
$
|
1,036,047
|
|
|
531,144
|
|
|
998,511
|
|
|
2,565,702
|
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
Tradenames
|
Balance as of December 31, 2018
|
$
|
707,380
|
|
Intangible assets acquired during the period
|
(874
|
)
|
Currency translation during the period
|
2,273
|
|
Balance as of June 29, 2019
|
$
|
708,779
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amounts:
|
Customer
relationships
|
|
Patents
|
|
Other
|
|
Total
|
Balance as of December 31, 2018
|
$
|
651,012
|
|
|
254,483
|
|
|
6,535
|
|
|
912,030
|
|
Intangible assets recognized during the period
|
2,092
|
|
|
—
|
|
|
—
|
|
|
2,092
|
|
Currency translation during the period
|
(2,464
|
)
|
|
(1,624
|
)
|
|
(9
|
)
|
|
(4,097
|
)
|
Balance as of June 29, 2019
|
$
|
650,640
|
|
|
252,859
|
|
|
6,526
|
|
|
910,025
|
|
|
|
|
|
|
|
|
|
Accumulated amortization:
|
Customer
relationships
|
|
Patents
|
|
Other
|
|
Total
|
Balance as of December 31, 2018
|
$
|
406,386
|
|
|
249,988
|
|
|
1,227
|
|
|
657,601
|
|
Amortization during the period
|
12,597
|
|
|
1,072
|
|
|
15
|
|
|
13,684
|
|
Currency translation during the period
|
(1,523
|
)
|
|
(1,580
|
)
|
|
(2
|
)
|
|
(3,105
|
)
|
Balance as of June 29, 2019
|
$
|
417,460
|
|
|
249,480
|
|
|
1,240
|
|
|
668,180
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization, net
|
$
|
233,180
|
|
|
3,379
|
|
|
5,286
|
|
|
241,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 29,
2019
|
|
June 30,
2018
|
|
June 29,
2019
|
|
June 30,
2018
|
Amortization expense
|
$
|
6,955
|
|
|
7,483
|
|
|
13,684
|
|
|
15,050
|
|
8. Accounts payable and accrued expenses
Accounts payable and accrued expenses are as follows:
|
|
|
|
|
|
|
|
|
At June 29, 2019
|
|
At December 31, 2018
|
Outstanding checks in excess of cash
|
$
|
7,559
|
|
|
14,624
|
|
Accounts payable, trade
|
976,231
|
|
|
811,879
|
|
Accrued expenses
|
454,930
|
|
|
430,431
|
|
Product warranties
|
47,873
|
|
|
47,511
|
|
Accrued interest
|
15,745
|
|
|
21,908
|
|
Accrued compensation and benefits
|
211,596
|
|
|
197,513
|
|
Total accounts payable and accrued expenses
|
$
|
1,713,934
|
|
|
1,523,866
|
|
9. Accumulated other comprehensive income (loss)
The changes in accumulated other comprehensive income (loss) by component, for the
six months ended
June 29, 2019
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
Pensions, net of tax
|
|
Total
|
Balance as of December 31, 2018
|
$
|
(782,102
|
)
|
|
(9,506
|
)
|
|
(791,608
|
)
|
Current period other comprehensive income
|
59,020
|
|
|
67
|
|
|
59,087
|
|
Balance as of June 29, 2019
|
$
|
(723,082
|
)
|
|
(9,439
|
)
|
|
(732,521
|
)
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Leases
Effective January 1, 2019 the Company adopted ASC 842, which requires recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet, based on the present value of the future minimum rental payments for existing operating leases. The Company adopted the provisions of ASC 842 on January 1, 2019 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.
The Company measures the ROU assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term.
As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s credit spread adjusted for current market factors and foreign currency rates. The Company also made a policy election to determine its incremental borrowing rate, at the initial application date, using the total lease term and the total minimum rental payments, as the Company believes this rate is more indicative of the implied financing cost.
The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for service centers, warehouses, showrooms, and machinery and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company enters into lease contracts ranging from
1
to
60 years
with a majority of the Company’s lease terms ranging from
1
to
8 years
.
Some leases include one or more options to renew, with renewal terms that can extend the lease term from
3
to
10 years
or more. The exercise of these lease renewal options is at the Company’s sole discretion. An insignificant number of our leases include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
Certain of our leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of our leases contain residual value guarantees and none of our agreements contain material restrictive covenants. Variable rent expenses consist primarily of maintenance, property taxes and charges based on usage.
