Mohawk Industries (MHK)

James Brunk CFO
Jeff Lorberbaum CEO
Chris Wellborn COO
Keith Hughes Truist
Phil Ng Jefferies
Stephen Kim Evercore ISI
Eric Bosshard Cleveland Research
Truman Patterson Wolfe Research
Justin Speer Zelman & Associates
Michael Rehaut JPMorgan
Matthew Bouley Barclays
Kathryn Thompson Thompson Research
Call transcript
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Good morning. My name is Natalia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries First Quarter 2021 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, Friday, gentlemen, April a being conference As today, recorded XX, Instructions] ladies this and is [Operator XXXX. Thank you. I introduce would your speaker, Mr. to now like James Brunk. Mr. Brunk, your you may begin conference.

James Brunk

Industries' morning, welcome Natalia. everyone, you, conference call. Good to Thank Mohawk quarterly investor and

statements filings Act are forth but set on as statements Chief to to the Commission. and and Chief Lorberbaum, Exchange me we first with like and numbers. Today, not Officer. press which may everyone defined various we'll in and Joining XXXX subject periodic those that forward-looking to, include in the Securities discussion on Private Jeff Wellborn, quarter and the I'd our Securities Officer; Litigation are of company's Chris Chairman during make this call remind our call including, non-GAAP limited This of today's may press Reform that President risks release include uncertainties, Operating Executive and update you release results. our and and call

reconciliation of For section to press Investors the of please release in X-K refer GAAP our Form amounts, website. and a our non-GAAP to any

Now remarks. to turn call for Jeff? his the I Jeff will opening over

Jeff Lorberbaum

quarter increase In of or with almost we sales quarter, the $X.X income EPS Jim. of as operating X% adjusted highest XX% had record first billion, $X.XX. our all-time you, Thank on ever first a basis an of reported of constant million, $XXX

sales In of to expand invest have begin specific economies been to by is restrictions. our interrupted impacted remodeling essential not in continuing new Those projects. businesses normal most customers' reflect to regions normal. an construction a Our anticipation government business our to industry's did and major their continued consumers to in commercial countries, in moderate homes improvement starting an so have a also businesses. flooring considered role the and the strengthen Around demand less see quarter invest the business, in as We're global seasonality. return plays first most in and world, are

flooring, Our in from lower with continues premium commercial in days, and World greater our products mix marketing to mix a improved first from Flooring of segment the to product quarter. sales resulted expenses, of our increased outperform and benefited The exposure which Rest margin segment channels. strong residential less

rates, other well strong and expanding margins, in States. Our low residential sales were growth and segments their performed the Market severe impacted remains in second as strengthened our also with results backlog businesses storms robust progressed, than Most inventories products would like. commercial we operating while though demand the production lower quarter. our the period into are by United of and order remain high at going running

States. operating United period production and costs impacted the in markets severe by many well winter as and supply weather of were in absenteeism, in new the our training employee Our limitations as

and restructuring productivity service and shipments made have imported us our seen Our and in margins categories have markets, prices reflecting stronger demand expand, vaccination and limited, we cost in Though continued growth Other the been anticipate demand, consumer government housing improving our employment around energy benefited our has the of disruptions. efficiencies. growth lower Global policies in should U.S. COVID enabled to countries investments our freight beginning and and labor, reduce economies rates higher We've see and of should more similar categories. are actions local further from level. product most increasing spending leverage costs. Even our increasing and infrastructure economies inflation and our and fleet SG&A Government stronger should on actions raw to materials, economic capacity are systems increased provide with proposed in we delivery The some the product transportation U.S. to COVID transportation. geographies, respond. as are With with and ongoing support stimulating receipt than economic trucking their delaying well as markets, actions are stimulus investments strengthening our local products. related U.S. expand in our program surges customers our constraints risk rates consistent world. monetary of in Recent which while

continue stock our price of million $XXX are spread $XXX restructuring million average projects plans, quarters implement for specific of a program. over quarter, since $XXX we million In the which million three savings. we million next completed. the The purchased the as We at our first purchasing balance to of will in total to an initiated our have our $XXX be of anticipated $XX achieved of $XXX savings

Our investments short-term strong balance billion. $X.X less remains sheet of with net debt

is leverage onetime below Our now adjusted EBITDA.

additional sales higher Jim investment reviewing and the to levels, opportunities first capacity. financials. operating our business our and you are will quarter we review expand Given

James Brunk

Rest reported of strongest. Jeff. Thank in QX the the billion. $X,XXX That's as being X% and All you, Flooring a with segments World XX% growth Sales XXXX on were showed a positive volume basis. increase constant

was the filed items section will strong as be and amounts from partially had improved saw have year be shipping increased FX. said, three quarter primarily Gives prior both the of and QX of four in of we and QX uptime, Operating as driven productivity prior Other in for gross XX.X% XXXX reminder, SG&A, XX.X% on increasing the reported improved a excluding of fewer XX.X% by points. will XX.X% of partially expense and the driven X.X% the X% in inflation. XX.X% were transactional includes savings, FX, excluding will $XX million, or Interest MD&A included by volume offset productivity increase higher Restructuring volume The additional of XX.X%, mix income, today. year. detailed of our us partially increased mainly million, favorable offset the later the was recorded manufacturing operating result as was margin Similar XX.X% increase Gross plan. charges reported, The charges, FX. reported, of offset leverage versus $X price/mix sales. days. by of As margin the or days price favorable income in XX. inflation. charges an XX-Q, uptime, was year, have charges, productivity, as prior FX, greater increased or we bond actual actions, manufacturing which the basis greater year-over-year our XXX from to the offerings. the full are stronger inflation as of million as the track by margin, impact and $XX and on million by excluding $XX approximately in these improving actions, volume Jeff

