Mohawk Industries, Inc.

Good morning, my name is Charlotte, and I will be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries' first quarter 2022 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 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, April 29, 2022. Thank you. I would now like to introduce Mr. James Brunk. Mr. Brunk, you may begin your conference.

Thank you, Charlotte. Good morning, everyone, and welcome to Mohawk Industries' quarterly investor call. Joining me on today's call are Jeff Lohrbaum, Chairman and Chief Executive Officer, and Chris Wellborn, President and Chief Operating Officer. Today, we'll update you on the company's first quarter performance and provide guidance for the second quarter. 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 8K 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.

Mark's performance in the first quarter exceeded our expectations. Sales in the quarter rose to an all-time record of $3 billion, up 13% as reported, or approximately 17% on a constant currency and days basis. Our sales momentum continued from the fourth quarter, reflecting higher pricing, growth in our ceramic businesses, an improving commercial sector, and benefit from our small acquisitions. Our operating income exceeded our forecast as strength in the global ceramic business offset rising European energy costs, improved operational efficiencies, enhanced flooring North America's results, and our management of European market pressures benefited flooring rest of the world. During the quarter, we ran our operations at high levels in most markets to address order backlogs and replenish inventories. During the past year, rapid cost escalations have required multiple pricing actions to pass through. We've implemented these unprecedented increases across our markets and have also announced additional increases across the businesses as inflation continues to rise. We're also controlling SG&A spending, enhancing operational efficiencies, and introducing new features. Labor shortages persist, requiring enhanced training programs and process improvements to minimize impacts. Supply chain issues continue through the quarter, impacting specific products and markets. We manage material shortages by reengineering products, streamlining our SKUs, and improving production planning. Market conditions for flooring remain favorable, even as governments raise interest rates to combat inflation. Employment is at high levels, and wages are increasing in most of our markets. Millions of millennials in their late 20s and early 30s are forming households and desire home ownership. Unlike past cycles, US home housing inventory is historically low. More single family homes are under construction, and the home deficit will take years to align supply with demand. New residential construction will continue at high levels, and delayed 2021 home construction will increase flooring purchases this year. Remodeling should remain strong, supported by rising home equity and buyers of existing homes completing long-term projects they've initiated over the past few years. Aging housing stock and changing needs of those working from home also expand property updates. We continue to introduce differentiated products that inspire remodeling projects as families customize recently acquired homes. Commercial new construction and remodeling continues to strengthen as business conditions improve and projects that were delayed due to COVID are initiated. Our commercial products create inviting environments for businesses, and we're deploying appealing new collections to capture pent-up commercial demand. In some markets, Our growth in the quarter was limited by inventory and production constraints. We are executing multiple expansion projects so that we can satisfy demand for our higher growth products, create innovative new features, and improve operational efficiencies. The categories that we are expanding include U.S. laminate, LVT, and quartz countertops, European laminate, high-end porcelain slabs, and specialty products, and ceramic tile in Brazil and Mexico. Our recent bolt-on acquisitions in Europe are enhancing our growing insulation and panels businesses. Sales of products remain strong, and our design and features are bringing to the market give us competitive advantages in all price points. Against the background of geopolitical tensions and rising inflation, HAWC has continued to deliver sales growth generate strong cash flow, and maintain historically low leverage. Given the undervaluation of our stock relative to our earnings, our board approved an additional 500 million share repurchase program in February. We acquired 2.1 million shares during the first quarter for a total of $307 million. Since the start of 2020, we've acquired 8.5 million shares, representing 12% of the outstanding balance reflecting our confidence in Mohawk's long-term growth and profitability. Our strong balance sheet provides many alternatives for investments, including product extensions, geographic expansion, acquisitions, and further stock buybacks. Since becoming a public company, Mohawk has completed many transformational and bolt-on acquisitions, and we continue to explore additional options. Finally, I'm pleased that Jerry Burris has joined our board of directors. Jerry is the president and CEO of Midwest Can Company, and he brings unique strengths in business strategy and operations to our board. Now, Jim will cover our first quarter financial results in more detail.