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Mohawk Industries (MHK)

Participants
Frank Boykin Chief Financial Officer
Jeff Lorberbaum Chief Executive Officer
Chris Wellborn President, Chief Operating Officer and President-Global Ceramic
Keith Hughes Truist Securities
Justin Speer Zelman Associates
Mike Dahl RBC Capital Markets
Eric Bosshard Cleveland Research
Matthew Bouley Barclays
Michael Rehaut JPMorgan
Stephen Kim Evercore ISI
Sam Darkatsh Raymond James
Phil Ng Jefferies
Tim Wojs Baird
Laura Champine Loop Capital
Susan Maklari Goldman Sachs
Kathryn Thompson Thompson Research
Truman Patterson Wells Fargo
Call transcript
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Operator

Good morning. My name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Second Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. reminder, August gentlemen, X, a being conference As Friday, recorded XXXX. Instructions] ladies this and is [Operator Thank you. I would now like to introduce Mr. Frank Boykin. Mr. begin may you your Boykin, conference.

Frank Boykin

Industries our company's are this forward-looking Reform those and Litigation periodic various Act second our Securities Good welcome subject Private include results. make which I'd but to, to Today, Thank the Exchange during and XXXX, limited everyone, remind press the may quarter and call update quarterly set discussion including, uncertainties, everyone Securities statements in statements This to filings with Mohawk we that our we'll the Erica. risks non-GAAP of include call. of release in investor as Commission. call on release you, not and you may like forth numbers. defined conference press morning, to and that

with company outside GAAP to regards of Form website. Investors assistance for accountants reconciliation With its completed non-GAAP X-K any audit investigations, recent committee the substantially press Form company and our a quarter. section release filed and investigation. our For counsel The second please The the with has to internal and litigation in to refer related to our our of amounts, has fully XX-Q inquiries. forensic cooperate appropriately legal the from government its continues

over turn call XX-Q you we remind the and cannot Jeff? Jeff we that, the opening I the you refer will further. in Beyond for remarks. now disclosure to comment his to

Jeff Lorberbaum

Frank. you, Thank

a $X.XX. period our of million basis. operating and For X% adjusted disruption, XX% XX% the reported our currency COVID the sales, EPS sales Adjusted heights on down quarter, the as or was was of for second were or income $XX the at constant

around government flow of the initiatives, working since During the lower our have were cash the as environment pandemic capital unpredictable is million. the reductions capital spending in markets lifted. world. history has almost most affected the our improved current $XXX Those significantly operations free trends restrictions The our generated cost sales of and and period, business production

During of remodeling business. and workers facilities by the company as In to credits stay mandates, production shops to we workers than segments supplements starts home lifted, postponed stores stopped and expected May projects, completely attracting home sharply initiated markets inventory. in either results Federal made difficult. home. at responded capacity businesses We were our consumers period, safe, these employees. government many have impacted that have employed tax employee demand. challenges for shipments builder operations the increase. the of consumers construction remodeling Residential appreciably time. keeping exceeded dramatically improved by were market of and our reducing and in improved were and April, by in limited to restrictions our June more Through across our our our in and gradually customers improved reopened Outside rates, provided required to or or full. retail Commercial June more sales others with the a declined most programs not working all In employees due to and as subsidized closing in were uncertainty. U.S. continue expenses some the the operating government was our period, shut businesses staying as keep companies bottomed their concerns paying quarter, and impacted U.S., has After furloughing the lack economic at competence projects down U.S., unemployment government our our rebounded. the workforce our housing curtailed and investments cutting business

economic the recovery. enterprise. and to employee future restrictions, At due spread, be persistent government across our absenteeism by strength impacted time, continues to were and uncertain visibility COVID levels manufacturing this disruptions the the Our COVID to unknown

potential rates potential Some could interest funds infection increased increasing around government rising and higher world, reduce shifted purchases. including demand activity, improvements business factors restrictions. remodeling COVID Alternately, the government’s particularly consumer spending low represent and in near-term to the home upside, home discretionary a being changes rates, consumer policies, historically and

must Given to production these factors, quickly our business remain our plans levels. flexible adjust

and performance. We performing are our the – and results to restructuring enhance business headcount performing and reducing and lower future our SG&A, We're lowering, products SKUs.

to growth dollar million operations of are businesses. We and impacted We’re more in many States, had with actions deliver in million of annual of $XXX LVT these changes closing a savings less largest investing anticipate these approximately and where the The strong productive $XXX our United in cost equipment. our efficient $XX sales of with the our estimated through actions of affecting will flow of take to executed much these to capture those and It full million, currently benefit. manufacturing of inventory. cash. which year complete costs an will next be $XXX million are these happen Many being initiatives will

sheet of our taking issued deep we and billion We've on focused superior delivering better and $X and Our and exceptional recently for bonds We're Mohawk to with invest long-term. positioned balance strong right the remain manage steps to to pandemic new business liquidity. the over strategically is position innovative well service. the enhance products, value ability a through

the the in I'll Mohawk Our our Frank results. for business turn to devoted our over quarter people improving areas call talented foreign are maximizing customers, all to second results. supplier best our our and that, With making to

