Mohawk Industries, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Mohawk Industries fourth quarter 2020 conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press start, then the number one on your telephone keypad. Please be advised that today's conference is being recorded today, February 12th, 2021. If you require operator assistance, press start and zero. I would now like to hand the conference over to Mr. Frank Boykin. Please go ahead, sir.

Thank you, Holly. Good morning, everyone, and welcome to Mohawk Industries' quarterly investor conference call. Today, we'll update you on the company's fourth 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 in press release in the investor section of our website. Jim Brunk is joining Jeff Chris and me on today's call. Jim has been our corporate controller since 2009 and was recently announced as my successor. He will officially assume responsibility as Mohawk CFO effective April 1st and will be providing our financial results on today's call. I'll now turn the call over to Jeff for his opening remarks. Jeff?

Thank you, Frank. First, I want to congratulate Jim on his new position. I've worked with him for more than 10 years and look forward to Jim further enhancing our business strategies and results in his new role. We had a very strong first quarter and delivered record sales of $2.6 billion, an increase of 9% as reported, with adjusted operating earnings and EPS of $305 million and $3.54. The business was stronger than we had anticipated, with residential markets outperforming around the globe. Our free cash flow for the fourth quarter was about $248 million after capital investments of $160 million. For the year, we generated a record cash flow of more than $1.3 billion. In the first half of last year, our industry was under enormous stress as the pandemic spread, and we responded to the disruption by minimizing costs, lowering inventory levels, initiating restructuring actions, and reinforcing our liquidity. In the second half, the residential flooring demand recovered significantly faster than expected as people spent more time at home. Meanwhile, commercial flooring demand remains depressed due to business investments being postponed or canceled. Our inventory levels decreased in the second and third periods as sales strengthened and production was limited by capacity, workforce absenteeism, and labor shortages. SG&A investments and promotional activities were curtailed during the year to improve our margins. The pandemic created substantial differences between our segments due to varying restrictions, stimulus, consumer responses, and our ability to raise production levels. Our revenues and operating income rebounded and surpassed the prior year for both the fourth quarter and the second half. Our fourth quarter results exceeded our expectations as we posted our highest-ever quarterly sales, even with increasing COVID cases around the world. All of our markets saw strengthening residential purchases with laminate, LVT, and sheet vinyl outperforming other flooring categories. Our residential performance was partially offset by a weak commercial market in the regions where we have more significant business in that channel. Our results were improved by higher volumes restructuring and greater leverage on costs while being adversely affected by lower production runs in inventory, absenteeism and labor shortages in some operations. We're also seeing greater inflationary pressures in many product categories and we're increasing prices to recover. Our flooring rest of the world segment continue to outperform with significant sales growth, higher operating leverage and improved productivity. The segment delivered further improvements in LVT production and cost, which enhanced our performance in the period. Our global ceramic and Flooring North America segments also improved, although both experienced a greater impact from commercial headwinds. Through the fourth quarter, we achieved about $50 million of the projected $100 to $110 million in anticipated savings from our restructuring initiatives. we continue to assess some projects based on changing market conditions. After paying off our short-term debt and pre-funding our longer-term maturities in the second quarter, our net debt leverage is at historical low. Our strong financial position gives us flexibility to pursue additional opportunities, including internal investments, acquisitions, and stock purchases. Since the third quarter, we've acquired approximately one million shares of our stock for $130 million as part of our share repurchase plan. Since the pandemic began, our organization has been protecting one another and supporting our customers around the world. We are mitigating the spread of COVID utilizing best practices while testing and tracking employees with potential contacts. I'll now turn the call over to Jim.