Mohawk Industries (MHK)

James Brunk CFO
Jeffrey Lorberbaum Chairman & CEO
William Wellborn President, COO & Director
Timothy Wojs Robert W. Baird & Co.
Matthew Bouley Barclays Bank
Susan Maklari Goldman Sachs Group
Keith Hughes Truist Securities
Michael Rehaut JPMorgan Chase & Co.
Stephen Kim Evercore ISI
Michael Dahl RBC Capital Markets
Philip Ng Jefferies
Truman Patterson Wolfe Research
John Lovallo UBS
Eric Bosshard Cleveland Research Company
Call transcript
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Good morning. My name is Charlotte, and I will be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries' First Quarter 2022 Conference Call. [Operator Instructions].

As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, April 29, 2022. you. Thank like now introduce to would Mr. I Brunk. James Mr. you begin conference. your Brunk, may

James Brunk

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

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

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

Jeffrey Lorberbaum

performance days in basis. in up an and Jim. quarter you, expectations. reported first or Sales as XX% Thank Mohawk's record of our a on the currency constant exceeded to rose billion, quarter the all-time $X approximately XX%

our ceramic acquisitions. improving continued momentum small higher an the growth fourth businesses, sales from in sector reflecting Our from and quarter, commercial our benefit pricing,

enhanced European of benefited America's and World. strength Rest Our operational European global costs, ceramic North operating the the business results in efficiencies, rising as of energy Flooring market income management our offset improved our pressures forecast exceeded Flooring

ran high order most our we to inventory. replenish levels quarter, address in at the During backlogs and markets operations

rise. Unlike operational improvements as enhancing markets products efficiencies We SKUs shortages We're features. required production additional of by favorable, and in flooring to at and material Market to businesses combat quarter, raise their issues Labor as Employment cycles, and have to rates XXs with requiring across improving increases inventory and increasing our supply in and and new early During our SG&A minimize homeownership. process increases and of shortages Supply past to our XXs the the take Millions through. also introducing years housing single-family are most U.S. demand. is homes chain planning. across is conditions markets. products, millennials remain deficit persist, these for late programs interest pricing even desire streamlining historically home escalations actions past year, low. the rapid specific manage through wages inflation are align high have and inflation. pass spending, More to governments construction, levels and impacts. impacting also We've markets. forming cost enhanced training implemented multiple are households continues unprecedented the re-engineering home controlling will under announced continued

home home needs they've stock long-term expand home equity residential of high purchases the updates. those homes delayed flooring New rising supported will Remodeling Aging of past and construction years. initiated working changing this should XXXX will strong, and and completing continue construction levels also at housing from year. over few projects by remain increase buyers existing property

construction families improve business We and recently customize are to projects homes. as that initiated. products due delayed conditions inspire remodeling projects continue introduce differentiated strengthen as COVID continues to and remodeling to that were acquired new Commercial

production by new are we in environments deploying commercial capture products the constraints. commercial In Our and for limited inventory quarter businesses, appealing demand. to pent-up growth inviting some markets, collections create and our was

U.S. Mexico. categories satisfy products; Brazil tile and so growth and create expanding and European operational products, laminate, innovative that projects ceramic laminate, efficiencies. demand multiple The include executing are new specialty improve in and for quartz features high-end slabs we porcelain higher We we expansion and LVT countertops; can our are that

Europe Our competitive to historically and market strong in price features background maintain generate has enhancing flow growing design and recent advantages to businesses. we're Sales bolt-on products our low us of the of acquisitions tensions sales our and in give leverage. Against rising panels inflation, are bringing insulation all geopolitical continued points. remained cash the strong growth, and and Mohawk deliver

share Given the repurchase acquired stock million. Since and growth million in Mohawk's acquired the outstanding XXXX, our X.X quarter shares, of reflecting earnings, balance, first February. approved We the $XXX additional our relative the to our X.X representing program shares a of of start undervaluation during Board an we've million our profitability. long-term $XXX in for of total million XX% confidence

Our bolt-on alternatives and investments, for product completed to explore acquisitions strong many extensions, company, provides geographic additional balance and continue transformational and acquisitions, a including buybacks. Since stock Mohawk further becoming options. sheet many expansion, we public has

CEO joined and President Midwest Company, Board strategy Jerry he Directors. business has to operations unique our in pleased Board. is I'm our Jerry and Finally, of Burris of strengths brings and Can that the

our financial in more cover results Jim Now first will detail. quarter

James Brunk

just to a increased Gross these product the partially excluding countered limited due increase and in Sales increase filed versus shortages shutdowns a XX.X%, expansion unit number an earnings prior detail SG&A unit primarily our by dollars That's by driven The material to inflation, productivity reported year which growth. inflation will prior was increased million. compared due the productivity gross you, The was basis, the record. significant constant flat MD&A XX% a inflation amounts of product in absolute impact the reported, was sales higher $X Operating be call. categories and for to temporary in strong and Thank in as after reported, of FX margin as volume Jeff. XX.X% supply global the charges. income, quarterly On and a actual pricing of of growth as versus being QX impact quarter actions for the dollar in in our items all-time year offset over XXXX. quarter included the headwinds, response and be by year-over-year actions pricing The XX% will an volume XX-Q, basis, increase were billion. on of this and of SG&A, of was prior XX% as was $XXX versus of in XX.X% sales to FX. offset volume, year. mix, was

