Good morning. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries third quarter 2021 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, 29th October 2021. Thank you. I would now like to introduce Mr. James Brunk. Mr. Brunk, you may begin your conference. Thank you, Abigail. Good morning, everyone, and welcome to Mohawk Industries quarterly investor call. Joining me on today's call are Jeff Lorberbaum, Chairman and Chief Executive Officer, and Chris Wellborn, President and Chief Operating Officer. Today, we'll update you on the company's third quarter 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 a reconciliation of any non-GAAP to GAAP amounts, please refer to our Form 8-K and press release in the Investor section of our website. Now I'll turn the call over to Jeff for his opening remarks. Jeff? Thank you, Jim. Our third quarter results exceeded our expectations as net sales rose 9% over the prior year to approximately $2.8 billion. Our adjusted EPS was $3.95 per share. All of our businesses performed well, managing through a changing environment. In the period, COVID directly and indirectly impacted many economies, creating supply chain difficulties that disrupted production, as well as leading to government lockdowns in Australia, New Zealand, and Malaysia that halted manufacturing and retail. Despite these and other headwinds, our third quarter sales trends continued in most regions, with Europe's results reflecting more normal summer seasonality. Home sales were robust across most geographies, and consumers continued remodeling investments at a strong pace. Year-over-year, the commercial sector showed improvement, though at a slower rate as COVID concerns delayed the timing of some projects. Our strategies to enhance organizational flexibility, reduce product and operational complexity, and align pricing with costs improved our results in the period. We continue to implement lean processes and reduce complexity in manufacturing and logistics. We're managing our investments in SG&A to support new products that will expand our future revenues and margins. Even with greater external constraints, we ran most of our operations at high levels, and we successfully managed many interruptions across the enterprise. Rather than improving as we expected, the availability of labor, materials, and transportation became more challenging, resulting in higher costs in the period. Tight chemical supplies, in particular, reduced the output of our LVT, carpet, laminate, and board panels. While we are presently seeing COVID cases declining in most of the regions, many of our operations experienced increased absenteeism during the period, affecting our efficiencies and production. For the near term, we do not see any significant changes in these external pressures. Due to supply shortages, government regulations, and political issues, natural gas costs in Europe are presently about four times as high as they were earlier in the year. This adds a temporary challenge to our European businesses as higher costs are reflected in gas, electricity, and our materials. Though our inventories increased during the period, mostly due to higher material costs and transportation delays on customer orders, our service levels remained below historical norms. Most of our businesses are carrying significant order backlogs, and we plan to run our operations at high levels during the fourth quarter to improve our service and efficiencies. Currently, some of our fastest-growing products are being limited by material and capacity constraints. We have initiated additional investments to increase our production of those and increase our sales and service. Completion of those projects is being extended due to longer lead times on building materials and equipment. Our results have improved significantly during 2021, and we generated over $1.9 billion of EBITDA for the trailing twelve months. Given this and our current valuations, our board increased our stock purchase program by an additional $500 million. Since the end of the second quarter, we've bought approximately $250 million of our stock at an average price of $193 per share. With our current low leverage, we have the capital to pursue additional investments and acquisitions to expand our sales and profitability. Jim will now review our third quarter financials. Thank you, Jeff. Sales for the quarter exceeded $2.8 billion, a 9.4% increase as reported, and 8.7% on a constant basis. All segments showed growth, primarily due to price and mix actions as volume was generally constrained by supply, labor, transportation, and COVID disruptions. Gross margin as reported was 29.7% or 29.8% excluding charges, increasing from 28.3% last year. The year-over-year increase was driven primarily by improved price and mix, which offset the increasing rate of inflation. In addition, gains in productivity, less year-over-year downtime, and favorable FX improved our margins. The actual detailed amounts of these items will be included in the MD&A section of our 10-Q, which will be filed after the call. SG&A, as reported, was 16.9% and flat versus prior year, excluding charges. Increased SG&A dollars versus prior year is a result of costs that were curtailed due to the COVID-19 pandemic, higher sales, increased inflation, new product development, and price and mix. Operating margin, as reported, was 12.8%. Restructuring charges were approximately $1 million, and we have reached our original savings goal, exceeding $100 million in annual savings. We continue, though, to pursue other initiatives to lower our cost. Operating margins, excluding charges, were also 12.8%, improving from 11.5% in the prior year or 130 basis points. The increase was driven by improved price and mix, offsetting increasing inflation, as well as gains in productivity, favorable FX, and greater year-over-year manufacturing uptime, improving our results. We were partially offset by impact of constrained volume and increased cost in product development. Interest expense was $15 million in the quarter, flat versus prior year. Our non-GAAP tax rate was 21.4% versus 16.9% in the prior year, and we still expect the full year rate to be between 21.5% and 22.5%. Earnings per share as reported were $3.93, and excluding charges were $3.95, excuse me, increasing by 21% versus prior year. Now turning to the segments. Global Ceramic sales came in just under $1 billion, a 9.6% increase as reported, or approximately 9.1% on a constant basis, led by strengthening price and mix across our geographic regions. Brazil, Mexico, and