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Mohawk Industries (MHK)

Participants
James Brunk Chief Financial Officer
Jeff Lorberbaum Chairman & Chief Executive Officer
Chris Wellborn President & Chief Operating Officer
Truman Patterson Wolfe Research
Eric Bosshard Cleveland Research
Adam Baumgarten Zelman
Susan Maklari Goldman Sachs
Mike Dahl RBC Capital Markets
Michael Rehaut JPMorgan
Phil Ng Jefferies
Keith Hughes Truist
Stephen Kim Evercore ISI
Laura Champine Loop Capital
Matthew Bouley Barclays
Deepa Raghavan Wells Fargo Securities
Call transcript
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Operator

Good morning. My name is Laurie and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Fourth Quarter 2021 Conference Call. At this time, 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, February a being conference As today, recorded XX, Instructions] ladies this and is [Operator XXXX. Thank you. I introduce would Mr. to now like James Brunk. Mr. begin may conference. you Brunk, your

James Brunk

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

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

For Investors his of X-K in to the for to over release refer Jeff? and remarks. website. press GAAP our the to a call amounts, any of that, I'll Form our Jeff With turn reconciliation opening section please non-GAAP

Jeff Lorberbaum

Thank you, Jim.

dramatically net rose year, to improved full our to approximately year Mohawk's reported For the versus prior margins more significantly. XX%. sales In business than XXXX, grew the as and XX% $XX.X operating billion

billion. exceeding XXXX $X.X adjusted EBITDA with $X.X Our operating approached income adjusted billion

for purchased full enhance company's approximately confidence repurchases and the stock share in our shareholder X.X strong X.X In of shares by And authorization the additional of growth approved the Directors basis the million our total ended balance February, improved versus of an million $XXX return. points. on during results, additional In addition, historically purchased quarter, margins with we during organic a based also XXXX prepandemic XXX sheet. the shares Board a approximately of fourth strength year and XX% million we our year. for adjusted achieved sales We to

encourage that home well All from rates prices, the of performed rising our by Throughout year. larger segments strong purchases remodeling owned complexities adapt our at rental to home. the benefited lifestyles supported and effectively 'XX, home homes housing by work Changing home new one markets shift and and favorable to to most upgrades interest flooring to upgrades. movement of occurred property, accelerated and millennial. Among frequent to during the improvement projects, is from responded school regions

it's XXXX. benefited our product sector commercial this trend continued the reached prior from year has prepandemic but The to which All improvement categories levels. continue of have over yet throughout is projected not

restrictions thought temporarily to government we impact us behind other year. and to Surges people While varying in voluntarily would and kept hindered throughout at continued pandemic home XXXX, in our operations degrees the the markets countries our be some regions customers. COVID in

continue We our risk mitigate to to facilities to maintain employees. our precautions in

will enhance Moving be bolt-on company operations, we manufacture When and earnings reduce integrated, and accretive markets our our forward, MDF 'XX. our an installation present we to in in they will from Irish an These include France which acquisitions completed in XXXX. will expand costs. benefit

as strength pandemic the in world, market delivered performance strong as our conditions, as and as of our maximize We Our results where those fundamental innovation around business illustrated improvements reported product strength automation, approximately industry XXXX year. and we possible. our quarter year impact X% more a to competitive through material, the well the billion. improved seasonality With our the leveraged and a impacted return across a and strategic the period rising executed shortages, inflation and to the to progressed. chain stronger fewer prior training, constant managed compared logistics U.S. and creatively increased X.X% for addressed reengineering, along process with currency to production product normal labor increases, transportation geographies. from XX% fourth planning. supply products approximately negative and multiple dollar, pass basis material or price where through with $X.X shortages a labor enhanced the and energy as days strong, The as We on advantage inflation, days disruptions in remained Sales supply shortages all We the rationalization industry. in SKU and

and from for EPS days the from fewer with $X.XX mix benefits by quarter increased adjusted Our productivity, price share in was period. inflation per offset lower and the volume

energy regions the transportation gas and sales lowered to Commercial during quarter. the natural the end As in and volatile, an the levels we products well we raised We have have retail COVID quarter of increases most the increasing inventory improve operations other energy through actions. through and during impacted our to even costs challenges costs deferral U.S., selling of continue some costs. raw in and government sales substantially ran improved as prices material, material high as been the at operations most with prices year in due effort European material quarter. government significantly. rise, our to restrictions our implemented our staffing, on price business the some in supply projects Outside costs

innovative and where fostering The inspiring Mohawk for foundation During how governance that fourth work. quarter, released is spaces the annual the and report we report. live our products lay more sustainability people healthier, environmental showcases

The how repurposing review fourth website. quarter now are is available highlight and and our will full maintaining resources. natural We on and waste a safe, year respectful our Jim also entire reducing conserving document financials. we workplace,

James Brunk

a a growth was across the constant $X.X a and Thank quarter seasonality. X.X% and more for on FX Sales basis, normal initiatives days attack record. offset Year-over-year, by costs, to fewer you, increase new shipping a driven by reported rising Jeff. as just of fourth setting the price/mix That's were the business days partially quarter shy XX.X% or billion.

year days was seasonality, unfavorable in as of volume $XXX improved and year of XX.X% energy, million, The actions of FX shipping offset reported fewer year-over-year more fewer year. a return On to of from unfavorable excluding to million $X basis, million. as XXX million SG&A offsetting with quarter inflation. $XX year and of a or basis versus a operating $XX.X increase of gains million, marketing $XX prior by prior set volume of XX.X%. reported The price/mix the material decreasing price/mix as reported prior XX.X% of X.X% lower a partially full by driven strong for $XX the million compared the in gain expense increase On price/mix also volume, with decrease Interest impact a $XXX days, the sales prior especially $X decrease from shipping million. $XX year. and a year. record year points million, the million Operating for full basis $XX prior of and increased, charges charges, million, adjusted by was partially of gain $X billion, inflation actions, an million, $XX million, For XX.X% offset productivity points by XX% of year and XX.X% by basis and and more is normal Mohawk year, primarily as total down a $XXX on increase FX gains prior $X exceeding primarily partially a and and productivity margin selling was by was of prior by $XXX result of XXXX margin to income activity net raw strong absolute XXX of million. was inflation price/mix the margin of productivity Gross excluding to and segment, was of basis, of volume each versus normal the year-over-year slightly compared in net inflation X.X% sales driven consolidated of in million, driven significantly XX.X% a quarter the a reported. due by dollar offset

was Act. Our year favorably in for was quarter by CARES non-GAAP prior tax rate XX.X% the versus XX.X% impacted the the which