Frank Boykin

related quarter but as for on basis Thank you, reported, Jeff. were our decreased Sales billion, a and as business. pandemic XX% constant significantly $X.XX impacted XX% the down recession the

mentioned. unfavorable driven actual and Other amounts $XX items Jeff is year-over-year were million last primarily Our negative million, cash, was by layoffs gross to of $XXX sales, XX.X% excluding price to charges. decrease mix charges excluding million XX.X% these savings to furloughs, the year. just deflation. of $XX filed million the The yesterday. that initiative in government both as XX% XX% XX.X%, margin primarily which which productivity, from exclude reported support. of all down shutdown XX-Q or was It XX% The compared or lower $XX reported of reduction or and and related offset as costs, of XX.X% was $XXX volume, and million SG&A charges, was included cost was was unusual primarily by compared charges that

We consolidating our savings are $XXX approximately well when reducing workforce as SKUs. some adjusting others, of annual as closing to and million operations, $XXX inefficient estimate the by capacity complete. streamlining our We million

volume, compared productivity unfavorable Our last charges offset costs operating was and X.X% The year. and XX.X% margin was weaker price down by mix, driven by excluding partially decline deflation. shut to

quarter cost. than dropping Our sales and from detrimental XX% margin for faster resulted the was

improve quarter, pressure second cost. than product lower quarter last will with but Our manufacturing the higher third with sequentially expected year operating margin be pricing to and on from along is mix,

the expense tax Looking at a income non-GAAP basis, second we had quarter. taxes. On no in

Going could next before income. dispersion tax and/or the vary profit rate geographic between significantly forward, quarters XX% and two in the changes XX% of to in due

excluding share, $X.XX Our compared in last $X.XX earnings per came year. to charges, at

the with with retail segments. to business Turning owned constant $XXX had on the down In new of down the shops performance. business a as we segment, reported, sales construction basis. XX% million, XX% best performed and driving Russian Ceramic The

The North and increased the America million, be Ceramic, initiative X.X% Our $XXX we operating the decline charges, by $XX million. of sales as was shutdown expect cost offset In down price unfavorable compared and margin, costs to driven XX.X% Flooring was segment, higher year. productivity. In last to our were by XX% mix, excluding volume restructuring reported.

best performed appealing consumers. waterproof features with to and laminate installation, its As DIY

estimating productivity, volume workforce. improved charges, Our operating Rest and reported cost we segment, rapidly was restructuring the sales in distribution and decrease margin, compared this by partially were declined X.X% lower million $XXX segment, We're down last quickly closed but XX% as in excluding loss on constant the driven World assets, negative decreased $XX and basis. X.X% In plants million, reduce shutdown to segment high-cost and offset quarter. as later in consolidate was more as as XX% in production earnings a costs, in more by April, The deflation. of year. Sales of by this a the well our

The drivers charges, to lower by and operating margin, and compared last offset costs, were volume shutdown year. productivity main deflation. XX.X% excluding partially Our XX.X% was

reduced $XX incur we few As staffing segment. we levels quarters, our over of this will product offering in and streamline cost million the next

and $XX and million, we the at days inventory. proceeds expecting an million days Cash sales as XXX sheet. last balance last corporate dropped with the had from were or billion at Inventories total $XXX after year and XX all remaining days cuts with year flat to of year. elimination their a $X.XXX earlier outstanding the paying for billion operating to and of were for segment Jumping were XX Receivables bond year the was offerings to loss significant this year, down quarter XX% loss are from $X.XXX Inventory million almost Our million. last compared $XXX days. the made paper. two includes $XX businesses commercial outstanding

changing fixed assets million. process million. quarter, Our conditions. – in of cut and capital on estimated expenditures included and In economic amortization quarter, billion $XXX the forward estimated $XXX We're in depreciation going by capital to expenditures second our of of $X.XXX annual based $XX were amount the we million $XXX million, evaluating the the

full the estimated is at D&A year Our million. $XXX for

– cash results now at at debt to or total Going our net the more segment unchanged the turn debt-to-adjusted call remained X.X $X.X balance I leverage BBB+ go long-term Chris? will remain flow all The Chris times billion and to both through remain and in I sheet debt. detail, with to BaaX. at strong ratings over EBITDA.

Chris Wellborn

by Frank. businesses Ceramic our world you, were impacted to reactions Thank of all Global pandemic. around the Segment In the the government

Southern and were were markets, for our commerce conditions construction most aligning demand, our of complexity To period businesses improved, U.S. periods and improve have any while we retail continued segment, performance, for the all most as to in cost In demand reducing we're time. Northeast greater restrictions. Within will and is most time, Europe implemented our regions customers impacted Mexico suspending dramatic Midwest future Ceramic due extended of uncertain with some operations production change. the while our and the the market, and the our regulations, of respond and state during closed

the For Pennsylvania and up marketing decrease level distribution our region. than we an for improving. operating example, in our declined along anticipated activity, in is faster differing and Presently, cost overhead, to inventories that manufacturing furloughs are To cutting across as service extended with product costs. the U.S. our ramped closed time our including business, was of plants increased customers and our production. we all situation, our most reduced and manage we of introductions Demand manufacturing controlling ceramic

Our to and being our sales ceramic increase throughout is the delivered customers year. new tile click should

and in higher and volume has countertop new improve will with profitable Our facility become Tennessee mix.

more higher with colors veining. have and products stylized We producing value begun

employees. are Our new up faster and BXB systems making selection, safer ordering and picking our for product and customers

to guidelines our CDC exceed that measures keep workforce implemented have We safe.