the US countertop business saw the strongest volume gains, while other products performed well against a difficult year-over-year Q3 comparison, which had an abnormal seasonality. Operating margin excluding charges was 11.9%, up 160 basis points versus prior year due to the favorable price mix offsetting increasing inflation, which improved with improved productivity and limited year-over-year shutdowns, strengthening our results, partially offset by increased cost and new product development. Flooring North America sales just exceeded $1 billion, a 6.9% increase as reported. The sales growth was driven by price and mix actions to offset rising costs, as our sales volumes were impacted by supply, transportation, and labor constraints. Operating margin excluding charges was 11.4%. That's an increase of 320 basis points versus prior year. The improvement was driven by positive price mix offsetting the increasing inflation and volume constraints. In addition, productivity gains and less temporary shutdowns favorably impacted our results. In Flooring Rest of the World, sales exceeded $760 million, a 12.7% as reported increase or 10.5% on a constant basis, driven again by price and mix actions while volumes here were constrained by material disruptions, especially in LVT, a return to a normal summer seasonality, and COVID restrictions which caused lockdowns in Australia, New Zealand, and Malaysia. Operating margin excluding charges was 17.4%. This is a decrease versus prior year as a result of the return to a normal summer holiday along with material constraints and COVID lockdowns, which increased our costs and lowered productivity, volume, and increased the temporary shutdown. Improved price mix, which offset the increase in inflation, and favorable FX benefited our results. Corporate and eliminations were $11 million, and I would expect that to be $45 million for the full year. Taking a look at the balance sheet, cash for the quarter exceeded $1.1 billion, with free cash flow of $351 million in the quarter and over $720 million in third quarter year to date. Receivables were just shy of $1.9 billion, with a DSO of just under 57 days. Inventories were just over $2.2 billion, an increase of approximately $374 million or 20% from the prior year. That's an increase of about 16% if you compare it to the year-end balance. Inventory days just under 107 days compared to our low point last year at just under 100 days and 103 days at the year-end. Property, plant, and equipment exceeded $4.4 billion, with CapEx for the quarter at $148 million in line with our D&A. Full year CapEx is currently projected to be $650 million, with D&A projected at $586 million. Looking at the current debt. One note on October 19, the company redeemed at par their January 2022 EUR 500 million 2% senior notes plus unpaid interest, utilizing cash on hand. The balance sheet overall and cash flow remained very strong, with gross debt as of the end of Q3 of $2.3 billion and leverage at 0.6x adjusted EBITDA. With that, I will turn it over to Chris to review our operational results. Thank you, Jim. For the period, our Flooring Rest of the World segment sales increased 12.7% as reported and 10.5% on a constant basis. Operating margins were 17.4% as a result of pricing and mix improvements, offset by inflation and a return to more normal seasonality in the period. During the quarter, sales were strong across our product categories and geographies outside those affected by government lockdowns. Overall, raw material supplies continued to impact our operations, with LVT production affected the most during the quarter. We expect that material, energy, and transportation inflation will continue, and chemical costs that rely on gas will accelerate in upcoming periods. During the period, COVID shutdowns in Malaysia, Australia, and New Zealand interrupted our production and sales. These restrictions have now been lifted, and we are ramping up production to meet demand. Our laminate collections continue to have strong sales growth, with consumers embracing our proprietary waterproof products for their performance and realistic visuals. Our new premium laminate introductions feature unique surfaces that replicate handcrafted wood floors. Our sales volume increased during the period, though our margins were pressured by higher than anticipated raw material and transportation inflation. We added new capacity in Europe to meet demand, and we are initiating other projects to support further sales growth. In Russia and Brazil, our laminate businesses are growing as we expand distribution with our leading collections. As anticipated, our LVT sales were lower during the period, given material shortages and lower production that reduced our output. We minimized the impact by improving our product mix and raising prices to pass through inflation. Sales of our higher value rigid LVT collections with patented watertight joints outperformed and benefited our mix. We anticipate improved material availability in the fourth quarter to support higher LVT production levels and improve our service. We have announced additional price increases as our energy and material costs continue to rise. Our sheet vinyl production and sales were impacted by tight material supply and transportation bottlenecks in outbound shipments. Our Russian sheet vinyl business performed well, with sales growing as our distribution expanded. Our wood plant in Malaysia resumed full operations in September after 12 weeks of government lockdowns due to COVID. Sales of our wood products will be down in both the third and fourth quarters as our inventories have been depleted. We have acquired a European wood veneer plant to improve supply, yields, and cost of our wood flooring. We're introducing waterproof wood collections with our patented WetProtect technology in our markets after its successful launch in the U.S. Production stops in Australia and New Zealand reduced our sales and margins, and we are scaling up our operations to meet demand as the markets reopen. Our new premium collections, enhanced merchandising, and consumer advertising will benefit our business as the markets return to normal. We are increasing pricing to offset inflation and transportation costs. Sales of our European insulation panels grew in the period as we implemented another price increase to offset rising material inflation. Our income improved with disruptions in manufacturing due to tight material supplies. We acquired an insulation manufacturer in Ireland and have begun integrating their operations with