Mohawk Industries, Inc.

Good morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries fourth 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 assistance during the conference, please press star zero and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, February 14, 2020. Thank you. I would now like to introduce Mr. Ken Hielskamp. You may begin your conference.

Thank you. Good morning, everyone, and welcome to the Mohawk Industries Quarterly Investor Conference Call. Today we'll update you on the company's results for the fourth quarter of 2019 and the full year, as well as provide guidance for the first quarter of this year. 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 Securities 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 the periodic filings with the Securities and Exchange Commission. This call may include a discussion of non-GAAP numbers. For a reconciliation of any non-GAAP to GAAP amounts, please refer to our Form 8K and the press release in the investor section of our website. The key speakers today are Jeff Loeberbaum, Chairman and Chief Executive Officer, Chris Wellborn, Chief Operating Officer, and Glenn Landau, Chief Financial Officer. I will now turn the call over to Jeff for his opening remarks. Jeff?

Thank you, Ken. Our fourth quarter adjusted results were as we expected. with sales flat to last year, operating income of $205 million, or 8.4% of sales, and EPS of $2.25. For the year, our sales were $10 billion, adjusted operating income was $938 million, or 9.4% of sales, and EPS was $10.04. Our cash generation remains strong, with operating and free cash flow for the quarter of about $440 million and $300 million. For the year operating in free cash flow, we're about $1.4 billion and $870 million. Our leverage is approaching historical lows, which provides us the flexibility to pursue additional opportunities. In the period, we bought back approximately $23 million of stock for a total of $375 million since authorized. As we anticipated, our business remained challenged by soft demand greater competition, and reduced production volume. In the U.S., markets continue to be influenced by the strong dollar and the impact of LVT on other product categories. Consumer confidence remains high, and lower U.S. interest rates are positively influencing new and existing home sales. U.S. tariffs on clickable LVT from China were ascended in the fourth quarter, and market pricing has declined for these products. Imports of ceramic tile from China dropped off substantially in the fourth quarter, and shipments from other countries have not offset, which we believe is due to soft demand and a reduction in US ceramic inventories. Competition has increased in our global markets, impacting our pricing and mix as we leverage higher investments in sales and marketing to drive growth. Many countries where we operate are stimulating their economies with lower interest rates to encourage greater consumer spending and economic growth this year. In the near term, we still anticipate continued pressure in our markets and product categories. Throughout the period, we implemented changes to increase sales and reduce costs. We've enhanced our LVT manufacturing in the US and Europe and realigned our US carpet operations. We have decreased our ceramic production and inventories that are taking out a wood flooring plant in the United States and in Europe. We are reducing the complexity of our operations, improving processes to reduce costs, and increasing automation to improve efficiencies. We continue to improve the productivity and volume of our new LVT, US countertop, Russian sheet vinyl, and European carpet tile investments. Our acquisitions in Australia and Brazil are installing state-of-the-art equipment that will expand their product portfolios. We're introducing new design and performance innovations to enhance our market position and broaden our customer base. To promote both new and existing products, we're making higher levels of sales and marketing investments. For a view of our financial performance during the period, I'll turn the call over to Glenn.