XX.X% year XX% charges, as and earnings year, versus rate XX.X%. tax is versus the we to prior us an share to of Giving $X.XX which $X.XX, was be in or prior non-GAAP XX% reported per Our improvement the expect full XXX% year. excluding

impacted Australia improvement had of or Mexico America, of $XXX or demand as or Ceramic and from XX% to Global prior offset residential partially on $XX offset productivity, eliminations basis productivity, operating as on approximately and segments. by the growth, -- improvement U.S. of to XXX favorable Russia, XX% LVT by year, year. reported, points trough. temporary the surface That's volume our million, at was charges finally, a storm. in higher uptime million, ceramic especially prior drove In X% on by World as an a the Operating be in income, from And points to The commercial in XX.X%, came was increased full XX% as million reported XXX X% excluding turning X.X%, higher year, constant and to income New price/mix versus versus of and our to unfavorably of $XX similar XXXX was reported by with improvement geographic the Operating soft increase the on Zealand. of strong the North points sales of Flooring a and inflation. manufacturing an recover basis of of driven of residential price/mix its I of million X.X%, increase product groups a all excluding and basis, versus driven partially focus while beginning inflation. year the global by and ice driven channel basis led prior offset charges with The volume sales business approximately Brazil, productivity, shutdowns, million. or Rest impact excluding sales by $XX up and unfavorable strengthening partially this by constant Now by $XXX margin volume, February across basis million. XXX for basis expect and increase in Flooring constant the with increase $XXX inflation. Corporate and increase XX% strong increase less that's product charges laminate, increased a that's an

us estimated that the million of from $XXX versus Inventories DSO Full $XXX versus at over $X we $XX approximately of prior very sheet just our D&A days prior $XXX QX of approximately year are cash with free X reevaluating sheet. us million. most days of the be over were level. from the remained for to billion, flow $XXX currently quarter of year. approximately And million. of and plant to CapEx D&A is $X.X with days with balance quarter just million. XXX see with XX in increase is Cash and decrease investments sequential X% the equipment Full billion a X% days Inventory cash XX. in year the to year. million improvement the Receivables almost billion. historically year, X gross an Turning XXX.X the debt Property million million. or giving from in $X.X a $XXX $X.X plan, will lastly, $XXX $X. marginal prior remained projected or of overall low billion. balance flow and just shy the billion, with at increase That's CapEx short-term at likely strong versus

I'll giving operational it I As And of EBITDA. times of leverage cash us Chris? adjusted investments total short-term to Chris billion, overview an quarter. with that, of for a $X.X said, over turn over first X.X our and

Chris Wellborn

Thank you, Jim.

World residential and on approximately leverage price continued and SG&A, expectations. as a over mix our basis, categories or and First on a product segment brisk XX% Flooring Sales renovation all last positive our across constant as at were of partially year sales to of by to expanded quarter our XX% reported strong Margins housing increased and geographies inflation. due offset Rest volume, higher exceeding pace. favorable XX%

at limited continuing some During ran shortages the our constraints into facilities we point, period, our of high some quarter. the this levels, utilization. second though At most material anticipate supply

inventories remain has customer backlog as Our low. increased

to We and additional categories continued have where increases raised all inflation has expand. prices across material product have announced

the consumers realistic to record as superior Our business, segment's largest embrace and category significant growth visuals our more performance. laminate product continues

Our leadership during the period. higher volumes margins in premium improved drove our laminate products and

create Our unique be manufacturing methods proprietary that cannot duplicated. products

in wood manufacturing traditional laminate provides the support and technology are beauty consumers with next-generation features exceed future installing Our wood assets we additional quarter, durability. premium to In that second growth.

During the with our rigid substantially growth LVT rose significant sales period, in LVT.

from expanded the material caused new normalizes that our operational supply restricted anticipate period, margins rigid in speeds. production enhanced operations disruptions to production collections. We shutdowns. the improvements as our increased In by Our expand formulations our our improvement that sales increases continued material and were supply and LVT unscheduled

retailers Our the limited anticipate in COVID sales period restrictions sales We in Europe. vinyl vinyl shops. reopen sheet were sheet their and our our as government are lifted customers by lockdowns improving of

sheet Russian product broaden we offering. business rapidly our expand as and vinyl base to customer Our continues

the a initiated support have We shift higher to sales at volumes. plant third

in conservation. costs. Sales plant production dramatically our results. problems have energy business provide COVID option operations of growth supply grow our Ireland and most to panels our geographies, impacted and increased in as insulation our continues the Our robust though Chemical our for was restrictions limited best

continued expected are our inflation have and third quarter. the chemical through We offset second to shortages price the increase announced last to

full margins business Our delivered wood plant running with panels and our expanding. improved performance operating

during for and allocating a melamine increased our our to we increased and our with decorative higher-value new mix We higher-value products As production. grows, improved mezzanine market floors. sales expand demand efficiencies. products of press panels period our installing are We're of the production

increased both to Australia to operating due productivity high and soft waste partially higher and hard offset surfaces our the for favorable New volume, and driven of results. market. facilities Zealand and grew improved by price by and Sales new remodeling uses inflation. a with margins mix, expanded significantly and solid create a that in benefiting Sales is strong Our plant levels energy in performance housing residential well

comprehensive organization, was SmartStrand and sales sales collections and collections, by our enhanced leveraging We and mix. service. carpet performance driven our increased projects and updated hard sales industry-leading Wolf service stronger, our were Our and primarily have that The by soft postponed. commercial strong

constant a inflation. sales America increased our X% Adjusted X% basis. due productivity or North by gains reported mix higher For partially XX% and offset Flooring the as improvements, to margins period, on to expanded volume,

