Mohawk Industries Inc. (NYSE:MHK) Q4 2018 Earnings Conference Call Transcript

Feb 08, 2019 • 11:00 am ET


Mohawk Industries Inc. (NYSE:MHK) Q4 2018 Earnings Conference Call Transcript


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Good morning. My name is Natalia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Fourth Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded today Friday, February 8, 2019. Thank you.

I would now like to introduce Mr. Frank Boykin. Mr. Boykin, you may begin your conference.

Frank H. Boykin

Thank you, Natalia. Good morning everyone and welcome to Mohawk Industries quarterly investor conference call. Today we'll update you on the Company's results for the fourth quarter of 2018 and provide guidance for the first quarter of 2019.

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. You can refer to our Form 8-K and press release in the Investor Information section of our website for a reconciliation of any non-GAAP to GAAP amounts.

I'll now turn the call over to Jeff Lorberbaum, Mohawk's Chairman and Chief Executive Officer. Jeff?

Jeffrey S. Lorberbaum

Thank you, Frank. After five consecutive years of record earnings, 2018 proved more difficult than we anticipated with inflation increasing dramatically, luxury vinyl tile impacting other US flooring products and most of our markets slowing. In this environment, we selectively invested approximately $1.5 billion to enhance our long-term performance, primarily in new product categories and geographies with greenfield projects and acquisitions, cost saving initiatives and buying back shares.

Our industry has faced periods with volatile costs and shifts in consumer preferences before and we have always navigated through them to emerge stronger and a more competitive position. And 2018 inflation in the US was primarily driven by increasing material costs, escalating transportation and energy costs and constrained chemical supply. The tight US labor market increased employee turnover which impacted both efficiencies and training costs. Our ability to offset these pressures was hindered by continuous inflation, more competitive imports due to a stronger dollar and substitution of LVT for other alternatives.

In the US, LVT is taking share from other flooring and it will become a significantly larger part of our portfolio. Our LVT manufacturing and import strategies are progressing and our margins will improve in the future. In the US and Europe we are adding more talent to our LVT operations to increase our production, efficiency and differentiation in 2019. While we are managing through these conditions, we are enhancing the long-term value of our business. In 2018, we acquired leading flooring companies in Australia, New Zealand and Brazil. And in Europe, two flooring distributors and a specialized mezzanine