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Mohawk Industries (MHK)

Participants
James Brunk Chief Financial Officer
Jeffrey Lorberbaum Chairman and Chief Executive Officer
Christopher Wellborn President and Chief Operating Officer
Eric Bosshard Cleveland Research Company, LLC
Michael Dahl RBC Capital Markets
Adam Baumgarten Zelman & Associates
Susan Maklari Goldman Sachs Group, Inc.
Michael Rehaut JPMorgan Chase & Co.
Keith Hughes Truist Securities
Stephen Kim Evercore ISI
Brian Biros Thompson Research Group, LLC
Philip Ng Jefferies LLC
Laura Champine Loop Capital Markets LLC
Truman Patterson Wolfe Research, LLC
Call transcript
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Operator

Good morning. My name is Twanda, and I will be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries Second 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, July a being conference As today, recorded XX, Instructions] ladies this and is [Operator XXXX. I your would speaker introduce for today, now Mr. like to James Brunk. Mr. Brunk, your may conference. you begin

James Brunk

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

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

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

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

Jeffrey Lorberbaum

sales In our billion we approximately quarter, the the Jim. period company’s any generated of highest revenue you, Thank history. second quarterly of in $X

Our global the when economy. significantly sales the increased over pandemic interrupted last year

Our adjusted EPS of $X.XX on record was any quarter. highest for the

the of we shown able of greatly all that achieve. of efforts what We our across extraordinary the result and dedication have a that appreciate the resilience the faced. been members is world success to to Our have they challenges team overcome

restructure actions four last and to have taken enhance costs The results. our we on in In expanded our are level expenses. our quarter, our years their product our across we than our our operating first stronger businesses as productivity period. significantly anticipated the were offering, our benefiting results from and quarter simplify with highest building sales momentum second leveraged SG&A all the to margin operational Our we had the

our Across the $XXX almost enterprise, and initiatives. optimizing rising continue restructuring by and we $XXX have delivered increasing prices energy savings million of to $XX to and million the logistics. material, We costs transportation respond anticipated from million in manufacturing to

most by or customer supply well in manufacturing at and managed capacity local During Overall, labor material successfully production closings ran the the regional operations material impeded unplanned operations limited period. many constraints related as we of were availability. regulations we our our normal of manufacturing Raw shutdowns quarter, led to areas. COVID and interruptions that during our as to in

in freight we slightly higher the availability limited primarily period, costs. of capacity international do near-term and increased levels of anticipate products, not exports. these our Presently, material customers constraints. inventory abatement shipments Rising costs, shipping reflecting local Our impacted imported to costs material and

and show continue now expand second initiated profitability. million are the $XXX for cover levels our XX investments global approved improves world. we Jim and robust our markets additional gain second new more mix quarter constraints, sales since balance introduce half the the levels. and we improve complexity amount in with of year. with above products we To months across production strength Inventory approximately average of at to most $XXX have the and program. million of backlog approximately sheet historical low, price and will remodel. strong All taking housing features our reviewing stock manufacturing quarter, With as fully increase the we efficiencies, of most we our to capital historically low projects alleviate remain our In total new an the Commercial to production our is a [$X.XX] the million leverage, purchased our remodeling implement. sales, confidence and lower $XXX investments economy sales To expand channels with and enhanced to investments are of in businesses to increasing and our of financials. to will XX sales second

James Brunk

Jeff. Thank you,

For XX% increased in by and charges segments increase increasing showed XX% XX.X% was an increase pandemic and Gross due by with strong which dollar price gross excluding on reported temporary margin from shut reduction impacted sales SG&A increase previously impact The for reported $X.XXX FX, in as increase operating of downs profit basis. the to shut XX.X% of mix, higher XX.X% as of curtailed reported growth last prior as to excluding XX.X% charges the product approximately was the business the of reported volume primarily pandemic the margin All was was and as quarter period favorable as XX.X% Operating or a constant and prior on year. quarter, costs was $X in versus absolute productivity, the of both increasing we result leverage sharp billion, improved a development pandemic, significant FX year-over-year inflation. XX.X% QX a The in or offset the inflation. of volume, year, the were of was the result by the versus year's volume. the XX.X% by are of our restructuring most sales partially XXXX, normal year-over-year downs. costs due charges, higher million.

are temporary in $XX foreign of development income, product $XXX we year. XX.X%, the other XX% X.X% of of income, million for the a in the the on tax the the million. Other non-GAAP price of was as costs. approximately prior expense from reported improving items. increased FX, settlement was on stronger by recorded $XX and and Operating inflation by downs a driven the volume, and other track the increase excluding favorable a partially have savings. million miscellaneous offset savings productivity higher million Our charges versus of prior non-income quarter year, the $XX shut actions, million X.X% Interest and result restructuring reduction improved $XXX contingency the primarily margin was tax was credit rate XX.X% Income planned as mix, and basis of