our existing business. During the third quarter, our panels business grew and margins expanded as we increased our price, mix and pricing. We're introducing a new decorative range to enhance our participation in spec-specified markets. We have added new press that will increase our capacity and add more differentiated features to our products. Our ongoing pricing actions offset rapidly rising material prices, and we will increase prices further in response to inflation. In the fourth quarter, we will complete the acquisition of an MDF manufacturer in France to expand our capacity in Western Europe. The company is a pioneer in bio-based resins, which will enhance our sustainability position. In the third quarter period, our Flooring North America segment sales increased 6.9%, and operating margins were 11.3% as reported as a result of productivity, pricing, and mix improvements, partially offset by inflation. Flooring North America had strong results given the material, transportation, and labor constraints impacting our sales and production during the period. Supplies of most oil-related chemicals were restricted, creating unscheduled production stops that lowered our sales and raised our costs. We implemented additional price increases across most product categories as inflationary pressures intensified. We continued to streamline our product portfolio and reduce operational complexity, benefiting our efficiencies and quality. In residential carpet, limited material and labor availability are affecting our production and manufacturing costs. We continue to increase prices to recover continued inflation. Volume and efficiencies are being negatively impacted by low inventories, shorter runs, and labor challenges. We are replacing older assets with more efficient equipment, which is improving our labor productivity. We have an elevated backlog, and we plan to run our operations at high levels in the fourth quarter to improve service and replenish inventories. We are enhancing our sales and mix as consumers upgrade their homes with our premium SmartStrand and luxury nylon collections. Commercial sales improved in the period, though the rate of growth has slowed as COVID cases increased. The government, education, and healthcare sectors outpaced office, retail, and hospitality channels, which are recovering more slowly. Our hard surface sales are growing as we expand our offering and increase specifications in commercial projects. We are investing in more efficient assets to improve cost, enhance styling, and reduce labor requirements. Our laminate and wood business continues to grow, though our sales were restricted by our capacities. Our new laminate line should be operational by the end of this year to expand our sales and provide more advanced features. Chemical shortages limited our laminate production in the period as we responded by re-engineering our formulations to maximize our output. We are reducing complexities to simplify our operations and improve our efficiencies and production. Our new high-performance UltraWood collections are increasing our mix in wood, and the productivity of our new plant is improving as volume increases. Our LVT sales increased in the period, even with material supplies limiting production and shipping days in our sourced products. We have improved our mix with enhanced features and lowered our costs by streamlining our processes. Our plant has increased throughput and yields despite disruptions from a lack of material supply. To support future growth, we are expanding our LVT operations, adding approximately $160 million of production, with the initial phase beginning at the end of this year. We are also increasing our sheet vinyl plant's production to satisfy expanding sales of our collections. In the quarter, our Global Ceramic segment sales increased 9.6% as reported and 9.1% on a constant basis. Operating margins were 11.9% as a result of higher volume, productivity, pricing, and mix improvements, partially offset by inflation. Our U.S. ceramic business grew during the period, with the residential sector remaining strong and commercial continuing to show improvement. Our margins improved in the quarter as we implemented price increases to offset higher transportation and raw material costs, enhanced our mix, and increased output from our plants. Additional pricing actions are being taken to offset continuing inflation. We are reducing our manufacturing costs by re-engineering our products, utilizing alternative materials, and enhancing our logistics strategies. We are introducing higher-value products with new printing technologies, textured finishes, and polished surfaces to provide alternatives to premium imported tile. We are growing our studio direct program that focuses on high-end remodeling and exterior collections that sell through outdoor specialists and home centers. Our quartz countertop sales continue to grow substantially as our production recovered during the period. Our countertop mix is improving as sales of our higher-end visuals grow at a faster rate. Our Mexican and Brazilian ceramic businesses are growing as we increase prices to offset inflation in both countries. We are refining our product offering, improving our efficiencies, and increasing our output. We have expanded our participation in residential projects and commercial sales. We are increasing the number of retailers that exclusively sell our products. We are investing in new manufacturing assets in both countries to expand our production and enhance our product offering. Sales in our European ceramic business remained strong as vacation schedules returned to normal. Increases in price, mix, and productivity enhanced our results, though they were more than offset by rising inflation. Our new products with enhanced visuals, unique shapes, and large slabs increased our average selling price and improved our mix. We are upgrading production lines to further enhance our styling and improve our efficiencies. In the period, natural gas and electricity prices in Europe rose to unprecedented levels due to anticipated shortages. Our margins will be negatively impacted until our prices align with energy costs in the future. Sales and margins increased in our Russian ceramic business as enhanced mix and increased prices offset higher inflation. Lower inventories and capacity limitations impacted our sales volume in the period, and we will continue to manage our mix until new capacity is operational. Due to an equipment delay, our production expansion will not be ready until the third