Mohawk Industries (MHK) 27 Oct 232023 Q3 Earnings call transcript

Good morning, everyone. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries Third Quarter 2023 Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, October 27, 2023. Thank you.

to like now would introduce Mr. I Brunk. James Mr. you begin conference. your Brunk, may

Good Thank to morning, Mohawk Jamie. Industries Welcome Call. everyone. you, Conference Quarterly Investor

me Wellborn, are Executive Joining Officer. call Chairman today's Chief and Jeff Officer; and President Lorberbaum, Chris Chief Operating and on

on Private that update third company's as and make that but our defined for press Act forth XXXX, to, the and and you Reform in provide I'd Securities risks Commission. like during Securities quarter of the release of we set Exchange may which Litigation various statements fourth our to and release quarter those Today, XXXX. with periodic in press and are include not this subject to our uncertainties, guidance the we'll filings performance the remind including limited forward-looking call everyone statements

call numbers. include discussion This of non-GAAP may

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

turn to now call over his Jeff the opening I'll remarks. for

Thanks, a pressures the X.X% due X.X% industry expectations continued billion, our or $X.X regions, as all investments basis, reported net discretionary down on our Jim. as sales to consumer third and line with constrained spending. approximately legacy faced in our tightening In primarily residential and across constant were quarter, of

cost EPS Our from and quarter productivity reductions, margins benefiting was for business initiatives the input across adjusted $X.XX, with the our lower costs.

vacations impacted Europe, the sales seasonally third reduced by quarter. earnings in prior quarter was performance Our versus and which our

offset in the both decline price Our mix. lower material energy and costs and

income operating of EPS. faced on FX headwinds or on also million We $XX $X.XX approximately

the year-to-date and of generated and basis. $XXX $XXX capital million working million free strong our a managing cash are on flow quarter in We

Their rates commercial new world both are central continue and actions residential in and banks to affecting channels, inflation. reduce around interest on projects. postponing During the down construction new remodeling their quarter, and economies slow raise to the spending

than are large X result energy in decades, to at and in rates flooring renovation consumers a the as In costs, housing market such the home which have limited and deferring mortgage highest suppressed purchases climbed Ukraine. war higher inflation the Europe, the due uncertainty has more of level as U.S., In activity.

greater that flooring than these faces purchases pressures are impact most from sectors, given a deferrable. other industry Our

the produce as With required fixed industry costs their to attempt competition maximize and to absorption. increases to high participants the flooring, sales slows increase

As and prices and a mix material declined, average partially result, selling benefit process the restructuring offset by costs, with have impact and improvements. lower our energy

recovery will Italy, million position, our a extrusion older in million production we new is we shut managing our rigid promotions charge ceramic process. expenses. housing operating expected further and are the competitive actions initiatives construction differentiated and of restructuring and To result results optimize The approximately $XX nonrecurring enhance of in sector managing production converting while the until expanded collections, selectively in occurs. launched it We've are continues our and be to cash to and direct business to flow will These a to participation margins U.S. taking which we postponed, noncash. volumes channel. $XX down our increase introduced We're LVT

initiatives these should enhancing completed, manufacturing optimizing our and our profitability annually million by productivity, production our When by lowering improve our costs $XX flexibility.

in slabs and expansions insulation and currently European Our porcelain are operation.

of should Our second European laminate to U.S. LVT U.S. half production premium and laminate the are 'XX. in begin continuing in Expanded up. countertop and start projects quartz

company's in and we operational while product and enhancing the of Mexico Brazil base. the administrative efficiencies As have management, the our integration consolidated and offering, sales general acquisitions customer functions proceeds,

from September, companies these the top quality ranked gaining has Scope the Report Institutional we our and of margins, time, markets repairable our Mohawk as While for X emissions. are Services the anticipate durable Shareholder Brazilian goods In in environmental first experiencing as for category. the recover. Sustainability XXth and provided and benefits Mexican markets we released demand and we reduced Annual additional acquisitions one

significantly have exceeded related to waste XX goals We water decarbonization, our reduction conservation. and

We're green production the product recently Award our decades breast content, Susan expanding our lowering G. Komen energy footprint using circularity. of and We by the increasing and our more our recycled Promise cancer. partnership fight for against X received carbon

We've mohawksustainability.com. also diversity. more, online our part Directors' Board formalized commitment of report as can the selection to the at ongoing you learn of read policy To

quarter the turn Jim review for financial call I'll third a of over to our performance.

Higher inflation Sales our a housing decrease price continued remodeling lower global were quarter just for mix X.X% and with new billion. constant and $X.X pressures. as the X.X% activity, interest basis. under Thank Jeff. business has volume It's and weakened you, rates impacting a legacy and reported, on negatively

unfavorable quarter, offset for detailed Gross was by input was excluding will the reported in these we and exceeding be onetime items XX.X%. MD&A prior points XXX it FX. with file The productivity, call. partially amounts XX-Q, lower as actual the unfavorable the quarter of and up That's after items, our the and with along margin stronger and in of lower volume costs included price the basis versus XX% which only energy will mix year

SG&A was of sales percentage XX.X% a as as reported.

businesses, FX Excluding onetime and marketing future inflation. it increased and of drive XX.X%. was unfavorable was higher investments sales, increase attributable in primarily new to dollar the to items, The acquired impact products