We be rate between XX% XX% to and variations. with quarterly expect tax XXXX's

Our versus Europe. XXXX's pace of full the On fewer EPS EPS primarily all-time basis level. adjusted was and effect basis, $XX.XX due XX% versus the XX% prior a year record, was XX% days an volume year reported and $X.XX, increasing prepandemic to of as inflation, and decrease shipping $X.XX of an especially in a was of on

of by That's shipping volume strong well days by been on had Now increase sales pricing crisis in $XX actions FX million excluding million turning of versus countertop margins million, million. FX is partially reported with and driven Flooring Europe, ongoing of growth actions $XX gain Europe and X.X% sales as just offset $X million Global impacted our was the a charges by $X constant X.X% X.X% inflation productivity North total $XX prior Ceramic The had to has as a for a of $X X.X% business in U.S. reported America increasing on lower driving Mexico to fewer quarter, billion. or increase or million, a of growth. strongest $XXX with the year. price/mix sales constant year the Brazil, XX.X% the and by segment as year-over-year showing segments. The basis. days energy Operating favorable compared the as basis. prior net of over X.X% the

of prior reported in laminate That's business negatively basis, labor a in strongest $X and offset by continued productivity to fewer With driven margins had strongest price/mix material days inflation as by having came The margin due and prior excluding increased in year. The of with compared and LVT a show panels constraints. as to on to was by Operating the increase charges million, Flooring volume year-over-year of categories X.X% to by million product continues our the of were and X.X% Rest $XX $XX margin the offset at impacted driven $XX materials, a of our as along primarily Operating decrease by negatively temporary in the FX to and million; volume is $XXX of or year-over-year in decrease shutdowns $XX fewer charges and million. X.X% actions $XX also the which business of World XX.X% laminate due improvement. labor And million raw supply primarily initiatives sales days compared shipping by growth results, which to as and the XX.X% finally, unfavorable was shipping with million; due less margin constant of constraints excluding million. and resilient $X days year. commercial productivity XX.X% million. impacted insulation decrease

the were we able of actions price/mix addition, $XX but seen have million. $XX quarter with escalating of offset million inflation In in to fourth

$X with in there the costs were million prior the million, start-up $XX eliminations of Lastly, by offset a fourth and increase FX gains In corporate million. line quarter, was our slight net in year. of $X

investments balance short-term $XXX Turning million. and were cash sheet; to the

compared quarter days of in we to million a recorded prior and CapEx, equipment year was prior at approximately Receivables were due due use flow Now cash to $XXX to cash Inventories XX just but increase over just in XXX over the just had of $X.X $XX XX% at billion. or free the days the strong in as year $X.X timing billion. of the at of shy That's year the the $X.X XX inventory Inventory in days full prior very $XXX an finished billion a XXX inflation. million the year. of increase strong million. from Property, of DSOs ended and primarily and increasing were versus year. plant

new the D&A $XXX of was million of million. our projects, based with the on $XXX timing CapEx for quarter Now

$XXX at full D&A year, came at For $XXX CapEx the million. and in million

be to XXXX, D&A $XXX CapEx For are be we to million. million forecasting $XXX approximately approximately and

cash Now to to Chris turn overall, adjusted EBITDA. to over a remained will with very flow and and I ongoing sheet And it review operations. at just leverage our debt with strong billion of over balance X.Xx gross the $X.X that,

Chris Wellborn

you, Thank Jim.

sales multiple and was for as margin quarter, Adjusted natural the due of constraints. gains residential the their in utilize transportation cost on shipments shipping the in suppliers momentum Despite demand due we and our even by offset a supply quarter. our in For to in product quarter the of volume a XX.X% in basis. prices we it's Sales costs inflation beginning interruptions fewer unpredictable lines strong segment mix maintained approximately World products of Based increased XX% gas constant and chain and delays as this the the began escalating result the to days our estimates, quarter year. as on are in inflation lower Flooring quarter, process. fourth lagging as or at our with third were of days pricing our increases. again Beginning these reported because still and currency Rest on pricing actions, raised manufacturing X% operating an material pace many during

to price time for costs actions We it offset extraordinary have based take current will our increases announced further these on circumstances. and

further required. closely we'll to continue actions take monitor will and We as

quarter, water-resistant due perform sales improved the to experience we unique shortages availability Russia our our continued technologies. impacted quarter. to and collections During to which and business, Though expected LVT in for premium our well laminate Europe the material we in visuals and our production continue