quarter of next year. Our sanitary ware sales are growing significantly as we expand production and our operations. With that, I'll return the call to Jeff. Thanks, Chris. Throughout 2021, Mohawk has delivered exceptional results with higher sales growth, margin expansion, and robust cash generation. For the fourth quarter, we anticipate that industry seasonality will be more typical, unlike last year when demand was unusually high. In the period, we'll run our operations at high levels to support our sales, improve our service, and increase our inventories. Our sales in some categories are being limited by our manufacturing capacities, and we're increasing investments to expand the production of these growing categories. We are continuing to implement additional price increases and manage staffing, supply, and transportation constraints across the business. We're maintaining aggressive cost management, leveraging technology, and enhancing our strategies across the enterprise. In Ceramic Europe, record gas prices are increasing the net cost by approximately $25 million in the fourth quarter, and it will take some time for the industry to adjust to the higher costs. In addition, our fourth quarter calendar has 6% fewer days than the prior year. Given these factors, we anticipate our fourth quarter adjusted EPS to be $2.80-$2.90, excluding any restructuring charges. Despite temporary challenges from inflation and material availability, our long-term outlook remains optimistic, with new home construction and residential remodeling projected to remain robust, and the commercial sector improving as businesses invest and grow. Next year, our sales should grow with capacity expansions, innovations and new innovative product introductions. Our strategies to optimize our results continue to evolve with the economic and supply chain conditions. Our balance sheet is the strongest in history, and it supports increased internal investments and strategic acquisitions. We'll now be glad to take your questions. Ladies and gentlemen, at this time, if you would like to ask a question, please Press Star then the number one on your telephone keypad. Management requests that you limit your questions to one primary and one follow-up. Your first question comes from the line of Matthew Bouley with Barclays. Your line is now open. Good morning. Thank you for taking the questions. On the natural gas headwind, the $25 million that you called out in Q4, should we assume, you know, that $25 million is kind of a good run rate to think about going forward if prices don't abate? You know, what confidence do you have relative to 2018 when we last saw this, that you will be able to align that with price? Thank you. Well, gas and electricity costs depend on Russian actions which are presently unpredictable. Gas prices are expected to decline after the winter. Timing of increases is being impacted by hedges and further increases are anticipated. We anticipate Q1 impact will be greater than Q4, Q2 will get better, and Q3 prices will cover inflation. Market changes can dramatically impact that result. Just as a note, yesterday, Putin said something, and the prices dropped 10%, so it's highly volatile, and we'll have to keep adjusting to the circumstances. Understood. That's very helpful color. Second one on Flooring Rest of the World. I mean, you've been signaling all year that there will be a normal seasonality this year. As expected, the margin was down versus the prior year, but it was still over 17%. Would you say that that's kind of a fair representation of how Rest of World profitability may look going forward? Thank you. Well, our business performed well as a result of pricing and mix improvements, offset by return to more normal seasonality and inflation pressures. Sales were strong across our product categories and geographies outside those affected by the government lockdowns. Overall, raw material supplies continue to impact our operations, with LVT production affected the most. Inflation in materials, transport, and energy are continuing, and chemical costs based on gas will accelerate. This year, vacation stops taking in Q3 as typical versus last year, or moved with the Q2 with COVID. One additional point there, Matt, is, you know, margins, you're right, are historically high. There's really many moving parts with energy and material costs increasing, and we'll continue to push price increases in response to that. Okay. Thanks, everyone, and good luck. Our next question is from Susan Maklari with Goldman Sachs. Your line is now open. Thank you. Good morning, everyone. Thanks for taking the questions. Good morning. My first question is, you know, as we think about the fourth quarter, you've seen some really nice improvement in the Flooring North America margins over the last couple of quarters. How should we be thinking about that, you know, given the seasonality and some of the pressures that are coming into the business? As we look at fourth quarter, you know, so far this year, we've delivered exceptional results with the EBITDA to $1.9 billion in the trailing twelve months. We've grown the sales, we've expanded the margins, we've had robust cash generation. We anticipate the fourth quarter seasonality will be more typical than last year was, which was really strong through the end, and we have the 6% days you have to put in it. We'll run all the facilities at high levels, and we're increasing investments to expand the constricted areas that we're in. We're implementing additional price increases, and we expect at this point supply and labor constraints to continue, you know, through the end of the year. We don't see anything stopping them now. We have to keep putting in the ceramic Europe piece, which should impact the quarter by $25 million based on our best estimate at this point. Okay, that's helpful. You know, following up on that, as we think about 2022 and, you know, the backlogs that you're sort of presumably entering the year with, how do you think about the ability to continue to expand the margins next year? Is there any one segment where maybe we should be expecting a bigger move relative to another? If you look out despite the short-term challenges that we're having today, we believe the long-term outlook remains optimistic. You start looking at the overall direction of the economies. You have government policies should remain supportive. The economy and spending should improve. Inflation's projected to moderate, and the disruptions in supply and transportation are expected to decline. In Europe, we