X.X%, a along rates goodwill discount was noncash goodwill and charges, million LVT Total name negative enhance in the resulted the competitive down older nonrecurring will in impairment shut as process. we economic $XXX production margin the converting our impairment and market challenging But the excluding U.S. charges position, our The with was trade higher Italy and ceramic trade addition, and it reported, production in in and a current of as rigid direct quarter. names. a further company's to was charge extrusion primarily conditions operating capitalization, $XXX million, XX.X% to to related of

unfavorable by by the to noted. as was productivity year-over-year impact the under FX, price and approximately exceeding gains, X.X%, driven profitability which were operating actions utilization. input should These decline and improve increased I offset in by The our primarily energy Adjusted million costs, lower partially due mix volume sales negative reduction plant pressure and annually. was $XX and of income lower

for $XX a due in expense income, other was the was of to current year Interest million. Other Non-GAAP XX.X% the increase year-over-year the rise is expense [indiscernible]. $X significant rate global XX.X% income million, quarter in interest in was tax versus prior year. the

XX.X% XX.X% an We share XXXX expect gives be us per tax an basis to on of rate adjusted $X.XX. approximately to QX earnings that

the businesses Turning from in our operating reported a year The the addition impact prior on unfavorable income was X% on Adjusted FX, $XX volume to new quarter. of and and and improving to sales, commercial pressure outperformed expanded and partially In of global just restructuring decrease shutdowns, were as a channel productivity segments. decline a legacy sales volume demand led construction in slowdown X.X% benefiting million Ceramic, or offset gains position the X% the sales constant to by Global basis. in U.S. That's $X.X billion. further under price/mix versus as lower in temporary and actions.

America, spending North and income to X.X%. and our as operating costs volume $XXX Adjusted sales reported offset Flooring offset XX.X% and assets in of inflation as a That's across interest due decrease by basis on demand was operating a pressure continue year negative of margin rates current million. In over discretionary XX.X% to just product energy in or $XX higher weaker million constant and all our was prior price/mix, productivity channels. lower underutilization as the environment. line input partially with plant The lower were

basis, over business $XXX and were Rest just confidence, low of sales and and World, inflation Zealand our as reported our been as consumer environment. products decrease this million. The a has rates, New best the Australia constant the held and in impacted higher Flooring on up interest in events. business geopolitical In X.X% a resilient insulation That's and by X%

operating was $XX or million Adjusted income XX.X%.

costs $XX prior versus price eliminations expanded by the temporary the than and partially shutdowns in as weakening with margin Flooring year for of to in prior unfavorable the line offset all benefits energy FX. prior were income fewer the operating plant energy offset year. adjusted the addition and million America, Corporate lower similar North to quarter, year, mix green input Our

Cash excluding management Receivables basis. DSO were $XXX Driven the in free sheet. the and cost. a focused the quarter. impact to XX primarily balance million our and of equivalents $X.X in and lower acquisitions, year. with decreased $X.X year-to-date cash due the $XXX strong over grew by for supported the prior with the days, standing a working line just flow just quarter of cash third which $XXX Inventories our million in billion, a million, to $XXX reduction units year-over-year year-over-year million, was decrease inventory was billion, to the capital, by of on Turning at over were million $XXX were

just Inventory and days million billion, was million. in CapEx XXXX of days over Property, forecast prior with year. also Full $XXX decreased $XXX to XXX at shy of point. days from a at QX just $XXX million year with XXX plant D&A $X.X this the of includes CapEx standing equipment

today. to that are billion the EBITDA. leverage rebound adjusted downturn advantage at full debt with experiencing And gross the was positions we X.Xx $X.X take finally, This a business like historically of follows

to Now to over it operational our with Chris turn review I'll QX that, performance.

sales construction was business due we and Thanks, introductions positions slower and Residential postponed channels. projects. due in home to expanded to service this, outperformed In our levels. our our and remodeling Global home product With new Jim. Ceramic, lower higher innovative the commercial

Our mosaics investments imported in new polishing and premium ceramic. are providing to alternatives technology, decorating domestic

further regional as more kitchen utilizing coordinated tile greater stylized To collections. retailers are countertop are with that value. sales expand new and we technologies as introducing builders to expanding sales, countertop our quartz our provide our well bath We and collections

product plants costs our lowered regional have distribution our We more and from bypassing our directly shipping warehouses. by

new concentrated, channels, construction greater industry Europe, more business, volume business pressure. where Across economies and we by channel being price ceramic low retail our gas align Natural with XX% Southern the by all European and competition, from reset traffic pricing and our our geography In have are sales. energy In creating to is is affected have to uncertainty. by and peak, specific are economic additional are prices declined costs. responding promotions their gain with we intense under

have continue optimizing across porcelain of grow, and expansion. to types, declined premium most While volumes are slabs product sales recent our capacity our we

and inventory To have conditions. changing costs, market and increased alternative production continue formulations. with adjust align We to overhead contain to productivity, reduced implemented we

cost our slower, reduced In have markets, to Latin being competitive structures affected. we less adapt Mexico more with America, to