We rent or sublease certain real estate to third parties. Our sublease portfolio consists mainly of operating leases.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The components of lease costs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 29, 2019
|
|
Six Months Ended June 29, 2019
|
|
Cost of Goods Sold
|
|
Selling, General and Administrative
|
|
Total
|
|
Cost of Goods Sold
|
|
Selling, General and Administrative
|
|
Total
|
Operating lease costs
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
$
|
8,169
|
|
|
22,807
|
|
|
30,976
|
|
|
15,857
|
|
|
47,262
|
|
|
63,119
|
|
Short-term
|
1,552
|
|
|
3,577
|
|
|
5,129
|
|
|
2,991
|
|
|
6,486
|
|
|
9,477
|
|
Variable
|
2,093
|
|
|
9,348
|
|
|
11,441
|
|
|
4,371
|
|
|
14,548
|
|
|
18,919
|
|
Sub-leases
|
(41
|
)
|
|
(151
|
)
|
|
(192
|
)
|
|
(125
|
)
|
|
(284
|
)
|
|
(409
|
)
|
|
11,773
|
|
|
35,581
|
|
|
47,354
|
|
|
23,094
|
|
|
68,012
|
|
|
91,106
|
|
Finance lease costs
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets
|
—
|
|
|
392
|
|
|
392
|
|
|
—
|
|
|
824
|
|
|
824
|
|
Interest on lease liabilities
|
—
|
|
|
58
|
|
|
58
|
|
|
—
|
|
|
89
|
|
|
89
|
|
|
—
|
|
|
450
|
|
|
450
|
|
|
—
|
|
|
913
|
|
|
913
|
|
Net lease costs
|
$
|
11,773
|
|
|
36,031
|
|
|
47,804
|
|
|
23,094
|
|
|
68,925
|
|
|
92,019
|
|
Supplemental balance sheet information related to leases is as follows:
|
|
|
|
|
|
|
|
Classification
|
|
At June 29, 2019
|
Assets
|
|
|
|
Operating Leases
|
|
|
|
Right of use operating lease assets
|
Right of use operating lease assets
|
|
$
|
343,716
|
|
Finance Leases
|
|
|
|
Property, plant and equipment, gross
|
Property, plant and equipment
|
|
7,955
|
|
Accumulated depreciation
|
Accumulated depreciation
|
|
(2,838
|
)
|
Property, plant and equipment, net
|
Property, plant and equipment, net
|
|
5,117
|
|
Total lease assets
|
|
|
$
|
348,833
|
|
|
|
|
|
Liabilities
|
|
|
|
Operating Leases
|
|
|
|
Other current
|
Current operating lease liabilities
|
|
$
|
100,345
|
|
Non-current
|
Non-current operating lease liabilities
|
|
249,844
|
|
Total operating liabilities
|
|
|
350,189
|
|
Finance Leases
|
|
|
|
Short-term debt
|
Short-term debt and current portion of long-term debt
|
|
1,012
|
|
Long-term debt
|
Long-term debt, less current portion
|
|
5,014
|
|
Total finance liabilities
|
|
|
6,026
|
|
Total lease liabilities
|
|
|
$
|
356,215
|
|
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Maturities of lease liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
Finance
Leases
|
|
Operating
Leases
|
|
Total
|
2019 (excluding the six months ended June 29, 2019)
|
$
|
477
|
|
|
61,429
|
|
|
61,906
|
|
2020
|
1,034
|
|
|
110,389
|
|
|
111,423
|
|
2021
|
738
|
|
|
82,494
|
|
|
83,232
|
|
2022
|
488
|
|
|
55,932
|
|
|
56,420
|
|
2023
|
418
|
|
|
29,997
|
|
|
30,415
|
|
Thereafter
|
2,930
|
|
|
43,162
|
|
|
46,092
|
|
Total lease payments
|
6,085
|
|
|
383,403
|
|
|
389,488
|
|
Less imputed interest
|
59
|
|
|
33,214
|
|
|
|
Present value, Total
|
$
|
6,026
|
|
|
350,189
|
|
|
|
The Company had approximately
$5,151
of leases that commenced after
June 29, 2019
that created rights and obligations to the Company. These leases are not included in the above maturity schedule.
For additional information regarding the Company’s Commitments and Contingencies as of December 31, 2018 as disclosed for capital and operating leases, see Note 14 in its 2018 Annual Report filed on Form 10-K.
Lease term and discount rate are as follows:
|
|
|
|
|
At June 29, 2019
|
Weighted Average Remaining Lease Term
|
|
Operating Leases
|
4.71 years
|
|
Finance Leases
|
9.08 years
|
|
|
|
Weighted Average Discount Rate
|
|
Operating Leases
|
3.3
|
%
|
Finance Leases
|
0.9
|
%
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
Six Months Ended
|
|
June 29,
2019
|
Cash paid for amounts included in measurement of lease liabilities:
|
|
Operating cash flows from operating leases
|
$
|
63,910
|
|
Operating cash flows from finance leases
|
26
|
|
Financing cash flows from finance leases
|
732
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
Operating Leases
|
90,091
|
|
Finance Leases
|
195
|
|
Amortization:
|
|
Amortization of Right of use operating lease assets
(1)
|
56,950
|
|
(1)
Amortization of Right of use operating lease assets during the period is reflected in Other assets and prepaid expenses on the Condensed Consolidated Statements of Cash Flows.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stock-based compensation
The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the options’ or other awards’ estimated lives for fixed awards with ratable vesting provisions.