shutdowns inflation, compared a Excluding increase charges XX.X% productivity $XXX million year. pricing Adjusted the compared and volume operating temporary shortages. Interest $XXX million was in was XX.X% lower expense the of expense prior year. FX higher million. impacted of Eurobond year-over-year of to and was XXXX by due X% $XX to XXXX. approximately expense income, due income higher The to $X to strong was an The actions was of was the increased material the QX basis for $XXX of constant offsetting mainly our settlement million dollars year-over-year decrease or other $X quarter million in result in a overall prior million. negatively on Other the

the for That's leads GAAP per on a basis. Our was a to and year be full non-GAAP quarter expect non-GAAP of and non-GAAP That rate $X.XX. with an an XX.X%, share and quarterly to the we and between variations. versus on earnings prior year possible GAAP XX% us a the of tax XX% XX% basis basis X% increase tax rate on

addition volume or operating in operating significant and was billion. The or segments. Turning due a margin, unfavorable due $XXX the Ceramic temporary income offset XX.X% just year. on excluding under had a operating and income the were $XX business. growth basis. in units, primarily in $XX constant an The resilient, line by due to to XX% on Corporate of and pricing income and operating Operating in $XXX increase pricing compared European material by year-over-year laminate, costs in million reported inflation, of America year, XX.X% overall XX.X% excluding inflation, shortages. a year-over-year And softness was eliminations last growth commercial and strong increase initiatives volume. basis with offset material energy with finally, prior XX.X% our costs, and productivity carpet. addition XX.X% actions The or increased basis XX.X% actions XX.X%, due The increase combined year. The year. U.S. with million was shutdowns to was year-over-year to $X.X compared as increase as charges, and a and That's million dollars offsetting $XX basis. prior to by sales shy Europe, from decrease X.X% prior $XX Mexico segment versus operating in income to of the actions rising countertop business and increase last North to year, on due That's The reported X.X% to World, was shutdown this Flooring productivity a year-over-year excluding across crisis, substitution. lower basis, aggressive residential charges, $XXX in quartz margin, pricing had in but pricing actions $X.X margin, the X.X% volume was increase of year. constant strongest favorable and compared the material shortages by decrease Adjusted sales driven And the That's sales pricing businesses. actions was segment million. material sales of million approximately with and inflation, actions X.X% just was to by laminate primarily last of which versus sales to adjusted year. driven year-over-year volume segment-wide on volume even the $XXX a was Flooring installation in million is increase Rest was million in on Operating charges, an Global prior strength panels in our constant year. to reported pricing was million the constant a to as a is in also productivity primarily the billion. constant result offset with in caused

a approximately Inventories short-term quarter with XX% to cash over is $XX the Full growth. year Turning from prior inflation was year. for billion. the to investments were with CapEx a be forecasted for XX% the $XXX in at prior million That's the flow the key $XXX approximately projected and at equipment increase flow over D&A with the for $X billion, of being $XXX just sheet. billion days, adjusted year strong XX% DSO full cash quarter free million from quarter review XX.X million of of seasonality. a the and million. days $X.X free forecasted Property, year. at call over debt return and was versus currently at prior over is Inventory billion cash were $X.X unit turn just in the and year due leverage for of remain with to gross the that, slightly plant cash at very I'll operational $XXX to to a use XXX.X million. days due XX.X prior year. balance $XXX just versus approach Receivables with of to Chris D&A down And our Cash $XXX million, with of And to XXX.X CapEx a $X.X balance with Full finally, the million, areas. sheet or an year flow and with the X.Xx in EBITDA. were normal

William Wellborn

you, Thank Jim.

continues improve Our margins. and to business its U.S. ceramic sales

multiple We mix implementing inflation. are increases enhancing price our cover to and product

sector quarter, new projects During remained gained the the commenced deferred remodeling. residential businesses momentum initiated sector strong and as while commercial the

are alternatives providing increasing should delays. sales by Our impacted to in which price shipping tile and positively imports, experiencing be

ordering the We in fastest pick the tools have and industry. technology selection, make and our easiest product to enhanced up

features. commercial produced in our ceramic Mexico low quarter The to Tennessee outstanding Our Brazil provide see our facility. sales satisfy and position domestically quartz rapidly inventory continue with of are construction ceramic our to channels be countertop options we strong, to market business initiated have being levels. in growing with the high and countertop capacity and expand and strengthening new as in visuals with at construction we even We by U.S. levels the our results at limited demand, sales improving

in strength commercial residential Our and projects remodeling performance with was construction ongoing by supported improving.

to past we both rising the inflation higher and have markets have with During responded price increases, accepted. cost multiple year, which energy

in Brazil. and we permits new construct steps European we Mexico, impact demand. relieve term, increasing We are ceramic team continue both government Near markets in uniquely continuing is to we may agencies for and rates strength a to though to actions rises. inflation constraints, in have to will take taking pricing To inflation increased facility our incentives capacity extraordinary adapt our future as interest and management challenging see with porcelain negotiating environment. In a business,

from in balance inflation. sales escalated in strengthened gas clay Ukrainian Europe ceramic quarter industry increased and when as inventory than was the the prior to Europe estimates, anticipated year product the mix to improved for invasion supplies we first the results Western by the we our the and in future increasing clay expected, The inventory of our Our prices improve to increased of our Ukrainian We raising our grew production. interrupted production customers before problems levels cost. and We interrupting Natural consumer results. levels our enhanced anticipation prices ceased. avoid our have demand more