by Inflation are in to further rates industry is beginning Brazil impacted in year. expected pricing, costs. Our margins lower banks are central and this energy with and by receding, Mexico reductions partially lower being response offset both declining interest

portfolio. product countries commitments customer gaining and To to synergies. We are product sales, price integrating our channels and using acquisitions in sales progress we increase expand in making executing all are distribution, significant the manufacturing and both our points our combined across

we legacy the our country, to broaden offering. our utilizing each assets are and In product of acquisitions business

have energy Brazil completed Mexico outperform information other operational systems further World, enabling end margins consolidation declines of Rest to and and increased in costs, in Sheet system demand. mix. categories as the our the have cost Flooring will We a be by year, partially and continues improvements. meet benefited the we of In by lower in conversion raw alternative, and from the offset lower the higher production provides vinyl material to price it completed

higher operational our increased vinyl acquisition delivering European sales. improvements style With sheet products underway, and Eastern is

introducing under pressure promotions in and and market, products, select the we Our merchandising are volumes. and are sales optimize laminate softer to LVT new

is flexible the the to restructuring to from impacting offering executed our positively our conversion results. residential which support have We rigid cores, of LVT

We sales, conditions. aligning and manage are demand cost current to the additional with flooring production pursuing reducing

volumes. business and a are affecting sales in Lower decline panels industrial demand. selling remodeling both projects and construction due our prices industry to has Our slowed activity,

also are are of from and we're Our declining, HPL benefiting growing improved green as customer production. higher-margin base material costs collections energy our and Sales productivity our expands.

and operational are mezzanine both and in synergies sales progressing Board our Our acquisitions.

positioned volume business is invest our energy for governments longer-term in construction other consumers greater businesses minimize and require the for as In to impacted the pricing new were with line input new cost declined quarter, by Our has our less Insulation and regional with product Industry remodeling. caused year. growth is our margins as their improved than and insulation plants costs. coming energy with conservation third prior categories online. along variation

In down industry the during Australia quarter, were and New sales in countries slowed the and both slightly. Zealand, our

are in maintain channels our budgets. by introducing to options impacted and mix as we sought the targeted the fiber of and were pressure demand. elevating lower-cost To consumers collections residential sales market across flooring their categories, increase protect promotions project results our products to high-end evolving enhanced meet margins, implementing Our

larger secure and strong, our New helping projects. specified is remained offering Commercial broad Zealand sales product in us

costs, In in product continue and our increased both pressure The additional and impact and expand was invest lower systems. input our productivity mix Flooring North offset categories, America categories. segment, flooring all by were To all results partially competition on pricing products our presence under in across initiatives. as to retail merchandising we restructuring

We our material and we many segment, regional efficiencies in with reduce construction channel Across maximize and utilization. cost, increasing home projects are the participation the national new improve to are builders. implementing

We reengineering and increasing alternative recycled are products content. with materials

completed We costs and of with restructuring to current our many initiatives conditions. lower our better have align

In residential provides consumer. premium mix, the our for more to superior our carpet features discerning improve which styling are expanding and we collections

For our increasing polyester homeowners, the offering. value-conscious environmentally are we recycled friendly

non-woven the flooring customer of integration completed and relationships. have our We their acquisition expanding are

continue perform vinyl sheet a collections budget-oriented our to choice well as resilient, consumers. preferred In for

friendly resilient quarter, In core LVT customer to were sales a environmentally orders, introduced we and actions products, imported is that alternatives. U.S. our higher-cost and PVC-based scratch-resistant. Customs satisfy to alternative an disrupted third we substituted more new the As polymer by

in an in improve LVT We fourth anticipate service. increase to inventories quarter the

continuing up ramp are in quarter. LVT We the our and both substantially to in the Georgia. anticipate be extrusion first We new will operational production projects process Coast West

us in In addition, the will we are features and to to market. technology introduce unique these styling enable the proprietary plants implementing

expanding builder are of We in and our the distribution retail laminate channels.

being collections superior widely flooring alternative as visuals. are with more RevWood Our waterproof accepted

Our laminate visuals product well have received at price accessible points. been consumers seek new premium launches as

are a to in selective improve promotions volumes We market. soft offering

channels. we commercial U.S. patented slowed holding activity our by business the up is difficult, Our as financing all our the in across as products quarter broaden residential, trim commercial and of Though stair more became than range performance the accessories is growing hospitality led sector. better

with content options collections and performance industry-leading and Our superior design recycled architects designers. product provides carbon-neutral to

acoustics, installation. Our specifier rapid its of is EcoFlex and to ease technology community the adoption ONE carpet in due gaining tile comfort

recent of are accessories expanding We our our through and existing distribution flooring partners. the commercial sales acquisition

relationships Our service real with to and health advantages and business senior new cultivate development retail, group product living customers. development has leveraged care, our major estate

to I'll remarks. call the return Jeff closing his for

downturn, geographies, are is managing sales in remodeling projects and resulting home the inflation utilize all rates offset market lower restricting industry persistent and adjusting present investments business our regional impact, the of plant while pressures the business conditions. elevated In we spending, to reduce as consumer postponed Chris. of should costs in aspects interest In Thanks, are and of controllable to our discretionary new are Competition all beginning commercial Similar to markets purchases. declines. capacity for sentiment increasing our input