[Indiscernible] and earnings $X.XX. of earnings per $X.XX. to XX.X%. was expect million between We Earnings of reported the charges an net rates share share for per excluding full-year XX.X% as be $XXX

to billion, was the strong XX% or by and downs reduction a XX.X% across point was The partially charges income across segment also historic growth significant a XX% Global had of from margin business still higher offset volume to lines excluding by by an by excluding improvement similar experienced inflation. a Ceramic in $X.X channels increase with just has increase The earnings and growth the of levels. a increase and led low led of the residential versus America XX% with strong strengthening mix solid XX.X%, Brazil the trough. charges carpet, commercial inflation. over geographic sales below with demand continuing North Flooring XXXX its significant Operating segment segments. reported sales laminate. the The and operating Europe. a billion reduction all of driven productivity, of XXXX increase driven temporary basis at $X or the year, price increase but as volume, was of price Ceramic Turning margin on constant prior under shut offset Global and by residential shut downs, favorable just the a by our income Mexico, improvement growth strengthening improvement result mix, temporary product Operating from and X.X%. LVT of The was productivity, increasing partially

on construction or Australia million, new the that, Lastly, Operating XX% had XX.X% across New XXXX improvement and FX, over point home and Flooring all full-year excluding And main expect a from to of just a by other our were constant in Rest panels, strength improvement in mix favorable and years in continued increasing temporary from the Zealand. and XX.X%. impact drove low offset by in our $XXX margin and of the to higher prior as $XX price inflation. million product XX% residential segments World charges downs, led was with business be came increase and approximately of at partially of $XX resilient drivers favorable reported million. sales eliminations reduction groups they volume, similar basis consistent as surface of shut with laminate soft significant Corporate remodeling again,

or billion And million. it remained an versus of X% billion, the our Full-year full-year projected $XXX cash approximately increase just at shy quarter million quarter the with or turn cash $XXX year XXX approximately from QX and Property, approximately and million billion $XXX $X.X EBITDA. for $X.X growth operational I'll over remained investments were CapEx sheet prior CapEx just $X.X very year. been XX to over X.Xx historically are in balance short-term gross and future or are with and increasing increased the strengthen cover million low the adjusted Cash sheet. that, year. versus days X% the flow XXXX. Receivables were at equipment million. Inventory flow in to million investments $XX an and short-term strong balance the to billion cash Chris approximately to days has prior of total debt Wellborn $X.X free to of to quarter. and billion, with be plant to shy the with approximately $X improvement XX Turning Overall, D&A of $XXX in Inventories with for $XXX XX the of compared prior D&A was in leverage and of $X.X to review. million days to of days $XXX DSO days billion, just a

Christopher Wellborn

Thank you, Jim.

the World higher basis. constant XX% a expanded and other offset For Flooring improvements significantly and their World the due of segments sales all reduction all residential COVID on improved mix as partially XX.X% sales as Rest outperformed expanded a our pricing our increased Operating volume, Rest restrictions, categories reported XX% of period, of margins in Flooring segment inflation. to the with by regions. product major to and

and multiple to laminate in product supplies and products of grow material third a freight to impacted implemented being have are continue alternative our LVT our widely most. water-proof anticipate inflation our We challenges will our cover problematic impact to accepted price to continue Raw as in dramatically material proprietary wood. quarter. the materials have business production as most the Sales freight. are and increases categories LVT and in sales We and high-end

We our are with of next-generation beginning visuals. levels handcrafted laminate collections to premium featuring at introduce

further in initiated. new Europe production online with being projects increasing We and capacity expansion our coming capacity are are

as offering business and distributor our UK are recently laminate We Russia that market. in growing our Our laminate in of a acquisition the the enhanced improve distribution. and completed our position strongly Brazil in will and expand we the

to shortages the increased have rise. we will manufacturing. prices interrupted Our LVT continue material be sales growth increases period as was been we have material To and strong and higher further inflation, for would our not had during if required compensate costs expect

expanding significantly of are collections water-tight moisture from that joints our rigid LVT the We patented prevent sales penetrating our floor. with

operations manufacturing improving Our progress, yields. and material have throughputs, made costs substantial

material to Our production in by quarter the continue be third availability. will limited

Our opened sales rebounded retail our as stores in primary sheet strongly vinyl markets.

vinyl expanded, sheet maximizing in growing production demand. Our the meet distribution and we has are Russia to

lockdowns has instituted Wood third category the Our quarter so COVID a government will idle wood impact us to sales the plant in address for surging limited. in been product Malaysia since small rates. the is be

to the permits plant that awaiting of complete are costs. veneers reduces lower a to acquisition wood our We

our and increased merchandising products triexta our residential Australian our the a growth. high-end results hard are with operated Zealand expectations. with volumes sales Carpet margins wool The Most consumer of surface with the high benefiting flooring excellent mix. advertising, was enhanced businesses New strong our level business a national exceeding improved with launch and collections sales facilities delivered and results. Our strengthening that our and of at leading new

levels, spread have pre-pandemic As Australian impacted our not recovered sales lockdown to in regions of markets, their COVID, has all government not so contain business. of the specific it has our to commercial meaningfully the

though European production. Our chemical sales limited our even grew insulation shortages

margins recovering costs. to price after cover we rising are increases implemented material Our

the further an future and We To manufacturer, is have signed acquire insulation our to sales. and business announced we third raw chemical tight could additional government Ireland existing supplies insulation inflation. the remain agreement to for our in expand an an material anticipate UK, increase quarter price pending have impact to offset approval. We which

to business operations. manage running able panels without been full shortages capacity our Our at and interruptions to far is so material we have

panel products our To offering, We as are have team. a to unique results, To decorative and commissioning value our improved raised surfaces specification with mix premium we higher of our offering our offering enhance that prices products. line our well project market. in are expanding creates new as the our and visuals differentiate we enhance

due XX.X% increased and partially by sales offset expanded For segment’s America and and to the period, adjusted improvements COVID margins higher volume, inflation. North mix to our pricing XX% Flooring fewer interruptions productivity,

and the by and period, first levels. Commercial backlog continued below strong, residential remains trends remained sales to remains driven our above sales Through the growth improve being pre-pandemic construction. order business remodeling continue levels. channel quarter with though from Our the rate our sales new historical

our service. our to maximizing facilities higher and support output at are We improve sales

the were impacting our receipt vinyl by supply, we and During constraints as continues. increased, shortages hindered inventories costs of our have quarter, our and sales, our LVT, production pricing material inflation imported freight particularly sheet increases additional service We levels. in delayed labor local price transportation actions levels products, announced carpet. Ocean and as implemented material and and

in efficiencies third improving and quarter. are the initiatives restructuring Our planned, additional realize should savings as we