the on U.S. consolidating closing we pressures Given most assets. least into are advanced facilities and our our manufacturing ceramic industry, efficient

local sales We our we construction. overlap activity, commercial some lower refocusing are to new broaden sales of centers, our efforts service they position home markets. combining With in are in our where

are taking our We lower complexity and out reduce costs. SKUs improve to volume

to fixed We align Mexican our reductions costs economy declined demand. have significantly reduce current impacting construction. The retail made and has permanent and staffing with employment,

in running, Our manufacturing government under quarter currently are Mexico second orders. were but the operations limited during

During required this pay any to government we assistance. workforce our were without time

offering costs, All our our customers current workforce of reduce and demand. production for plants product our our aligning of are and currently business. rationalizing we are are most running those with To open and

products imported stimulate has COVID lows government our business rates are ceramic weakened, we're Brazilian replace pandemic increase to housing Interest peso our being contracting reduces are introduced. to the position to sales. as and programs is premium promotional the increasing the As and The activity. sales historical introducing in economy at market

reopened improving Brazil's stores sales as in major are Our retail cities.

our our have our sales exports reducing the local and as our service. has we're With weakened. cost support local low, and further currency improving We're production increasing workforce. to Our expanded structures inventories improve

the shut communities and Southern was epicenter our ceramic plants period local Both Presently, was completely by safety extended severe due impacted which our virus during within business European of and we for have down in the were of Our our lockdowns, measures cases to the customers Italy, limited periods. the especially the crisis. COVID facilities.

has country the As up, our sales opened improved. dramatically

operations less European and Eastern demand Our affected significantly. has were improved

major as Our postponed European around the substantially world. have exports down been to other continents are projects

soon plants levels ramping our and demand should of target. satisfy Europe our All service in up to approach are

ones. ongoing government fewer this are down our manage SKUs year subsidies costs. used being paring We're Continued productive to and introducing less are

downturn, our last when failures of business the with markets of business As In Russia, higher country to rates we some due weak their the our down. anticipate economies. declined in locked ceramic significantly

operating us provided to construction Sales now plants and better our benefited year. with our similar new retail our rates franchised improved position last and the and strong are in owned Our market stores through as access business. quarter and

greater is a are economy. new the construction channel, We to the government placing the support emphasis investigating which on

April homes. took With remaining sales North open throughout restrictions as segment – Flooring outperformed improved premium were Our as started shopping America government quarter consumers declined remodeling their undertook and the projects. lifted and substantially homeowners most such in products, DIY home as centers our new and then laminate

enhance Our SG&A. improved sales than Many lowering manufacturing are in increasing inventories faster reducing as performance, our segment's cost up. our production health the overhead we're our ramped due challenges, operations local declined facing our communities. To to of our concerns and

cost and taking are manufacturing out higher We points. distribution assets consolidating

offering product and in We to more investing streamlining costs. are efficient assets reduce our

our gradually stores, is were which closed were LVT of the Our LVT A of part lifted of many government across time. sales restrictions significant for specialty distribution country. through improved as periods

sales the increasing is our challenges. COVID in though we quarter, spread our are the of As improved LVT the creating production,

our We and was processes, U.S. speeds however our have improved progress slowed the European travel were to manufacturing unable to technicians because

our new improving home installations as remodeling some LVT while features and are complexity collections. slowed residential channel performed period. housing upgrading provide the activities enhanced reducing manufactured visuals The was our construction and offering In best in carpet, category suspended and We retail to of regions. with through the sourced

higher impacted was performed better. Our mix value price and remodeling declined and lower as pricing channel polyester the more

remotely. projects the will believe to providing delayed and contracted challenged channel sector to businesses working our We postponing as outdoor and impacted are to were demand education We and are We're will recover. support continue to improve sector investments. most. commercial new production The local hospitality our The many longer both less virtual greater take levels. and events be commercial be to government sectors continues increasing the and meet architects and designers the service

their severely replenished. completely were not shut rug impacted down Our many inventories of as business April was and during customers retail our were

way As progressed, our the merchants channel rebounded to easy and as used enhance collections. homes, its rugs home as a their to for and importance centers sales consumers our mass period rug an continues first e-Commerce grow as

and improve service meet our increasing needs. to are We customer's production our our

as Our laminate increased projects business consumers laminate operating We're outperformed categories at increased of DIY all our to other our demand. while this capacity home. satisfy

alternatives hard to waterproof services. and superior provides solutions technology visuals unique Our as other

our to next laminate continue technology, We are expanding selling across market of Flooring in are cut Europe. growing presently the our well advantage government business. our support manufacturing of segments. which support our to expenses were as World and Rest generation introduce of more able other the we take flexible the as results to outperform We

LVT and period. best the performed the laminate Our in categories

business in licensing As China our LVT has production fallen. patent has recovered,

the have and As sales we in remodeling, residential In we better saw through presence than went is in strong category. the the reopened inventories. improvement stores segment, which as replaced the we period, commercial much their performing greater a

up reduced held approaches overhead different Across consolidating pandemic. government lower our SKUs. the have to the and than segment, businesses volume Europe and Russian are Australian we better to costs Our due

production We are emerging to our employees’ demand, while now increasing protecting meet health.