sales and improve to while merchandising best-performing and in while our promotions with expenses. volumes are enhanced cost selective margins products expenses expanded we reductions participation and restructuring the lower productivity, enterprise, our implementing our the operating and initiatives results. Across managing maximizing channels and our

optimize We our continue working management to our to manage flow. cash capital

rates exchange We expect foreign headwind. be an continue to to earnings

and $XXX, our fourth EPS these between $XXX nonrecurring charges. Given anticipate factors, we be excluding quarter to adjusted any

undergoes postponable troughs than greater building the to due this, industry its flooring products With nature. exceed full peaks XXXX cyclical other EPS should year Historically, adjusted $X. our and

remain benefit demand the from pent-up will when strong and rebounds. industry Our business significant fundamentals

than aging planning term. who responded Given U.S. more indicated renovation XX% to survey, they the housing recent in of near stock, the JPMorgan are projects homeowners

outlook addition, trailing as demand, new economic years activity will years come. after will the for In Commercial construction many expand homebuilding be of improves. substantial to required

opportunities. these Mohawk the capitalize is to As positioned provider, on largest flooring well world's

glad be we'll Now questions. to answer your

from Instructions] Barclays. question from Our first today Matthew [Operator comes Bouley

But and hear on to actually misheard you you anticipate perhaps decline out into how the price/mix price/mix early any thoughts I I guess in I versus input me Did cost reduction if quarter? 'XX play XQ there? correctly during correct do costs the in exceeded the that that.

frame that. let me Yes, Matt. you, Thank

weaker So it $XXX P&L. months be the material the XX-Q. numbers gradually XXXX, falling price/mix also X takes to here late some started usually energy QX, provide and to totaled flow X led through by offsetting cost in million, of $XXX Lower I'll our in and million. cost In will our and that

$XX Now through costs anticipate $XX cost In of fourth the million. quarter, should declined would P&L. lower flow the continue million, price/mix sequentially, the we to exceeding lower

Got it.

natural bit zooming down extreme you from secondly, last it's a gas higher it's creeping year, levels more European in the you Europe market maybe there clearly I little like seems certainly, Then Super mentioned have seems and natural now the costs Okay. but ceramic know into helpful. come mentioned specifically. again, a and gas like quite that competitive. a

So playing how European market, do ceramic? anticipate in that specifically you price cost and out

in responding our We're We're gas older last we restructuring initiating utilization. premium for to definitely lot. and cost to actions business improve levels the and that a and also line. how slabs correct we're it continues But a with grow, construction. out, the new come see we'll the down and face retail then have promotions, And to lot you're with Well, just to has and pressure also new to declining assets conditions cost optimizing than Europe, have continue traffic is slab eliminate our lower gas year.

from next comes Our Lovallo UBS. question from John

up costs following the the consider I And Matt ceramic there segment? of should specifically. then in on input more outside there seasonality curious, anything just declines fourth there? Did material that as move price/mix by Is in there. the I'm margins segments quarter, quarter? across we how should the about into and think about we guess, Maybe we lower normal offset global

Flooring third and cost through, hitting World, Well, in the some flowing in the the that and complete material kind as energy of Flooring is P&L the has quarter, North global lower the higher offset should and quarter. still it America Rest price/mix ceramic material of

Got outside any margin normal we the in consider then factors on should it. seasonality? of And quarter fourth

No.

and rates obviously, spending it due expected interest Margins constrained elevated and shutdowns. higher and inflation. home have be to slows still we quarter, than fourth holidays. with the seasonally postponed pressure remodeling last are the year We Remember, to greater pricing with at increased look discretionary purchases. you anticipate If

to We do reductions noted, cost will the and continue lower forget, foreign we costs, implement I productivity input don't and to be continuing a in and anticipate headwind as quarter. anticipate be should we exchange,

later sorry, you in margins higher to that's In the we sorry. up leverage -- quarter it this I'm The pick quarter, the volumes right. got as not quarter. the

CapEx should as around pretty particular Is $XXX I timing? there in follow-up, good is million going the $XXX fourth quarter. the in then implies year just that anything in that Or million And we think, step-up, full Okay. on a there consider? a

It's really between quarter XXXX. of in and timing as end you terms -- XXXX XXXX the

investing to then about, the continues we've future that talked investments budget be innovation to optimizing on the in of acquisitions. focus of reductions, Our $XXX with making be product And million cost the balance of growth the the another million million. $XXX $XXX for business that CapEx up would and maintenance that really year

comes next Deutsche Joe question Bank. Ahlersmeyer Our from from

A have yours couple early into assumptions U.S. markets some of next residential of offered peers end year. on

I on maybe a within balance. assessment year it let's well. relatively be is, do And for that? might North You America take market flat Question about And to next the aside segments. that simplicity, talk for with that sources second could residential call just across be? agree might And your the the markets guess, outlook flattish and and of international a upside you that what the as just downside commercial

'XX. improve and year actually and as these since start of consumer the has to going a confidence to will industry see get flooring occur, an that the financing we're industry mid inflation we improvement improves. When moderates [indiscernible] the We look middle in believe been will better. We downturn in think

And volume a the it determine depending see how we then the versus where the when improvement with basically year. upon occurs, are strong this we is of half as we as year. go So what through we'll first continuation