SmartStrand investing in being with proprietary franchise improvement residential accepted. well sales Our growth new collections Sales continued our across trend expanded consumers their with our of home projects. channels carpet all

expanding environmental sustainability. styling enhanced Our polyester collections EverStrand and are value, by providing

Our implementing to and by and our personnel carpet staffing operations, we actions shortages productivity. our many limited have in been sales increase are

improved by efficiencies have and We rationalizing our our operational strategies. streamlining SKUs low-volume

businesses hard faster. products surface Our new grew have with construction and commercial increase improved sales and government living, senior tile projects. remodeling education carpet recovering Both and healthcare, as

slightly from we support our consecutive our With commercial global improvements new waterproof continued importing visuals collections performance, process growing laminate implemented higher premium from production Index the operations. maximize substantially. the many and are levels, are To of and product demand, projects. U.S. Billing to realistic record of have renovation indicating our fifth down expansion, a June Architectural So had and strengthening development month

end Our and the remains this should year. of laminate on schedule operational by be expansion

our Our and costs. Europe. Redwood, operation U.S. already to volume business, next-generation of the our of laminate introduced increase MDF line lower To new being our produce completed will which our is the investments in support growth

as typical Our are launched wood a being floors. to engineered new waterproof alternative Ultrawood high-performance collections

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

impacted sheet supply delays by and plant by and growth our were that productivity and Our caused vinyl LVT operations imported LVT stopped constraints. disruptions in an transportation

LVT our with visuals, We offering scratch joints realistic improved enhanced and and have more proprietary stain resistance. water-tight

further which throughput. implemented increased speeds launches. should Our process our support have that enhancements our see improvement increases, material recent we manufacturing, our operations availability When U.S. product will in and domestic

For to by constant Global and pricing inflation. due segment’s and to the basis. disruptions XX% increased as on higher a sales period, COVID Adjusted margins XX% expanded productivity, improvements our fewer Ceramic reported offset XX.X% and volume, partially mix

sales. Our channel the around world ceramic have businesses greatly with improved, the strength in residential and increasing commercial

All service of sales and inventories, which have low our them growth levels. impacted

We have plans increase Europe. capacity our Mexico, to and mix in and initiated Russia expansion Brazil,

businesses inflation. ceramic energy to cover and material, prices raise continue to transportation Our

price Our is and to inflation. freight U.S. cover and increases we business are implementing ceramic strengthening, material

our improving and new mix are We product sizes with surface structures. shapes,

improve to and productivity. products our reengineering are material We cost

have the projects fully are providing growing restructuring Our been and the expected benefits. implemented – expected

reduced repaired. production, as we temporarily failure period, to the Our mechanical countertop technologies. has our sales which mix offer improve continued expand In premium new our with and been

business. the our further plant initiated of countertop have grow our to expansion We

are not Brazilian our our very Our historically Due facilities in high our at businesses production. fulfill so strong, business capacity allocating both commercial we recovering. to with ceramic are residential still and constraints, customer regions Mexican levels and demand, could

We multiple increases price and offset have inflation. executed to material energy

are new capacity in quarter, increase Mexico we investments Brazil. and We to this in initiated expanding have operations

they mix product our products, and and premium We though historical outdoor delivered small sales ceramic to are as sales slabs, levels. Commercial margins. below of increased our antibacterial starting European productivity business sales profitability remain collections. trends pricing, strong sizes, and Our improved improve including

freight increasing selectively and recover inflation. material, are prices to We energy

with at increased our improved high the period, During ran efficiencies and levels throughputs. operations

our operations. some initiated rationalize support To SKUs collections, have high-end projects of which year sales expansion we We optimize to through our next of take low-volume will to to continued complete.

to Our were customers stores across all outperforming. owned in sales and our robust ceramic with construction new channels Russia sales projects through our direct

We have inflation. announced to price increases cover rising

inventory to our period, are our to focusing accelerated on respond product limitations, sales remaining the levels. with capacity historical During capacity Due we below to mix. operations at ran present optimizing manufacturing

our year. I'll expansion owned Sales our of are stores as sanitary the We manufacturing through retail with expected expanding primarily half ware and With second Jeff. return call the of in plans have next up. franchised that, new to initiated our production new ramps products

Jeffrey Lorberbaum

period, should slowing commercial typical The from second In improve third interest expect projects and the strong vaccines. COVID success quarter. to the favorable with of the economy to Thanks, we sales levels remain to rates, Chris. construction flooring global world, with low stimulus and and seasonal our high continue due remodeling residential our government the Around sales at strengthening. continue, new trends

additional introduction operate limit the local and utilization continue our and to products our investments sales Material, though inflation expand require transportation will at will future offset. with labor of will will to mix. and our of energy facilities Most high is our actions ongoing new and further production. to features enhance and We pricing constraints increase expected rates material

Ceramic Global third Rest observe government and many in costs to the future business. contain In reduces quarter, vacation remain the risk their period. schedules increases and and our impact World Our which could the actions will European COVID segments of Flooring countries, production a in

construction. to $X.XX, third economic factors, adjusted our recovery, between uncertainty year $X.XX the Given renovation with and excluding home these charges. any We about we COVID, EPS anticipate this entered quarter restructuring and be new

expected in business high should we additional support efficiencies. increasing should improve stronger level, to and at to continue and renovation apartment historical remain is sales rent and Our and term, strengthen. investments housing anticipated, are projects Longer than we deferment expires growth commercial a as had to are investments remodeling accelerate

results. to new our are expanding our We operations introducing and innovations maximize

We'll additional to exploring are glad take your internal we and now strong, acquisition is projects be sheet opportunities. balance questions. Our and

Operator

Research. with line Our Instructions] from comes the question Thank of Eric first Cleveland you. [Operator Bosshard

Your line open. is

Eric Bosshard

Good morning.