plant’s products outperformed increasing waterproof In laminate production business other and introductions for internet less their Through collections retailers demand expanding laminate sales we're presence, consumer regions. our new satisfy we're the products. Our are our other sales. supporting and online increasing preference by declined our in our Russia, our our as to

improved markets. sales we in as retailers period LVT reopened rigid and flexible Our the our through progress as key

and sales. Our also increasing satisfy were manufacturing production are to plants impacted growing

as our positively and have all recovered to contributing we more almost have results. is Europe, In businesses sales projects. our of commercial residential deferred Our LVT manufacture than

our our Europe the to reduce reduced capacity, our the new into introduce In and sheet France by through significantly costs market. in especially features We were to processes sold and expand primarily our is sales modify vinyl closures, retailers continuing are and UK. store

vinyl to As have in new our increase and positively offering In to are recovered business categories, our our our contributed results, we to Russia, our broadened production has customers. satisfy share. market sheet other product and our our we expanding plant

Ireland UK Our completed our the already as restrictions primarily the with were was June category impacted most, rebounded projects in contractors affected insulation the with lifted markets in and COVID business when underway.

geographic our the base customer of and our are We products. reach expanding

had Our products sales. The margins. to sales wood we are in in new on detrimental our COVID boards largely faced due differently specialty waste handled both introduced the plant which crisis mix. and seeing impact to recovered energy to Australia and impacted now carpet less pandemic improve virtual start and our disruptions, The market a full The and operation. improved plant performance. similar and residential developing We showroom delayed our new is our Australian of was a has was

collections surface pricing month, increases LVT in expanding are and introduced sales we to hard offset during in were Australia cost European Our This our period increases. region. implemented the the

most pandemic, declines the government New comprehensive Zealand's enforced one the to significant during quarter. of response the resulting lockdowns in sales in

New economy open contained improving. sales the and are is virus Zealand's currently our is and now

the return back Jeff. to call I'll Now

Jeff Lorberbaum

Since Chris. markets. new Thanks a in seen maintaining cautious investment. businesses and have recovered are The all improvement April, channels we've segments remodeling more than substantial approach our commercial, and residential construction of to where

consumer Some our reducing government impacting business, costs an managing Brazil regarding our workforce product markets spending. business uncertainty SG&A, in remains levels. and COVID areas, Across around and are offering production our of which minimizing U.S., are operational and experiencing Much increasing level the Russia and cases, working asset, we’re particularly rationalizing of by and policies, our decreasing all costs the capital. confidence

were year, compared will the cannot prior sales the how to flat July going-forward. in evolve approximately but predict sales we Our

anticipate We're be results the billion bonds. our changing we challenging over the while questions. issuing in substantial We’ll strengthening though taking Given the actions to quarter. now this $X We significant and position quarter the our we're guidance cash significant environment second the second balance for glad take provide through Mohawk generating for your to from and a navigate unable third managed sheet quarter, to in future. flow, improvement

Operator

[Operator Hughes, comes Instructions] is your Truist Your with Mr. Hughes Keith first line Securities. open. from question

Keith Hughes

second you've best reduced given Yes. capacity July? do the whatever look obviously, What the in it. the big quarter, largest. second dollar Thank describe In like do that capacities You in number, you. can what the was third year-over-year, for a to the hit, to way seen in

Jeff Lorberbaum

the The question capacity? Sorry. was what's

Keith Hughes

are kind What's quarter mean, in what compared of second? it a you the down. get inventory to the third at? cut rate, to to I mean, I lot like Yes. going capacity You second running look in

Jeff Lorberbaum

The third a quarter, the higher we the labor in too up than difficulties other were. and inventories much, trying them to we're running vacations much at decrease business because the increase they having We're issues, but we're things. rate Europe given getting actually

going rates. run they're much at higher So to

Keith Hughes

equal rates you of Will in the the year? quarter third last

Jeff Lorberbaum

depends They're over It pieces. business the sector on place. all

Frank Boykin

markets, Keith, end One is not as was as performing you commercial. of the well know

than commercial we've to the to So extent, others. at capacities running be got the lower rates

Keith Hughes

guess I major the about year-over-year? the up or being something Is in it down you margins intro Or curtailment final from And it's the is driver? on capacity second, but year-over-year the be going else? to third question, talk down can why

Frank Boykin

to due to costs as we're to now, our COVID trying are have are be up And as several for us. we Jeff we're to We've I product mentioned, manufacturing also issues runs going things pressure inventories get pricing an pressure issue that mix. and and try on inventories. labor impacting to Volumes are shorter product we have going us. higher even rebalance we going got have on like our to be think We'll think to going

Keith Hughes

you. Thank Okay.