have the temporary problem with this rapid increase in electricity inflation, which will impact both our energy and material costs across the businesses. The forward prices are expected to drop in half once we get through the winter. With Ceramic Europe, which is most impacted due to its gas use, its margins, we're expecting them to recover by the third quarter as the industry aligns over time. We look next year, we think the sales will continue to expand. With residential expected to remain strong, we see commercial continuing its improvement. The margin expansion is really gonna depend on what happens with the inflation intensity and how the competitive conditions, you know, change with it. We're doing everything we can to push price to keep up with it, and through the first three quarters of this year, we've been able to align them. As we look at the next year, we expect to benefit from increasing production, improved material supply, higher inventories, as well as new product innovations. But keep in mind there's still some of the businesses that will remain constrained until the new investments we're putting in are operating. We expect to continue to generate significant cash, which will support the greater investments and acquisitions we're trying to find. Okay, thank you. That's very helpful color. Good luck. Thank you. Your next question is with Phil Ng with Jefferies. Your line is now open. Hey, guys. Congrats on a really good quarter in a tough environment. Certainly we're focused on the outlook, but the team's done a great job in a tough backdrop. Thank you. Outside of European ceramic, can you give us some color when you kinda expect price cost to be neutral? Your guide seems like implies that the rest of your business is in actually a pretty good spot, on the pricing and cost side. Separately, given the seasonal nature of nat gas prices, certainly in Europe, and you mentioned that the forward strip is expected to come down pretty hard, how are you tackling price increases? Are you looking at that forward curve and kinda guiding your approach on pricing? Or you're kinda looking at current prices and trying to be really proactive here? Well, first, on a year-to-date basis through Q3, pricing and mix has offset inflation. We're continuing to raise prices as costs change across most of the categories. Obviously, energy materials are very volatile at this point and difficult to predict. In Europe, as we said, you know, actions by Russia that will really determine the energy and material that are gas-dependent. Jeff pointed out, it's very volatile. Just on comments, we're seeing the spot prices drop, you know, today, you know, over 10%. At this time, you know, and we expect Ceramic Europe to catch up sometime in Q3. Okay. The best answer we can give you about the future in Europe is we're gonna have to keep reacting to the market conditions. The material prices that we're purchasing are just now starting to reflect the higher gas prices. Gas prices, it's anybody's guess what they're gonna be tomorrow, let alone six months from now, is it? The best we can say is that we're gonna keep raising prices aligned with the costs that are changing. That's really helpful. Demand seems pretty healthy here. It's not a demand issue, and you got some pent-up demand from supply chain constraints. So curious, what are your customers telling you? Backlogs, any color on that front? Just more broadly, when we kinda look out to 2022, appreciating you got tougher comps, do you expect volumes for your carpet and ceramics business to kinda return to more pre-pandemic growth levels or continue this more elevated growth backdrop, that we've seen in this past year? I think they're gonna turn to more typical growth rates. We think the industry's gonna it can't keep going up dramatically. Housing can't keep growing by 20% a year, is it? We think it's gonna be more normalized, and it will reflect in our sales as we go through. Okay. All right. Thanks a lot. Really appreciate the color, guys. Thank you. Our next question is from Tim Wojs with Baird. Your line is now open. Hey, good morning, everybody. Maybe just first question on capital investments as you think about 2022 and 2023. Is there any way to size what you're planning to spend next year and what the potential kinda output growth or kind of available capacity that might represent? Yeah, just to begin with, before the expansion, the production is being constrained by material supply, by capacities, and by transportation today, as well as import delays are limiting our sales at the moment. To expand sales and reduce costs, we're investing, we're estimating it's gonna end up about $650 million this year, and with more planned next year. At the moment, we haven't finalized the budget, but we think it's gonna be approximately $800 million at this point. The major pieces that are getting expanded are laminate in the U.S. and Europe, ceramic in Mexico, Brazil, and Russia, the quartz countertop business, LVT in the U.S. and Europe, as well as other areas. On top of these, there's a huge amount being spent on efficiencies and productivity as we go through. Okay. Okay, that's helpful. And then from a competition standpoint on imports, is there any way that you guys think internally how your relative share has performed versus, you know, imported ceramic or imported LVT? Is there a way to kinda articulate, you know, how your share has shifted as those imports are more pressured? The estimates of it, there is so much change in the inventory levels. In ceramic, just as an example, during the downturn, everybody stopped all the imports. What happened is all the imports got shoved down, so now all the inventories are trying to be rebuilt. It's really difficult to see the difference in the inventory and the distribution channel versus what the consumer is spending. We think we're performing in line with the sales, but the inventories are changing dramatically in both. Do you get the feeling that you're taking share, or do you feel like you're just kind of maintaining? If there's anything I gave you, it would be a guess, is it? What's your guess? I think we're doing better. Okay. Okay, thank you. Our next question is with Keith Hughes with Truist. Your line is now open. Thank you. You talked a lot about constrained production in this call, you and a lot of other companies. If you had to look within North America, you know, what product has been the most constrained? Near the end of the scale, which one have you had a better ability to produce and get raw materials and things