We are collections. to enhance in our particularly continuing our processes, rigid higher-value LVT

expand levels customer higher we are sold product panels treatments. wall and Europe. performance on in growing which our used product our for our require vinyl line as production and is sheet and As that we cabinetry laminate offering, to a furniture base Russia We and complementary is installed new high-pressure as a such sales surfaces

enhancing are from with visuals laminate flooring. technologies our We panel new our

we XXXX, as integrate acquisitions differentiate last our year competition. position for we Throughout period the in to warehouses significantly expanded. expand and grew further also business from flooring Mohawk space bolt-on demand will e-commerce completed the mezzanine our Our

new French The first our engineered our and more purchase wood will cost a of of floors and make those operations, countries veneer complement MDF purchase operations to our will position. U.K., our will operations will complements in refine manufacturer processes. of To the existing upgrade we insulation and product and facility our the the enhance their and polyurethane the be our improve Our existing in and producer assets in strengthen Ireland plants The increase category. our enhance insulation finalized sustainable. with share in regional an operations, their these offering quality wood quarter

us the leader. Rest through premium our prefer. foundation performance growth unique made Our innovation delivering a proven World segment product value-added The and features based for that the of has consumers on style laminate market of has

pandemic. collections across press year. home popular laminate all our as laminate the renovation and premium our sales, waterproof expanded To increased Our during capacity has we maximize growing sales channels demand seen we are last have

though constrained $XXX We our Global by Adjusted additional a regions pricing in on European the of sales Russia segment are the support and In of in XX% inflation those as by a reported and the laminate period constant million basis. our improvements, which production increased was executing and X% margin operational at return will quarter, seasonality. is result X% fully days approximately expansion next XXXX. crisis, productivity mix of fourth in and operating more Belgium end when Ceramic as and the energy normal outperformed Mexico, to currency a and offset limitations. even sales Brazil were capacity sales

as and increased. Our quarter reliable commercial our the U.S. growth ceramic exterior ceramic grew offerings our prepandemic as levels imported less products in service become as floor, are have with below costs papers. Residential with gaining as and still new well sales products such mix levels. our mosaic innovative landed and momentum improved though remodeling drove improving have We wall position in and outdoor expanding porcelain sales construction

collections polished with and and rectify a have sizes We performance our enhanced introduced and of shapes unique variety new expanded features.

tile Due prices gas implementing will sales volatility quarter material, unprecedented our impact to to accelerated this presently uncertain natural costs. and at extraordinarily on supply due Europe, stability about Future Most second we grow continue offset taking the and of increases and winter, mix impact in all contractual our markets energy the to is supplies to of aligning which availability will participants labor to grow, improving European year. industry first world's We slab to Xx Russia actions we porcelain increases and are Last the an opportunities and pricing of many year, whether high Mohawk producer shortages sales obligations. higher results. depend position we ceramic are pace these have energy, than in long-term energy prices ceramic and price forecasting Xx beyond that prices largest last are margins. anticipate quartz continued our half leverage Inflation additional our are in year. our and Our region and and it's to the profits. recover. in to continue

traded products an dominant keep outdoor We of be will and a to operational are that business. commercial Brazil, constructing production to that Europe, fully a This we where line by into $XXX quartz the and In of growth capacity are ceramic of In significant countertop and business approximately successful is pace new Daltile. are facility completed markets the inflation and on XXth Mexico, or margin year this constant productivity, segment still additional In and porcelain increasing maintain In with to higher with seasonality. year. basis remodeling offset construction the U.S. in rapidly greater operating sales strong, our a are improvements, of will and Flooring of investing service normal providing operating porcelain where with new we're slowly tile result levels, by porcelain manufacturing XXXX. through of mosaics are concerns In decades, year more we return production sector material be in in production significant next legacy energy tile prices our place, the these in sales past increased major The acquisition Russia, budgets. capacity residential expand specialty benefited to the Russia, deferring remaining of North tile tile we entry though expansion. ceramic expansions the that with training yet commercial quarter, many should anniversary products additional sales production In such improved though America increased housing flooring. market. new the mix, Mexico, allocating the to are ceramic is expenses, supported sales enhance we hires. period, as and large not million, support slab when for to end specialty The Collectively, and improve, while a as In both in new the our and tile pricing tile Sun we lines costs later local their our and X% primary be into opportunities has expanding robust reported projects. consolidation all Belt. The as have two the Mohawk's and well particularly U.S., COVID production due adding inflation. was We our for acquisitions. of a line our absenteeism grown expanding through energy markets expanded consumers demand. our success of industry growth our X% the markets with market our and In our new positioned Brazil some our some differentiated our we to flooring the Ceramic operational. and taken of continued fully partially increased XX% mix down should is

constrained raw limiting was material shortages, and manufacturing Some increasing product by operations costs.

are commercial, increase in We manufacturing and laminate, carpet floor LVT, expanding our capacity our tile to sales. mats,

have reinvigorated All expect for are of projects capacity we increasing improvement the performance. we visuals will Commercial continue our confidence future. leader market and markets waterproof We as and category is laminate residential are additional to use new and channels initiated. our the foreseeable recover $XXX expanding laminate Mohawk business support premium improved million continued sales. grows the the to of in U.S. and in with the product sales are

the will lines and as business continue leadership fastest-growing is the XXXX. proprietary in up improve capabilities with fourth starting to floor the the at existing the expansion following product next phase quarter have production in extend LVT delivered facility. category. growth quarter LVT production the strong remains produce phase to our we generation The to first of market our in new this second laminate our The in

through incorporating needed. can expanded support a more are of We laminate are value LVT unique our half provide developed sales business. $XXX operational, features is of lines project be to plant's up in the To Once technical further now as be site proprietary The to XXXX. over customers, million. are all phases planned starting technology and utilizing our first will installed fully we second the equipment operation new being completed for the

capacity to to transportation With the addition projects cost-saving In investments, segment. fiber that, also these return increases, I'll have the including and productivity profitability Jeff. call many and within manufacturing improve that we will

Jeff Lorberbaum

enthusiastic year, our sales remain markets This X% Thanks, Mohawk's Chris. a in remaining growth favorable commercial of about After sales we're grow and rise XXXX, expected to continued residential profitability. remodeling. GDP and and X% rates will future with to should strong support and most likely record-setting home improvement. is Interest historically but to

the projects and efficiencies year. selling many in and all During We're inflation -- in and declining. year and inflation of material expansion significant additional margins We've products across categories anticipate We're all formulations, constraints and growing is we increases, and moderating mix increase of optimizing labor, product Significantly multiple short-term our in and year, we price presently and beyond. this initiated our geography. material, offset. area are have energy, are our capacity our businesses sales this energy spending to announced transportation affecting to ones reducing this and improving reengineering implementing

to continue of also time. costs our recover pricing adjust over accelerated as materials. have dramatically will necessary cost Europe, to and In We margins have the our affected energy our

a the headwind net anticipate business million impacted increases in million we Our price to $XX the been European first $XX most of ceramic will has which create quarter.