and with Our clay higher of materials time costs without uncertainty slow operations. to earlier energy is our than inventory XXXX in sufficient alternative growth second half There market estimates. should reformulate with provide disrupting the to more products expected economic

the necessary line delivered as demand strong. remains World of market are We The as Rest based growth adjust on prepared strategies Flooring top segment conditions. solid our to

took material increases, inflationary rising inflation Our volatile chains. costs, announced price management we energy rapidly have response pressures. rising supply team and escalating Europe in manage multiple additional are cost lagging in actions to price continuing and increases Despite to

innovation for their with distribution to production, we as collections premium performance, we supply quarter leading-edge introduced visuals Due sales remain unique continuous water-resistant in maximize and increased expand Though position our the growth demand and continued our laminate, laminate expected and material and laminate new the strong. our new supports our category in premium Our laminate long-term innovation features. design our and limited margins. we To under inventory the and Belgium features XXXX. follow our market our premium Sales channels market of share low utilizing brand value unique by and sheet impacted our that vinyl with in brands. by up channel strategy we support and Quick-Step market are expanding With them were innovations add in and adding new disruptions material specialty negatively this capacity other laminate, in in to business the our features end levels. for and LVT

the by increased prices. through Raw supply as improved through material but margins driven challenging, for period. the improved was Our both categories period production went and especially we

enhance are We to sales continuing improve and our to our and formulations margins. LVT processes

consumer sales the increases LVT are category as substantially growing rigid preference. Our in

quarter, Our line the proceeding and our acquisitions planned. to X is top integration contributed as during bolt-on the both of

of insulation our is new production the purchase manufacturer of state-of-the-art acquired, Our products. In insulation increased in one of share plants Ireland and technology plants the up. presently sales installation an with polyurethane market with a we U.K. starting and line

MDF French offering enhanced new product the of facility our Our extended and has reach our geographic business.

capacity material sales We will Despite enhance generating the plant's operations wood. strong by business, improving expanding waste the energy our panel with mezzanine demand. in our is grew in which processes, and including e-commerce results constraints, expanding significantly from quarter,

our emissions wood well reduce position. line cost for more a Our coordinates manufacturing fiber wood a introduced that into new is new laminate will performing MDF patented high-pressure reclaiming and have category other deliver products, with technology from extending sustainable and that product To carbon we panel panels. boards new our

wood Our cost. emissions carbon significantly X and energy energy our plants lower fueled reduce our with waste

demand business remained have to while the difficult Price for following implemented COVID material transportation restrictions, to in had response in increases due New flooring in the countries robust Zealand Our both loosening been quarter rising COVID continued Australian and of costs. restrictions.

rounds superior years service have in price improve projects past implementing strategies of sales North as our production an our the the improved to As manufacturing the levels next-generation of is our share of continued To greatest and support related anticipate have America We most structure channels, prices absorbing North constraints. enabled to production collections as continued have LVT growth. our in leading including capacity we costs and the will our increases in been we ever laminate a sales With increases targeted laminate during online, environment. segment, given a the continue during quarter margins year and assets performance, are line North Flooring inflation wood alternative levels planned addition grow have their productivity, products. in announced year execution, our as in Rest of U.S. to X and Across us oil we our market our the next quarter, this sales Most construction. managing become increase to increase home appealing to and Flooring and expand laminate to achieving is has visuals multiple waterproof in demand initiated the which The to and our cost Escalating we XXXX. production are of to ramped enhance both experienced. new expanding our many holds additional new second suppliers the offset, World, Mohawk gas have comes upgrade up. results. it premium market supply to we further American our difficult manage and America efficiencies of and realistic our new

grow Our to from offering improved quarter in across continued channels. an benefited substantially we the LVT sales all first as

and were that impacted delays disruptions in manufacturing, interrupted costs. sourced higher products freight material margins ocean by Our

its significantly Our operation line legacy LVT improved speeds has capacity. and and is processes increasing

Coast production Our and and operations advantages to facility will customers. is When West West our service Coast processes. initiating East fully fine-tuning implemented, provide LVT and new our logistics

strategically utilize We and our will sourced continue portfolio maximize to out business. our LVT round to

Residential inventory, quarter, period. normalizing during also raised though operations material sales shortages for substantially We customers our lowering are material anticipate our stopped impacting vinyl resilient improved and sheet in the carpet our margins. sales increased, our Our will improve service and supply the which cost sales. second business and

prices reducing offset costs. are costs. energy operations By improving we efficiencies, increasing and material raising are escalating to complexity, and simplifying We further

productivity. are We markets are impacting managing and labor staffing tight that

strengthen and continues and led and Commercial tile by Billing commercial Sales rebound future sales the reflected government, design and initiated. products. to as growth in LVT Index. activity both pipeline channels. being by strength growing are as will collections health to support workplace continue our deferred carpet This project are care new sales of March commercial Our our commercial Architectural specification projects the in

domestically local stability, supply. preference produced specified dimensional is more and Our superior to LVT performance due greater consistent being its for more widely

the committed carbon to while new that, becoming a superior and return of are I'll our sustainability to We half with provides have flooring carbon with level acoustics that the commercial introduced achieving With carpet comfort tile neutral footprint. Jeff. and certifications products call the highest

Jeffrey Lorberbaum

despite increases about year continues products industry remain mortgage additional months Four as is rise. optimistic our We've most of in spurring inflation low rates to into the the price existing people and cautiously Chris. markets and homes rising Thanks, past anticipate announced this and purchase pressures. rate home X over continue sales, will should its XXXX, and by routines. supply families growth interest commercial Housing to are upgrading we inflation sooner. purchased rebound with pre-pandemic to returning higher X equity be Remodeling years. homes of sector historically home We supported continued the to