The Company granted
18
restricted stock units (“RSUs”) at a weighted average grant-date fair value of
$133.45
per unit for the
three months ended
June 29, 2019
. The Company granted
187
RSUs at a weighted average grant-date fair value of
$137.30
per unit for the
six months ended
June 29, 2019
. The Company granted
4
RSUs at a weighted average grant-date fair value of
$204.35
per unit for the
three months ended
June 30, 2018
. The Company granted
127
at a weighted average grant-date fair value of $
237.94
per unit for the
six months ended
June 30, 2018
. The Company recognized stock-based compensation costs related to the issuance of RSUs of
$5,788
(
$4,283
net of taxes) and
$13,645
(
$10,097
net of taxes) for the
three months ended
June 29, 2019
and
June 30, 2018
, respectively, which has been allocated to cost of sales and selling, general and administrative expenses. The Company recognized stock-based compensation costs related to the issuance of RSUs of
$11,577
(
$8,567
net of taxes) and
$21,593
(
$15,979
net of taxes) for the
six months ended
June 29, 2019
and
June 30, 2018
, respectively, which has been allocated to cost of sales and selling, general and administrative expenses. Pre-tax unrecognized compensation expense for unvested RSUs granted to employees, net of estimated forfeitures, was
$29,629
as of
June 29, 2019
, and will be recognized as expense over a weighted-average period of approximately
1.70
years. The Company did not recognize any stock-based compensation costs related to stock options for the six months ended June 29, 2019 and June 30, 2018, respectively.
12. Other expense (income), net
Other expense (income), net is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 29,
2019
|
|
June 30,
2018
|
|
June 29,
2019
|
|
June 30,
2018
|
Foreign currency losses (gains), net
|
$
|
2,088
|
|
|
3,317
|
|
|
978
|
|
|
4,722
|
|
Release of indemnification asset
|
—
|
|
|
—
|
|
|
—
|
|
|
1,749
|
|
All other, net
|
(5,136
|
)
|
|
(1,227
|
)
|
|
(7,762
|
)
|
|
(383
|
)
|
Total other expense, net
|
$
|
(3,048
|
)
|
|
2,090
|
|
|
(6,784
|
)
|
|
6,088
|
|
13. Income Taxes
For the
quarter ended
June 29, 2019
, the Company recorded income tax expense of
$56,733
on earnings before income taxes of
$259,387
for an effective tax rate of
21.9%
, as compared to an income tax expense of
$118,809
on earnings before income taxes of
$316,354
, for an effective tax rate of
37.6%
for the
quarter ended
June 30, 2018
. For the
six months ended
June 29, 2019
, the Company recorded income tax expense of
$93,751
on earnings before income taxes of
$417,980
for an effective tax rate of
22.4%
, as compared to an income tax expense of
$166,441
on earnings before income taxes of
$573,227
, for an effective tax rate of
29.0%
for the
six months ended
June 30, 2018
. The difference in the effective tax rates for the comparative periods was caused by geographical dispersion of profits and losses and the issuance of IRS Notice 2018-26 which caused the Company to record
$54,674
of additional net tax expense.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Stockholders’ Equity
The following tables reflect the changes in stockholders’ equity for the
three months ended
June 29, 2019
and
June 30, 2018
(in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
Redeemable
Noncontrolling
Interest
|
Common Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Treasury Stock
|
Noncontrolling Interest
|
Total
Stockholders’
Equity
|
|
Shares
|
Amount
|
Shares
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2019
|
$
|
—
|
|
79,771
|
|
$
|
798
|
|
$
|
1,853,484
|
|
$
|
6,709,782
|
|
$
|
(777,547
|
)
|
(7,349
|
)
|
$
|
(215,716
|
)
|
$
|
6,244
|
|
$
|
7,577,045
|
|
Shares issued under employee and director stock plans
|
—
|
|
7
|
|
—
|
|
(24
|
)
|
—
|
|
—
|
|
1
|
|
4
|
|
—
|
|
(20
|
)
|
Stock-based compensation expense
|
—
|
|
—
|
|
—
|
|
5,788
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,788
|
|
Repurchases of common stock
|
—
|
|
(66
|
)
|
(1
|
)
|
—
|
|
(8,962
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(8,963
|
)
|
Accretion of redeemable noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Noncontrolling earnings
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
214
|
|
214
|
|
Currency translation adjustment on non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
45,067
|
|
—
|
|
—
|
|
60
|
|
45,127
|
|
Prior pension and post-retirement benefit service cost and actuarial gain / loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(41
|
)
|
—
|
|
—
|
|
—
|
|
(41
|
)
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
202,441
|
|
—
|
|
—
|
|
—
|
|
—
|
|
202,441
|
|
June 29, 2019
|
$
|
—
|
|
79,712
|
|
$
|
797
|
|
$
|
1,859,248
|
|
$
|
6,903,261
|
|
$
|
(732,521
|
)
|
(7,348
|
)
|
$
|
(215,712
|
)
|
$
|
6,518
|
|
$
|
7,821,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
Redeemable
Noncontrolling
Interest
|
Common Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Treasury Stock
|
Noncontrolling Interest
|
Total
Stockholders’
Equity
|
|
Shares
|
Amount
|
Shares
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
$
|
30,924
|
|
81,883
|
|
$
|
819
|
|
$
|
1,827,075
|
|
$
|
6,212,966
|
|
$
|
(487,168
|
)
|
(7,350
|
)
|
$
|
(215,749
|
)
|
$
|
8,066
|
|