aligns. manufacturer, first has excluding acquisitions, expansion. around on inflation restructuring margins Given company, diversity, markets in improve Mohawk flooring major outlook the leading sales globe. In charges. geographic the is investments and positions is expect Flooring to largest new potential Based as product we to built EPS essential the the part of margin our an we world's our be long-range our in growing strength our and categories construction quarter moderates adjusted these growth for factors, flooring remodeling $X.XX and higher half, and $X, to and pricing capacity of any second expands, anticipate our as

to business benefit expect our strong cycle. We demand economic from through this

our with to many added which us products new return advantage representing to end appeal users and and in an homes, opportunity. enhances the years. pent-up historical environmentally inventory commercial demand should remain Mohawk's low sector construction today's our significant today's strong gives a In growth, existing for markets residential it's of bottom conscious Given we line. time, expect sustainable remodeling to

addition state-of-the-art and deliver to expanding in value invest capacity, exceptional technology our to In service talent we and design, our to to continue customers. organization's

three sales anticipate as our higher product, we and initiatives. implement we and years, Over margins manufacturing marketing next the

We glad to growing your our questions. our strong will pursue profitability. that continue acquisitions to further reach be geographic leverage product sales while to take sheet We'll and offering now our balance and

Operator

[Operator Instructions] Your first question comes from the line of Truman Patterson of Wolfe Research.

Your line open. is

TrumanPatterson

morning, everyone. for taking questions. my good Hey, Thanks

First, margins the sequentially? consolidated that I it embedded higher first fall it And decline? call about of we just when quarter And is at basis A, wanted out op trying first this op if safe compared kind guidance. look understand rate are to fourth margins you're to to XXX outperform to EPS then expecting quarter-over-quarter. when points to it I any that look assume historically, historical at look just to at tax a XQ also, segments the guide, normally in quarter Is maybe quarter. there

James Brunk

take Okay. of first I'll Well, that. part the

as On expect it's of And we vary to lower the the year. XX%, the quarter. at maybe full for then in than going the a to XX% as said, the looking the to rate, tax go little year, through said, bed I bit I I it be as bottom Truman, first would

Jeff Lorberbaum

is. two the of the and also I This were out behind, year, seasonally last you year, it's same different. is and stronger part have, the first last the were we in year, the in in days going fourth as so have the thing between abnormally. normal. in inventory then levels was think channels than we comparison more And And demand behind the difference year, it the also -- was customers of also quarter their it were purchases the impacting

in there's the lot two. a between So seasonality the of differences

Truman Patterson

of long comments, is have especially on I'm detail more In can help us manufacturing and little prepared And release and cost-saving fiber a you initiatives? all projects. each transportation there quantify press some the over can any in North those hoping, way Okay. the discussed initiatives the you give those the you term? America,

Jeff Lorberbaum

the asset in upgraded we've lower-cost is over the the business to has in years. it done and fiber based put of assets the the assets in We various manufacturing with how investments. changed on Some yarn purchases

in Some of is the it transportation.

processes put systems and way to or relative We on transportation And to the the the rates new business have charge higher in transportation the which charge improving for through. were systems go for we to trucks. we the trying as getting the weights market optimize are we

So they're the benefiting business. all

James Brunk

flow eliminate of the productivity completion back of also, out optimized it's and of the basis. we had Truman, XXXX, it that Some assets we to side the on older the and in actions labor started is on got where the material plant which -- going side help a

Truman Patterson

All guys. right. Thank you,

Operator

your comes next And you. Thank of the Cleveland from question line Eric Bosshard of Research.

Your line is open.

EricBosshard

years LVT. all five of And you LVT was think the in of last the it time years, life thinking was Thanks. industry like growth for Jeff, a about doing but the U.S. other, taking over we as guess, curious if three are also how it felt each the okay. you to and ceramic those you actually was. I'm of next tile, the from cycle where share four are talk could period in I that relative or categories laminate was behaving think over three about just And globally. largely curious

Jeff Lorberbaum

so a as where LVT it's versus the don't we've believe size going take advances LVT it the made rate grown going volume in it, other through. perceived as going visually the show growth as is you that waterproof all added equal of and to on cheap of wood the an it's was both as as still down. forward pretty opportunity change Because XX% technology; we've one growth, it to are the now we've real that, the all the floor. side, other There's business And being wood. gotten tell the think side, categories in growth going slow flooring has go we category. to where been a on on In made U.S., We the laminate to -- can't the is. alternative. seen to it the With now and of with difference approximately has The

So a When And growing midst larger Europe, level. piece support to laminate a same at Europe it's in much investing changing U.S. it. in it's a is the is part you of go industry and it not the the than to we're of

is hand, U.S. hasn't than is. the our less rate it the as half premium as has. it United accepted the the at a On the the same probably market States as LVT is category other size in

Eric Bosshard

U.S. referenced remarks. hard follow-up, one this Okay, I that's guess your And business, you But if position at it of as you a position, then in cost could. helpful. I but imports transportation The your how costs the over relative that question surface-focused and for I'm is your the competitive of prepared couple what performance the they're curious that with. the years next the you of dealing business cost position influences and think look you. just to means incremental

Chris Wellborn

I and the the constraints the can The increasing causing have as ceramic in are comment freight import industry cost. If delays ocean on -- ceramic the increased. side, the -- strengthened, prices

to well ceramic we're I take share. additional So the States positioned side the in on think United

Jeff Lorberbaum

of plant year, slow the original the The other good fourth by order We're plant. in in in and just the machines piece impacted costs LVT, quarter improving still keep last the the lack costs. And were we're to we is running. position. to of actually we're a the In on I think still had down supply

not products; investing to and we importing And a continue grow we're the imports. in new good a be in the We're lot also productivity to to cost-advantaged plant other. with a market. the versus We're expect so of We think think we in improve. it's position the which lieu of will cost

Eric Bosshard

Thank you. Great.