We production the supply should expect which our levels. improvements constrained in increase of materials

constraints Our mix year-over-year are inflation controlling our our on per relieve additional in capital through investments year, share. spending of focused completed when increases, will our by increase which specific and optimizing price productivity actions, we increase the impact our limiting and offering. margins capacity This should and initiating earnings

restructuring quarter excluding $X.XX anticipate to these Given to EPS we our any factors, be adjusted second charges. $X.XX,

remodeling benefit future business housing despite long-term to trends should and and projects. We of we have that structural take will residential new the satisfy confidence home from years strong for construction, Globally, near-term commercial uncertainties. in in is there a our deficit long-term

brands are sustainable comprehensive in products. strongest the includes collection of recognized that most product the flooring a industry's and portfolio Our provide

through balance design, innovation digital continue The the simplify grow that customer for expedite the performance we in to our allows customers easier it pursue generate Through team, transformational acquisitions leading strength bolt-on and making talented are our of that leads, to value. of us our tools sheet ordering to and both complement We and lead industry business business. their our deliveries.

be X questions. to Mohawk's We'll years, Over should take your glad enhance and expansion. X margin the to next sales now advantages these


Instructions]. [Operator

the comes Your from with Wojs question of first line Tim Baird.

Timothy Wojs

And in And perspective? I'm maybe mix mix. of current something kind production And about the the then you'd what to want higher I question can any first guess you're to you capacity, improve I not? you or seen just lines up on us seeing, kind broad reaction update have on from just your strokes mix in give is curious any the of prices opportunity an maybe areas your environment margins? Maybe to side? mix a from product within your to guess or that within what is own do if

Jeffrey Lorberbaum

in on There the is some trading down markets. going various

it more go. much quality That bottom prices, in you people the probably pieces. increase market, the top to end, end are different And place not in them occurring The squeezed. product. and budgets some It's is middle. As of the not reduce to the the have of the people there's requires

think there in with year, last So the inflation the that return will selling We at is normal industry slowing. remain of volumes, increases anticipate prior prices. high some We levels year average to and with coming. seasonality so versus or

We also negatively this translated impacting our and dollar U.S. anticipate year. results the strengthening

Timothy Wojs



just So given up own the I there's bit mix mean, then margins? a capacity, you okay I current of would look you Are mix? to lines product just your little within to improve kind within with environment, guess the there. your

Jeffrey Lorberbaum

ceramic always low the European end pushed sales given on just the our we up, the each margins. improve in limited try have which of and inflation we mix. year helped introduce where, help and goal cases certain the business. our mix to purpose, new ceramic the the the also business the margins enhance In to products And to business, Listen, it us is our improve rising like of

Timothy Wojs


raw materials, I what you of to of would a volume growth for the if materials? then have been the know context, right you raw in challenge I of been certain got mean, to you I able guess just amount I I necessary type your businesses. mean, had has mean, And access supply if deliver Good. Okay.

Jeffrey Lorberbaum

are also and Zealand. There and imported it our The and the COVID some Europe, laminate lack all restrictions by in others materials. disrupted materials and includes in our operations, We New were Australia the many by of products. LVT had delays was U.S. in business, and of panel material, business, of them vinyl sheet

the the think We be through substantially went all impacts better. quarter we reduced. will As quarter, the second

James Brunk

then what sales the to say would a about us the impacted $X I cost loss And we really is in quarter, know million but perspective, estimate. hard from it


from Our question Bouley the from Matthew Barclays. next comes line of

Matthew Bouley

specifically you It supply, clay inventory of sounds the again, European like procured supply. on Just ahead disruption.

I picture think Can in doing going Europe you say build you just to that? I to and heard for allow extra supply some inventory to the just materials. what that clay the on you are time reformulate address the you is elaborate and sort of industry

William Wellborn

Well, and widely in did as Ukrainian you our used increase mentioned, clay is Europe, we inventories.

And I versus have advantage good think can have many have going R&D I forward. and have think supply because, we a advantage we area this one, And alternatives. for good resources sustainable transition. companies a on logistics really we'll resources working the in an we

Matthew Bouley

same Okay. I topic guess in European ceramic.

to you Could demand as and inflation. build price mentioned higher sounded I you speak the customers increases. some in just that inventory just strong, volumes ahead like prices It spite customer guess, I come I the were how of of for think think the you you do building said these of future what that think elasticity volume about through? could was, inventory mean

William Wellborn

anticipate really Well, do judge increases. And as I some much was, volume prebuy. those that was how just we to were take a would there believe some don't We to there but early able good price pricing. buy-in we to have was that


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

Susan Maklari

ability are you lot you that that it to for of chains how could the we has mean when than make coming gain market incrementally ability forward, couple Anything doing the differently to look maybe lot perhaps go supply quarters in is, a the we share can global should a I through comment My stickier what the lot that just guess, on next And thinking domestic bit volumes that of improve? dynamics, a retain be about talked first you you past? a of share? through. as as to the it's whether market are that And just about or been international given these question

Jeffrey Lorberbaum

given strengthening what's forward, interest the we're of the reduce dollar And this will the about happen rates. translation business, year despite rising As we going look cautiously optimistic inflation, international the to pieces. our the

though will and is material costs. to basis continue is with availability as help continuing increase. We us raise to lower commercial other grow continue it cover announced higher the rate. Our starting And costs at we the that to a mentioned see pricing GDP the and that will to continuing increases we're see improving before We of chasing. going we've materials to the that increasing