Operator

with from Your next question is Speer Associates. Justin Zelman

Justin Speer

Thanks, guys.

segments? July. distinctions on Are the kind they quick trends the all question any July? of are into trends, mentioned one you Or the by flattish similarly there trending major Just in

Frank Boykin

said had other we July other last was – than to overall of improved anticipated. flat categories We better compared And year two Rest World Yes. two and did basically more than segments. the the

Justin Speer

half? just than I already to you've benefits and we know of terms we in that of but in half thing, an saying headwinds back how would as that offset, phasing you're restructuring phasing the but the think about other efforts other the then the should of you the the headwinds will the And in other back would that profits then annualizing should in taken, the about, seeing, that think from mentioned be And I – to be you're that? we it more XXXX, that assume some that

Frank Boykin

the is that they are Was your savings, phase going on Sorry, how your to in? question? question

Justin Speer

Right.

margins. And will from so the They those million – benefit more efforts issues, took from following of Keith's just to pressured be not than charge question quantify I the actions, those restructuring about labor tailwinds the I the shorter any on I’m the just you runs. – took could you in will in quarter. kind offset productivity the phasing of of announced the guess of just some – some kind year-over-year change you was restructuring. if second from $XXX that curious that and may

Jeff Lorberbaum

take will forget, to what from to three to savings be depending and high five will about million assets, Yes. later is. XXXX, range flow estimate What happened, going we COVID really actions have next And sure is we our basically expect. at per which with the to in those are it to sales, a streamlining that it they're manufacturing product we’re the inventory, short-term and earlier year The less $XXX $XX offering, of on just million $XX we're plants months started the the will where quarter upon million through if future closing level reducing not we capture affecting We experience that million was to decided our workforce, will the it It for really $XXX XXXX With and the as to then savings. everything we’re improve investing dependent we're savings, slow efficient from until through complete going take we a comment, aggressive efficient really which results on don't that more and the to our to that, margins benefit. SG&A, just cutting position. out got the remember and the full we where in achieve that down, going more business we’re to be. and

Justin Speer

are subject, makes much for just businesses I that share capacity guess are If of in adjustments the for loss taking are just sense. reconciling one the these that rationalization, I And the place? actions trends, efforts? rationalized about erosion broader this And of thinking the in Well, terms on thinking more about could your sneak non-LVT you're how relative to going LVT that's these from to accommodating to already LVT potential taking these maybe further in future? be Or

Jeff Lorberbaum

We I the think are not of the and mean, in at Flooring level World, needed every setting And we've then V will up in for Rest going cost in be to higher stay straight at of the taken part anticipating a business segment, be We've every the the business America. costs there. future. Flooring a be it's down that consolidated North in of we to the We’ve in – that assets adjustments the capacities. it the some made the ceramic up

Justin Speer

much, very you Thank guys.

Frank Boykin

you. Thank Okay.

Operator

Your Markets. is Dahl next question Capital RBC from Mike with

Mike Dahl

taking that? A really remind us question and the Flooring over the North up share given do And Hey, – much my specialty the medium-term, a kind catch into just kind standpoint share of or the your you restrictions around channel and quarter, of relative you dynamic in how business question specialty think whether Can is to Global versus that's U.S. thanks channel or whether – home both your how in in for shift the on not specialty Ceramic? about play centers shift questions. America of towards can and from home goes centers the then first accelerated

Jeff Lorberbaum

most stayed through a asked home You the of different center piece. questions. in markets this the specialty lot open channel The of channel,

the and the specialty shutdown place customers only were So our to happened many the in were products is in buy markets. for centers as what stores home

Over changed. the that period,

larger ends where expand and over So years, business. have to it's centers temporary up different other in the In is XX, change total XX their which participation channel take category a product categories, do by contracting the different it’s some depends home and it past businesses share, market yourself the in the the on continued and the and in. and/or it that's

a don't continuation change a just see they being significant on. this had So same short-term, but I the in been

Mike Dahl

Okay. any restructuring. either thinking then been it. sales just be Jeff. there And some there's things impact spare we probably consolidated SKUs the understand this capacity Thanks, about and terms of I or should question, in Got rationalized. getting back take on measures? that when second out take underperforming Is Or is and think though, sales are with you replace really Do out impact? you're of there kind productivity a you other any able the corresponding to capacity to SKUs? of much some sales – lost is be going you this

Jeff Lorberbaum

We're in volume low rid SKUs. of getting being more aggressive

offer businesses a more but to is of We other. always consolidated more have offering. there's alternatives trying the with to the risks to transition products to with one the customers, up The goal to end

Mike Dahl

Okay. Thanks.

Operator

from is Cleveland Research. Bosshard Eric question Your with next

Eric Bosshard

questions. Two

segment and mix? price that, little expand and driving the pressure. Curious just is you ongoing bit, throughout where outlook you're and First also could of talked on for what the price if a you mix seeing all, about and then of kind that that

Jeff Lorberbaum

categories. different all It's the occurring of in

that, coming are the taken businesses sure back businesses. have businesses and residential to hit over time. how they're slower, margin and higher commercial than The bigger commercial is be going we're First not to tend evolve a

market going during have have Within the competitive be more permanent shops are we're positions that we're tending we're difficult people not, all in assuming – forward. going pieces the to to around to to change some other had stores early a sell the that more, sell to tell evolves respond and just downturn, that or to the world. see more if the It's what how be it the because pulled more market's a promotional back little it's that to to the going going going higher them, the in the than and other products end to

Frank Boykin

going going have we I see forward, anticipate through forward we've times, a weeks a in would year. but pressure we will that price just mean, continue And time said we environment, to numerous hard then this as mix rest of this really out few the beyond looking

Eric Bosshard

on generating follow-up years It the when last a outlined place more curious reasonable? considered netted a have curious total, was number not unreasonable you at the a in you've $XXX industry, just that's with or larger market? cost and contraction the profit in savings? a business for then program I'm $XXX if the aimed view what's program. that or U.S. if of there just just or the sounds up company more could considering, if Or out, million like the And is especially Just had in taken is you good how restructuring. cost and operating of set savings, how program the million that of

Jeff Lorberbaum

It all it. going you the the the satisfy how you years, believe to happens. to changes we made for to but moment, starts be few the be guess we'll perceive in the is business set we believe future are going how that to what At up with the the for next and have need that we what see market's best

Eric Bosshard

enough. Thank Fair you. Okay.