Operator

line Baumgarten of the next from Zelman. question Adam your comes of And

Your is line open.

AdamBaumgarten

good America. segment, the you in carpet? sticking with everyone. about guess areas like When some that talk in LVT? the morning, you related Or down I trade to Flooring are it maybe Hey, North of is also primarily other seeing

Jeff Lorberbaum

going prices. Every start they're inflation of spend the industry, of time the significant you value hold the looking through to to the go consumers some what in or

course a down see And some all trading so significant categories. there's it's you normal as events. in And inflation, the of

Adam Baumgarten

then And to switching gears it. Got maybe ceramic.

Is increases. in net net all segment? of that European European net that the the price natural about You from ceramic the of talked cost just pricing? Or is gas headwind

James Brunk

European of ceramic That's pricing. net

Adam Baumgarten

Thank Okay, got it. you.

Operator

question Goldman comes of of And Maklari line the your Susan next from Sachs.

open. Your is line

SusanMaklari

Good I more the North margin want I a to bit Thank with guess, everyone. Flooring side. morning, again, Sticking, on America, little you. focus

year obviously coming back are low to double-digit the a where gotten margin range. off that you've You

segment about the that a where going that on been you As perspective? talk to trajectory think how is? in in that initiatives profitability And of think segment, that that, over where about can what the we've are you the time, does maybe go can from that in it compare past you

Jeff Lorberbaum

a were to margins business pieces. different been come peak They're at -- and at prices there's the down been ago. carpet the where in has years The back. in trading the below still industry, few they lower have a There polyester

get they not probably will the were back margins those So peaks to at.

Impacting the as On we go more categories, the we to behind we have have other we the are sales and thing investments as still commercial and in the also levels. put room in have all that think, through. whole you investments LVT prepandemic the hand, laminate grow margins, in those improve mix

category and to those channel. and XX% could be prepandemic which which are and on product depends levels They XX% sales. below products higher-margin estimates Our the

to those margins those improve as back, the come going also. are So

Susan Maklari

Okay, led do there? the within and you're of further And think in geographies? from areas to incrementally terms about going globally some that's are forward to initiatives think business of the be where is thinking about you of capture? you talk looking think that should then we the this going how of on capture have or when going really out can helpful you really about you all will time, sort what the even color. that ability across products growth And And over on growth business, what

Jeff Lorberbaum

What's went many to have expected out is when that, us year business as COVID, in of categories. various the categories we the on we then came back found in of the had the through in happened we it, And multiple years. pulled investments grown we one what that all

$XXX high-growth with up we're the $XXX will catch going is next roughly of in year that in. year We're year and this to trying sales investments all categories. which in add the million putting million about investing us see you about this worth So which

manufacture have the of we we for the portfolio leading optimize of In to or into countries. products the The support different them two. capacities We One increased don't the five brands the probably still going next sales that have the credit is is, the business continents. get sell We to additional markets, different right we're enough -- the steps in other have. we year don't positions. different taking think We and categories over market into XXX business. we

going into be strong you a so well to the We're to have opportunities. heavily our our balance sheet our We'll take over We you they product or us come next moment. this, and with positioned see acquisition believe two. the the marketplace several balance costs have, more to advantage are there with to of We're And there's We more talking at with to how sheet see offering. reduce going to investing broaden think year those. evolve.

we've probably margins. we to that, the us continuing leading technologies the we're improve Usually, and it. think to we industry, growing to economy of then normally you overbuilt part hear cycle raising it. invest rates chasing the what rates that in And we give as and still all You markets the -- this we're the start The -- housing. at get the see in at differentiation us mid-cycle with running This are the towards when point. high keep residential time, have residential

grow. of We've So commercial the it plenty improving. about there's like talked to seems room

right few growth over position in next we're expansion higher the think we and years. So margin the for

Susan Maklari

luck And great with good Thank color. That's everything. you, Jeff.

Jeff Lorberbaum

you. Thank

Operator

And comes Markets. Thank our Capital of you. of from next line Mike question Dahl the RBC

open. is line Your

Mike Dahl

questions. areas. my on to Good for of I follow couple morning. taking up a wanted Thanks

the last you and as Can headwinds dynamics a to acting The competitors competitive raising this and so to you quickly. Because hedged opening point, they quarter, pricing In at raising your terms $XX ceramic the point? on million of it first in the adjust. little you're that of of gas seeing that were weren't elaborate competition prices some competitors was the this you most terms price of whether more? say is addition is talk remarks, at outlined enough Can did that are European environment I more the what environment. about $XX in kind and the you nat to in think the million,

Chris Wellborn

the is Well, everybody market prices, in us. raising including

a to hedged that's less are raise little and be fast them prices causing but than You're everybody need they probably right, to some is prices. raising

-- due of QX expect winter for we're after better reasons. then European summer gas you're progressively a the We in contracts, availability. you've But the look got what into peak And the -- through uncertain that and as volatility months to One where should getting short also lower term, naturally now. at get experiencing energy forward the you're couple than cheaper. and is the the is we are headwind they lower reserves

Mike Dahl

Got it.

it it's seems the kind how slightly but call to a standpoint high industry question, on down variety your volume North -- has closer slightly. volume share up a you've for quarter second growth my data and been, industry in still America, I'm you're seems value back I you've I total positioned and And to XX%. and would in maybe still headwind, flattish position value, maybe it made a digits product. like that like of your or suggest seem going at days-adjusted was share. Okay. it, to me comments the And market basis, If But market categories. a wrong single correct a and from of volumes in And I around in adjust some days take around data think fourth look to

to would slippage. maybe So some that seem still share data suggest

what to are can and evolved expectations talk this year? speak kind you of think for quarter your and through just your how you about So share that performance the

James Brunk

a there, Let of me little what unbundle bit said you Mike.

the so I piece, And across was else, seasonality. the of fourth sense demand you're compared everything and abnormal days you would fourth slightly quarter right, business unusual think volume in of volume So say if quarter, first for makes levels flat you the that, all, as adjusting about to the had segments, XXXX, and relatively down. we to that when look really

the impacted product in in and So quarter. we not that various our sales the kind fourth labor straightened of but Also, quarter only itself in the this categories. constraints production our of fourth material out had which year,

that So that impacted volume. definitely

Chris Wellborn

Yes.

