Mohawk Industries, Inc.

Good morning, my name is Lori and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries fourth quarter 2021 conference call. At this time, 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 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, February 11, 2022. Thank you. I would now like to introduce Mr. James Brunk. Mr. Brunk, you may begin your conference.

Thank you, Lori. Good morning, everyone, and welcome to Mohawk Industries Quarterly Investor Conference Call. Joining me on today's call are Jeff Loribond, Chairman and Chief Executive Officer, and Chris Wellborn, President and Chief Operating Officer. Today, we'll update you on the company's fourth quarter and full year 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 reconciliation of any non-GAAP to GAAP amounts, please refer to our form 8 and press release in the investor section of our website. With that, I'll turn the call over to Jeff for his opening remarks. Jeff?

Thank you, Jim. For the full year, Mohawk's business improved significantly. In 2021, net sales grew more than 17%, as reported, versus the prior year to $11.2 billion, and our operating margins rose dramatically to approximately 12%. Our 2021 adjusted operating income approached $1.4 billion, with adjusted EBITDA exceeding $1.9 billion. In addition, versus our 2019 pre-pandemic results, we also achieved 12% organic sales growth and improved our adjusted margins by 270 basis points. We ended the year with a historically strong balance sheet, and during the fourth quarter, we purchased approximately 2.4 million additional shares of stock for a total of approximately 4.9 million shares purchased during the full year. In February, the Board of Directors approved an additional authorization for share repurchases of $500 million based on our confidence in the company's strength and to enhance shareholder return. All of our segments performed well and responded effectively to the complexities that occurred during the year. Throughout 21, our regions benefited from strong housing markets supported by rising home prices, favorable interest rates, and accelerated home purchases by millennials. Changing lifestyles encourage shifts from rental to owned property, movement to larger homes, and remodeling upgrades to adapt to work and school at home. Among home improvement projects, new flooring is one of the most frequent upgrades. All of our product categories have benefited from this trend, which is projected to continue throughout 2022. The commercial sector continued its improvement over the prior year, but has not yet reached pre-pandemic levels. While we thought COVID would be behind us in 2021, the pandemic continued to impact our markets to varying degrees throughout the year. Surges in some countries kept people voluntarily at home, and government restrictions in other regions temporarily hindered our operations and customers. We continued to maintain precautions in our facilities to mitigate risk to our employees. Moving forward, we will benefit from bolt-on acquisitions we completed in 21. These include an MDF manufacturer in France and an Irish insulation company, which will be accreted to earnings in 2022. When integrated, they will enhance our present operations, expand our markets, and reduce our costs. Our performance in 2021 illustrated the fundamental strength of our business as we maximize our results in strong market conditions, as well as those where the pandemic impacted our industry. We delivered product innovation around the world, leveraged our logistics strength as a competitive advantage, and executed multiple price increases to pass through material, energy, and transportation inflation across all products and geographies. We managed labor shortages with enhanced training, process improvements, and strategic automation were possible. We creatively addressed material supply shortages through product reengineering, skew rationalization, and improved production planning. The negative impact from inflation, supply chain disruptions, and labor shortages, along with a stronger U.S. dollar, increased as the year progressed. Sales in the fourth quarter remained strong. rising 4.5% as reported or approximately 12% on a constant currency and day basis to approximately 2.8 billion with a return to more normal seasonality for the industry and 6% fewer days in a period compared to the prior year. Our adjusted EPS for the quarter was $2.95 per share with benefits from price mix and productivity offset by increased inflation and lower volume from fewer days in a period. As raw material, energy, and other costs continued to rise, we implemented price increases in most products during the quarter. European natural gas prices have been the most volatile, substantially increasing our energy costs as well as material costs, and we have raised our selling prices significantly. We ran our operations at high levels through the end of the year in an effort to improve inventory. Those staffing, material supply, and transportation challenges impacted our costs. Outside the U.S., government restrictions on business operations in some regions lowered retail sales during the quarter. Commercial sales improved in the quarter, even with some deferral of projects due to COVID and government actions. During the fourth quarter, we released our annual Environmental Sustainability and Governance Report. The report showcases how Mohawk is fostering innovative products that lay the foundation for healthier, more inspiring spaces where people live and work. We also highlight how we're maintaining a safe, respectful workplace, reducing and repurposing waste, and conserving natural resources. The entire document is available on our website. Jim will now review our fourth quarter and full year financials.