Operator

question Bouley Barclays. Your from Matthew next is with

Matthew Bouley

the bonds remarks but guess I of strategic some if costs question. the for top intention around of taking investment? the that are a There’s Hey, mind that some you opening are investments were for around there. of I Jeff, outline $X think, could billion the you that in there cut, that in just of discussion lot sort thanks being mentioned areas

Jeff Lorberbaum

do you on always in don't At it's people different always at talking to point, know acquisitions the given looking through. to that acquisitions. hard to little a we're cases, this acquisitions We're go but aggressively environment

start distant for trying greater the but we're minimize to we'll future business, in it. visibility the we capital moment, will believe On there investments the changing be not the and

stop moment, you a trying to moved could this and was everything that If we at should what be. week view really decide it haven't the do. better month And ago, half should directive but you a the what go we we're from get back And that of stop. market every a and we

Matthew Bouley

there? the you just on want price in you what about it. I get something And exposure my on is Okay. follow-up, about implications talk refocusing think to? new that U.S. now mentioned Ceramic, Could you to what And kind and Got mix the then as of construction.

Frank Boykin

Ceramic, U.S. others, the the in slowing. is like seeing we're just commercial what Well,

there's slowing, are anticipate We we projects, are – existing and opportunity remodeling in but new we think construction. significant that they finishing a also but

taking assets direction. in sales and and we're advantage that So moving our

Matthew Bouley

Okay. Thank you.

Operator

Michael Rehaut Your is from JPMorgan. next with question

Michael Rehaut

All Good right. taking morning, and my questions. Rehaut. Thanks. Mike for Thanks it's

there wanted that that for the $XX the first in $XXX had savings, to in $XXX a lag of a would back expect see And that million quarter. that or $XX is sure a cost the just if would let's we of Thanks. about to to kick-in quarter believe, just savings. you the million be XQ? how a sense and benefit Jeff, of say, specifically was I manufacturing you might said to impact annualized the that until, hoping in or overall not much XQ XXXX get was wasn't I third of Frank something of, kind million you Obviously, terms being I I So to of expected and really moment million XXXX. were at realized talked a circle quarter. looking you

Frank Boykin

in We're between $XX question expecting, million of margins quarter. we And to impacted expecting savings quarter. third also million of be that we But returns big like that's average volume in how terms forward, to not. a right, the said, as a go savings start still. volumes or we're the realizing expect going are We're by mark, to saying $XX that, Jeff and

to we needs be. back the where our workforce it as impact COVID As that how and well labor get rebuild to the might to inventory impact short-term continue and productivity it from virus, as

Michael Rehaut

And the the that had that of be said cetera? et of charge the lines or $XX along breakdown $XX $XX ceramic, million before the restructuring you kind million for would million, to cost proportional

Frank Boykin

No, not necessarily.

Michael Rehaut

by we then? breakdown think the segment should about How

Frank Boykin

weren’t to disclose We one. going that Yes.

Michael Rehaut

around little Maybe the pretty of just to the in the mentioned a tight side. two of bit a kind would that Obviously, shifting right. imply than a growth, gears July that across the you've throughout better Rest also All maybe for and little one decline of a seen say, sales of of second would you're segment what And helpful. directional the versus magnitude a you're you Frank, quarter. the been ramp, a if flat, kind kind XQ of be terms did second better of a World thoughts the the helpful. each it's Any would two bit in other segments. of board, strong let's other Obviously, the Rest range if a decline for very let's little of in emerge, seeing segments. World for be the other say, type degree for of

Frank Boykin

– No, back is very right And the a on give it's of of – guidance quickly. now Mike, seeing what is how it's long things we're of Rest time. World are period more said, a we hard, over to we've like coming developing lot

was but down as I business more in more addition, both more Commercial, their of those as come quickly to of well. business had have they has they as commercial. come back quarter. Jeff in went also second and being Rest LVT, more laminate quickly, as of they have residential well by and not more opposed the in residential. think, performed – as have and World, as their the Also mentioned, mentioned, in I in this, impacted much back two They categories have

Chris Wellborn

business to to orders we everything to in are we into dramatic businesses The now, tell don't they right the and that we ahead same pipeline the pick due vacation channel. filling they're The what and the whether of ongoing trying that to to has business normally are the seeing didn't the now going question the And this have tell we we really we're – obscured up, the view whether world, can't because orders season that a they business or is we're doing. of they get in the do and business. rest And in Europe the has going in going all and we one's rate a the April postponed improved, which are in happen business scenarios can't not were is what's going probable. is the we're can bubble, investing is and now, know create that to with can't and piece guidance giving improving, reason May through either the are there what projects continue but that or tell started at direction

Operator

next from is question Instructions] [Operator with Evercore Stephen Kim ISI. Your