The on data the that look making marketplace, in were most think volume, other thing would the they're we well. the we're I at customers the we're the look coming coming imports the hard But And into inventory got at we country getting competitors the measuring of during in. ceramic -- that time. read add which doing you've the we building think the and way we're when imports to it's because really the you out is market, that the go progress really and when

Jeff Lorberbaum

the industry the it's on data units. in industry was think the carpet shows seasonality The And differences two. we again, carpet between because of down the

XX% are before probably higher business the on commercial On to the the it other XX% side, we where was which still below pieces. indexed is prepandemic

a business also percentage but our lower the have We there. growing we're of LVT

Mike Dahl

Okay.

for makes that color. that Thank of sense. All you

Operator

question of Michael line comes next of JPMorgan. from Your Rehaut the

Your is line open.

MichaelRehaut

guess, I Thanks. get a everyone. before clarification question. into, questions few I morning, Good A bigger-picture

If year-over-year And you I approach is not relative want That Number to those talking quarter. XQ, just to second the improvement you referring you half saying in definition kind million off make $XX about when understand. in I the in last you talking that that changing were sure to the could of impact the you're just clear. 'XX, we one, when of $XX of million were could about $XX of make we're that million. also, $XX that -- that the explicit, price kind sure quarter, $XX the last same expansion of number net that's ceramic million the million $XX to million of of be to European improvement. we're headwind margin to just to more million mean $XX doubling. say

Jeff Lorberbaum

number's ceramic the same. with the Let piece. piece, still me the ceramic The start

going we're However, we actually more price we're to The little getting get there a than -- different. thought.

On net different. actually they the higher, about so to But same the other the thing. prices are both were back gas down hand,

James Brunk

Mike. same, the definition But the is

So million we million $XX is the to the same. didn't -- $XX the the compared to definition $XX million,

Chris Wellborn

some in prices. the But very first have which that off may rolls to seen gas cases, as is the you quarter, of as you XXX, Mike, inventory what quarter, they high. in happened -- that the spiked the we in -- produced And -- course, XXX impact. in the that fourth see

Jeff Lorberbaum

the fourth should same and improve price of headwinds And all had trends, when costs the we the that housing from all premise think get is we that energy and we from as the don't year. we quarter, and As the economy, rest going projections throughout about year. the we aligned see and into are last we're continue have we what the the investments, And continue after better first we present expect forget, to starting the shouldn't as quarter the the have everybody. get -- year, margins our business

Michael Rehaut

consolidated you So Is about again, we're just second again, than be second say? talking half when to -- talk second to clear, on maybe 'XX? a margins on improving, basis, that about half half margins fair a higher

James Brunk

first the upon Yes. expect and is that inflection at what that And When how second we're well looking really, half. would now the trends addressing. then saying the I that sentence, But as we're economic plays that year-over-year. depends in say we're continuing out it is in most as half

Michael Rehaut

Right.

Okay, good.

X% release outlook of X% goal to growth press Usually, have markets. least meeting this across most a for the of your that companies GDP growth. in also about GDP at talked you Secondly,

the to mid-single-digit question. quarter 'XX, also there's about right price? be also, full the of driven that price more way days granular So 'XX by by be sorry, a we half in of kind If the into you range would revenue 'XX should early shipping expecting mostly when modeling. put that any place and for sales think increases variation XXXX, given particularly it? in versus in back in for year about Is for 'XX, your growth you've And the that think growth helpful one

Jeff Lorberbaum

Let's see.

assumptions seem will reasonable, you're is first volume -- then the customers the than with more as impact a we'll it? out in the will piece And see increase We'll in have this in year. the comparisons -- And start back to you'll replenishing the at correct half put same increase price the that going more first the in have inventories. year is to the were see you you be see a bigger -- don't half be a from thing. at last also you in normal half, Let's we in second. Just the in increases seasonality inflation difficult the the first

year, at to second due just our is that stronger As in the as pricing. we dollar the as last business impact better inventories service than a translated half, part growth estimates -- into and we'll going forget, we by better some see to expected thing volume go lower least on this the dollar a well everybody results. not our so to think the stronger can more we One show to stronger would is year have be a reduction from

James Brunk

terms other in And three are same. there's of the the first and the quarter days, Mike, less in day one

Michael Rehaut

a lot. Thanks Great.

Operator

line Ng Jefferies. And our question from from the Phil comes next of

line is open. Your

PhilNg

guys. Hey

your results impacted the in business. certainly, fourth supply your You labor World mentioned chain was the quarter Rest in of that pronounced very that and

more is to kind of kind up call little Should a that how to curious, take that improve it, So or of a XQ. you XQ event? in it's shaping time, expect going

Jeff Lorberbaum

still and labor it having the of bigger problems with still problems both U.S. it's and is our business. our supply. in Probably with impacting the We're part still We're having in LVT Europe. business,

to we're running them. keep speeds at of lines lower running For instead them instance, and starting stopping

shut up plants. we're we'll And it but and with places having had to showing most to we've improvements and just see different. and/or for other we've people have to works. COVID, then having -- some places suppliers We have how have the pieces areas, down that seeing stop work not to had In run the

Phil Ng

Got it.

that's Okay, helpful.