Our performance consumers and residential increasing quarters new with seasonally in historical first investments stronger was remodeling than construction.

investments sequentially commercial continued new its improve in Our to business growing projects. with from trough

backlog rates Our normal. is order remain strong and than our higher

We transportation costs have increased a material and as we'll have further as prices adjust and escalated required.

output of are shortages impacted support service. our In we interference their maximizing from to production operations constraints, All managed levels. higher which our and supply and the sales labor through period, improve our

have our and imported delayed impacted Our in service of also inventories been to ocean levels products by due freight. shipment bottlenecks

are continuing our as year. ongoing they provide this We completed which restructuring results to initiatives, to execute will are our benefit

residential mix their our remodeling consumers homes. through Retail in as channel, premium sales quieter our Our spaces improved desire increased of carpet sales comfortable, our improving more was strongest products.

collections performance. with franchise SmartStrand are that and offer our We superior design proprietary expanding new

simplifying low-volume and by yarn complexity operational our and reduced significantly SKUs. strategies have reducing product We

workforce processes and extensive have relocating to meet necessary. that production our demand, market training assets where So implemented higher are increase to we

Our the as along improvement. commercial sales business remodeling are economic increases recovering with

We higher-value products Index commencing. volume are The XXXX. increasing reflects Billing are also as since the project seeing highest specified of inquiries Architectural level of larger April projects

delays. production LVT business, increased our improving. import commercial are we managing We of carpet tile limitations the in markets have supply commercial anticipation In and

Through laminate the supplementing have from Our sales waterproof all performance and across improvements, appeal setting our domestic are numerous operations. of significantly with production global visuals channels. are our and records increased it we expands as imports our process realistic

of at sales. expand to this production additional further our installing are end We the year

next which already Redwood, is the generation consumers. by accepted Our of will produce European well being also new line

board We have MDF our enhance completed and and cost. upgrades to our facility streamlined volume

wood up and fade scratch, received natural superior Ultra a ramping are industry-leading engineered wood, to also alternative We premium waterproof production features of is ultra first our being flooring resistance. traditional the dent wood as wood that flooring. well

residential construction Our to and new sales increase sheet LVT channels. retail continue vinyl and in the

LVT stain improved and We enhanced scratch are upgrading our offering visuals unique joints resistance. with and water type

improvement its output increased continued we in as operations. to has manufacturing proven implemented to work local Our similar processes and European production those our

material we domestic in by to In our margin will each further construction. The anticipate and offering by rose in sourced impacted volume, in and as We been increase a X% of our residential markets, reported growth the shipments our and will has due supply output. Ceramic XX% and quarter, XX% sales in service the and in on of see sales supply constant Our disruptions price, improvements delays U.S. approximately remodeling with our products. Global and to basis, new partially productivity driven mix adjusted offset expanded increases segment's gains, by inflation. production

Our Russian, by were as they capacities ceramic and production results allocating limited though Mexican necessary. strong businesses Brazilian are delivered and their

costs, businesses transportation our of pricing rising energy facing and offset. are have we and All material, actions to taken

their and ceramic commercial from remodeling U.S. sales construction sales Our residential improving grew new from are and levels. low

and we centers. residential service strongest Our at seeing was in strengthen construction, new are our activity contractors with growth

our wall and mosaic, including polished, We antimicrobial are mix. decorative collections higher-value products, introducing to improve

doing more have levels, Across to with are We the easier channels us our our Escalating customers. business, freight have fastest-growing increased with profitable technologies raising we actions. for advanced our make are to and we and costs faster, restructuring plants and business and on hurt are offset. our margins, prices at our running implementing higher focusing productivity the

are bank and service. the recovered temporarily is increasing period, our enhance production operating as The plant have that its manufacturing and expected, by gas electricity Our improving and margins. storm are at introducing should Southwest facilities most our In the our the stopped quartz our facilities our are natural of supply. which all interrupting more we sophisticated productivity, hit collections, and improving mix ice

performance strong grew demand. and quarter, consumer Our European some business with Sales commercial mix in our the in improving business greater productivity, risk robust and a in improvement a residential Europe projects. by substantially Southern in export ceramic led and delivered markets,

our Our running service, to operations results. and the high our satisfy demand improve at enhancing are greater rates cost and leveraging

levels as production our as growth flows enhance optimizing product We and our through are processes mix. increasing and support improvements our to in well equipment

which and production businesses all credit, is Russia remodeling order backlog driving are expanded high, sales. our in lower and housing Mexico, greater three are rates as necessary. interest all Our ceramic from we businesses, allocating are benefiting In Brazil and and home

We service. to streamlined strategies have product planning enhanced our optimize and offering our

ware are solution Our are a provide scheduling customer owned and our stores and premium plant we and growing inventory our manufacturing offering this our complete our levels enhancing year up demand. Russia, more processes. by new ramping allows we franchised Brazil and and Sanitary are optimizing tile maximizing low, to and our meet and to our wall In to sanitary Mexico, increasing improve and Ware to capacity output our needs. complements we tile In mix. sales our production satisfy floor are

market we higher ceramic the Jeff. the expansion Given are capacities. With our of reviewing that, to return sales, increased and demand I'll our call

Jeff Lorberbaum

Thank you, Chris.