$
|
7,346,009
|
|
Shares issued under employee and director stock plans
|
—
|
|
69
|
|
1
|
|
1,340
|
|
—
|
|
—
|
|
—
|
|
4
|
|
—
|
|
1,345
|
|
Stock-based compensation expense
|
—
|
|
—
|
|
—
|
|
13,645
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,645
|
|
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Accretion of redeemable noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Noncontrolling earnings
|
781
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
178
|
|
178
|
|
Currency translation adjustment on non-controlling interests
|
(1,662
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(364
|
)
|
(364
|
)
|
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(184,323
|
)
|
—
|
|
—
|
|
—
|
|
(184,323
|
)
|
Prior pension and post-retirement benefit service cost and actuarial gain / loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
358
|
|
—
|
|
—
|
|
—
|
|
358
|
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
196,586
|
|
—
|
|
—
|
|
—
|
|
—
|
|
196,586
|
|
June 30, 2018
|
$
|
30,043
|
|
81,952
|
|
$
|
820
|
|
$
|
1,842,060
|
|
$
|
6,409,552
|
|
$
|
(671,133
|
)
|
(7,350
|
)
|
$
|
(215,745
|
)
|
$
|
7,880
|
|
$
|
7,373,434
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following tables reflect the changes in stockholders’ equity for the
six months ended
June 29, 2019
and
June 30, 2018
(in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
Redeemable
Noncontrolling
Interest
|
Common Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Treasury Stock
|
Noncontrolling Interest
|
Total
Stockholders’
Equity
|
|
Shares
|
Amount
|
Shares
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2019
|
$
|
—
|
|
79,656
|
|
$
|
797
|
|
$
|
1,852,173
|
|
$
|
6,588,197
|
|
$
|
(791,608
|
)
|
(7,349
|
)
|
$
|
(215,745
|
)
|
$
|
6,245
|
|
$
|
7,440,059
|
|
Shares issued under employee and director stock plans
|
—
|
|
122
|
|
1
|
|
(4,502
|
)
|
—
|
|
—
|
|
1
|
|
33
|
|
—
|
|
(4,468
|
)
|
Stock-based compensation expense
|
—
|
|
—
|
|
—
|
|
11,577
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,577
|
|
Repurchases of common stock
|
—
|
|
(66
|
)
|
(1
|
)
|
—
|
|
(8,962
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(8,963
|
)
|
Accretion of redeemable noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Noncontrolling earnings
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
204
|
|
204
|
|
Currency translation adjustment on non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
59,020
|
|
—
|
|
—
|
|
69
|
|
59,089
|
|
Prior pension and post-retirement benefit service cost and actuarial gain / loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
67
|
|
—
|
|
—
|
|
—
|
|
67
|
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
324,026
|
|
—
|
|
—
|
|
—
|
|
—
|
|
324,026
|
|
June 29, 2019
|
$
|
—
|
|
79,712
|
|
$
|
797
|
|
$
|
1,859,248
|
|
$
|
6,903,261
|
|
$
|
(732,521
|
)
|
(7,348
|
)
|
$
|
(215,712
|
)
|
$
|
6,518
|
|
$
|
7,821,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
Redeemable
Noncontrolling
Interest
|
Common Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Treasury Stock
|
Noncontrolling Interest
|
Total
Stockholders’
Equity
|
|
Shares
|
Amount
|
Shares
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2018
|
$
|
29,463
|
|
81,771
|
|
$
|
818
|
|
$
|
1,828,131
|
|
$
|
6,004,506
|
|
$
|
(558,527
|
)
|
(7,350
|
)
|
$
|
(215,766
|
)
|
$
|
7,847
|
|
$
|
7,067,009
|
|
Shares issued under employee and director stock plans
|
—
|
|
181
|
|
2
|
|
(7,664
|
)
|
—
|
|
—
|
|
—
|
|
21
|
|
—
|
|
(7,641
|
)
|
Stock-based compensation expense
|
—
|
|
—
|
|
—
|
|
21,593
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
21,593
|
|
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Accretion of redeemable noncontrolling interest
|
305
|
|
—
|
|
—
|
|
—
|
|
(305
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(305
|
)
|
Noncontrolling earnings
|
1,226
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
209
|
|
209
|
|
Currency translation adjustment on non-controlling interests
|
(951
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(176
|
)
|
(176
|
)
|
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(112,829
|
)
|
—
|
|
—
|
|
—
|
|
(112,829
|
)
|
Prior pension and post-retirement benefit service cost and actuarial gain / loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
223
|
|
—
|
|
—
|
|
—
|
|
223
|
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
405,352
|
|
—
|
|
—
|
|
—
|
|
—
|
|
405,352
|
|
June 30, 2018
|
$
|
30,043
|
|
81,952
|
|
$
|
820
|
|
$
|
1,842,060
|
|
$
|
6,409,552
|
|
$
|
(671,133
|
)
|
(7,350
|
)
|
$
|
(215,745
|
)
|
$
|
7,880
|
|
$
|
7,373,434
|
|
15. Earnings per share
Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted earnings per common share assumes the exercise of outstanding stock options and the vesting of RSUs using the treasury stock method when the effects of such assumptions are dilutive. A reconciliation of net earnings available to common stockholders and weighted-average common shares outstanding for purposes of calculating basic and diluted earnings per share is as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 29,
2019
|
|
June 30,
2018
|
|
June 29,
2019
|
|
June 30,
2018
|
Net earnings attributable to Mohawk Industries, Inc.