as up of about you big when better. little well. you come a a the good gate. the your ramps there there years laminate a this marginally think year? project whether then lot start-up you back learning And and of a ceramics going component I a that, a EBITDA the capital some contribution to had coming up, stuff of on, to kind ramp time. know how headwinds LVT, is us standpoint, few It's then got there's remind appreciating year? to to kind costs take and new way are it's curve through that So you And exciting from had product Can a of out

Jeff Lorberbaum

if them what put think of through of year. I are would we go to tried year remarks, some of middle they in in next because to all the the some in this come time you are it. introductory them points back They're and

timing think of the you get of that, If you sense it. go I through a

expansion U.S. the where sold X upfront. increasing business investments we markets existing the than start the have in went the markets it, This that U.S. we there sold Our where U.S. new we into are costs up current The with time, we different and the countertop our sales. marketplace in did last the in already in focused markets was marketing ceramic up. products that and our and on significant Europe, LVT earlier laminate time and We're the are expanding we outside had in are and and -- business our at projects, new Europe products to business. time

the which reduce So the selling costs through. thing, are that up have which start-up technologies also same should start get proven as up. markets operating are the there we we are them then we in the they assets for places which as all impact the And we're limit where the using has of

our immediately business. both In which enhance addition, on productivity projects there other should and efficiencies are

Phil Ng

Got it.

Sorry, -- it's So go Jim. ahead,

James Brunk

say to the laminate first we was line going if -- -- the new you look fourth I just timing-wise, laminate in the so quarter. launched

will So in than LVT 'XX most that, into what others, the benefit 'XX echoing Jeff But more on so the you'll benefit launch. impact see of of limited some said, 'XX.

Phil Ng

than to expecting a of guide additive right? it's But So headwinds, more Okay. good you're rather it anything? be than big any

James Brunk

Yes.

Phil Ng

Okay, great. Thank you.

Operator

And of Hughes our Truist. of comes from the Keith line next question

Your line is open.

KeithHughes

the America, and the the growth, I to adjusting about a ahead. North that's for days, of Compare up out we excluding And at numbers for if that coming bit. you carpet Question revenue some seem the days, even LVT. of was you. look Thank good know well industry, laminates

well? products grew versus quarter also in how average bit magnitude is, question the could put more my in year of fourth the for on as the those a segment little the and much Just a you

James Brunk

We of normally don't get to granularity, Keith. level that

right in You're resilient the than business that -- more segment, grew laminate certainly carpet. that and the

in growth really really around they kind place I the volume. pricing say, we of actions with, so put dwarfed the anything along And that drove would

Keith Hughes

Okay. American And -- on Global the within then, business. Global North Ceramic, second question

could you growth looked like If it's and average the puts segment talk on takes that what versus and the are. what about

Chris Wellborn

products reliable U.S. as on first, imported products landed and Well, are have momentum less increased. ceramic, gaining are our costs

offerings Our line introduced margins improve pricing prior year. and and actions And sizes wall were have shapes. at several this floor, then that offset new products inflation, keeping to We mosaic we've mix, in with introduced offered year.

mix you under the and we given gas. optimize and just think as the we grow Russia commercial U.S. their will in price and volume And will Brazil, remains natural volume As strengthens. Mexico 'XX, look increases residential to both have natural believe will limitations. into given EU capacity pressure from be price strong

Keith Hughes

you. Thank Okay.

Operator

of Evercore of Stephen Kim line the from comes question next your ISI. And

Your open. is line

StephenKim

very thanks Yes, much guys.

it to to which seems about half some the as question half small laminate both The a two million going XX maybe wanted a the phases. Just off line. the bringing million in make And line done about capacity much that quite the as like $XXX you smaller, I plan phases. next LVT XX you of as Flooring your I bit in clarify start want talked to be just large, million of on to encompasses the is is is, as $XXX over guess months. my half America. talked to North that that size, sure I $XXX or maybe then capacity, think first

site within is be -- as additional curious, how was site? So could to And when I that about expanded capacity you quickly the bring you site on where that talk needed, able being expanded located?

Chris Wellborn

operation. the long Well, the terms production runs. high-volume And East optimize an were our all, in just products are about To provide for West of and have Okay. advantage. U.S. and talked of plant Coast designed runs factories. for it's be cost you logistics first our more production, our Coast location. new And service, one now and and manufacturing, adjacent this lines a original This other lines smaller will to and LVT of Mexico both differentiated in designed should us we'll the

Jeff Lorberbaum

the does were laminate, laminate. And line then, The about around I think $XXX other questions each each. million

now And the and close the operating in line is next in one sometime. second start-up then it's in right middle of potential. in, first to should the come quarter middle The next of the be will year

James Brunk

we billion across just what of said about we up to And capacity -- five LVT have that's clarify, point, Steve, sales is $X have lines. to this globally, and in we've

the $XXX on the lines. line So other different not new the really is million totally versus

Stephen Kim

Europe Yes. Yes, a I know in and you couple smaller forth. so of lines have

That's Okay. helpful.

Second mean in productivity. question we think and had as at in strong benefit It I EBIT. was start particularly with labor XXXX. EBIT become years moving would other couple I good relates a growth now. pieces could whatnot, from specifically, year-over-year pieces really [ph] a like and was specifically to look EBIT and the in your like I your to of on curious, the inefficiency to productivity XXXX. maybe strong I'm absenteeism labor. all you productivity block it From mean, the

And -- And in expect year I'm XXXX? from that flow segment perspective? would might or in you strong how you a could timing another curious, so a of productivity

Jeff Lorberbaum

we're happens we'll Listen, to Presently, still and places. struggling supply find with what world out to the to labor in around pieces. different the have

through of that seen start going it the have up same all year. it yet, the productivity offsetting during show some is bringing are some we At up year. other to the we we're facilities the and haven't the things truth, new better you as these assumptions But productivity Our positive of to time, gets it? negative tell