And The us our going to continue EPS. a year. period this forward will we've of the other just business, seasonality to that's done impacted thing while the going European stock the the And repurchase benefit of talking, is as is the QX increase note then we're is strongest QX by vacations.

lower than then the typical is and quarter. with the Some of in. third fourth the models don't holidays And quarter that put

Susan Maklari

how through that comps next are puts bit should actually, we still helpful. some of That's the look of just takes do which rest us little you And sort to we these be we about into give segments next of is, question, leads thinking that the year, Okay. as can different of go on my Jeff, quarters? out as the a across weird the given and some the different couple commentary

Jeffrey Lorberbaum

When the high. you first low. in shipped industry the of inventory we seasonally year the were the year, a first were channels was, is, lot happened But half year the in look into the the year, of the capacities half at The we constrained. last what and went really

comps comps then easier see are the then the get we versus normal. first And the the half should last in in harder second normalize and So than year. half, should it


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

Keith Hughes

struggles that result? of within impressive the how Your this Flooring North Could that us carpet grew you much to hard kind segment quarter. your get give surface magnitude America pretty some in growth of its considering had was

Jeffrey Lorberbaum

answer that we how one. see Let's

reducing channels while adjusting over all the improving The XX% And LVT been satisfy first our up at. been sales plant and it. that and pricing right, the We've we've carpet service, the business inventory more quarter sales production been with to share continue to strong expanding on and business increased products. last importing the you're normalization well as capacities. momentum The you're more LVT, was costs. the And as different couple In to to, years the had of limited our our basis, made starting then of has by changes of rates new that this we're sales our weaker the the performance, strategies laminate implementing we've actions. we're are constant it our we're then laminate right, we with a primarily due get the

If in look different Q, categories the will you category. in you you product and can just our the volume terms different at categories show broad in product look by

James Brunk

And laminate you'll by supported and categories did stronger business. certainly grow and Keith, a resilient also commercial wood see, the

Keith Hughes


Second do on North product importing what North numbers in you doing in import just well. think seen coming. We've LVT LVT or below is here question, you America. America? still as Do feel overall, strong I like growing or you're faster in And Mohawk, think line you're

Jeffrey Lorberbaum

number that get. all, to hard is And... of first Well,

Keith Hughes

example, If in? than are you faster it you for compare growing versus coming imports, imports are

Jeffrey Lorberbaum

shutdown. quarter in the have also Chinese first Asian to the and the We

as first the quarter, build growing But fourth in marketplace. shipped faster the people coming I up quarter in. before all inventories show in or we're it, which So think the are which fast than


Your next question JPMorgan. from comes from Michael Rehaut

Michael Rehaut

relative sales granularity third helpful. quarter high-water as specifically, thinking type seasonality anything quarter. XQ EPS just in would mark about the circle to would First, terms helpful. And additional to be wanted your of the fourth the in perspective be and be year? comments and should back for the quarter to margins I Any a we of XQ around from And

Jeffrey Lorberbaum

at few years, see take we the the and in Europe, QX happens and is third is the you And our the impacts plants in I high-water mean, sales mark. look what last that down margins go the shut that if the vacations back quarter. and which you'll

go the Christmas lower On a then people to do to because so quarter you through. typically. flooring U.S. the and always Jim, quarter the hand, don't go as up you other of little bit fourth they than vacations the want tend when offset trees anything you peak, they have it? And buy their add products businesses is as to third

James Brunk

things the first look the of at our the earlier seasonality, in pricing in we're other comps we're taking the Remember, that implementing. consider to Jeff's of inflation, Mike, account comment into the projection, half. on the you As terms pace

first half know the price year mostly volume, sales driven sales the versus of price what some where we by would we expansion of of in today. considered things the be normalization increases, expect should the the So half all second year

Jeffrey Lorberbaum

where Jim, impact just the it the FX from is. euro go over

James Brunk


euro the other cost Jeff Last approaching from our was in second the The point pointed standpoint. $X.XX. a to exposure, FX especially as year, $X.XX, quarter, out, just the the on seasonality, is euro

As fallen below you've seen recently, it's to even. to $X.XX $X.XX

our will that an results. on So have translated impact

Michael Rehaut

work and medium would a alternatives bit we was long there. on the clay the that just near around reserves as guess, clay inventory. to could there deeper your you secondly, I depleted. kind right, believe appreciate sustainable I term are heard guess very can could sustain perhaps from easily possible, if perspective. Ukrainian inventory, I of once the helpful, That's if And you just the Chris Great. could production and that have I that an used reserves mentioned into color in the term, interested little to currently I that in those explore wanted I a replacement that longer it earlier R&D comments supply, that how clay in what type you to be dive of alternatives R&D it that the understand, if be view was

Jeffrey Lorberbaum

we me the because price production we of that more we will then is had expected. price industry the was Part and give were you answer. industry Let point first of less that to faster we enabled that make in the Chris got through was quarter it because trying than expected. by than One more push detailed start to a the and

one that was point. So

said, are companies. was The than higher our other that second everybody, people, is, most that levels Chris are inventory higher had than most

and into then anything? abilities which on And of transition. did covered what's And we're also the miss easier. help people, And our advantage most year. others, the around And I as didn't going insight world through different should Chris, the our can so and have worldwide us then an it think find to chemists we their alternatives much. make we have we that swap, more us impact in

William Wellborn

uses but mostly in all at No. I'd Europe Italy, that Spain products just Michael, add end. and high clay to particular Ukrainian that, the for especially

longer is there's Ukrainian is and industry everybody transition, to so going but not And to to The the have we of for supply everybody going clay. anticipation Ukrainian clay is be, just to gives we to have that to alternatives, lose amount think time is us that and everybody the us, a going replace substitute.