Jeffrey Lorberbaum

morning. Good

Eric Bosshard

the things, are in end terms of regions, stuff capacity the you the to and you first of XX capital some up increased have two in where of XX this investments most terms talked all, at – about the over of adding where you've that that shows you months, But the got or increased year. product conviction, categories next capacity? Wondering

Jeffrey Lorberbaum

are the all world. the We in business over of adding capacity constrained parts the

has same – other constraints. at – – time, still by but limited adding one we're we're the our So production thing been

with ceramic a are to million pieces the include. And also So and other million countertops, that will areas capacity biggest the in, imports. than for the laminate, years. from that, to the capital we this products you but going labor there problems have of to limitations and fix that $XXX we're are forecast of $XXX of and in the materials through in is delayed $XXX and put some to million they the $XXX be run The get it million rather number being year raised is when next then

Eric Bosshard

helpful. Okay. That's quarter, guidance earnings third secondly, then of helpful. terms is the And in the

you that revenues step if typical is all help traveled of at XQ us sales does XQ there has something down? commentary that way terms path the seasonal wondering Or XQ of your revenues the we relative could to to look Just that in should normal at to XQ slowing, reflect would guidance, change the suggest historically? that that

Jeffrey Lorberbaum

strong. business with The bigger know, material might quarter residential business. period Europe still our commercial non-U.S. not And the we In business, don't a with normal keep especially think but we to of the slow And The as have are outside become operations part all a continue labor, improvement. in you sales have the from actions the U.S. some we over trends we we the holidays run the through. second non-U.S. going over expect – European holiday have enough. third quarter. that expanding with the the transportation keep always We're go assuming pricing many supply, as constrained of We with and have become a businesses time years are still larger that impact will results

coming. Our keeps inflation

X, are try it. third third quarter, second. in increases And United by impacted prices – which in the have to States So is keep then July the we think other of just the expect is in manufacturing in holiday what to quarter the to putting more things, you than in as you rather in costs

You impacts have drop the go holidays, cost through. off only [indiscernible] we which but the not as sales also operating, the

mean I – lay pieces that out best you. biggest the that's I So can for it, of

Eric Bosshard

you. Thank

Operator

Thank you.

comes question from the of Our RBC Capital next Dahl with line Mike Markets.

is line Your open.

Michael Dahl

Jeff, I and know clarify, All think $XXX CapEx $XXX for million the you of million. to I to on I the meant first wanted of that. question, right. the don't Thanks just questions. taking million, my just trying said $XXX out $XXX figure you million but follow-up if

XXXX or are I Next, capacity, new the about of some very some the demand you CapEx the and be that a the and physical these conviction you it’s labor, some potentially we about CapEx. XXXX? not would be temporary do to carryover should tailwinds. from thinking to of and to it’s temporary these guess long-term between think And in investments are cases in about CapEx decision, out when question even your of look balance add normal guess, all these is I the capacity? How constraints materials. constraints How point

Jeffrey Lorberbaum

The not constraints, increasing pieces we're are that temporary those.

coming those exceeded year leaving than alone. are higher things things anticipated our this are that we sales have, into happened increasing, the is, What the that much The are year. we capacity. the we We

planned this the that growth that, having hadn't year. on we So to with we're the support capacity having

to first is get had to capital for so addition this that in plan the to money, million we year. $XXX the And is the the in

was remember. if before million, around $XXX So this capital the year, I

James Brunk

Yes, that's correct.

Jeffrey Lorberbaum

I'm next around then we're budget the sure rest then haven't So got to $XXX in for that we this year, yet. I’ve raise million approximately through And $XXX final million the million of and over next that of but going half year the the $XXX will $XXX it exactly our million Of year to the about was of right, to million. go not planning this number will go year. $XXX finalized

different again, done tried presentation made, through. going all to are the And original more you lay we we're the Brazil, as all to Russia, less than we have Europe add just out we'll we've we ceramic what already for to increased. decide pieces. through So in The businesses Mexico, go or being

United laminate here. Russia, States. United States have there's other I number increased. And ones being countertop The increased and business in the being the We are of Europe a mean, are is the in all that businesses

the and in shape the putting what's on the grow we're to in future world. support more business So going in

Michael Dahl

Okay. back That's or that embedded really when of helpful. you it My cost. order Do ahead implementing XQ guess price cost to you'll about current assume question, you magnitude Thanks of and Just price will of for on in be back or negative be Will your second catch-up quite XQ just a of color the price detail. escalation a more little that XQ? neutral? kind cost costs and the the in we in or enough aren't neutral stay pricing what's on the additional before think whether actions given comments you're positive? is in cost more I pricing. should lag the and guidance? costs and How

Jeffrey Lorberbaum

quarter. the keep which raised prices with out able the to in he numbers you'll the We business. We’ve We later. start new increases. publishes were let's across Well, that announcing inflation, second see the cover

through. Our we week wake don't it's where know new energy, increases, going. adjusting we'll so we keep continue We rise. with go required as freight as Every to up materials,

put that and do stays marketplace, close. all thing, mix that customers for enough think them with something announced the for we in as raise that a the think estimate they the start into going some budgets. of And trading – together. And budget. and the see We you prices looking to residential have so down get at budgets how both we we we've know timing them in we're this have and about commercial work then point, in They we and what

process So just normal of this. all a that's that in occurs

Michael Dahl

Okay. the color. Thanks, Jeff. Appreciate

Operator

Thank you.

comes question Baumgarten line the with next Zelman. of Adam from Our

open. is line Your

Adam Baumgarten

everyone. Good Hey. morning,

Jeffrey Lorberbaum

Good morning.