Stephen Kim

that's helpful. Thanks much, guys. very great. Okay, All right,

Operator

your And Laura from Capital. of question of comes line Champine next the Loop

open. is line Your

LauraChampine

It's lower any the other my you in comments Europe gas question. heard basis basis a being prices elements half. where the your inflation be about thoughts to follow-on in this or taking answer half for your see provides I half first to about a are for can back but Thanks year? inflation in there back -- lower versus

Jeff Lorberbaum

depends high materials significant offsets. the that on been with shortages it up prices. to and We're pressure demand that some world. the historically And around year is and that assuming There happens this versus the of then some gas oil lines prices the raw from of have be causing what capacity at

Laura Champine

broadly to are capacity that more the down will year? units for there's think this industry thus that coming more imply expectations Does be that do freeing you your market, year-on-year, Or capacity? up

Jeff Lorberbaum

of -- in. there's categories capacity product the to We the more support that think we're that some

For for levels. next that are It's the wood at some balance instance, our because balance starts in year burn as into down, assuming wood Europe of energy There the and to that to unusually energy prices, it prices with an high We're gas up it? going starting is we're seeing to six was where months. source, supply better marketplace last more places come there's we're as the are than instance. come high prices assuming out be other there a they're to the

Laura Champine

you. it. Got Thank

Operator

Matthew line comes question of And Bouley of your Barclays. the next from

open. Your line is

MatthewBouley

questions here. everyone. for afternoon Thanks good taking the Hey,

the natural ceramic European So just in gas on market.

European volume increases I that you and of price earlier competitors think that you mentioned heard, Chris, some result I of a are as these implementing. in you expect ceramic level pressure

any there well? side prices expect So you is the an color as on you the materially? more to that lift it elasticity mix And there impact as of

Chris Wellborn

far, seen -- in so our haven't still we mean, strong. been I volumes Europe have

there we it make it. that market. could haven't So that's pressure it taken But seen being the so we with we far, But sense that it. anticipate on haven't put just pricing the seen would

Matthew Bouley

Right.

this at guess, Jeff, just you competitively European great That ceramic the a Spain Or the you other market? helpful. other guess, the on -- same any, overall U.S.? gave, just -- Okay, way Italy that's severity people pricing changes impacting beyond there exports the I Have seen to the or I And is limiting adapting just wood. anything all? is then, production Are from within any market. manufacturers the Are comment burning ceramic any to on market was side? topic

Chris Wellborn

the were on shut trying as on impact general, the down. they cover in Well, cost players the of the bigger in way cut other the I that hedged. market have or And one are that as we back then producers say, of the you end much. market it have to much market, end, some some know have the of let of -- But the would smaller some are the competitors can, too to not you

freight a a we good it's inflation It's put so The to of prices. position. it's between And United increased pressure put killing we're on got gas increased not balance, in pressure as you got, and too, covering demand. exports. And the expect, those though, could going the why be in to think States, that's your cost,

Matthew Bouley

thanks the luck. and good Well, it. for Got color

Chris Wellborn

you. Thank

Operator

And your Raghavan next Wells question Fargo comes from of Securities. of Deepa the line

is Your line open.

DeepaRaghavan

been business good pushed Are grew industry switch gears to question. out. and XXXX has my how expecting acceleration an the in XXXX? commercial you're for able I'll in taking further business but ask share Hi, the hospitality trends. Thanks much recovery appears Looks you afternoon. like about also it

growth verticals your So business Am that Are offices component in some accelerate is XXXX? pieces about growth drivers primary correctly? thinking schools, and commercial the the would I -- to institutions these like etcetera. moving drivers essentially, actually your maybe the the within commercial

Chris Wellborn

depends Like been doing still levels it's prepandemic category. not is to also but it's Hospitals, strengthening. schools, I well. hospitality the think Well, back ceramic, in it certainly on

James Brunk

and led back But have then good respond. channels really of growth the Yes. slower been area the levels. But as had 'XX strong some to other the It's versus been we government to not 'XX healthcare 'XX. by said, it's other in -- Chris again, the

Deepa Raghavan

Okay.

Just interest just there backdrop. concerns curious out the rate on with the

manufacturers, you calling were we're are at You're IVS. still larger-format looking are up the the stones some for in ceramic spend R&Rs. the obviously, of And about in. thinking the R&R We U.S. at the How

It impacting say, on be interest this any -- industry the us seem comparisons invest You obviously, But of what Should to are certain that? items. is innovation, your in continuing to it's help rate product XXXX? we thoughts, in doesn't products. comparisons first like different of bringing concerned draw as and any such. could all, So because out the the new concerns industry are time,

Jeff Lorberbaum

that we're going to Where with midpoint of in are still decreasing. presently, it we're cycle see you're assuming the unemployment we the

incomes still to see going rising. You're

keep end demand the it there's relatively cycle. in are of mortgage We exceeding does still And supply historically the expect like economy the The and rates still it of the to new for construction. low. housing growing is supporting unlike mid-part cycles, the

support remodeling should do it takes home to all values when existing go that buys It it. in through. Typically, increased don't multiple continued home as someone the multiple sales, do on a remodeling year. they -- have takes home, you the first years of You

last years you have that the prepandemic demand still two have and below continue to sold you homes all commercial, remodeled. that's be And get should should then these it were help increase. the to pent-up that So over of levels there still

up expecting they unless So we than move the category. improving to continue the we're higher way rates expect,

Deepa Raghavan

That's for and color great. luck. good Thanks the

Jeff Lorberbaum

Thank you.

Operator

are questions Lorberbaum And there closing to over queue. no Mr. you. back Thank will further turn on I for the comments. call

Jeff Lorberbaum

us joining We today. appreciate you

long-term optimize right We're and our support business the long investing term. you Thank over really we spot are in to about expansion us. optimistic We we're for performance. and margin the to growth believe that our joining

Operator

And Thank today's call. conference this for you concludes participating.

disconnect. now may You