As period. historically we commercial in additional our our see to operations and introduction robust around ongoing product and should margins. savings increase with the restrictions to manufacturing present the world, fewer efficiencies government Across that features provide enterprise, enhancing residential improve volume strengthen we anticipate markets sales while programs. our pandemic We're we the cost trends the progress through the to which rates, low actions improving executing offering increase our will we second our and year, interest slowly continuing

Our material supply operations some first face improve suppliers indicate still that should from could availability constraints. though the quarter

those materials, to labor and transportation supplemental increases with price managing some unemployment could required We continue of to and are communities interfere staffing world. be costs markets could around U.S. further operations. raw maximize energy rise, in federal challenging programs our the If

expansion improve our now normal in excluding to residential innovations product low investments introducing business leverage, We're EPS globe. With strong the of across our projects, our adjusted opportunities to backlog glad for advantage take expand. to strong be reflects the and to We're improvement -- be levels restructuring quarter a we new preparing investments. our of demand commercial Given we anticipate optimizing an your economic to $X. second increase We'll $X.XX take enhance XX capital Currently, offering return service. and backorder our an and escalated production these historically will charges. factors, anticipating and any to our to liquidity questions.


from [Operator with Hughes first the is question Truist. line Instructions] of Your Keith

Keith Hughes

I'd volume you an don't you increased know quarter in about do you second ahead, tougher And products even and kind ball push to more anticipate comps, you'll some despite can you in I of and margins Do also try difficult able we something talk [indiscernible]. normally given margin one it year-over-year? like half? forward the period, a unusual but comps, to margins, be got the think on give the

Jeff Lorberbaum

some give present expect believe the the the expected trends We're of we guidance facilities We've rates. quarter in quarter Listen, high to the raising into which on. limitations are all going views included will that things. and run I at can continue second you supply second our qualitative quarter. prices, the the already And also second provided we

into think look you the will quarter, the demand commercial we continue to third We think remain sales good. second As residential half, will improve.

third Rest with World government and consumer remind could Our of the about remember, could few that strengthened sales it vacations it ceramic be quarter. in in, ago. historical. minutes rates impacts -- higher supply impacted constrained both take make in other and year, production will to you, or we Those Last Sales as our COVID. a people sales it third talked areas by also some and changing actions capacity continue be to segments, margins summer comps the the increase. behavior should Also that our went market just both by in or Europe, period, resident as in

X we year. seasonality days fourth As you production have this we remember, and normal occurred year, more quarter, fewer the do that than expect year and levels go last into last

helping and year, operational being margins. full see if income. our sales SG&A the expect we it, look at For you leveraged improvements improvement strong in and also We

as next, we the the the it. year raising said, to we thinking it of -- tax evaluating are process is higher And year XX.X%. last and growth, X% both go That and will to for about up from rate, in capital With investments XX. the through. we're this

Keith Hughes

final Okay. Then just question.

producers? You product talked a a the case phrase, laminate growth. actually LVT believe record a your or other minute, share That on in used in about other release. setting the laminate from a is Or is taking lot dent that growth where sales? making this I you it's

James Brunk

with Keith, become market clickable has a laminate market LVT, alternatives. flooring and the wood

and adding we're Our laminate is and better other expanding importing waterproof channels, is laminate from to features and with satisfy. in capacity plants all

Keith Hughes

share be would -- way Is a So applicable say? it's that an that gain? to just

Jeff Lorberbaum

people looking at are all, the really as -- alternatives. the see into It's all being them they and that as same presented they're stores go and they

that's Now happening the the on part focus part. other is we premium

the LVT. and a -- that's offered. than have other that are they're products we the are So with waterproof And story equally equal better visuals things

So around the category, year, will premium the really end capacity. a it's lot the have growing the is is plants we limited By line running, up by our year, and our we're production satisfy still we'll new the then we're that a of we've and more in and which importing be will U.S. products being growth. us production. give from can't world, substantially really laminate category plants, increased the really and This improving expanded, and


with question Phil Ng Your of from next the line Jefferies is

Phil Ng

look I what in seeing looks the years, with like you growth last noticeable for say, for and we participated saw ceramic declines see R&R, strong Jeff, XXXX carpet you putting type and guess, in growth up? after to out could bigger pretty R&R really environment and of If few the growth carpet new strength a picture, we and construction. it if example, mid-single-digit a see you're let's for seeing the

Jeff Lorberbaum

you're flooring what of whole I seeing increasing. the category think is

growing because side, carpet growth share, which whole in But but well and up, the lose low through. we commercial and a in in levels. that they're other business, as products, forward going market, it carpet the as we think you I all is are so to differentiated still as the that's higher which higher have margins categories more much it's that ceramic both go as at go picks help the is And is still the And as we will categories cause. have it really

Phil Ng

it. really certainly, price on may and guidance, you've really well. Based looks like up been helpful. out is margin go Based That's pretty proactive more increases. on it pricing with Got holding your XQ And your on what you that any, you're and the pretty envision have this offset timing do mismatches at good out year? fully alone year? there do seeing, traction you least, throughout should the like pricing feel And you inflation

Jeff Lorberbaum

Well, materials, as we're keep aligned. in to raising prices our view a through the continue before. than of we're we react we Every month, get doing everything flowing we the different to it having we and transportation supply energy had can rise, it inventory, the And see to month to changing We're you prices base. they're know, as it. and

We trying to with to align push price it. are through increases

And so well far, it looks like we're with doing reasonably that.

keep all Some going do can is making is reviewing that actually keep and and adjustments. products, Xx what's increased on -- we've we already


Goldman Maklari . Your next question is of Susan the from line with Sachs.

