Mohawk Industries, Inc.

Good morning, my name is Abigail and I will be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries' 3rd Quarter 2021 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 1 on your telephone keypad. To withdraw your question, please press the pound key. Should anyone need assistance at any time during this conference, please press star then zero and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, October 29, 2021. Thank you. I would now like to introduce Mr. James Plunk. Mr. Plunk, you may begin your conference.

Thank you, Abigail. Good morning, everyone, and welcome to Mohawk Industries' quarterly investor call. Joining me on today's call are Jeff Lohrebom, Chairman and Chief Executive Officer, and Chris Wellborn, President and Chief Operating Officer. 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 Investor section of our website. Now I'll turn the call over to Jeff for his opening remarks. Jeff?

Thank you, Jim. Our third quarter results exceeded our expectations as net sales rose 9% over the prior year to approximately $2.8 billion. Our adjusted EPS was $3.95 per share. All of our businesses performed well, managing through a changing environment. In a period, COVID directly and indirectly impacted many economies, creating supply chain difficulties that disrupted production, as well as leading the government lockdowns in Australia, New Zealand, and Malaysia that halted manufacturing and retail. Despite these and other headwinds, our third quarter sales trends continued in most regions, with Europe's results reflecting more normal summer seasonality. Home sales were robust across most geographies, and consumers continued remodeling investments at a strong pace. Year over year, the commercial sector showed improvement, though at a slower rate as COVID concerns delayed the timing of some projects. Our strategies to enhance organizational flexibility, reduce product and operational complexity, and align pricing with costs improved our results in the period. We continue to implement lean processes and reduce complexity in manufacturing and logistics. We're managing our investments in SG&A to support new products that will expand our future revenues and margins. Even with greater external constraints, we ran most of our operations at high levels, and we successfully managed many interruptions across the enterprise. Rather than improving as we expected, the availability of labor, materials, and transportation became more challenging, resulting in higher costs in the period. Tight chemical supplies, in particular, reduced the output of our LVT, carpet, laminate, and board panels. While we are presently seeing COVID cases declining in most of the regions, many of our operations experience increased absenteeism during the period, affecting our efficiencies and production. For the near term, we do not see any significant changes in these external pressures. Through the supply shortages, government regulations, and political issues, natural gas costs in Europe are presently about four times as high than they were earlier in the year. This has a temporary challenge to our European businesses as higher costs are reflected in gas, electricity, and our materials. Though our inventories increased during the period, mostly due to higher material costs and transportation delays on customer orders, our service levels remained below historical norms. Most of our businesses are carrying significant order backlogs, and we plan to run our operations at high levels during the fourth quarter to improve our service and efficiencies. Currently, some of our fastest growing products are being limited by material and capacity constraints. We have initiated additional investments to increase our production of those and increase our sales and service. Completion of those projects is being extended due to longer lead times on building materials and equipment. Our results have improved significantly during 2021 and we generated over $1.9 billion of EBITDA for the trailing 12 months. Given this and our current valuations, our board increased our stock purchase program by an additional $500 million. Since the end of the second quarter, we've bought approximately $250 million of our stock at an average price of $193 per share. With our current low leverage, we have the capital to pursue additional investments and acquisitions to expand our sales and profitability. Jim will now review our third quarter financials.