Mohawk Industries, Inc.

Good morning. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries third quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers depart, there will be a question and answer period. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. To withdraw your question, please press the pound key. Should anyone need assistance at any time during the conference, please press star, then zero, and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, October 30, 2020. Thank you. I would now like to introduce Mr. Frank Boykin. Mr. Frank Boykin, you may begin your conference.

Thank you, Megan. Good morning, everyone, and welcome to Mohawk Industries' quarterly investor conference call. Today, we'll update you on the company's third quarter results. 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 in 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 our periodic filings with the Securities and Exchange Commission. This call may include discussion 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. In addition to Jeff and Chris, joining us today on this call is Jim Brunk, our corporate controller. As we previously disclosed, we received subpoenas from the Department of Justice and the Securities and Exchange Commission related to allegations in a class action lawsuit filed against us. With the assistance of outside legal counsel, our audit committee completed a thorough internal investigation into these allegations of wrongdoing and concluded that they are without merit. We are cooperating fully with the ongoing governmental investigations and will continue to vigorously defend against the lawsuit, which we do not believe has merit. I'll now turn the call over to Jeff for his opening remarks.

Jeff? Thank you, Frank. Our third quarter results significantly exceeded our expectations with sales recovering and operating income substantially increasing from last year's levels. Under continued pandemic conditions, people all over the world are spending more time in their homes and working remotely. Globally, this trend increased investments in home remodeling as well as driving new home purchases. All of our businesses and geographies were stronger due to higher demand and customers increasing inventory in our distribution channels. Flooring rest of the world delivered the strongest results in the quarter, as our Northern European, Russian, and Australian businesses were less impacted by the pandemic. Our global ceramic and flooring North America segments also improved substantially, while being more affected by COVID and postponed commercial projects. Our laminate, LVT, and sheet vinyl outperformed our other categories, and our new plants improved their output and efficiencies. Fluctuations in worldwide exchange rates negatively impacted our EBIT by about $7 million, with declines in most currencies offsetting the strengthening euro. During the period, demand for our products exceeded our production, and inventory declined by about $80 million as we ramped up plants across the world. Our increase in manufacturing in the period was limited by challenges with hiring, training, and capacity. To cover higher operating material logistics costs, we've announced selective price increases in some markets and product categories. We've made significant progress on our previously announced restructuring actions, and are in line with our planned schedule and savings. Though in response to higher demand levels, we have postponed some restructuring projects while we assess future conditions. Our businesses responded to the COVID crisis as our focus has remained on keeping our employees safe. Throughout our offices, operations, and distribution systems, we've implemented procedures that exceed the public health guidelines. We're tracking all identified cases, testing all contacts, and successfully containing the spread within our operations. Throughout the pandemic, our people have collaborated to protect each other and support our customers around the world. Even with our improved performance in the period, our visibility of the future remains very limited. As COVID cases increase, governments may expand restrictions on commerce and reduce stimulus activities. In addition, future consumer spending is uncertain. Business investments remain low, and inventory growth in the channels could change. We continue to monitor health information and market trends to respond to the evolving conditions in our market. In the second quarter, we took advantage of the favorable rate environment to pay off $1.1 billion of short-term debt and pre-fund our future long-term maturities. In the third quarter, We generated about $530 million of cash, bringing our cash balance to $1.2 billion at the end of the period. We will pursue additional investment opportunities, including internal growth, acquisitions, and stock purchases as the pandemic and economies improve. We believe our stock represents an attractive investment, and our Board of Directors recently approved a plan to repurchase $500 million of the company's stock. I'll turn the call over to Frank for a view of our third quarter financials.