ISI. next question from from comes Kim Our Evercore Stephen

Stephen Kim

move. Congratulations on a of wanted competition It outfoxed your there. like Ukrainian you I to Flooring though. North ask on America, that sounds couple questions

carpet you inventory. resi customers construction or that customers right reducing reducing just cycle lot a That's elaborate a see and that. we're to the seeing I little are First, if is could business are bit carpet on you of on that the service bottlenecks extended now a wanted mentioned inventory? improving side, Why times.

we're people industry that that max, a here. the improve. get may from think to It situation nearing not that, lot is who I homebuilding going probably follow worse most probably think

I think how might the So sales overall wondering was channel. you into just affect that the

kind you context just inventory with reducing of about if comment can into customers by an So your that outlook. put

Jeffrey Lorberbaum

customers the What due to of happened of everything in were shipments, timing our taking last could the and the year unpredictable. was fall they which before,

more warehouses order And if increased to were their availability, order it. consistent of in most they there in them supply. any put So have was to it, taking

were inventory point. able levels their same we've the require the the inventories to service back they don't so Over last almost business the pre-pandemic prior levels to where been to get months, levels was to they operate the few and

Stephen Kim

sense. Makes it. Got

I But the later fine. completions, correct that able more builders that year actually product would the the perhaps, to benefit build have That's you in offsetting if to me and be Okay. more are degree I'm somewhat to imagine that wrong. a would

Jeffrey Lorberbaum

looks like extended dependent a that all going houses dates. year year. It good to is be their on started how in that looks of many homes it's and like volume they it the build, were So there completion were last lot a

So to thing flooring be in the tends them. last

also that help. So should

Stephen Kim

Yes. I would guess.

may the other be some and flooring different fact, installation products. the from that of Speaking of how

clear will But do home move, curious, remodeling prices, I'm think, that's existing of be about that home home to a housing see thinking kind maybe is environment you associated if resilient. is stay been the sales, stronger flooring even a sales, think the might construction somebody you existing out. exposed about we where new The that to One bit more when remodeling thing thinking that invasive in of so on that of little times done a lot of I was to It's It's versus a moves stay? like like work And you easier kind remodel was to sort I was in you of this see things we've slower though of and that. room the to thing. you'd switching weird with floor, the curious slower a rate of U.S. any kind sort and do speak. you're got of houses, that ever to if

I'm thinking offsetting factors If validity any to about? there's you that not or there's if think that

Jeffrey Lorberbaum

to disruption somebody's significant a home. is Flooring

be home. when So typically, the flooring tend the people in significant that they in And there goes are do projects. to changes again, larger move,

Now Day get on done doesn't X. it all

a high which to, it, demand of X years usually X home takes a upgrade means for the So years of from there sales. period be lot when they or existing buy of it pent-up to a last home, people should really

slow don't because everybody it this existing still once the from demand remodeling all down, at the you most inclination. if have home people do sales years money to is or have last over should the that So few left

Stephen Kim

probably also Yes. then delayed well. probably contractor availability things And as

Jeffrey Lorberbaum

people is projects now to to the up part wanted was talk restricted. The other people and do about labor really

available. wasn't has been postponed don't much So know how I because the labor


from from Capital Markets. Dahl Our RBC next comes Mike question

Michael Dahl

way for Have reformulate. a rushing is the been experienced European mass and like of follow-up there is, you've But contributed It on I type some XQ? it time. kind supply, kind does of especially second much could a everyone to for is of clay to decisions targeting? is ever where and can and had Is seem part long that that And reformulation your I you line? Just your quantify How this point, situation any what it's it? for on And you time typically that that guess reformulation you advantage of kind a there's temporary since the XQ know and insight another advantage, the product take, question does your the a how results. like can on peers? quantify any perspective carry or the your of of kind you had on on this line unique time you given to

Jeffrey Lorberbaum

flatness It for before to and and test it the the thing multiple it's product it, months change because you change coming, because in usually, very then like changes anticipate alternatives. look you're takes time it have you hasn't of you to other tests make running this product. to up. happened the Usually, and this And make at you want degrees of know if affect the a you close X,XXX then quality small and

So we competitors where inventories. they're to you not if what already. option they happened they upon usually production that systematic have people And reduced depending is have changeover. their go Presently, know actually are, through a some low going method of very with

of the all month I each how long with on answer. and the one to to can't think that world, advantaged tell we Now it, different you can products them over and last to all tests worldwide categories, going it's our have views, for looking I by take that. react we and we're we're to going

William Wellborn

a for the products. just player thing, Ukrainian has most It's logistics to it company a that going for all a going if you're that to have And broad than doing change company impact it's to smaller for of have And one. for to premium. the other a is be small a high-end products, important and range clay less do harder research

Michael Dahl


global exporting to Russia. give is you are question update still you One, on Russian as Europe? have if this us you still Okay. is Russia And out? pulled so, And Russia from my point are three, product operations. operating an Jeff, at can companies then any your you Two, are why operating? second other or self-contained on

Jeffrey Lorberbaum

the by of saddened and huge really concerned a on It's we're Well, there going Russia. out, crisis. what's start let's humanitarian actions and

refugees in European supporting providing our through. Ukrainian employees. Poland Our We're as to we team go is aid

investments new spending. suspended sanctions all reduced in We're marketplace. have We've the there. following We the

Michael Dahl

longer Europe rationale is Russia staying are second to just as the there? or it self-contained there product being, And for just from exporting still and any term then all as far really point you

Jeffrey Lorberbaum

is the satisfy a business export local they're businesses, business our the up of The that markets. most very set portion to limited all like of

export So we much. don't It's good.