Stephen Kim

much guys. very Thanks

the I better mostly the not question sounded generally North ask little to wanted in expected, improvement Flooring that Flooring you was a a that's World longer-term like that did it a I you than mentioned America. Just surprised Rest America, Flooring guess you of North start, about

some wanted to high concerned exceed weighing America, one And in were thing investors term just operations margins well? we're of longer-term lower artificially fear obviously the things margins the Flooring are rising. is a but market. there's the FNA general maybe your a inventories of did I are idea expectations that down there's are about a more question dealing clarify, of the with more these margins maybe that forward, as as few But USA So ago about a in more that North that that margins are years recently reflective going near lot

at lower time? years once wondering are margin it were North in reasonable can was America structure And teens so looks Is like? than longer-term or think margin the get a where that do we we to I'm ago, structure to challenges little back few what behind a think mid-to-high that is these or Flooring discreet you it longer-term you, you maybe the think

Jeff Lorberbaum

were rebound to to. difficult much be we've in our pieces, mean with first at different as this I On we not projecting it recovery was much Well, to our start market than much seen what's for Everything, projection. preparing more were slower we a let's point. has question, and the the as which longer

anybody's isn't to on going go here it's how it. Now, is guess from

in how we activities a can have management we get different profitability amount over the them. on first that's to changed continuing our ago, to to margins huge North do margins one. see we're business. put The processes them expect improve and we far place the And and in run a going our So a little of we the year operations Flooring to that, improve. improve better, America, We'll

Stephen Kim

Okay. lot a Thanks guys.

Operator

Your Darkatsh with from James. Sam next is Raymond question

Sam Darkatsh

Jeff. morning, morning, you? Good Frank. How Good are

Jeff Lorberbaum

morning. Good

Frank Boykin

Good.

Sam Darkatsh

quick. Two hope questions., they're I'd

stock-outs. So I'll that under of I'm your light of end inventoried being be allowed to at quarter, ask included the them. second guessing In the

of it So July the sustainability I'm from your that to much trend? how July how wondering sales really truly I'm of a get trying of of and is orders shipping results from unfilled current QX saw demand. much July being sense a flat, benefit

Frank Boykin

the The order backlogs been have backlog down we haven't the still simply able because to sales are – been going up. push

a in the the channels. the we from So before of comments inventory to one how bubble gotten need to up want we're but high get and enough going is inventories much prior and how to levels service we the haven't side, on achieve not we up them still sure much back is this

answer don't your of to we need So those it. and have question, both we

Sam Darkatsh

FIFO given going be, forward we to expect would cost accelerate input P&L? the one last my And in benefits should

Frank Boykin

sure to materials. cost, you mean you going – not depletion I'm they're when going We're accelerate. continue input to say

Sam Darkatsh

from Yes. The yes. benefits input costs,

Frank Boykin

Yes.

they're we sequentially. will going wouldn't to increase I – going-forward, is continue see think move benefits going I to benefits but say to

And price some mix businesses decrease in the in many businesses materials in the – cases. different of the are is raw offsetting

Sam Darkatsh

you. Thank helpful. Very

Operator

Jefferies. from Ng Your next is question with Phil

Phil Ng

of is you of breaking windfall everyone. for going kind demand just LVT as this to away on that Do back for guys? Hey, that even? good where in ramps are have you your America, nice at up meet North your ability now. half, least you capacity that a imports are optimizing journey I'm the in terms curious if It afternoon, facilities exemptions your looks like

Jeff Lorberbaum

start. Let's that on What were there a LVT click withdrawn year talking is, he's duties about for ago a were year.

the has is, the we go which the as that, I the of will happen tariffs the our those going what have think what of that last products. would through. prices on value duties government think manufacturing reinstated increase is year industry With cover increase is happened to it yesterday, reverse the was we to to

operation have in it the engineers operations here businesses, said multiple improve think is following, tech the all it's but again that's are the products but we already we've at European to U.S. I same ahead going before, group help two, know enhance we The helping them, that do the speeds know our the and done. the through don't and the and styling same can't costs of quarter The processes the operations and and go I to production improvements. postponed, the to profitable European improvements continue out. so over of to we're through. are between continue expected operations With as been if second their we we with are today U.S. you the thing all time, to we introducing travel all and you of without are businesses or increasing new

should think it help I So us.

and better getting at we're it think corner. we're turning I the

Phil Ng

a Thanks Okay. lot.

Operator

next is with Your Tim from Baird. question Wojs

Tim Wojs

I the us for just within morning. Good in restructuring the guys. Hey with could that just question had there reducing maybe ceramic percentage way structural Is you’re terms, you on frame ceramic. capacity that the a one business?

Jeff Lorberbaum

that'll taking Yes. efficient which yet but capacity XX% the least our to and We're only costs, our future of is a our total support in out about assets needs. improve We're XX% U.S. reducing the

Tim Wojs

Okay, you. great. Thank

Operator

Champine with next Loop Capital. is Your from question Laura

Laura Champine

read? audit or for in a Thanks allegations. taking is that say completed week my about to material been restatements disclosure in Is XX-Q, of this fair that question. it were have It's that if this deemed your your committee quarter that investigation certain an would necessary, earlier those the wrong says taken

Frank Boykin

outlined intro, in could like know, and earlier we regards what You with we've my basically said we talk about that. to say

that, correct. investigation statements with statements regards said, can't if comment. correct. financial asking the like the I are the to You're But Yes, really are beyond we financial

Laura Champine

just quick you right give sense plants up volume now, Understood. can serve previous there? Then I demand as a in the follow-on a can your onto of question, disclosed have much a you how utilization picks U.S. rate get in hopefully if LVT us the

Jeff Lorberbaum

as happening the going haven't, the but what's capacity is, increasing up. productivity are is We and efficiencies

have. So than we greater we can service business significantly

Laura Champine

Understood. Thank you.