Susan Maklari

My is through U.S. how seeing the expected of first some demand add on give facility to us coming that's in this there? and that's that question you're how Can update you to around kind the LVT

Jeff Lorberbaum


start the and European improve operating just our operations out, margins. to continue So are well to a put and cost

and PVC get is Europe. in but it it's limited U.S. both yields. from to Has the optimize been continuous better, the the not that minute. have the plants in over we we're there demonstrated the supply And at S. the both and we We processes implementing run at United on us in to causing and speeds improving disrupted States the in they're to have and Europe moment, there, U. our them expect a people Europe and this

Susan Maklari

been then and last And year. helpful. on That's terms us you the as where obviously anniversary well, Can some lot And about of give in you And as making be follow-up, cost-cutting second progress of that a that out you we more you've color through set initiatives year with of the in Okay. a as how thinking the some flowing back of are that? then that? quarter? should for especially half the we productivity

Jeff Lorberbaum

Okay, Susan.

significant made So progress. we have

As that had balance XXXX. million million $XX impact, the go we We'll see complete we through would have favorably said, $XXX QX I those we our we've year, million anniversary of that margins. the impact starting QX restructuring the about would the $XXX actions and and as expect cost that to seen most from of planned,

And you of included Those look between million so the $XX somewhere projections. $XX in at are full and savings additive if our year million.

James Brunk

Just embedded remember last so first in the million. prior that -- quarters, it $XX million already the the have $XX it is comparisons in in embedded the


Tim Your is question from Wojs line of with the next Baird.

Tim Wojs

just couple quarters. is a sales And Yes. than everybody. question run lower Maybe thinking first you're a how over about last investments? bit little has SG&A the of

business? bring next some as investment into XX some And so back XX where to just over the biggest months, the think to you guys are of the opportunities SG&A you for

Jeff Lorberbaum

lower. satisfy SG&A, grow leverage to we support bring the the same out growth top so get the going growth, SG&A, to the the expanding to top, on line it's still the but than have the at time, market SG&A sales top. new to goal products the with start and been the with of lower at to We're rate right need the You're increasing to and the it is

Tim Wojs



some So back but it. you'll bring able be to leverage

environment, there to Okay. of update been progressing, you sort take out Can of? is you balance for it's M&A your just if us And give how there's in of and then best the any years. in just advantage the sheet on the I opportunities M&A on that's environment mean kind shape probably an

Jeff Lorberbaum

you we're the and know make it those while. when we over to to looking get things sure for to right sheet As through good prices never the available significant But position are is balance the you there get are of that the opportunities said, with money. things takes at an going in the We're the ability amounts to invest talking right return to people. a time. the need agreement And can


Your line Kim is ISI. with the from next Stephen Evercore of question

Stephen Kim

income. give operating productivity input Historically, the you that. the of were sort to of given of able guys terms you on I cost, Jim, was the rundown breakout in benefits us curious if volume, have the

James Brunk

in you'll looking was Well file today, you later said, were will that as MD&A Stephen, because but it one our XX-Q one specific I there we for? get our

Stephen Kim

No, We Well, That's okay. have that's just fine. that's -- wait. no, we'll I fine. to guess

just then I related more some about about a you're How that, you're the could laminate, capacity capital tremendous opportunities you you're enough? segments much a which North was making potentially capacity And expanding hand us that of that if Let and that And this you point America, already. evaluating I about opportunities. ask you to at curious where you in are both most talked a could, amount evaluating it's comment expanding Europe? in. give are North me in your you investments at confident America in if question, demand

Jeff Lorberbaum

Let's if outside U.S. point. our the start with that this laminate, at limitations would the European one. U.S. on To most pieces the answer are the constrained the that be the businesses, board have can I businesses businesses most our Europe, that ones and right would ceramic see now be and

in additional European it's capacity. million, around I coming We of add in to year the Europe. U.S., and the this to laminate. In $XXX the both new capacity remember have U.S. $XXX think don't number million I

of to are but Brazil and which We will other ongoing in there's in those our production, have in both operations new and ones. Mexican lot a big And things the in it. we ceramic, have equipment optimization that, coming increase LVT

Stephen Kim

me And margins. is then just lastly for

see bit Or is was And benefited sequentially of if down things, a imagine, this an of into that, would XQ. year? I'm Usually, margins because I you wondering XQ to happen And rise year? your quarter a You happening again seasonality of unusual mentioned in would potentially XQ. expected seasonally. just that's some think those margins that unusual margins that you this lot

Jeff Lorberbaum

seasonally the which go and Rest You're stronger, increased was marketing product Flooring one by was right, through. said, lower quarter first as the margin days. positively we quarter you affected temper mix, the which does The expenses increase World, of

remember, to was -- that then stay is So year have one First one is more at those quarter, -- we that to going days. going that the And this X% has levels. not

in days quarter historic the the This first second quarter. So usually relationship, more going when the year, you about it's has reverse. to think

it relationship. changes So the

at to that in looking have when line. you all perspective trend you're keep the So


is question Your with next of Cleveland the line Bosshard Eric from Research.