Jeff. Appreciate that. helpful, very That's

'XX, your share, bought late So a stretch From buying you there's it $XXX. maybe of follow-up a where $XXX billion seemingly early stock, there 'XX back around even at a in you're $X.X to here.

position, had stopped one, this your maturities was investing it not CapEx the know on much. you But health some changed competitive and having back You buying were of several there. the there and And softened, on in about last March. especially in category, flow you're now calls you I talking cash

the is stock buying So just seemingly how hesitancy of stock your the right reconcile today sentiment that might incremental an buyer investor who the now? with back around

At world. of economic the a conditions in the affect difficult. that financing still moment, The there's are can There's conflicts uncertainty everything. regional lot still

and improves that believe at continuing the having So where preferred, our buying review but we it visibility consider stock would is capacity is moment, excess as to from today. it we're

comes Maklari question next from Our from Susan Sachs. Goldman

Jeff, building maybe question. Joe's off just of

into think excess the you new But in As company-specific of the improve about some for and the what that year. those think the do can the around capacity. Mohawk? year how remarks in layered I the you over 'XX, efforts how about middle you're they mentioned and to of know that you go you with could in market you think 'XX products cutting detailed will be your mean cost course and going

Let's look will go SG&A the see, we through higher the [indiscernible] overhead and we the all improves, improve. business when it, as as productivity volumes we'll leverage

products. in up and We that expand, as buying the restructuring and benefits that also We'll start selling expect customers occurs. with come will through better takeouts the improvements all average from prices margins see trading

compressed. our the then add ability addition, investments performance. will acquisitions come up we we and done to will multiple of will in this. And the them volume recently. expect And Those to been we help finally, significantly sales we've out Those as our have -- in areas also the growth also have come

through the we thing, see as improves. whole significantly the So business we as expanding think the margins

as newer that especially the you've then a in some that, taking markets turn year. better part for these of markets, maybe Okay. That's is hopefully bit And color. some next macro of helpful your the of a mentioned of

is that or we thinking to opportunities As and categories, next the X.X should that think or you you over about years those be the of so? some those areas interesting anything about in

this Latin further. more look the than and cycle, world rates at rest they the If of in actually aggressively you raised America

Mexico think we So this rate and rates we're actually starting Brazil, lower be year. see to there significant and in even could decreases to them starting

they held others. little better out up environment may to margins a come on to less Business to happen. difficult Australia hold able what's marketplace, know things, is competitive in in than There's for has Europe really us. earlier we've this to better. the and those been going of So a

The help they've and the got worker to consumer going it's Europe, United and and different higher it much more confidence remains something so covered inflation than to average increases, than we low move States take the do.

really it's issue confidence So a in Europe.

Our Kim comes from from next Evercore. question Stephen

color drive embedded also business is said clearly the were in drive And far. release you've market this both tough lot Susan. cost up, given a all today, your rather of gets you've pretty better, factors try may with and to I challenges that way Appreciate you've how so important in is coming you got be quarters changes the and cyclical. what talking their Jeff, that. a just out Right your reduce press laid business all the it broadly, in as drive over More your that you've cyclicality about your and think from everything are business the to in you deliberately that to fixed all now, question leverage pricing longer my on haul? then to competitors

things. based we our move our industry, Well, And are things. and is part to capital minimize then other is we including -- fixed how -- the the company really cyclicality is One up the interest at to high costs these competitors, tend these and rates. sensitive trying two to down, the on

stay you're it. it's if industry, part the think going of to in I

in it other Now costs insulation up doesn't have instance, in, we're as the it. margins things fixed in we're much Europe, much business the that are better like hold getting less, for the -- and to

we're that So differently categories in we today. business different and act different

are remember, canceled. And are deferred. purchases are that not These these

the see great Jeff over being building as in a term. with said need aging the mid- feel we to we're you demand. housing So housing, that in longer position pent-up the like the remarks, of just a and prepared stock And behind for

we lose X years improvements for after this been X that don't later. back For pent-up -- thing for hasn't the it. remodeling and for It is done, just housing, first houses demand the over, or comes

Yes. doubt. There's on way. a certainly somewhat no rebound that longer-term agree I there's the

to But that, talked a you getting Joe timing -- the else. was you I about were think so the maybe U.S. or asking somebody of And with think I it about rebound

I first next looking you're think bracing you tough to year, by materialize. -- a you half it's going for for midyear, said you're one, think

you're carry relatively curious you are actually -- leads say levels demand Let's materialize your to mid-year. strong how start I rebounds. it as run higher planning inventory of your service soon being inventory levels? to of does by levels something right, to think and that as I'm as

And Do you whether sort think year levels, that going U.S. the inventories to or in of you're maybe and is Europe service LatAm. to strong around turn? normal provide U.S. anticipation similarly the And the try beyond inventory particularly to view allow I'm maybe curious to, such let's midyear carry we see as next of planning higher say, you you beginning at XQ? and wanting may to is then a also, be could to of yourself build inventories where just broaden your in

and part. to the the based first ability is other our on respond. in is The Let's start with levels the two market what things. is One inventory are

at probably have Given already that solve react think in to as upside to the utilize rates goes we capacity And capacity it the we're it won't the low and presently, to it to satisfy coming. then volume inventory significant have so ability we it see a until build it up. to we have we we much we