|
$
|
202,441
|
|
|
196,586
|
|
|
324,026
|
|
|
405,352
|
|
Accretion of redeemable noncontrolling interest
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(305
|
)
|
Net earnings available to common stockholders
|
$
|
202,441
|
|
|
196,586
|
|
|
324,026
|
|
|
405,047
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding-basic and diluted:
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding—basic
|
72,402
|
|
|
74,597
|
|
|
71,970
|
|
|
74,525
|
|
Add weighted-average dilutive potential common shares—options to purchase common shares and RSUs, net
|
278
|
|
|
340
|
|
|
280
|
|
|
403
|
|
Weighted-average common shares outstanding-diluted
|
72,680
|
|
|
74,937
|
|
|
72,250
|
|
|
74,928
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Mohawk Industries, Inc.
|
|
|
|
|
|
|
|
Basic
|
$
|
2.80
|
|
|
2.64
|
|
|
4.50
|
|
|
5.44
|
|
Diluted
|
$
|
2.79
|
|
|
2.62
|
|
|
4.48
|
|
|
5.41
|
|
(1)
Represents the accretion of the Company’s redeemable noncontrolling interest to redemptive value. The holder put this option to the Company on December 20, 2018 for
$33,884
.
16. Segment reporting
The Company has
three
reporting segments: the Global Ceramic segment, the Flooring NA segment and the Flooring ROW segment. The Global Ceramic Segment designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone tile and other products including natural stone, quartz and porcelain slab countertops, which it distributes primarily in North America, Europe, Brazil and Russia through various selling channels, which include Company-owned stores, independent distributors, independent retailers, home centers, commercial contractors and commercial end users. The Flooring NA Segment designs, manufactures, sources and markets its floor covering product lines, including carpets, rugs, carpet cushion, wood flooring, laminate and vinyl products, including luxury vinyl tile (LVT), which it distributes to its residential and commercial sales channels through its network of regional distribution centers and satellite warehouses using Company-operated trucks, common carrier or rail transportation. The Segment’s product lines are sold through independent floor covering retailers, independent distributors, home centers, mass merchandisers, department stores, shop at home, online retailers, buying groups, commercial contractors and commercial end users. The Flooring ROW Segment designs, manufactures, sources, licenses and markets laminate, wood flooring, carpets, roofing elements, insulation boards, medium-density fiberboard (“MDF”), chipboards, other wood products and vinyl products, including LVT, which it distributes primarily in Europe, Russia, Australia and New Zealand through various selling channels, which include independent floor covering retailers, independent distributors, company-owned distributors, home centers, commercial contractors and commercial end users.
The accounting policies for each operating segment are consistent with the Company’s policies for the consolidated financial statements. Amounts disclosed for each segment are prior to any elimination or consolidation entries. Corporate general and administrative expenses attributable to each segment are estimated and allocated accordingly. Segment performance is evaluated based on operating income.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Segment information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 29,
2019
|
|
June 30,
2018
|
|
June 29,
2019
|
|
June 30,
2018
|
Net sales:
|
|
|
|
|
|
|
|
Global Ceramic segment
|
$
|
958,031
|
|
|
929,297
|
|
|
1,856,383
|
|
|
1,805,845
|
|
Flooring NA segment
|
983,439
|
|
|
1,057,570
|
|
|
1,905,419
|
|
|
2,007,928
|
|
Flooring ROW segment
|
643,015
|
|
|
590,147
|
|
|
1,265,173
|
|
|
1,175,443
|
|
Intersegment sales
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
2,584,485
|
|
|
2,577,014
|
|
|
5,026,975
|
|
|
4,989,216
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
Global Ceramic segment
|
$
|
118,141
|
|
|
134,760
|
|
|
202,476
|
|
|
248,177
|
|
Flooring NA segment
|
59,502
|
|
|
100,662
|
|
|
60,151
|
|
|
175,410
|
|
Flooring ROW segment
|
101,533
|
|
|
100,166
|
|
|
191,964
|
|
|
189,226
|
|
Corporate and intersegment eliminations
|
(12,316
|
)
|
|
(9,281
|
)
|
|
(22,401
|
)
|
|
(18,107
|
)
|
Total
|
$
|
266,860
|
|
|
326,307
|
|
|
432,190
|
|
|
594,706
|
|
|
|
|
|
|
|
|
|
|
At June 29, 2019
|
|
At December 31, 2018
|
Assets:
|
|
|
|
Global Ceramic segment
|
$
|
5,661,364
|
|
|
5,194,030
|
|
Flooring NA segment
|
4,024,428
|
|
|
3,938,639
|
|
Flooring ROW segment
|
3,858,264
|
|
|
3,666,617
|
|
Corporate and intersegment eliminations
|
262,046
|
|
|
299,837
|
|
Total
|
$
|
13,806,102
|
|
|
13,099,123
|
|
17. Commitments and contingencies
The Company is involved in litigation from time to time in the regular course of its business. Except as noted below, there are no material legal proceedings pending or known by the Company to be contemplated to which the Company is a party or to which any of its property is subject.