Eric Bosshard

Flooring your changes ceramic. of You coming curious businesses, world the was to I'm didn't better, relative and growth two is in that anything the that those quarters? the rest quarter of in original notably the North accelerate can for within talked the characterize totally those What the expectations the quarter, about the about growth American you limited

Chris Wellborn

sales first was and while were ceramic. just to can commercial by negatively in is interrupted $XX starting in gas which $XX And least ceramic the we we speak supply, to million then The storm, I to U.S. improve. impact. U.S. the electricity estimate quarter, impacted million our stronger residential and at

margins and forward. improve and transportation productivity prices offset restructuring, with going Our raising we're to

Jeff Lorberbaum

to PVC of hard. we we've other have impacted American the pieces did availability the to is by of do. laminate to trying in all also LVT the products supply businesses, North product limitations In imported was the on coming of the satisfy been are you late. run The about lack the The plants heard

then the on the go run So we in trouble of some plant. And manufacturing, in lost through. the markets, carpet having the as finding to those sales we're labor we

has that, do of up we're includes limited our raw production picked local side, everything So to plant some materials equipment program X X we and on labor, our to can actually trying more to some and to moved another labor have we've and by from market which but been improve availability. training

that we've the it. into impacted the And those things second So quarter. projection all all built in

hand, limitations, but going get how the the out coming all Texas we how is we'll to think have still supply area of to On in the to we supply we it exactly limited supply going the we're see don't know better, other have believe chemicals goes.

Eric Bosshard

sales good Okay. And inventory and as to have inventory secondly, that, visibility on That's then helpful. just as curious situation channel up you a the much are and perhaps, your bit. your

channel important inventory? year-over-year balance you happen? about that? might is How or rebuilding relevant Your inventories do that are down you think inventory, your when inventory on or think How And sheet. your do

James Brunk

sequentially. the with start I'll inventory

and back did we inventory increase we million, $XX we would if increase you talked by which remember that FX. inflation somewhere impacted the a that thought stay combination between believe noted, the we now expect actually though I more historic even sales will turns inflation than to XX% is from the XX% and higher and we about XXXX would about the year-end, in combination year-end than 'XX that to do levels. that be of volume As And February, the X% with of higher by

channel demand. customers, help remains the with low our the believe do of and near-term of actually should this the terms In inventory inventory, most we

In ever working, as this of being to quarter strong our improve is try large of as their are at week, addition, XX and it businesses it. seen I've are to increase some I customers through in business by as as It's go our ability we some the their well. as of most obviously, as The several to have them install years. to limited service and strong for we spoke as been them. customers,

would our so while get So little install that it's taking them haven't because if the more. in fill couldn't impacting all some service, ship to the it to a we in able they And we like. much not been channel being there. addition, like it they immediate, of could It's instead cases,

also have the And good. can't I good, the And at are to wouldn't backlogs point the third this So I is second through demand good the get think quarter. quarter should it aligned that point, we and them good. the why be be see is


of line with is Truman the Research. Patterson Your from next question Wolfe

Truman Patterson

And op look should going when suggested leverage follow all a XX%. still forward, But right? on Rest from strong as Jeff, you of new to quarter, at that wanted it XX% this World we Just kind margins. in the shouldn't base I be strong sales seems very XQ the you growth. like Flooring Very margin generating at use second up

vacations. help hoping back coming in I'm So that year, online back the frame walk of can be you the of part costs the just us the through or might European some

give Just can little a more there. seeing bit color if you

Jeff Lorberbaum

-- we as stronger, The it. just are into the sales is that for first one quarter, Okay. the coming said or else everything

So of -- year see margins and we increasing the do all Rest World. but sales Flooring

it lower said, we expenses. benefited marketing As from

the up through year levels. So have to to expenses to go marketing higher we're going we ramp as the

to it. going that's impact So

it go going getting through. are that greater year through level margins going as favorable better for and just the in we really be first last maintaining quarter, as through. we in days was by products. also than And go the be to and increased to channels They leverage the the You're year. product itself don't But different see I have mix mix then at helped that we won't mean between the

usually third year, business, The historically that you and the see highest because sales, it's margins those vacations. and go and if World quarter, back is the the at of the look You'll the for quarter of Rest second

that see back use go line you start. to a and you a look trend base If as you'll should historical, at

Truman Patterson

you expansion year, the not And for necessarily quarter? each clarity, for were talking full specifically margin about

Jeff Lorberbaum

correct, On rest Truman. Yes. world. of That's

Truman Patterson

And LVT third-party is Part running the And you when LVT then B, seems U. some U. terms making in the both the us good your capacity capacity? internal at might and out full what you pretty on could at along it share with much everything in think S.? progress again manufacturing, remind your be market like any on Europe. how running you'll LVT, be idea dollar imports, just you're S. in But

James Brunk

supply that go and concluded our We're us we this additional all we we're reviewing term, optimized broaden get we here, What haven't towards over at and term So headed billion, is long to We're it else? give what need we from long that manufactured and at. point. capacity is do capacity to $X marketplace. the using imported

James Brunk

U. would still even we have though shared are I gain. Truman, And the with say now, we growing market the in S. right

Jeff Lorberbaum

as not the at think least market we're growing XXX% We're we the market. but sure what is, as fast


line is Justin with Speer Zelman the & of Associates. question from next Your

Justin Speer

had future I details, few a you terms plans. years. out speak question know maybe of can't rewinding I in to mapping One but

magnitude M&A we potential You've do how projects? range in about a to prospective sense internal CapEx should maybe lot priorities? today, think for terms And decision give greenfield I out made growth opposed magnitude projects going capital of I the us you investment, at investment, look the of lot of a maybe as a guess M&A. of as it to and/or and of guess, doing --