America possible trail little regions, and will different out to America have in side, little the U.S. this of Europe middle Latin that pick, evolves. first. I come If Latin come would Europe see out it is U.S. this I the think to may other the had a guess how we'll earlier, [indiscernible] the later may Europe but it of maybe hard And a then On to I know.

the bad. thing question times one actions and good us and on Stephen, is help cost then which restructuring as And structure, your part of that well, that taking, lower we're in our lower original does to permanently

Truist. Keith next Our from comes from question Hughes

rigid what of the you take how to your direct direct savings that, of and Question more it's a LVT on do terms production, the expansion change to bit little conversion? Can cost about in your going to kind your talk extrusion. in long

our is Keith, presently also will plants, than executed. and flexibility we us million and of technology provide savings Georgia that products styling to the features East both the $XX changes these when new give We're installing will to plants to being converted production both rigid unique Yes, from lower in direct more West annually our extrusion have ship and it's will more costs. and

change is LVT this rigid this to this method? a of production partial all conversion? your will And Or

No, changed it be will this. all to

this just more efficiency And it? how get at the Or Okay. do same time? you savings from the does drive

Well, from technology formulation a We the just in start-up lower heated to for a changing and cost this should and QX. an be phase. currently in is operational substantially process we're press allows extrusion

Phil comes question next Jefferies. Our from Ng from

Energy Are prices bottom. broadly? And the somewhat different some of to any I upward pressure we more you your still here? see [indiscernible]. off costs started you are on business to in stabilize look have kind forward? price/mix there have kind respective oil as of your starting it's input your seeing bounced Or know tied pressure

a think can we'll we that there's at point answer also costs is, have the is see. probably as bottomed, if different this the have One it ways. chance as to but we bottomed Let's material well a see few good pricing maybe

also is it and of prices energy up, supply the As oil go cost the demand. basic and but

to going time different for it's categories flow the how it low take the that than given sure chemicals, longer industry demand not using and a actually through this may to flow I'm the normal. little through of So

as their in the the it costs then chemicals increase through. to through of occurs, it goes as when to have margins goes is and have Usually, recover pass out And recession, the we we happens up that come demand happens. the as what

Okay. few questions That's then on And helpful. a more LVT.

those With the from next on all investment How standpoint this American and quality think stack we does up Asia? North how side year, And versus with at your you're coming and LVT extrusion coming early a still out manufacturing product versus imports business neutral, year things? making a is stack now Mexicali online standpoint flooring, a headwind? from of the and point it about does cost accretive, your up should margin early next

products all, the are of to high the the -- imports. first definitely at -- out coming especially that see going competitive end, be we going in with with think we're we're me Let new to LVT

The with well from freight the as pricing as both has lower prices costs. lower material substantially import declined

Our down U.S. given have also still from China, like different costs disruptions pieces. going things coming manufacture [indiscernible] the We the on are with U.S. service it. other

of our year, next improve. and business margins so the expect the we expand, And profitability to should

That's resilient friendly superior also well. And introduced doing polymer a resistance. that's we new environmentally really core scratch with

Okay.

the And a just so as at from because capacity? does China. in Is your friction, How up not still coming goes it of or that from importing imports ramp good terms mentioned the in of position some from guy directly this domestic day, the on end you Asia. cost of up you Mohawk especially broadly Asia, you're maybe

also imports getting we combination that here as you through fall, material do. both, with here we're the the We're the as of The fall lower costs also. crisis cost the suspect, cost energy getting would lower

other has same the the the come with down pricing competition lower time. volumes at increased On the and hand,

next comes Michael Our question from JPMorgan. from Rehaut

just to versa? on maybe This press release. us your have is vice in concerns or appreciate guys in out Mike. for any even wanted will that I significantly more prices a from pricing fall shouting markets particular that standpoint, [indiscernible] ask, I you maybe for you

of the Most all markets we're markets in, the -- pricing has the declined.

down that combination unabsorbed down, a the materials industry. You we've coming of about cost the and is overhead of have coming the the price the energy talked

going it question go has at we the be whether speak. bottom down industry industry that So pricing occurs, forward, that may or the the the think pressure at think The the as to there'll we but -- supply we'll and when base, the And And to we usually it material or not, is is, things after does. as from be improve improves that's bottom it today? come once react increase it down. our the prices

react events world gas the That we time, have and how that anybody's is At have oil just one and to everything. affects with the same to it. you guess,

maybe costs how has aligned any of input been on declines quarter? next you in And And prices? next to further guess quickly energy I energy costs, terms pricing into lower year? any and sequential thoughts are seeing

fourth to versus the Well, again, positive energy year, total a flow-through from a should quarter lower the price/mix. the to in That's from impact see the and perspective. we P&L the of the costs material prior offsetting continue year-over-year