Alabama Municipal Litigation
In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama (the “Gadsden Water Board”) filed an individual complaint in the Circuit Court of Etowah County, Alabama against certain manufacturers, suppliers, and users of chemicals containing specific perfluorinated compounds, including the Company. On October 26, 2016, the defendants removed the case to the United States District Court for the Northern District of Alabama, Middle Division, alleging diversity of citizenship and fraudulent joinder. The Gadsden Water Board filed a motion to remand the case back to the state court, and the defendants opposed the Gadsden Water Board’s motion. The federal court granted Gadsden Water Board’s motion for remand.
In May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama (the “Centre Water Board”) filed a very similar complaint to the Gadsden Water Board complaint in the Circuit Court of Cherokee County. On June 19, 2017, the defendants removed this case to the United States District Court for the Northern District of Alabama, Middle Division, again alleging diversity of citizenship and fraudulent joinder. The Centre Water Board filed a motion to remand the case back to state court, and the defendants opposed the Centre Water Board’s motion. The federal court granted Centre Water Board's motion for remand.
Certain defendants, including the Company, filed dispositive motions in each case arguing that the state court lacks personal jurisdiction over them. Both state courts denied those motions. In June and September 2018, certain defendants, including the Company, petitioned the Alabama Supreme Court for Writs of Mandamus directing each lower court to enter an order granting the defendants’ dispositive motions on personal jurisdiction grounds. Those petitions have been fully briefed and the Company awaits a decision from the Alabama Supreme Court.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company has never manufactured the perfluorinated compounds at issue but purchased them for use in the manufacture of its carpets prior to 2007. The Gadsden and Centre Water Boards are not alleging that chemical levels in the Company’s wastewater discharge exceeded legal limits. Instead, the Gadsden and Centre Water Boards are seeking lost profits based on allegations that their customers decreased water purchases, as well as reimbursement for the cost of a filter and punitive damages.
Belgian Tax Matter
Between 2012 and 2014, the Company received assessments from the Belgian tax authority for the calendar years 2005 through 2010 in the amounts of €
46,135
,
€38,817
,
€39,635
, €
30,131
, €
35,567
and
€43,117
respectively, including penalties, but excluding interest. The Belgian tax authority denied the Company’s formal protests against these assessments and the Company brought all six years before the Court of First Appeal in Bruges. The Court of First Appeal in Bruges ruled in favor of the Company on January 27, 2016, with respect to the calendar years ending December 31, 2005 and December 31, 2009; and on June 13, 2018, the Court of First Appeal in Bruges ruled in favor of the Company with respect to the calendar years ending December 31, 2006, December 31, 2007, December 31, 2008 and December 31, 2010. The Belgian tax authority has lodged its Notification of Appeal for all six years with the Ghent Court of Appeal. In March 2019, the Company received assessments from the Belgian tax authority for tax years 2011 through 2017 in the amount of €
40,617
, €
39,732
, €
11,358
, €
23,919
, €
30,610
, €
93,145
and €
79,933
respectively, including penalties, but excluding interest. The Company intends to file formal protests based on these assessments in a timely manner. The assessments are largely based on the same facts underlying the positive rulings, which the Belgian tax authority is appealing.
The Company continues to disagree with the views of the Belgian tax authority on this matter and will persist in its vigorous defense. Nevertheless, on May 24, 2016, the tax collector representing the Belgian tax authorities imposed a lien on the Company’s properties in Wielsbeke (Ooigemstraat and Breestraat), Oostrozebeke (Ingelmunstersteenweg) and Desselgem (Waregemstraat) included in the Flooring ROW segment. The purpose of the lien is to provide security for payment should the Belgian tax authority prevail on its appeal. The lien does not interfere with the Company’s operations at these properties.
General
The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses that are reasonably estimable. These contingencies are subject to significant uncertainties and the Company is unable to estimate the amount or range of loss, if any, in excess of amounts accrued. The Company does not believe that the ultimate outcome of these actions will have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations, cash flows or liquidity in a given quarter or year.