Adam Baumgarten

touching meaningful due business. due been – LVT Just year the that technological much that to much surge maybe It there's some demand of is shortages supply? it and like appears kind of so. that in How or a laminate the in maybe the last of advances on is there seems you've seen of how over to really

Jeffrey Lorberbaum

laminate And there of into is multiple in out the What options. dramatically. a is retailers alternative what's start they other And with the LVT as ones our of is of are first. with many main waterproof the good and technologies the happened was waterproof waterproof. about if it talking we they start today, one in happened or growing have Let's better showing And marketplace, to you flooring category start products had you which the features go category.

So grow. it's being and It's channels, been into going growing different to that's causing it also used.

any higher market, than remodeling market television buy laminate higher If And past. they because you and features the the and then our separate in which the watch a much Europe. we portion are we from premium products really it, shows, than they the of new in pieces, it other at using do the us of have visuals have much unique the today, houses remodeling give and separate a had and from differentiated rate that all technologies that U.S. of that,

James Brunk

part year in had the the a plan and U.S talked we about the is in why of years. capacity end Europe in the we're as this million why that's and both of Jeff that the reason in the at U.S. Which the adding future $XXX

Adam Baumgarten

more Got you made seeing in pronounced on over certain categories it. just you that mix Thanks. down then it And are Jeff, comments others?

Jeffrey Lorberbaum

are same and if not tends cases, mass new to apartments whether around the lower. remodeling buy they you've trade It's the building down. part and moving higher to In mean, in the of seen the have home customer it's thing business tell. some and construction, then value people homes, budgets hard other just and people a I be

changes So there is on. all mixed kinds going of

Adam Baumgarten

it. Got Thanks.

Operator

Thank you.

the Our next comes with Goldman of Susan line from Sachs. question Maklari

line open. is Your

Susan Maklari

there first your Thank is, just for this in think fourth us in talked I you morning, quarters seasonality business. question know of some that you Any versus and quarter gave everyone. comments. helpful. guidance kind the that you. Good some But comps the third third or would the year together how help we're about Jeff, quarter the come guidance about My of can facing given you the may few the be next color quarter

Jeffrey Lorberbaum

transportation. So the quarter, expect know high continue. of quarter, it's again, sales target. we trends in we built again and labor we are a to in best our Operations the running supply happen at moving how the in going third third to don't they're guesses same do and all With the the constraints, levels. But

from it is fourth into typically softer. you there go As the quarter,

during see remodeling the did. spending year it of utilization we rebound it’s But going end the to year. to to how we reduced when from new days on X% in Christmas. impact into a last the they the the at tend days and we go next this the people margins products then and X% the less don't we're As happens as flooring difficult we much that have will then year to had buy to the lose as plants. compared as sales holidays, year, to And – lower in absorption and sales also we're with year have end Then to the the the constrained guess, year this point. this the We're more expecting versus more point going But vacations and normal increased going year And last this period. and seasonality the more predict in know because is at don't at to we a we a last enhance lower dramatically, order taking with days people what's products happen. into we now holiday this less and new we're of year, get invest of

Susan Maklari

$XXX $XXX Thank color. quarters, think about My of When Okay. on capacity that follow-up last almost million stock. million in within to the you That's question the very increased helpful you your What's kind purchased where few have about is, you you. your these appetite continue allocation the buying announced do at buybacks the on spend of that? today, fall levels? capital back stock or

James Brunk

Well, given the sheet, bought of our options. moment, quarter. a last $XXX have And lot million we balance at we

a year then year $XXX plan to acquisition, change think and the finalize more We second the million for and we product about under have We'll innovation. and I go new the acquisitions costs, on the is but where of started one or the business we those. next other bolt-on the the still reducing we acquisitions. open primary of then that $XXX when half share are the product which see businesses do more to million. step for constraint markets of this keep We'll categories or of few looking found options facts, broadening now. the we're either align And offering pieces

we more do can than sheet, balance the one thing. For

Susan Maklari

All Okay. you luck. Good that. Thank for right.

Operator

you. Thank

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

open. is line Your

Michael Rehaut

Good Thanks. everyone. Hi. morning,

and some wanted that earlier expect time, you to vacation same trends continue, Europe. at time, Just to Jeff, you increase mentioned third about think the your sales in an but around comments, quarter to clarify of how particularly in the

statements. I to think be ability misinterpret an those there might

of think more trends, little maybe I say dollar in basis. vacations. least year-over-year trying that dollar you’re people it's modeling revenue indeed just should say Rest Global at are an trying the But on some type to bit a decline a sequential I to similar you be to dollar the to you or we as suggesting World, should sales be absolute an in of If XQ on qualitative XQ absolute and even and on due basis, Ceramic Flooring understand basis are think

Jeffrey Lorberbaum

sales I continuing, I trends the what's I same is are confusing go like the business strength believe which the say has that will think that. means

not of part our a five years enhancements our they European impact of understands, the seasonality, which European I'm ago is and we've all much They the part did larger become than the done. business businesses – second everyone The non-U.S. businesses acquisitions of today business. business – of because before sure a and there more or is

their from it third and years. negative margins, prior business the So the total have sales will and it impact normal seasonality. on changing, a the the has when down and whole it's reduce as quarter which level stepped and not in it will sales And because steps the down, been it's lower category they be of

many facilities from with that, – we the unusual. COVID, shutdown a in in Now the and was quarter. also separate their quarter. and vacations our is our our we what customers, last we second people happened of second lot plants And year last the And the what happened people and taking have year