Baumgarten comes from Zelman. next question from Adam Our

me. for one Just

America Just wondering positive will a industry on the if going [indiscernible] an carpet discounts the you payment of impact forward? terms and Flooring the removal of segment some historically North as guys have had

within little and margins upon terms helped has has a some it depending you of the the where are, The it changed bit. industry

of have line did. And push in didn't some we customers staying increase -- an are we other to through with like many try in We our cases. the guys

we're within to our trying to position the So improve customers. use it

Research comes Our Kathryn Thompson from next Thompson from Group. question

commercial you less We pipeline this resi-focused space, on traded [indiscernible] less trade you end fast news. retail? relatively a more news Just have in North looked better terms early What are and bad performing end forward done of that had news stocks office to some bad certain And shift week, what business the your in And also business market. manufacturer less seeing to up year, at then the traditional better on markets than your with commercial-focused focus commercial relatively commercial end this you towards focusing you bad this on year. the of in your market? America are in

Commercial business residential is business. better the holding up than

the categories. is which new predicts softening We are marketplace coming parts the different in online declines. ABI index showing in The seeing

half the year in as starts other softening commercial the year and a later, to typically projects a So recessions, as up. finish a commercial

starting we're So that. see to

the a in our hospitality, more differentiated the different so in it you much hand, emphasizing categories. is care, are senior more in product pricing all other resilient doing is residential have we're better Government those. the the and offering, business restaurants, On commercial, than in participation

look what it adjust. like we're to having Okay. importantly, not we're getting listen, canceled, a to for and does -- understanding to was but just Yes. And helpful are extent, full non-res. it something timing saying, some we're of understanding between projects now that industry you. difference but going shift who forward? ship mix It starting I being was better a able Because, residential have just postponed, contacts really mix instance, to the see but of for

One other follow-up question.

logic keeping months, As from made industrial is it efforts various and global restructuring the footprint a long-term for you of to a manage argument the the trailing is as currently? footprint back what charges. stepping for XX the business to you rightsize going as look lot standpoint, your But obviously the have forward? What's make operations at picture over and past having global the bigger

with the we we allows ceramic, our order as the The have the global the knowledge world. what other participate in and footprint concepts distribution in do lead businesses we are business. help the to same and we low. to flows the have ones It to high, medium us mix the used us in us it through down the such -- then The it high different and that that ones product design, to to of in allows and innovation, increase styling optimize distribution can businesses, categories across businesses leverage

their into, maximize we residential, can commercial can help business. In help they're to different in businesses we strong -- them if show we how get

out we systems. of other categories and benefit information that processes, warehouses have the distribution, running just We get

can help that you So there's to synergies of do a acquired lot the businesses.

comes Patterson Truman next from Research. Wolfe Our from question

perhaps quarter quarter First, help guide. decline. you seasonal that hoping a worse I'm could just mentioned categories, Brazil, really normal versus the buckets EPS cetera, Australia, but whenever I'm stability, then believe looking you high will? that you're at also, are worse there to us et some sequentially level, the XQ, it guidance than from bit that fourth I pricing, where the any areas, if And seeing led throughout discuss implies product a got you

a ground. lot of You covered

can I if [indiscernible]. see Let's

inflation and that the remodeling rates the difficult spending with it's the home and elevated in So constraining starting it's our the assumptions more postponing and out period. purchases, are are interest

seasonality, You're being holidays and control also need planned and given inventories time ahead, so more where there's the period. the of manufacturing in for the of the lack in more there's shutdowns the

greater capital. on We to pressure be The pressure this in less are were, quarter but versus than the higher fourth third are in going the increasing think the assuming covering year-over-year commercial margins we absorbed and still quarter. there's they as the implementing then the and third that a inventories and happening what We're it's are productivity in our similar expect overhead we foreign was exchange, quarter. present headwind control assumptions and reductions, the working with cost we

Yes.

talking about. gap that that you're sequentially, So

foreign QX. bit mid-XX% a little guidance. And in If our back bit over implied certainly may headwinds little are are from additional and you've two that exchange It's this prior years. you a year than say the forward, to time XXXX look more QX the got I'd shutdowns difference be from unusual and

we fourth in the normally pull is Another normal in difference be of the quarter quarter. building out the third inventory the and then quarter, of would back down years, the we end of as start come the

not year. we're happen So doing -- this that didn't

prior of And wanted follow kind Okay. then up on just question. a to

mentioned well balance current generating repurchase share into You M&A, in I year. that you any $X.X I'm how might of Jeff, And of product with think cash hoping geographies price, for step today. or in debt, M&A manageable. of you it repurchases? potential pretty categories just earlier valuation lot as of a seems not all balance billion this might that flow have been your perhaps lieu share discuss share you own could as focus your you

First, out. we and before we've in integrating we we Brazil X get taking M&A, the have Mexico, acquisitions done costs which recent into the new and are

bolt-on being with We have X or business. X that put the are also acquisitions together

of significant come volumes should those All upside go up and businesses. us up give the we as the in

see which alternatives other soon stock out the we'll business gives to arise. significant about consider with all value and another not the future, purchase as problem of this make today through. we And the of that come opportunity, as then in looks correct we going there's you're what the worldwide that that's events as occur sure have versus we go allows the like to we on to As that

more attractive another deals current are Asked your those than desk, across M&A way, your flowing valuation any for Mohawk? valuations

try don't The -- any businesses sell and companies most have to are to their sell this valuations, that don't seriously many don't do that ones in environment options distressed these as only tend businesses. are