18. Debt
Senior Credit Facility
On March 26, 2015, the Company amended and restated its 2013 senior credit facility increasing its size from
$1,000,000
to
$1,800,000
and extending the maturity from
September 25, 2018
to
March 26, 2020
(as amended and restated, the “2015 Senior Credit Facility”). The 2015 Senior Credit Facility eliminated certain provisions in the 2013 Senior Credit Facility, including those that: (a) accelerated the maturity date to 90 days prior to the maturity of senior notes due in January 2016 if certain specified liquidity levels were not met; and (b) required that certain subsidiaries guarantee the Company’s obligations if the Company’s credit ratings fell below investment grade. The 2015 Senior Credit Facility also modified certain negative covenants to provide the Company with additional flexibility, including flexibility to make acquisitions and incur additional indebtedness.
On March 1, 2016, the Company amended the 2015 Senior Credit Facility to, among other things, carve out from the general limitation on subsidiary indebtedness the issuance of Euro-denominated commercial paper notes by subsidiaries. Additionally, at several points in 2016, the Company extended the maturity date of the 2015 Senior Credit Facility from March 26, 2020 to March 26, 2021. In the first half of 2017, the Company amended the 2015 Senior Credit Facility to extend the maturity date from March 26, 2021 to March 26, 2022.
At the Company’s election, revolving loans under the 2015 Senior Credit Facility bear interest at annual rates equal to either (a) LIBOR for 1, 2, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between
1.00%
and
1.75%
(
1.125%
as of
June 29, 2019
), or (b) the higher of the Wells Fargo Bank, National Association prime rate, the Federal Funds rate plus
0.5%
, or the Eurocurrency Rate (as defined in
the 2015 Senior Credit Facility) rate plus
1.0%
, plus an applicable margin ranging between
0.00%
and
0.75%
(
0.125%
as of
June 29, 2019
). The Company also pays a commitment fee to the lenders under the 2015 Senior Credit Facility on the average amount by which the aggregate commitments of the lenders exceed utilization
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
of the 2015 Senior Credit Facility ranging from
0.10%
to
0.225%
per annum (
0.125%
as of
June 29, 2019
). The applicable margins and the commitment fee are determined based on whichever of the Company’s Consolidated Net Leverage Ratio or its senior unsecured debt rating (or if not available, corporate family rating) results in the lower applicable margins and commitment fee (with applicable margins and the commitment fee increasing as that ratio increases or those ratings decline, as applicable).
The obligations of the Company and its subsidiaries in respect of the 2015 Senior Credit Facility are unsecured.
The 2015 Senior Credit Facility includes certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, subsidiary indebtedness, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, future negative pledges, and changes in the nature of the Company’s business. The Company is also required to maintain a Consolidated Interest Coverage Ratio of at least
3.0
to 1.0 and a Consolidated Net Leverage Ratio of no more than
3.75
to 1.0, each as of the last day of any fiscal quarter. The limitations contain customary exceptions or, in certain cases, do not apply as long as the Company is in compliance with the financial ratio requirements and is not otherwise in default.
The 2015 Senior Credit Facility also contains customary representations and warranties and events of default, subject to customary grace periods.
In 2017, the Company paid financing costs of
$567
in connection with the extension of its 2015 Senior Credit Facility from March 26, 2021 to March 26, 2022. These costs were deferred and, along with unamortized costs of
$6,873
are being amortized over the term of the 2015 Senior Credit Facility.
As of
June 29, 2019
, amounts utilized under the 2015 Senior Credit Facility included
$21,057
of borrowings and
$22,787
of standby letters of credit related to various insurance contracts and foreign vendor commitments. The outstanding borrowings of
$1,179,286
under the Company’s U.S. and European commercial paper programs as of
June 29, 2019
reduce the availability of the 2015 Senior Credit Facility. Including commercial paper borrowings, the Company has utilized
$1,223,130
under the 2015 Senior Credit Facility resulting in a total of
$576,870
available as of
June 29, 2019
.
Commercial Paper
On
February 28, 2014
and
July 31, 2015
, the Company established programs for the issuance of unsecured commercial paper in the United States and Eurozone capital markets, respectively. Commercial paper issued under the U.S. and European programs will have maturities ranging up to
397
and
183
days, respectively. None of the commercial paper notes may be voluntarily prepaid or redeemed by the Company and all rank pari passu with all of the Company’s other unsecured and unsubordinated indebtedness. To the extent that the Company issues European commercial paper notes through a subsidiary of the Company, the notes will be fully and unconditionally guaranteed by the Company.
The Company uses its 2015 Senior Credit Facility as a liquidity backstop for its commercial paper programs. Accordingly, the total amount outstanding under all of the Company’s commercial paper programs may not exceed
$1,800,000
(less any amounts drawn on the 2015 Senior Credit Facility) at any time.
The proceeds from the issuance of commercial paper notes will be available for general corporate purposes. As of
June 29, 2019
, there was
$526,000
outstanding under the U.S. commercial paper program, and the euro equivalent of
$653,286
under the European program. The weighted-average interest rate and maturity period for the U.S. program were
2.73%
and
31.09
days, respectively. The weighted average interest rate and maturity period for the European program were
(0.21)%
and
38.35
days, respectively.