of that nature? The most constrained would be the LVT production, which the vinyl supply has been hand-to-mouth, the plant stopping and starting, or just running whatever they give us. It's probably the most affected. The least affected from a material standpoint, it may be the carpet side might be least affected from it, but in North Georgia, there is a huge problem with labor and manning the plants, given the amount of capacity in the area that everybody's pulling from the same labor pool, just to give you on extremes. Yeah, I've seen your billboards on I-75. I get it. Second question, shifting to you sorry. You mentioned earlier some strength in some of your Central and South American businesses and units. Could you talk there, is inputs there more readily available or what's causing those to honestly look a little bit better than some other areas? Our ceramic businesses in Mexico, Brazil, and Russia are all running wide open. They're all running at capacity. As we came out of COVID, the industries are doing well. The backlogs are high. In all three markets, we can't ship any more. Yet we went into the third quarter with low inventories, and we don't have material constraints or labor constraints in those markets, but we have capacity constraints. Keith, we're adding capacity to Mexico, Brazil and Russia next year. Okay, great. Thank you. Our next question is with Stephen Kim with Evercore ISI. Your line is now open. Yeah. Thanks a lot, guys. You gave us a lot of great information, so thanks for that. I think you said that you would be running equipment at high levels in Q4. You talked about reformulation efforts, you know, that you're doing in many places, I guess, to get around some of the material shortages. I guess my question is, are you gonna be able to produce at a higher level in Q4 than you did in Q3? Regarding sales, you said that would be seasonally slower, so I assume you'll be rebuilding inventory. That also implies that, you know, productivity will be pretty strong as a result. I'm wondering if that productivity benefit would be recognized in Q4, or would it be more in the first half of 2022 when, you know, those products are ultimately sold? First is that the production rates we're assuming are gonna be fairly similar to where we are in the third quarter, because at this point, we're not sure we're gonna have any differences in all the constraints, and we don't know anything that's gonna change them. What we're assuming is unlike last year, where the volume stayed strong through the winter, where it normally falls off, we're gonna be more typical, which will allow us to increase the inventories as we go through. The cost, I think, will flow through as normal as the inventory turns in the future. Okay. Yep. On inventory. Got it. Great. You talked about the U.S. LVT business, but, you know, there was a lot of information given in a short period of time. I just wanna make sure I heard that right. In the U.S. LVT business, where you've historically been, you know, dealing with manufacturing challenges to try to get to nameplate capacity, in this quarter, am I led to believe that you're no longer really facing those process challenges, that it's really just a material availability? In other words, are you able to actually produce at nameplate capacity if you could get the raw materials in? And did I hear you say that you were adding a production line in the U.S. LVT business, about $160 million Did I hear that wrong? LVT was limited by material shortages in the U.S. and Europe, is it? Mm-hmm. The product mix in the business is improving with higher rigid sales and better premium products. We're increasing prices with inflation. On the U.S., the imported products, we have the same freight delays everybody else does, which is impacting the sales level. What you heard was the plants have increased the productivity, the yield, and what's coming out, but you have to have material to keep them going. They're stopping and starting day to day or week to week, is it. We did say that we are putting more production in. We're expecting the output of the existing plants to increase as soon as we get more material to support it with their higher throughputs. We did say we're expanding the production in North America by another $160 million. Is that gonna be in the same building, or are you gonna be actually moving across the street with a new location there for our new line? The building that they're in is full. Yeah. That's what I thought. Okay, thanks, guys. Our next question is with Mr. Truman Patterson with Wolfe Research. Your line is now open. Hey, good morning, everyone. Just wanted to touch on the spike in the natural gas inflation, which, you know, kinda happened overnight. You all called out the $25 million headwind in the European ceramics business. Is there any way you can help us frame the size of the headwind in the U.S. business, ceramics? You know, U.S. natural gas is still inflating at a pretty high level, maybe not to the same degree as Europe. Let's see, to give you some reference point. The gas and electricity, which we bundle together as energy, is roughly historically about 9%-10% of the U.S. cost. You take that, and you know, just as a reference point, gas prices are maybe double where they were. You can figure out approximately what the impact is, but we continue to raise prices trying to recover it. Okay. Thank you for that. You all have been fairly consistently repurchasing shares over the past year. You just did another share repurchase authorization and have about $1 billion of cash on hand. Are you all, when you look forward, you know, based on the valuation, are you thinking about turning into a more programmatic share repurchaser? I think our cash priorities, really haven't changed at this point, Truman. You know, we're gonna look at expanding constrained businesses and reducing our costs. We're gonna try to broaden our product offering and drive innovation, in the products. We're gonna continue to identify bolt-on acquisitions. We talked about, three of them this morning, and other acquisitions that are new markets and products, but share buyback will be part of that cash priority. Do you wanna review with him the cash where it is today versus the end of the quarter? It's lower than where he thinks. Yeah. Yes, I would. Yeah. We ended the quarter at just over $1 billion in cash. As I said in my prepared remarks, we have paid off the 2% EUR 500 million in October. We used on-hand cash for that. All right. Thank you. Appreciate it. Our next question is from Mike