Mohawk Industries, Inc.

My name is Kelly, and I will be your conference moderator today. At this time, I would like to welcome everyone to the Mohawk industry second quarter 2019 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, please press the pound key. Should anyone need any assistance during the call, please press star then zero and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, July 26, 2019. Thank you. I would now like to introduce Ken Hilskamp, Investor Relations Vice President. You may begin your conference.

Thank you. Good morning, everyone, and welcome to Mohawk Industries' quarterly investor conference call. Today... We'll update you on the company's results for the second quarter of 2019 and provide guidance for the third quarter. I'd like to remind everyone that our press release and statements that we make during this call may include forward-looking statements, as defined by the Private Security Litigation Reform Act of 1995, which are subject to various risks and uncertainties, including, but not limited to, those set forth in our press release and our periodic filings with the Securities and Exchange Commission. This call may include discussions of non-GAAP numbers. For a reconciliation of any non-GAAP to GAAP amounts, please refer to our Form 8K and press release in the Investors section of our website. The key speakers today are Jeff Lorberbaum, Chairman and Chief Executive Officer, Chris Wellborn, Chief Operating Officer, and Glenn Landau, Chief Financial Officer. I'll now turn the call over to Jeff for his opening remarks.

Jeff. Thank you, Ken. In the second quarter, our business delivered results at the high end of our guidance. Our sales were $2.6 billion, up slightly as reported, and up 2.4% on a constant basis. Our adjusted operating income was $277 million, or 10.7% of sales. The U.S. dollar strengthened compared to the prior year, reducing our translated results for the quarter by approximately $9 million. Most markets we operate in remain soft and with pressure on volume and pricing. We anticipate the environment to remain difficult. In the U.S., housing sales remain below last year's levels, impacting flooring demand in our largest market. LVT continued to grow significantly, affecting our other product categories. Many of our other geographic markets softened with their economies, reducing flooring sales and increasing pricing pressure from excess capacity. In Europe, political and Brexit concerns slowed the economic growth. Australia was further impacted by a housing bubble. The Russian economy has softened and Brazil has slowed due to political uncertainties. The Mexican ceramic industry is growing despite a slowing local economy. Given these uncertainties, we're taking actions to improve our business. We are streamlining our operations, consolidating facilities, and taking out higher-cost assets. We are reducing production to control inventory levels, introducing new product categories, and increasing promotions to address changing markets. We are reducing overhead structures and controlling investments. We've benefited in the period from lower material costs, offset by labor and energy costs that continue to rise. To recover inflation, we implemented many price increases in the first half of the year, though much of the benefit has been offset by mix and competitive pressures. We're improving our administrative costs while investing in sales support, new products, and entering new geographies. Our LVT manufacturing has improved significantly with increased speeds, efficiencies, and yields in both rigid and flexible products. As our LVT process has improved, we're initiating trials on new features to enhance our differentiation. We will implement additional process enhancements this year as we further improve our outputs. While managing these challenges, we're enhancing the long-term value of the business. The utilization of our new investments in U.S., Europe, and Russia is increasing as we broaden our product offering, expand our customer base, and add shifts to increase production. The critical integration of our acquisitions in Australia, New Zealand, and Brazil has largely been executed. Our management teams there are focused on improving our market position, offerings, and cost structure. In each acquisition, we are progressing with new investments to enhance our capabilities and introduce new products. These acquisitions are contributing to our results as we build a foundation for growth and margin expansions. The margins of our greenfield projects will increase over time as our sales, production, and mix improve and costs decline. For the specifics on the period, I'll turn the costs over to Chris Welber.