Our from comes question from Phil Jefferies. Ng next

Philip Ng

pocket XQ macro quarter an slow backdrop down guidance guess, little to strong really feels pretty of if new this from Is bringing later see year? trying muted ability how mode backdrop. big I you're on kind perhaps pivot looks on growth a to of we ramp capacity of to an the air consumer just can do some there the a the Congrats you a and and choppier. picture, I'm encouraging. gauge Jeff, quickly more

Jeffrey Lorberbaum

existing and/or in are on we the expanding. let's sales the areas focus of The expansion product So where capacity where sort projects is. categories of just growth are constraints have the

new of And growing our it's LVT laminate So sold and market it equal in a already it's pieces, wood. the going if an laminate you in, we the a the the sourcing are have share lot In substitute, in and as line product. business. for start and becomes up substitute expanding production. we're a The U.S., business, LVT, different look committed. we and increasing through We're

slows countertops, We're of And there. reduce quartz the our products. sourced so down, products we can plant. if we amount In importing in it oversold are U.S.

until put in But we've year. also and growing reached production, are of if as of we we through. our coming quartz businesses So end In of as can go next down reduce and capacity this it's amount it. slows LVT laminate in, the we rapidly. That's Europe, not the imports the it countertop the there

we're growing again, in it. So our share

mean, in we to able slow need we to but down, we're change plants products make slow if within So transition from finally, and spending and then mix margins. the quality the we may slabs utilized. in of for the then mix which we've Mexico, expand we've little being in pieces, the it's bit there. money expansion over been things a already specialized putting oversold and The the And products to the and we're for the be porcelain have Brazil again, more are the capacity a put ceramic year, our to it. upgrade In Europe is, need sourcing to we And in I in, oversold it. will help down and it

major either reduction. beyond are things, or in cost So product those all the pieces bringing new to market into features

use can we'll is, we've the the the whatever lot think of hear, a market decisions. we're it. all stuff we you have we made it I to or not, fast is, adjust So Whether right as sourcing hoped as or as not. And to

Philip Ng

Got positioned trade the chain then you on side share. elsewhere? about color. And the inventory carpet. ceramic kind just Can expand It North some America any dynamic of of great sounds you're of pretty That's LVT costs from drawing your that flow Are maybe And are you and of from taking whatnot? that separately, talked for seeing how like that you. in the the logistical customers on you down and then it like well you're some and supply nuances, side. sounds given some of

William Wellborn

the, just talking Well, about share in ceramic. we're on taking

pricing energy is cost, causing well growing. has import and delays freights got our You've is demand increased increasing domestic positioned and given and manufacturing and transportation, then ocean our commercial

Jeffrey Lorberbaum

logistics problems go made being because there LVT, with along that U.S. the production In is more of it. the

and thing of it's we rest your do. to I we're you the the forgot the question So positioned well truth. to tell right think there,

Philip Ng

No problem.

are about that on this you of replenished other they're your your some some because carpet the of customers any at Are down inventory in drawing products? point. of seeing talked You side,

Jeffrey Lorberbaum

Most of levels. the think the to approaching same more haven't carpet for the inventories industry the other gotten level is carpet product normalized categories, has. the We as

yet. are ones other The not quite there


Patterson Truman from from comes question next Our Research. Wolfe

Truman Patterson

line, SG&A had First, and leverage we also that good on move nice enterprise from there. hoping elaborate you going as leverage year. the sustainability you of initiatives that level, that internal can potential all the were I'm control cost forward driving an some just the really the really on through

Jeffrey Lorberbaum

let where and I'll Jim miss. fill start in I me Let

there's potential a Going volumes year, knew into and that industry the to change. we the for

into to SG&A the went spend. trying So year we optimize the

We have good everywhere. controls

products, still side control as good as and business. of but spending we're places. there, sure the to, high growing is costs of the We top and through it's don't the inflation doesn't are new putting We energy think just it material that but trying is, and same, the the the right in because is to we product. the line make the And have other we're SG&A And controls inflation. investing in the not it have that

SG&A with the general, as a inflate have you're rates. to different two that, So in going cost at lower

James Brunk

administrative side. focus forward. really continue be on We'll increase. see leverage to side is of keep the we controls trend We'll sales, sales We as percentage certainly lower on strict the And try marketing, that we gain advantage sales us the move last the continue. product Truman, expect the to to against the to the very year-over-year versus year.

Truman Patterson

I it more bit you it? lever if sounds are of Is Jeff, like that And a think good the efficiently correctly, than able volumes. Okay. heard revenue a to to pricing you way all growth

Jeffrey Lorberbaum

I think so.