Laura from Capital. comes question Loop Champine next Our from

Ukraine. is that hit in you plans Russian a information out called on Can the the on business give Europe negative year? release that? your us to from more the What You material are your impact for in And business? this press earnings conflict

following But Well, our sanctions. to -- adjust conditions. answer to Russia, maximize leveraging market. to our in We're market and We're to distribution to strategies we're the is in also all no that. be our more sales difficult styling the the adjusting [indiscernible] these

all the businesses Remember, less than are that's business. Russian together Russia -- -- X% is of than less our

comes from question Eric Bosshard Cleveland next Research. from Our

things. Two

what business bottom First you've in being improvement then 'XX. now and curious just the in I'm middle those Jeff, both this potential of of of seeing the thoughts? that a all, you're price about the of talked supports

First is believe, the we and pricing costs are decreases costs, are material material the bottom. following the

we more So forward. falling significantly other then believe the going pricing from what change was will the the part And that question? of

back half then and about for you're business was 'XX. first the The comment similar to [indiscernible]? seeing second path in the the today being in What part half the the today improvement of

continue, guess believe assumption have We're the the I the more crystal a that, present we line After you sight the have anything the first of we ball dynamics quarter. is we happen. on that do. going given than circumstances in making into could any don't world, that

back other year, have that you there's that What we're you'll people of argument the but see in kind and again, an of half can said get strengthening going well. some come numerous way quoting the there out is the as

[indiscernible]. it's really So

that And I'm future business? there component then Is the other component a of Or secondly, to catalyst the there reduced some goodwill are of just relates explain of that [indiscernible]? this write-off, that the this. earnings is curious or dynamics for

on business, side, in capitalization, our higher the macro impacted then you rates, with the negatively market all it reduced a that's our the market volatility Remember, required. inflation, was triggered deterioration the the it internal which that impairment the conditions stock goodwill through that interest an starts compared Eric, and segments. charge review go quarter, in of really across the price noncash it's the to and

you details that's after the to for see XX-Q There filed will the be call. in more

comes question Rafe Bank America. Our next of from from Jadrosich

what start of is segments? pull ask to to wanted I seeing thing in first capacity, add just of in you the other competitors the back competition to are continuing foreign seeing industry particularly Or terms are Are So you any any the you U.S.? in capacity? seeing

the taken the Across out capacity the some else year, of have in categories, And marketplace. the been in What some increases U.S. of different the there places. was capacity over been have question? past there pieces industry LVT of all in different rest the

any there competitors any reducing like seeing on capacity Is manufacturers domestic you the capacity the capacity open incremental in Are foreign are the of categories investments carpet or any And U.S.? there? hardwood? then of

plants. slightly Well, underutilized, in that the say, United generally, just to comment new added I capacity in couple on ceramic, there the have But have that's been States is a in would ceramic.

And excess is the XX% -- imported. about XX% probably of ceramic in one,

situation find which some companies are some there levels same the Would been here, of some the be ways to to here industry. he's capacity of trying opened optimize about. some capacities to their service from up have are have other similar opening there's product LVT and where the they in So categories, out talking taken capacity [indiscernible] of foreign the

outlook, new the those versus you're Okay. single That's on just to construction just you And us multifamily your it. can And segments? remind Got X helpful. family? what exposure between then seeing then

of don't of the in our sure front think, I front I me. of me new the building, have is XX% multifamily numbers have those XX%, piece. The not in I I'm of construction home around number business.

break out. that. We have usually number that quoted. included the Jeff new that We in don't of construction kind don't We

number or as as number it's we new remodeling forward. go replaced the it gets in in the construction either It's

between have relatively the And compared based seems pretty see significant difference saying It the construction that is side? now see it meaningful some outlook of next kind -- is year. and it could what there to you like multifamily? on multifamily we Or declines. probably pretty are homebuilders rise Is single-family any looks single-family? soft, we'll is like multifamily Do there on the still small single-family, margin exposure

construction. use is the typically products lower-quality home typically single-family lower. Multifamily in They

they they are few to where more home every over hand, be other the be the XX-year depends it On cycle. could typically, it, years the a where building tenants multifamily replaced on X- after gets replaced could frequently in much change new and

a the big replacement into difference as each. So there's in products as going well of quality the cycle

we in Flooring earlier, ceramic expanding said new in construction America presence channels well. U.S. we've the commercial and As see North also as in and an

Our relationship with the builders is stronger.

and years be that you There the of thing one haven't X.X category mentioned, go the starts X.X a and number that product coming, finished to in. huge to finish. is through other is coming last been of the minimum years multifamily projects our multifamily, are new The typical yet, takes the are but could

Yes.

commercial, to has it tail long a to similar completed. So be

it. Got

It's there's So helpful. backlog there. still a very

over gentlemen, question-and-answer time, session. turn closing concluding to remarks. to Mr. And this like today's Lorberbaum ladies be the we'll back and for floor at I'd

the controllable managing that we've been discussing. We're costs

we to see continue volatile. to you joining significant which when day. upside great We Have a market that and well us. occur. We the react returns positioning are think changing appreciate conditions, we're market ourselves for to We

And call. that, conference presentation. thank ladies for today's and We with attending you gentlemen, conclude today's we'll

You may now disconnect your lines.