And did. do vacations vacation the because we normal business they same quarter. then phase the the happened. didn't go like the on People third second in use getting when in quarter, shutdowns the things started thing we So the and didn't better

was for unusually third different. of quarter customers, whole the the our our vacations because high was structure vacation So production, people

this last unusual is quarter this year. comparison quarter the third in So of year, the third

Michael Rehaut

Okay.

think I I understand.

saying The a like for year. sounds $XXX you're clarify the on possible outlook second next that million basically bit question, to of million, expected CapEx XXXX. also and It the best I just wanted $XXX to circle is the back little

$XXX So you're this of roughly that doing year. million

to million to CapEx year-to-year. of should that's either outcome of figure from sequentially better least So at trying total I but closer your people million something the with answer a I out. just us think reviewing think is $XXX know are Jim, I billion? another $X that take at a a range basic higher as we that, Are don't $XXX we're be this of maintenance way CapEx, to this looking to kind delta all-in decent

of better be helpful. range would So type any

James Brunk

told we the this order changing year we planning said, when this understand And the next in not wait did business. the our year, – plan you. support we until normal planned. You period have of we we in to year stopped middle capacities as start what and our to can't is The

is process the identify So more knew do have planning I And wanted haven't be give less. or of maintenance any yet, year we done still through it. that to can't we more than that There million, things then everybody so and it it. and we did go is decided on want do the we we could we decide to we what $XXX haven't and took the we which that, and hadn't top next what to to typically, call We direction. it normal around safety,

Michael Rehaut

One tax Okay. on rate, if last clarification the could. I

XX.X%, or point benefit? that exclude that to does second a include benefit that in rate tax would quarter mid-XXs you guided the to You of because it kind the XX.X% does to

Jeffrey Lorberbaum

the the was for to of XX.X%. than seasonality rate benefit, QX non-GAAP slightly QX. would to XX.X% tax QX I in be so based higher expect Excludes rate that XX.X%, the full-year on is the

Michael Rehaut

Thank Great. you.

Jeffrey Lorberbaum

You're welcome.

Operator

Thank you.

Truist. from comes with the Keith of question next Our Hughes line

open. is line Your

Keith Hughes

Thank you.

in quarter is which had being release second You about correct. quarter, record the talked a

still Flooring slightly below. the within XXXX, look North your above are America, revenues are you bad If but at are margins

do Just my margin? need the to up you to and is those What first then? question to back what's get do difference the peaks operating historic

Jeffrey Lorberbaum

costs. in commercial all improve, didn't as peak from shortages. period, sales, did – volume didn't have we and we're are have higher. inflation didn't the We margins which going had We shortages. fighting labor are you The now The that pricing this the have material on, so things said, now. We

as creating We the through. can, than service are in go running we markets, the in is as inefficiencies fierce short to we runs in more causing [indiscernible] factories around the today And trying keep the addition, some of well the was factories as competition in. it which is

Keith Hughes

you. Thank Okay.

Operator

Thank you.

comes Our from next Kim Stephen question Evercore. line of with the

is line open. Your

Stephen Kim

thinking there's $XXX times offset I to – just And during Thanks very as you? just a lot. you And that sales from wanted a of of to well to ran kind that then, just you sure costs capacity come looking back much modest months And that. over a time. to million make much know some The of think period million XX sense might remember in here. outlook to million that about startup $XX results. offer I appreciate XXXX, that want for year, how properly. it wanted come with a opportunity guys. Nice next we're does of program, a really the $XX XXXX lot I XX And expansion get executed the you not

might is a get what the range – be this Just want sense be to to reasonable capacity as comes for make offset a online, that thinking about?

Jeffrey Lorberbaum

X% a direction. around numbers a total business it. with costs translate And to high will somewhere always sales, million The give you that along to come level there's round X% our yes, of $XXX into start-up

On in technologies this a existing door, existing facilities be the of far is away. or building other hand, too businesses not next known all being put could

the the pay we So of that we learning curves other had ones. shouldn't for have some to

Stephen Kim

But enterprises, very Flooring we've in we've step-up added the talk over And quarters think – positive the of been upside this has grower. them. the a business Yes. fastest an it World, a obviously been been that of I capacity now, know about is different area many makes a Rest When lot you've lot significant. we seeing of pretty called you've it. out And business to about Yes, big this contributor I the really four a know sense. I years. That's helpful. four seen also that that of last is has number lines I for know there in it's quarters the the

but you there that try of because the still just pretty big waiting on in be the we've your generalized it was capacity And the it actual lines were in got certain do so attribute in a or this much see or seen business to there post-COVID, demand understand demand. and certain as Flooring just was bringing to World surge is just do there really of business step-up you what step-up To of excluding I wanted not previously sales, for across it, the – Rest of the the impact in acquisitions, organic. capacity and

Jeffrey Lorberbaum

income most – operations is at operations the the are levels. you of the cost which near our As running is and are Sales World Rest said, capacity, helping The strong. performance structures. high of

Our been product to the mix mix. after is we’ve one taking other improve the improving from actions

We have Then are pieces with aggressively through. align to as we prices trying to raise the go parts. different you