James Brunk

little us this in of a I think middle you're bit. We're ahead of the study.

of up no Russia we we anybody into first new hadn't made Some been category, we from was in went in that new products machinery never geographies. new run countertops plants things learning We before. customers. no We time product put markets in in into had put the curve. by new a went We a more the like

mean to plan in Europe. -- our So to countertops it them. took It's I in But us put in longer port ceramic it. get we expand

just plant, in that on, Our much as we just a else shift third the Russian money vinyl business. anything as put we have making

it where took So when the get were want together, in we it us up we got them LVT, of longer. it last just all steps to to.

outside So it's when you longer. do take the stuff to greenfield going normal,

together. plans the put haven't We

to businesses geographies are operating. existing existing an around So with far, plans existing the in equipment expand how all that's

So we overcome. the to anticipate same having things don't

also we're same looking the at side, at the time. the change On business what to other can we do step

the 'XX and looking planned business we've really got and this things doing year, 'XX in enough far economies expect We in side. and really as So the we're at on that be didn't to under we in. haven't them along the pulling well

Justin Speer

two question And how extreme most, now your P&L? headwind start maybe earnings seeing and year-over-year and prices. One that think expect chain there of commodity I That's through I extreme give transportation statement? into much that your your we that guess is flow the income basket to up when part the at of in up? been do guess, had part lag I the questions, your put is when most you I helpful. most across prices is commodity has you right a basket So any the of context that topic other calls can and terms you just of Is the us what are supply

James Brunk

started like else has in we're quarter. rising the fourth everybody just So

X.X through to inventory, about numbers, so have then. it flows it, X of round call We months

quarter, going the trying with aligned of it it. it. it, some of up high which prices The going the And know in show don't get more is third second to and part to how we biggest in So is hitting first quarter, in to we're it's going is still be even to the inflate quarter. the

when to We to as marketplace, can the all in got to So show time it we it's the we're working they're manage in through. through. going everything up think hit and doing we pricing P&L, go we've the the

Justin Speer

And last sorry. -- question I'm

James Brunk

we in think increase things that we're X% the some there's numbers, thing to and -- The XX%. things X%, are raising around

board. it's over So the all

Justin Speer

to price all reception these categories? consistent the is across increases And

James Brunk

same have The everywhere, marketplace through in increases and the prices we all competitors, our is pushing materials. raw

For part the the that most through supply low. are channels the we said,

it's this historical through at easier the them than point. push So to


Michael from Our of with is the next JPMorgan. line Rehaut question

Michael Rehaut

give more would America. price I a which for specifically, to whole. a I talk the different two, and just sense? when more you better here, say, thinking of mix issue or And mix little get wanted the over last sense been particularly the mix you in North businesses. Obviously, about First, us just Could year better on Ceramic has about Flooring an price

and price if versus the mix changed And that so all prior that's market North certain going just far year the is or America? for both sense had how price of and a us Flooring this you year two? the of You've at But increases itself give influences part Ceramic in price/mix. if

Chris Wellborn

Michael, I comment will ceramic. just on

residential back. And stronger One business little on a a have side. of at the be pricing starting higher the the to the things we business come commercial that just typically, is our is impacting mix would and commercial moment is

James Brunk

is also way the the has more that's have So better, differentiated. impacting where in products was. the other but the large commercial where And are still margins businesses, it's we all commercial the businesses, because higher -- doing it commercial below

back there. going So we categories X.X those year, product know to years as to next, have move normal, don't be I higher-margin significant it's over the X our opportunity

So that help will everything.

Michael Rehaut

years over LVT better I other coming last and the categories ceramic some with also mean, challenges I what of that's or thinking on, here within spear, with LVT. perhaps your is couple that. compete flooring the carpet mixed about I in guess, to Look, caused residential like appreciate I'm

or residential within if you've any change it's product So or worse stabilized? portfolio for if mix the seen better I well, wondering in as was the

James Brunk

I'll see if I can answer that. It's complex. more much

have is on. things you what going So

growing the share a market. carpet as So which business, lower-priced are in the polyester had of carpets you carpets,

mix. the So that's impacting

Second you different is growing. at moment the channels have

the you The which So have then of of you have business. it's direction. low, lower sales rapidly, to the the impacting the margins construction helping commercial same are time, at part the see growing remodeling And how and up they business then is tends the so the all part is well, versus go that's we'll picking highest side, of has it mix quality and the other products use to as the just -- the mix doing moving and it. in business it. than remodeling and new And through They're the evolve. the

Michael Rehaut

Okay. But thought just no in of terms impact? net the overall

Jeff Lorberbaum

is The the will through the comes is picked higher a it. build question business modeling piece and doing the happened expecting earlier because better. year. There's the is margin the mix is builders to remodeling We're what improve remodeling up that

we're a get the mix as go to through we're going year. that we So hoping improvement

Chris Wellborn

that, And as improving, also mix with get you'll well. the Mike, couple the commercial of benefit favorable

Michael Rehaut

No, Right. helpful. that's

there. production Rest XX%. the of guess, still Flooring of I from come you've maybe about this sales expect in secondly, pent-up a the about talked demand Just quarter margins your you've to guidance, bit little increasing out rates. of There's lot margin, on in World how you versus talked But second terms a

your European months summer the businesses. in be won't You that impact

to at considered? it second -- So in second fair should dollar the quarter than greater is the those first quarter absolute an quarter, expect sales the things greater all be be basis on to

