Mohawk Industries, Inc.

Good day, and welcome to the Mohawk Industries Incorporated fourth quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to James Brunk. Please go ahead.

Thank you, Jason. Good morning, everyone, and welcome to Mohawk Industries quarterly investor call. Joining me on today's call are Jeff Lowerbaum, 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 performance and provide guidance for the first quarter of 2023. 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 in press release in the investor section of our website. I'll now turn over the call to Jeff for his opening remarks. Jeff?

Thank you, Jim. For the full year of 22, Mohawk's net sales were $11.7 billion, up approximately 4.8% as reported, or 8.8% on a constant basis. And our adjusted EPS for the year was $12.85. The flooring industry entered 22 with momentum from strong housing markets supported by record home sales, low interest rates, and rising household formations. High home equity levels Shifts to larger homes and the desire to customize living spaces during the pandemic were driving remodeling investments. As the year progressed, the U.S. housing market declined under pressure from rising interest rates and inflation. In Europe, energy and overall inflation escalated, and consumers reduced discretionary spending to pay for essentials. In the first half of the year, the company implemented pricing actions and production strategies that offset the inflation we incurred. With reduced home sales and remodeling in the second half of the year, our flooring volumes decreased. Our pricing did not cover material and energy inflation. Throughout the year, commercial and new construction and remodeling activity outperformed residential. Even with the housing industry slowing during the second half of the year, we concluded 22 with a strong balance sheet low net debt leverage of 1.3 times EBITDA, and available liquidity of approximately $1.8 billion to manage the current environment and optimize our long-term results. We acquired five bolt-on businesses during the year that extend the scope of our product offering and our distribution. These include sheet vinyl, mezzanine flooring, and wood veneer plants in Europe, a nonwoven flooring manufacturer, and a flooring accessories company in the U.S., When we complete the integration of these acquisitions, we will expand their sales opportunities, enhance their operations, and improve their efficiencies. We've just acquired Elizabeth in Brazil and are awaiting regulatory approval to close Vitramex in Mexico, both of which will almost double our local market positions in ceramics, expand our customer base and product offering, and improve our manufacturing capabilities. The teams are preparing to integrate the businesses, which will create significant sales and operational synergy. Turning to the fourth quarter results, Mohawk net sales were $2.7 billion, down 4% as reported, or approximately 1.3% on a constant basis, and our adjusted EPS was $1.32. Our revenues were driven by price increases and strengthened commercial channels. Our sales across all our businesses were slower than we expected in the quarter as residential sales contracted with rising interest rates, declining home sales, and lower consumer confidence. As a consequence, our customers lowered their inventory levels and consumers reduced their spending for renovation. Unlike other products, flooring does not require immediate replacement, so purchases can be deferred more than other durable goods. Commercial sales continued stronger than residential in the quarter, benefiting from ongoing remodeling and new construction projects. In the quarter, our global ceramic segment outperformed the others due to a higher level of commercial and new construction sales. Our flooring rest of the world segment softened as higher inflation and energy costs reduced demand in Europe. Our flooring North America segment sales declined with lower residential activity and a reduction in customer inventory levels. The combination of weakening sales, plant shutdowns, and the consumption of higher-cost inventory decreased the segment's performance for the quarter. In response, we reduced production rates and lowered our inventory, which increased unabsorbed overhead expenses. We curtailed spending across the enterprise, though inflation offset many of our initiatives. In both Florida and North America, as well as flooring the rest of the world, we're taking restructuring actions in specific areas to align our operations with the present market conditions. During the quarter, energy and material costs around the world began to decline, which would positively affect our future results. While we're managing the present economic cycle, we're operating with a long-term perspective and expanding capacities in areas where we have the greatest growth potential when markets rebound. These include LVT, laminate, quartz countertops, porcelain slabs, and insulation. We have reduced our planned capital spending until we see greater certainty in our markets around the world. We recently announced an agreement to resolve the securities class action lawsuit filed in January 2020. Though we believe the case is without merit, further litigation would be burdensome and expensive. We reached a settlement of $60 million, a significant portion of which will be covered by insurance and is subject to court approval. We also settled the dispute with the Belgian tax authority regarding royalty income. Though we believe our position is correct, we settled the $187 million assessment for 3 million euros. I'll turn the call over to Jim for a review of our fourth quarter financial performance.