Zealand efforts business. in the ago. years upgrade offering. their bought started – go We the Well, few a surface. New now Australian, back days years. seven running to Two is plant a that investments years They line, So We've plant it were putting to hard up new to get product change their We over vinyl. just we in in you in been week. some Russia put a ago the trying product put of sheet

sheet the our laminate, share new about. We new pieces, and in hard that And hard and to we surface put business. vinyl we of introducing sheet a leader are the talked well. product business have of businesses we're growing in offerings We put marketplace. our in European Russia sheet innovations. make dramatically vinyl, market vinyl, surface laminate our in in kinds doing the In all Most we place. residential, plant keep in We in it's

improving that, keep we do mix. our we As

a wood the margins years. had bit are also have business. a to improve over high We've shortages running sales The years. few years panels. few wide We a we open. level there in a The able They panel and It's at is we it's are business because the us wood taken bought bought when margins IDC – laminate ago, been dramatically that improving.

level. high a at it's So

put multiple ones. we've plants, insulation other Our business, in we've acquired

So we even really doing it's we're costs. chemical insulation well, have chasing though And business. high a strong

lot a from benefiting we're things. of So

Stephen Kim

of just had longer-term like that and fulfillment plan your there then executing. the you've sounds Really Yes.

that still forward the lot for Flooring it to volume go on As we of a the we future, seems a like be the of to opportunities growth basis? expecting other there's segment into segments growth continue World. Rest outpace Should

Jeffrey Lorberbaum

going are keep to to exceptional, be rates been at. It's Those up they're hard the growth doing. they've what

much million don't to will business we that. we I trying at and stay And think margins that $XXX more higher in which as $XXX of the enhance new $XXX the low. the – can. one margin for laminate in the only keep the we We business pieces We're going million investing a places we're million putting the businesses have commercial it just to grow growth there are about commercial is rates are to in And capacities a comes We pieces. can of investing line, other in in new the laminate. as all to add capacity remember, products. thing commercial Commercial in then back, us. is everywhere make is some as

Stephen Kim

to. sure. forward Yes. have look Yes, that to Appreciate for we Not it. Thanks.

Operator

you. Thank

of with Our Thompson Research. Kathryn the question comes next Thompson line from

is line open. Your

Brian Biros

case call commercial? to there of sales were for there like with was product is that any it’s in Or on previously quarter. of been taking Kind here? significantly Thanks expected questions. or to I you stronger? stronger for weaker, out segment is getting going guess, had into Brian start Kathryn. just say strong wanted than mentioned it specific that areas – momentum anticipated kind a that more actually than my I Hey, the

Jeffrey Lorberbaum

resales, people at in everybody huge like strong the how and projected how be COVID happening we huge with strong what's the going maintained have was into then world we're coming sure forward else it's going itself uptick the and of projecting in on home, staying I'm strong given what's housing it or thing surprised We year and which and or be thought entire it There's us what go the States the would United see the it really quarter we going know talk not. we And to depending and difference about the and fall than forward, off. if on happen like back don't We across estimating and quarter. same stay world. yours. it historical no is can in to better big will business ways fourth what the in and our a crystal ball last

Brian Biros

expected the commercial the you than characterize a residential combination of or two? as I guess the would stronger side was it or

Jeffrey Lorberbaum

driving think but is bit had improving thing, but the to little we better had we picking the probably than is I and The getting a And better. expected, commercial commercial residential up. whole anticipated is quarter-to-quarter

Brian Biros

is but be the level of for concern When there few guess, the about our it’s demand And installer growth I of growth Okay. concern investments had or their labor the and to in installers installers, given there, Understood. guess that we that point a to biggest asked a increase And I I labor, a contacts to much level you two? labor especially specifically making question. guys, second forward. support how on as to force you're is year shortages, Understand, there's production? for going the at the out going

Jeffrey Lorberbaum

so, Everybody – much hope our we is with you listen, every it. company twice have sure as right. industry. If labor couldn't could problem it ship a they but and customers, to has install every We

can goes it ship. There part, whole So through. the you're limitation in that they're correct. the is stream everything as we installing most for But

Brian Biros

you. Got Thank it.

Operator

you. Thank

Our Phil Jefferies. line comes Ng with next from of the question

open. line Your is

Philip Ng

certainly I up you and mentioned, on products. out time, sold help. free guys. Jeff, But a that you're shortages will guess, strong in will great congrats execution so material Hey, certain really quarter in

kind of this ramp headroom capacity? for curious you So some of do next as you much have year growth how just up

Jeffrey Lorberbaum

and categories. by different businesses different It's

others the presently major cases, can't customers some As delaying transportation. actually products other have you it. around problem have In that’s it the businesses in it's and and enough. labor stuff a get imported fast We we said of is moved to

year, some and months to the one, the We second trying quoting through businesses out. new keep we're get We're other But businesses, maxed half the we mix have we’re until our to capacity prices. improve in an running pick of capacity wide they're we're out passing Brazil, trying in next – as example. open and dates,

we an do of example And – have one. so that's

We have pieces that. like

U.S. that could of ones that is to get around show production our we disincentivizing other increase the giving in various could people. have dramatically. up We money ways people work, we people These if for

I that And show the checks just the sometimes up for when don't two next get days.

