Mohawk Industries, Inc.

Good morning, everyone, and welcome to the Mohawk Industries second quarter 2024 earnings conference call. All participants will be in a 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. To ask a question, you may press star and then one on your touchtone telephones. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to James Brunk. Please go ahead.

Thank you, Jamie. Good morning, everyone. 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 second quarter performance and provide guidance for the third quarter of 2024. 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. Thanks, Jim.

Our second quarter performance reflected our focus on the controllable factors of our business, including sales initiatives, cost containment, and restructuring actions. Our net sales for the quarter were $2.8 billion, down 5.1% compared to last year. our adjusted earnings per share were $3, up 9% year over year, as a result of productivity initiatives and restructuring, as well as lower energy and material costs, partially offset by market pressures on pricing and mix and foreign exchange headwinds. We generated free cash flow of approximately $142 million during the quarter, for a total of $239 million year to date. In a quarter, we purchased 755,000 shares, or 1.2% of our stock, for approximately $90 million. We remain optimistic about the future of our business and confident that in time our worldwide markets will recover. Our second quarter results exceeded our expectations despite soft market conditions around the globe. The commercial channel continues to outperform residential, although some softness in the category is occurring. While the long-term demand for our products is strong, residential purchases across our geographies remains weak. During the quarter, the actions we've taken to improve volumes in many product categories helped us, though the gains were offset by consumers trading down in competitive pricing. Residential remodeling is under the greatest pressure as consumers defer large discretionary purchases due to inflation and uncertainties about the future. In addition, flooring remodeling is significantly influenced by housing turnover rates, which remain suppressed due to elevated mortgage rates, high home prices, and the locked-in effect on homeowners. To reduce costs and align our business with current conditions, we're initiating additional restructuring actions across all our segments that will generate annualized savings of approximately $100 million, of which $20 to $25 million will be recognized this year. The cash cost of these actions is about $40 million, with a total cost of approximately $130 million. The execution timelines will vary by project, with some extending throughout 2025 and into 26. In our global ceramic segment, we will optimize manufacturing by idling some less productive operations and aligning production to increase efficiency. We'll consolidate regional warehouses, further reduce product complexity and leverage technology to lower administrative costs. We'll rationalize some of our Flooring North America manufacturing to enhance plant utilization, retire less efficient equipment, and simplify our offering. And Flooring the rest of the world will lower our administrative and operating costs, streamline our product portfolio and distribution, and decommission inefficient assets. These actions will complement our previous restructuring initiatives that will reduce costs by approximately $60 million in 2024. Along with these, our teams are implementing many measures to manage current conditions, including enhancing sales opportunities, increasing productivity, and managing our overhead and working capital. Economists had anticipated that the Federal Reserve would lower rates this year to stimulate the U.S. housing sector. While central banks and some of our markets have already begun to reduce rates, the Fed has indicated it intends to wait until inflation and economic activity sufficiently slow before taking actions. After the U.S. Consumer Price Index dropped in June, many are predicting a September rate cut. If the Fed begins to lower rates at that time, we anticipate our industry should benefit next year as pent-up consumer demand increases flooring purchases. In April, US Today once again named Mohawk one of America's climate leaders, given our reduction in greenhouse gas emissions over the past four years. On July 16th, we published our 15th annual sustainability report, which can be found online at mohawksustainability.com. Now, Jim will review our financial performance for the second quarter.