James Brunk

Yes. Yes.

top doing as all growing line, So you're line the it in with volume. way the to more you're it now

Jeffrey Lorberbaum

get other normal is, with the the all top to of on margin hard one the it's Just inflation, inflation. piece too,

all on and margin So you're reverse material you the energy trend, of have inflation. the getting in of not same that normal

Truman Patterson


your to another price/cost ceramics time of now I'm had and discussed but take European European for then hoping gas you business. the to had And take step it nat some flow in was discuss your being higher. through, can going some Okay. Previously, we've pricing competitors hedged all you

you pricing Just on the traction in gas? getting natural spike hoping the offsetting it the incremental in to understand, that are European region? Is

William Wellborn

over extraordinary million. Well, it worse The $XX energy of net $XX margins the comment. is The were in at million, to adapt there anticipated quarter we million team sales and to taking The anticipated. be and to environment. higher to than had I'll impact this we inflationary just steps was $XX

I implementing So say good would really increases. we've in price job done a those

James Brunk

impact, to mix. Truman, to before QX, then parity of to be QX again, that kind improvement expect and in some be said we should closer what QX net cost energy price advantage. if is QX, And we Yes. versus that about you think from

Now has everything so energy has had risen cost we do to your more to the point, increased. pricing because,

increased, has outlook. the is in same but everything really of story the So our terms


Lovallo John from comes from UBS. question next Your

John Lovallo

just one on Russia first The again. is

that sanctions having trouble the of getting place, some and are money of Given are out you in in Russia?

Jeffrey Lorberbaum

We're think. don't money not and Russia, out I in moving of

James Brunk

itself Russia self-contained. pretty much is

flow So local supports their business. basically, their cash

John Lovallo

the But are repatriating you of any funds?

James Brunk


Jeffrey Lorberbaum

Last from had money of need out we year, Russia cash because cash we had there. we of a moved of generated lot a the that lot didn't we and

this. of So to prior out cash we took the all

John Lovallo

helpful. Okay. seeing, that any or commercial think improvement end in Are retail, office And then hospitality, That's mentioned I the some markets. those seeing on end you're of you you of the any markets? improvement

Jeffrey Lorberbaum


was still are way continued health travel, It's like by commercial those the seeing workplace all the of in improvement sectors a We're those. care and projects more retail. Across presently. we and and commercial. being initiated. starting There's things, more in see areas there the So hospitality activity lot some led be activity we postponed COVID, to starting see government, the to behind things of are in some during that

the we can we So see commercial far as continued of. improvement see side presently as in


Bosshard from Eric from next Our comes Research. Cleveland question

Eric Bosshard

and played first detail. team you what's Europe 'XX. has were expectation First half natural I you maybe position started. just ago well, you talked ceramic on you executed in difficult and this better when that turned thought nat And love of the than but would gas would rise ago? months and all, anticipated and much stayed just appreciate a a the different gas situation. materially seems out better hedged than is a months in had And of follow-up X Six than about nat some and it incrementally so improve the the price/cost better you've competitors what out gas had more ago, of an what's done has little I obviously X all months

Jeffrey Lorberbaum

disadvantaged increased marketplace and competitors, Ukrainian it with all, And to still I it more. among connecting gas. keep Let's today. our are prices the clay because has not exists see. some were we The

advantaged aggressive raising in clay which raising production, or which clay, the in reduced marketplace us, the people are made the in prices. also but We more the helped also

products cost So lowest able price the that, thought. same had we capture than push most margin at mix were And to more the time our we the addition we increase. to in have able to of were percent we up because

gave better expected. So of quality than we pushed the more products, into all results we had which us different

Eric Bosshard


consumer trending execution. volume consumer and performance really On looks the you upside a about doing stay demand start standpoint, how in pan into area translate tile the coming that demand can But the consumer your how the that's of demand could year-over-year price what standpoint, are in but side, consumer we consumer on quarters? then appreciate talk then first customer if that then is the it business. elsewhere? is changing? side, I but in in And you're growth in I demand the like was in the does appreciate the The half, and a and how Europe great demand and across from rest comparisons and there from more quarter difficult

Jeffrey Lorberbaum

through, can't is the difference and other the price between in going their us the is there which that what just what changing the possibility the inventories I of the take price it's we customer to of hope they in for really was pulled is amount the of why you channel customer increases, difficult with, some can Europe, purchases. we've announcement tell forward tell We and inventories, purchases. appreciate increase that through put to a their said

William Wellborn

that think the been low inventories have the other channel. I in the thing is

fill saw those in customers to in you inventories. going So

Eric Bosshard


the North guess, with consumer you of, America Okay. And in growth to flows terms just more Europe conviction trends then I you're year. that demand through what specifically, through then and that, broadly for outside volume seeing of

Jeffrey Lorberbaum

from the the same house. last to do. go months Typically, housing XX X flooring is into thesis takes The the have levels. it. to running thing The high We to you it build at still is anywhere

the earlier still we're home talked replacement. influence, phases. in the demand existing piece. change we said, sales like goes seeing as housing do we in good So again, in about, The it But

anything the really stopping demand coming see So which moment. the then we years, an last commercial from at business of yet continuing. part And X and the over have high, upswing, we the been existing is still don't see the homes on


Lorberbaum will call our concludes now back turn over Q&A comments. This session. for Mr. to I closing the

Jeffrey Lorberbaum

to and expand and you areas think us We're steps long confident the are the We our taking joining the for for term maximize in constrained that and term. the cover we that growing good business we appreciate position are right a good you we're we're investing product in and the thank categories, to shape. manage short We participating. and


today's conference This call. for participating. Thank everyone, concludes you,

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