Dahl with RBC Capital Markets. Your line is now open. Hi, thanks for taking my questions. Jeff, sorry to keep harping on the nat gas. It's just kind of an important point given how dynamic it is. When you talk about the headwinds in 4Q and then growing into 1Q, I mean, given the timing of the gas spike and the time to turn inventory, it actually seems like 1Q should be substantially north of the costs that you're seeing in 4Q, not just a little bit. I'm wondering if just directionally or order of magnitude, you can give us some sense of that. I know it's still dynamic, but if things were to hold today, you know, order of magnitude you're facing in 1Q. Yeah. I can also just comment on that we've already raised prices twice, even though we're significantly behind. We believe some of our competition hedged some of their needs and are not presently impacted as much, limiting our short-term pricing. Over time, we'll catch up. In our estimates, now remember, the costs we have in one quarter flow into the next quarter with our FIFO piece, so they'll pass through. In ours, we have two real things going on. One is we expect to continue increasing pricing over time to get it back. We've been limited a little bit because some of the competition did hedge some of it, so it's limiting how fast we can push it up. The other side of it is, if you look at the forward prices, the natural gas prices, I think in the second quarter, prior to yesterday, were predicted to drop 50% from where they are now. You have our pricing increasing, and you have the future cost coming down, which is how we get to where we wanna be with it all lined up in the third quarter of next year. Okay, got it. My follow-up is really around that when you talk about the third quarter of next year. I'm still unclear, is that. You know, it seems clear that in ceramic, this is going to be a margin headwind until the third quarter of next year. Are you saying that margins for the overall business will be down year-on-year until Q3, given some of these moving pieces? All our comments on the margins are around specifically the ceramic Europe impact, is it? Mike, just one thing on the energy. Our other businesses require much less gas, and the impact is much less. We also produce significant green energy using biomass and wind, reducing requirements. It'll impact the other- We still don't have a full view of things as they're changing. In our European businesses, anything that's related to natural gas, we're just starting to see materials and other costs increase, and we're trying to align the costs with the prices, but it's fluid. Yeah, for sure. Okay, thank you. Our next question is from Michael Rehaut with JPMorgan. Your line is now open. Thanks, good morning, everyone, almost good afternoon. You know, first question, just wanna kind of maybe sum up the views here around price costs for 4Q and maybe into 1Q. You know, when you look at 4Q, depending on obviously what you're assuming from revenue, but, you know, you're more or less looking at a, you know, 200 basis point year-over-year drop. Now, what's actually interesting also is that historically, some of that drop is due to, you know, a tougher comp in the year ago when you had flat margins sequentially. You know, usually you can have 50- 100 basis points of sequential margin decline, 3Q to 4Q. You didn't have that last year with the shipping day tailwind. when you look at that year-over-year drop, you know, how much of that should be covered or made up, let's say, in one Q as the price increases that you're implementing today have a chance to be more fully realized? No, you have to separate out the $25 million related to ceramic. You have what you said last year was seasonally unusually high with the pieces which made the margin higher in the comp piece. The 6% fewer days not only impacts the sales level, it also impacts the coverage of all the fixed overheads. You have all those together. In addition to that, you know, we really do think the challenges we saw in Q3 will continue in Q4. You know, material shortages really constrain a number of the businesses, which is impacting productivity and obviously increasing the costs. The chemical supplies will continue to put pressure on LVT carpet laminate and our boards business. Yeah, maybe said it another way, when you look at Q4, I mean, you know, in Q3, obviously, you had a lot of raw material inflation, but you know, price and mix was able to offset that roughly. You're not seeing that in Q4. I was just hoping to try and get a sense of either on a dollar basis or a margin impact basis, what that negative price cost inclusive of the $25 million, you know, represents. You know, on a consolidated company basis, you know, when do you think that negative price cost might go back to neutral? Would it be the first quarter or the second quarter? Just trying to get a sense of, you know, because you've been implementing price increases throughout the year, they've been successful. You know, right now you have a gap in Q4, when do you think that might, you know, flip to neutral or even, you know, positive? Well, it is a very volatile situation, Mike, especially with the impact in ceramic Europe, along with any chemicals that come from really natural gas as part of their manufacturing process. You know, the deficit, you know, we'll see the $25 million flow through in the fourth quarter. That will increase right away. We believe that will increase in the first quarter, which creates a gap between price mix and inflation as well. If you were to, let's say, take out for a moment the nat gas headwind, I mean, you're seeing inflation all over as well, you know, just kind of putting aside the nat gas headwind, you know, would you expect price cost to be neutral in the first quarter? Or, how should we think about that? Listen, we can't even figure out what the gas price is gonna be tomorrow, is it. There is a headwind with the inflation, but every one of the businesses is increasing prices. We're trying to get them to align. There is some pressure in the short term, and we're trying to get them all aligned, and we're raising prices as fast as we can in all the markets. The flow-through impact does negatively impact us as you go through Q4 into Q1 as well. Okay, thanks a lot. Our next question is from Adam Baumgarten with Zelman. Your line is now open. Hey, good morning, everyone. Thanks for taking my question. You mentioned that some of the European ceramic producers who have hedges are benefiting and maybe holding back price a little bit. Are there any