Senior Notes
On
May 18, 2018
, Mohawk Capital Finance S.A. (“Mohawk Finance”), an indirect wholly-owned finance subsidiary of the Company, completed the issuance and sale of
€300,000
aggregate principal amount of its Floating Rate Notes due
May 18, 2020
(“2020 Floating Rate Notes”). The 2020 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2020 Floating Rate Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bear interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus
0.3%
(but in no event shall the interest rate be less than zero). Interest on the 2020 Floating Rate Notes is payable quarterly on
August 18
,
November 18
,
February 18
, and
May 18
of each year. Mohawk Finance paid financing costs of
$890
in connection with the 2020 Floating Rate Notes. These costs were deferred and are being amortized over the term of the 2020 Floating Rate Notes.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
On
September 11, 2017
, Mohawk Finance completed the issuance and sale of
€300,000
aggregate principal amount of its Floating Rate Notes due
September 11, 2019
(“2019 Floating Rate Notes”). The 2019 Floating Rate Notes are senior unsecured obligations of Mohawk Finance and rank pari passu with all of Mohawk Finance’s other existing and future senior unsecured indebtedness. The 2019 Floating Rate Notes are fully, unconditionally and irrevocably guaranteed by the Company on a senior unsecured basis. These notes bear interest at a rate per annum, reset quarterly, equal to three-month EURIBOR plus
0.3%
(but in no event shall the interest rate be less than zero). Interest on the 2019 Floating Rate Notes is payable quarterly on
September 11
,
December 11
,
March 11
, and
June 11
of each year. Mohawk Finance paid financing costs of
$911
in connection with the 2019 Floating Rate Notes. These costs were deferred and are being amortized over the term of the 2019 Floating Rate Notes.
On June 9, 2015, the Company issued
€500,000
aggregate principal amount of
2.00%
Senior Notes (“
2.00%
Senior Notes”) due
January 14, 2022
. The
2.00%
Senior Notes are senior unsecured obligations of the Company and rank pari passu with all of the Company’s existing and future unsecured indebtedness. Interest on the
2.00%
Senior Notes is payable annually in cash on
January 14
of each year, commencing on January 14, 2016. The Company paid financing costs of
$4,218
in connection with the
2.00%
Senior Notes. These costs were deferred and are being amortized over the term of the
2.00%
Senior Notes.
On January 31, 2013, the Company issued
$600,000
aggregate principal amount of
3.85%
Senior Notes (“
3.85%
Senior Notes”) due
February 1, 2023
. The
3.85%
Senior Notes are senior unsecured obligations of the Company and rank pari passu with all of the Company’s existing and future unsecured indebtedness. Interest on the
3.85%
Senior Notes is payable semi-annually in cash on
February 1
and
August 1
of each year. The Company paid financing costs of
$6,000
in connection with the
3.85%
Senior Notes. These costs were deferred and are being amortized over the term of the
3.85%
Senior Notes.
As defined in the related agreements, the Company’s senior notes contain covenants, representations and warranties and events of default, subject to exceptions, and restrictions on the Company’s financial and business operations, including limitations on liens, restrictions on entering into sale and leaseback transactions, fundamental changes, and a provision allowing the holder of the notes to require repayment upon a change of control triggering event.
The fair values and carrying values of our debt instruments are detailed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 29, 2019
|
|
At December 31, 2018
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
|
Carrying
Value
|
3.85% senior notes, payable February 1, 2023; interest payable semiannually
|
$
|
624,041
|
|
|
600,000
|
|
|
599,904
|
|
|
600,000
|
|
2.00% senior notes, payable January 14, 2022; interest payable annually
|
594,325
|
|
|
568,569
|
|
|
587,487
|
|
|
572,148
|
|
Floating Rate Notes, payable May 18, 2020, interest payable quarterly
|
340,583
|
|
|
341,142
|
|
|
343,004
|
|
|
343,289
|
|
Floating Rate Notes, payable September 11, 2019, interest payable quarterly
|
341,270
|
|
|
341,142
|
|
|
343,560
|
|
|
343,289
|
|
U.S. commercial paper
|
526,000
|
|
|
526,000
|
|
|
632,668
|
|
|
632,668
|
|
European commercial paper
|
653,286
|
|
|
653,286
|
|
|
707,175
|
|
|
707,175
|
|
Five-year senior secured credit facility, due March 26, 2022
|
21,057
|
|
|
21,057
|
|
|
57,896
|
|
|
57,896
|
|
Capital leases and other
|
13,899
|
|
|
13,899
|
|
|
6,664
|
|
|
6,664
|
|
Unamortized debt issuance costs
|
(4,094
|
)
|
|
(4,094
|
)
|
|
(5,155
|
)
|
|
(5,155
|
)
|
Total debt
|
3,110,367
|
|
|
3,061,001
|
|
|
3,273,203
|
|
|
3,257,974
|
|
Less current portion of long-term debt and commercial paper
|
1,891,512
|
|
|
1,891,512
|
|
|
1,742,373
|
|
|
1,742,373
|
|
Long-term debt, less current portion
|
$
|
1,218,855
|
|
|
1,169,489
|
|
|
1,530,830
|
|
|
1,515,601
|
|
The fair values of the Company’s debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values.