Jeff Lorberbaum

expect second the the it. first have one more have same days But first I up quarter. the X% to the than the have the should the that it's throw up. sort limited We're you comparisons piece, the be are easy. get. won't low. also, which to on because quarter same you top going go the you of piece on the ship Other supply higher out. we you There's didn't as differential at than we're historical we're not of how how versus same exactly can get we we're still that, much the are much Yes, than inventories capacities it but then the to because have trying it, to And time sales XXX% sure


from with next line Bouley Barclays. question Your the of is Matthew

Matthew Bouley

I to I'm first the with last on versus And greater is seasonal the talking what there when wanted unusual got the the specifically, earlier that thinking around quarter of you It actually said, days margins issue. about be quarter. price materially given you implying. sequential was the different what I a into is strength seasonality. of second touched the just cost you're and QX, in everything follow the up on shipping But anything in being margins appreciate X might else QX headwind?

Chris Wellborn

which the I'll World, Rest business. on mix from -- -- product caused just lower improved that benefited marketing in a on greater Flooring and QX days, of margin comment increase again, expenses,

Jeff Lorberbaum

For the put products to to and is higher the up the all out. going SG&A more go support level business of to we're going new sales,

trying some it in enough So it's were in it in keep but not to going economy the increase, year we When because support to investments the but year, increasing know next to to we was to go only up the where to should we keep what business last volume be. we more go still compare trying as put you get didn't stingy below through. were the this going leverage. we're We're to making year we

to cyclicality it then we've European almost The same reminding vacations, versus compare -- increase, first take margins. that is second, they the quarter you is which third going people into of World quarter to quarter in the the it the the in before you take at you get the the the relationship have you it. keep the keep to and X% to of about that Ceramic when models just of off I that's business you And think it to first look So have to consideration, some start. Rest both don't affect the need piece, seen

Chris Wellborn

also back as the and full see the And operational get again when for in strong sales we'll step SG&A, well. improvement year, income, you in leverage improvements we expect and then we'll that

Matthew Bouley


the above quarter, is that your the as I'm typically deliver absorption be just mean incremental these in margins impact on how higher producing on volume might you it inventories you're seemingly the therefore normal normal? rates today? that just on is curious fixed that one quick on might high Second this production seasonality. relative year cost than and to Does

Jeff Lorberbaum

to It does help, it and continue help. will

haven't to We we with are we the Now so still higher talked going labor on get in overtime We're about The have stuff hard manage. absenteeism. paying even all is in. as not COVID pieces. to where people

does It's through question the And fourth strong look way hoping all quarter, to And what way when there. going end. it's too the early to be the to the business the tell. through. way get I'm as So like all that be, is we to going the there's the we then impacting business, all other the come costs the year, also of hard to through year, are really out is question the be last going as to trying was much place. we the volume ran fall get


final the line Your of is Research. Thompson question from Kathryn Thompson with

Kathryn Thompson

for the on, the on update to congestion, growing give has port an to congestion? and this port How cost, Could help space? are in increasing the costs meet for distribution thoughts the how with chain. value the increasing Focusing you managing the just port plan congestion? are understand future. many able companies along you storage issue or you which an ability of specifically, demand more inventory us transportation you're light us And been And

Jeff Lorberbaum

X there. we the there the and normal where than or some delays the are freight else, are call they they what everyone costs Like times In are higher cases, costs were were. in

are huge products. have be could in cost there's X-week on the delays pieces into impact the that the So a to be four delays weeks Then to added anywhere it.

it getting this to And that but to to as it them to chasing like the them to a quite timing landing at have, align go while, still get try we're from little assuming stuff earlier what stay in point, better the and starts and a the we things through. trying get line ordering the are the -- here. is of it's transportation We as we purchases this going we're we're for

see out. Let's it works how

Kathryn Thompson

Because ships. been space going Are the renegotiating up we're have them you renegotiated in back things your allowed are on and back to experience? of get there's has -- is that -- you're different one several that rates? you companies rates, hearing that Has that more stepped and going

Jeff Lorberbaum

getting more I say that space. can't we're

getting try together them, it, in ships We adding orders orders put to are -- to to and the put delays delays have and that we the the the -- piece paying prices high. we're on the we're are with put through and there align

Kathryn Thompson

later. significantly disrupted, that Then Okay. stand just key a of effect I'll -- the on the ripple on with understand Texas were the in follow-up resins follow do are resolution freeze. products the terms we up where I of today just that?

James Brunk

in the the From of side, supply it. still we're middle

picking to coming have up to their mean to sending we're try I the it plants off the in we're trucks We lines buying. down. same things we're keep moving that and It's day and it running.

though that to is, begin from the for you're And it? mean, ordering that that's I capacities goes another. is part are the so the business And to anything we the customers and more just going to are constrained one like what there. getting still of you're can What better. difficult are get, it going it's And get. affects everyone to we're in all glues they're to resins It get you're as it's in what even get getting problems percent us chemical indications going So tell playing are the the better. when whether hard

Jeff Lorberbaum

all disruptions positioned we because us, a have all of you going about. a are our the a appreciate We're best joining appreciate managing more being to and through our we're think in and you well supply good year, base performance makes but manage as We're been things, The as things the all little to on have these Have the unpredictable possible. day. good We businesses. business, strong. the we're we improving we've of which the We talking call. markets And and


your Thank the you XXXX first This participation. conference Mohawk call. Industries for concludes quarter

now may disconnect. You