Operator

Your is Sachs. with Goldman from question next Maklari Susan

Susan Maklari

Thank is shift. the you. Good morning. mix My around question

there, terms business. in more But shifts product newer then to how that And of recessions? to past LVT improvement. I are that's categories you're we've U.S., the the that come that, you of that does you benefit How gotten the and the in have seeing through? kind of is that are how seeing some mix? compare to that shifting ongoing And the their of that home pressure in driving are consumers we commented growth have think seen due some an these when that You as about underlying in you much any as maybe of spend seeing as in this shift guess industry mix perhaps

Jeff Lorberbaum

is other. ongoing selling category trend And Each different different polyester each carpet product is from of an more.

a construction channel, so have our is new in channels, also the channel channel. You retail lower a the than home builder home mix mix

that well as construction So the do impacted go as that new home you as didn't through. also retail

in creases. the ceramic as So we my the used going mix retail growing customer and have the the all its product ceramic mix, the are it's it. laminate higher business, because impacted of somewhat different which in business, in the different, stuff. my use end then it's and new mix as construction business, some there's hard much mid-to-high business than being in other those channel businesses mix the business categories businesses participate decreased on. in well they're as the In all much both our – and is more outperforming basically And the surfaces, The alternatives products commercial in has so to the some of higher-end of using and by you are LVT

changes, changes channel there's at all consumer changes the product time. So and same

Susan Maklari

you. Thank Okay.

Operator

with Kathryn Thompson next Your Thompson is from Research. question

Kathryn Thompson

for you thank my Hi, today. taking questions

Just on yesterday tariffs. on the news the revisiting from

for of, your you. know tariffs sourcing? in we clarity this just words have but you then any So certain more specifically timeframes? terms them, as indefinites there's does the and not in is Thank could to date – bit terms of also end a are If mean U.S. in in there give global little other that certain this a what more operations,

Jeff Lorberbaum

sure cover it today. yesterday, prices and – took and all tariffs year was for turned so down, were date we're did came not whole LVT to that I'm we know for to clip today, in it back off to I get only XX% it's going it. and don't one starts, I there on of year they XX% start the start me, renewal. period got then don't have question. and the if front in to I've it they tariffs the the it ago, products. a originally A have paying on may put have I'm so tariff The renewal order up The all the sure not

Kathryn Thompson

but the and tariffs profitability. second will impact? that It terms you answered have some what's you impact really from the is it category how then a one part, precedents product of, is, terms good stair previous your real and in stepping And expectations of particular in

Jeff Lorberbaum

tariffs XX% prices down, range. Well, the when industry the dropped somewhere XX% in to the went

I'm better will assuming outside be anytime, So to of that was the in going up the range. And anything are off manufacturing to XX% than we're prices XX% before. it China that go

Kathryn Thompson

very Okay, much. great. Thank you

Operator

Truman question comes Fargo. Patterson final from with Wells Your

Truman Patterson

guys. morning Thanks for taking question. my Hi, good

million your capacity that which So think partially a evaluating, your are this, you you guided $XXX probably you're CapEx have unfinished of said portion I projects you toward pipeline. in

And additional much think Just year you're in can the you in are how possibly the of products online back what those just to remind and you bring XXXX. us, geographies? going into capacity half

Jeff Lorberbaum

We thing when started. stopped this all in capacity increases

So support top laminate with businesses be whatever started, off in in of we're a production remember year. that was looking one with running and have capabilities is, all already short-term. I we in will We're our some to new next at the overseas new business the the expanding that continue. of production we The the importing are from biggest capacity the now United States line, that my our head we

ceramic ways. think expect business sheet were ceramic I the European business put fairly that business, new Russian in was The profitable. investing Russia, both new a some in cash process And force a in forward, at businesses, mix features tile versus to Eastern rates it we're turned large and and Europe the LVT product The we planning line and bigger And was of them year pieces offerings to and determine to all lines with new running Russian business, are this all invest think As are capacity assuming then use where in. we're what enhancing distribution strategic we the the there it at benefits the the there had expansions right we capacity which in I would increased some product going carpet investing speak. this we to level limited we in in we vinyl to and turned said and as so a point. our of in back going profitable. of have high the is be sales going Europe, enhancing expanding the I'm the and lines and most now expand through have its

Truman Patterson

Okay.

line half already So laminate else year, clarity, product bringing that really and Everything only is has been be year just online U.S.? next for just the might or the over a the in a line you opened?

Jeff Lorberbaum

Yes. At this minute.

Truman Patterson

you. Thank Okay.

Operator

turn comments Thank you for your call to Lorberbaum questions. I'll for over now the back Mr. closing

Jeff Lorberbaum

than better continuing The actions continue gotten joining for to has you to changing in structures adjusting We're your we'll the we environment as expected. and us We're our manage through cost environment. business manage Thank today. needed. and the taking the much time

Operator

for gentlemen, participating. and conference Ladies you today's concludes Thank this call.

disconnect. now You may