other categories across your global portfolio where maybe pricing is getting a bit more difficult for some reason or another? The ceramic Europe is the one that's most impacted. Most of the other businesses we've been able to push it through up to now, and we're trying to continue to do the same. The question will change is if the material prices start softening and or if the marketplaces start dramatically changing. At this point, it looks like business will be good. At this point, we see more increasing in inflation rather than decreases. At some point, it'll change. Got it. Thanks. Just maybe thinking about Flooring North America specifically, are you worried about any potential demand destruction as you continue to increase pricing, really mainly focusing on carpet and LVT just given their historical, you know, kind of demand patterns versus, you know, pricing? When prices continue to go up, some consumers have limited budgets, and when they have limited budgets, they start looking for cheaper alternatives to put in. At the same time, the installation costs have gone up, and which is driving all the cost to not only that new housing and everything else. There is a concern that at some point you get it up as high as it can. On the other hand, you have all the positives going on. You have the economy still growing, more people working, wages going up, commercial expanding. The question is: How are they gonna balance out? Is it right at the moment, we and everybody else are still optimistic that we'll find the right balance. Thank you. Our next question is from Eric Bosshard with Cleveland Research. Your line is now open. Thank you. Two things. First of all, the addition of capacity in the U.S. LVT business, your U.S. manufacturing has had a, you know, has traveled a road from start to where we are now, and the market has evolved and imports have done what they've done. I'm just curious strategically or philosophically of, you know, why add capacity? Why not import more? Where do you think we are in the curve of penetration of LVT in terms of market share in the U.S.? Let's see. First is the industry has gotten to be a large part. The rate of growth cannot keep up the rate of growth it's had based on the size of it, but it should still grow greater than the flooring industry in total is it. Second is, with all the shipping problems and all the different pieces, there are multiple players all putting more capacity in the United States, given those things, and we think that we should increase ours also to support our needs. Okay. Thank you. Then a follow-up, and just try to be targeted to not ask the same question again. Excluding the days and the calendar in 4Q and excluding gas, what I'm trying to figure out is you've had inflation and supply chain challenges year to date, and the margin in the business has performed quite well. Is there something that suggests that performance is not sustainable? Again, ignoring the calendar issues and the natural gas issues in 4Q. Is there something changing that suggests you can't sustain how you've handled these challenges to this point? I don't think so. We're continuing to raise prices everywhere. The only thing is the magnitude of the increases and how long it takes to balance them up. Okay. Thank you. Our next question is from Kathryn Thompson with Thompson Research Group. Your line is now open. Hey, good morning. This is actually Brian Biros on for Kathryn. Thank you for taking my questions. First one, I guess, if the kind of general construction backlogs that are out there, if those start to get worked through next year at a higher pace, do you think that's further supportive of more price increases, even if inflation moderates? Or might there be pricing fatigue by then making it harder to pass on more price due to solely demand levels? I think for the pricing to start softening, you're gonna have to see a change in the trend of all the raw materials across the category to do that. Then your guess is as good as mine if and when that'll occur. Okay. Yep. Maybe follow up on the internal initiatives you guys have around reducing complexity. Is there a way to measure that or think about that maybe on a margin basis points, or maybe just how much more is there to squeeze out on the reducing complexity level? Well, you've seen through the year that our margins have expanded. You've seen the result of those things, and it's been by taking out the complexity in the product and the offering, we're able to get more throughput through the plants, and we're able to take more costs out. You're seeing the results of it in the margins, and we have more of it planned. Thank you. Our next question is from David MacGregor with Longbow Research. Your line is now open. Yeah, good morning, everyone. You talked about the commercial business. You said you were seeing improvement but at a slower rate. I'm just wondering if you could talk about how price cost spreads maybe differ in commercial versus what you're facing in residential and how you're approaching sort of the inflation recovery in commercial any differently than what you're planning to do in residential as we go into 2022. The commercial business is a more differentiated offering. It is a sale made with performance, design, uniqueness, unique features. Because of that, it tends to be higher margin businesses with it, so they tend to be a little easier to recover the increases. Now, what happens with the COVID increasing in the third quarter, as it increased, what we saw were some of the projects that we thought were going to conclude and move forward got pushed out, and that impacted the rate of growth. All the corporations are looking at how they see the economy, and most of them still perceive it fairly good, so we perceive that there'll be continued improvement over next year. All right. Can you remind us what percentage of commercial is ceramic? I remember it's relatively high, but where would that stand today? Before it collapsed in the U.S., it was about 40%. Now it's less because the whole category decreased. Right. Okay. That's all I got. Thanks very much. Thank you. Thank you. That's the end of our question and answer period. I will now turn the call back over to Mr. Jeff Lorberbaum for closing comments. Mohawk today is well positioned for the long term. We'll overcome the short-term disruptions that are in front of us. We appreciate all of you taking the time to join us. Have a great day. Ladies and gentlemen, this concludes today's Conference call. Thank you for participating. You may now disconnect.