Philip Ng

it. helpful. your was Jeff, and we've to from super trends you're of I normalization some curious the hear seen partners. retail. ran different That's Got We've hearing what and lately channel seeing in certainly seen builders orders

an these been So and we curious impact to how out, is going between tracking channels have orders look have on when mix? patterns it

Jeffrey Lorberbaum

sales should whole stages. it remodel home, high you Let's go continuing continue to stages remodeling. it, home historical, is pieces. the at that – various they're housing purchased relative know existing typically a levels. see don't new and high but the the year, were in buy all that there over at the thing goes houses levels. in last ups of an When downs I in The We through you

So that'll forward. while out play a going take to

the have point to with to haven't some with at houses somewhat. increase paying turn who some those mortgages, the are going their going things sales some over You government. been People policies of that's remodeling and

rentals haven't You change people. next for been going to that and are point paying those of to in people at them over remodel going to they're the have the some have rents, some

that You have invest for on and in the the they're start to more. to commercial it a It on There's put time getting more to stopped. Companies are time business. starting confident it’s awhile that, them. parts construction new of a got takes void budget,

unique are back. comes it's a And profitable until business it there's a a and it. And of because the upside lot more to products in there's So be going more void differentiated.

the all look So good. trends

far them to enough As we we we run in don't as can some if the know other the see have on tomorrow cases. place materials side, short-term,

something come supposed the the happens and and are shut And materials so up in wake we to we plant down. and just

come hiring, turnover. have train there's do. normally for You more people and and showing more it's work The people – longer they difficult takes we up like in to just it we're and aren't

there it to all, So huge are we're short-term and amount of parts moving predict. day-to-day managing them makes in but hard the

Philip Ng

Got Jeff. it. color, it. great That's Appreciate

Operator

you. Thank

line the from comes Laura question of next with Loop Champine Capital. Our

is line open. Your

Laura Champine

you. when comments line to sight terms what's terms made. back complications. to inventories where you are Do the tight units your seems wanted It these unit want difficulties? them production I you'll in you of because on offset Jeff, plan all like to follow-up these Thank of your just have of the in really as you have and inventories production

Jeffrey Lorberbaum

the material talked we expect labor we the with happen. about struggling What and are to we flows. doesn't First, happen

could making you said. order taking those them so levels take And We we're can. constraints. we to we're in all year the as as that If actions the And can we hit need given much as be hit we as depends influence these higher inventories service to the inventory that best the the can able further. build until the much constraints end demand high, stays or there's on And won't availability. chance we of to the it a given constraints, we and be

if we we increase and materials other could people to and the hand, can come facilities, On the outputs. happens the something get in faster operate the

comments, other look of the And the is stay tell heard the fourth positive, to back is the know that really whether the going how it's and On we strong our hand, there's can't a don't or be. going seasonality quarter see. last make, we me to we strong to like earlier in to demand normal end going you year go

living So answer in. can't keep you I as we because the clear we're make month-to-month, plans changing that's they give what And them reality we of a and happen.

Laura Champine

of think mentioned? how given probably taken are some got you year? margins in a be your And you've a tailwind, sustainable into that should trajectory but lot about next to and that pricing you've gross we up given margin that's gross productivity just think you've Do

Jeffrey Lorberbaum

substantially be and with the The as business at goal through. improved to margins improve the demand margins the higher The we and is the up this topline will costs. improve go year

was a really The running everything second quarter period wide high open. was because

year, going predict place We to on demand, really and it As in to which is putting better, pricing we do better. we're but think go to environment, do out but improve, competitive really next we going think hard these depends it's material to everything days.

We our investing that own under are new internal are improving our things. things in control. We're

We are a expanding doing really could our help the limited where position. we're if we and is thing And everything in good the we little from get grow right to be world, business. the production, a

Laura Champine

it. Got you. Thank

Operator

Thank you.

Research. from Our of the next Truman line question comes Wolfe with Patterson

Your line is open.

Truman Patterson

my and for question. Hey, morning, good thanks taking

a your thoughts. product these and out $XXX First to wanted just organic the the on million the the not invest imagine categories there, capital but of pipeline balance possibly decision you in investments the organic expanding just environment in the And updated and thoughts to you potential I Could wanted M&A. discuss lot get there? or you're to there's just touch could all with

Jeffrey Lorberbaum

conditions bit a acquisitions, less we're it's The environment. more valuations that are improving in improving. investments our basis little There two think at high them and it is in sell we the are people ability we so the internal are going our of related. the investigate options is our the a a because what perceive moment business the little this continuing marketplace see demand The not that's The difficult investments. to be are The opportunities. of business, to really trends where to

As acquire smaller we announced, we have some bolt-on to businesses. agreements

the other have ready are valuation call we our long-term. right are We buy if ones think identify at suggestions, the right we any good businesses And if for me. can the you to that

Truman Patterson

products? Fair key enough. or Any geographies

Jeffrey Lorberbaum

the give ones around present out we most two. benefits. geographies leverage our – get the that us the most more can between benefit we It's are Those in the of that

the can longer right a For that find term, to the into growth new we the into And new a go group, we thing proposition with a geographies the If right us in use another we point going gives products. as to some related same geographies base them. same on go with to new into can business markets. then go to products business know to that category can what and leverage to And another add then us, at we're think leg some how with we growing and are do we that point, product keep could tie-in considering the it, we business. the still at we and

and the So talent, we the have have people just we the have right right the find have money, we to propositions.

Truman Patterson

channels. this I'm hearing We're question and tour hoping the strong a around us give price either product Thanks hikes that a for Okay. that. pricing very incremental next world your you on or power in just can just the portfolio.

can hoping of you some maybe by quantify Just product that or geography.

Jeffrey Lorberbaum

me let try generically. answer pricing, to The it

that of we All costs. the businesses have are dramatic having increases in

in the are. position as are same Our we competitors

problem. also same We materials and have limited those our also competitors have

those going through spot businesses everybody us as more like as is through long And the market can't it that? is is, I that's competition aggressively, the conditions to push last how where given the pushing what's world. pricing. in the it a long So say, it's to but like enabling across

Truman Patterson

Okay. Thank you that. for

Operator

Thank back you. Ladies to Mr. I now like over and gentlemen, the in for call time, turn of interest remarks. would the Lorberbaum to closing

Jeffrey Lorberbaum

advantage we're We Business are day. opportunities. listening the have going you good conditions good and trying positive of appreciate We shape. a is to and take forward in think the

Operator

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

now may You disconnect.