Good morning. My name is Victoria, and I'll be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries' second quarter 2022 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. 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 star then two. Should anyone need assistance at this 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, July 29, 2022. Thank you. I would like to introduce Mr. James Brunk. Mr. Brunk, you may begin your conference. Thank you, Victoria. 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 second quarter and provide guidance for the third 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 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. I'll now turn the call over to Jeff for his opening comments. Jeff? Thanks, James. Mohawk's second quarter sales rose to $3.2 billion, up 6.7% as reported, or approximately 11.1% on a constant basis. Sales grew in all our segments, with our top line results benefiting from price increases, enhanced product mix, improvements in commercial, and contributions from our small acquisitions. As the quarter progressed, the global economic environment became increasingly challenging, and our organizations implemented additional actions to support our performance. Our operating income for the quarter was in line with our expectations, even as material, energy, and transportation inflation remained a significant headwind, and our translated results were impacted by the strengthening U.S. dollar. Over the past 18 months, all of our businesses have faced extraordinary inflation, and we have instituted multiple price increases to pass through these higher costs. We're also taking numerous operational actions, including cost controls, productivity improvements, mix, and logistics enhancements. Across our markets, inflation is causing changes in consumers' discretionary spending. U.S. housing sales have been impacted more than our other markets as mortgage rates have risen faster. Unlike past economic cycles, housing demand exceeds the available supply, and foreclosures are not an issue. In Europe, interest rates have not risen as much as the U.S., though consumer discretionary spending is being eroded by energy and other inflation, which is impacting demand. Volatility in natural gas supply have caused a dramatic spike in near-term prices, and supplies and pricing remain uncertain. The European countries are considering strategies for alternative supply, ways to ration gas and supply, subsidies to support those most affected. In most regions, investments in commercial construction and remodeling remain solid. Both projects that were deferred due to the pandemic and new projects are being initiated in greater numbers as the commercial sector continues to strengthen. As we navigate the near-term market dynamics, Mohawk's strong balance sheet provides many options for investments, including internal expansion, acquisition, and stock buybacks. During the second quarter, we announced approximately $440 million in new acquisitions, with the largest being an agreement to acquire Vitromex, a leading ceramic manufacturer in Mexico. In early July, we completed the acquisition of Foss Floors, a leading U.S. needlepunch flooring manufacturer. In Europe, we are making excellent progress integrating our 2021 bolt-on installation and panel acquisitions, which are contributing to our results as expected. We continue to explore additional acquisition opportunities. Our expansion projects remain on schedule, including laminate, LVT, quartz countertops, and European porcelain slabs. These investments will help us satisfy current and future demand, as well as deliver our next generation of product innovation and operational efficiency. Now James will review our second quarter financial performance in greater detail. Thank you, Jeff. Sales for the quarter were just under $3.2 billion. That's a 6.7% increase as reported or 11.1% on a constant basis and FX basis, representing a second consecutive record quarterly sales. Favorable sales and mix across all segments and benefit of our 2021 small acquisitions offsetting softening volume and negative impact of FX. Gross margin for the quarter was 27.7%, a decrease from prior year of 30.7% excluding charges. Although the dollar amounts and impact of year-over-year inflation, primarily in raw materials and energy, was more than offset by price and mix and productivity, it was not enough to negate the impact of the lower unit volumes, temporary shutdowns, and FX headwinds on a percentage basis. The actual detailed amounts of these items will be included in the MD&A of our 10-Q, which will be filed after the call. SG&A as a percentage of sales was 16% for the quarter, as tight spending controls by the business drove a 90 basis points improvement versus the prior year. The immaterial increase in absolute expense was due to higher sales, price mix, and inflation, primarily offset by cost-saving initiatives and the impact of FX. Operating income as percentage of sales was 11.7%, which is 220 basis point decrease versus the prior year, driven by lower volume as the business drove price, mix, and productivity initiatives to offset significant year-over-year inflation and the impact of temporary plant shutdowns and FX. Interest expense for the quarter was $12 million, slightly down from the prior year. Other income, other expense was income of $3 million. Our non-GAAP tax rate was 22% versus 22.5% in the prior year. We expect the full year tax rate to be between 21% and 22%. That leads us to an earnings per share as reported of $4.40, or excluding charges of $4.41. Turning to the segments. Global Ceramic had sales of just under $1.2 billion. That's 11.5% increase as reported, or 14.6% on a constant base and FX basis, as pricing and mix actions more than offset the softening volume in the segment. Operating income for the quarter, excluding charges, was $154 million or 13.3%. That is an operating profit increase of 12.5% versus the prior year. The favorable product mix, pricing, and productivity actions offset the impact of lower volumes and inflation, which is primarily due to rising energy costs. In Flooring North America, our sales were $1.1 billion, or an increase of 1.7% versus the prior year, with pricing actions offsetting volume declines. Growth in commercial, laminate, and resilient products offset weakness in residential carpet and a significant adjustment in rug products during the quarter. The rug business is concentrated with major national retailers who dramatically cut orders to reduce their inventory levels. Absent this adjustment, Flooring North America sales would have increased approximately 6.5% in the quarter. Operating margin as a percentage of sales was 9.1%, which is 210 basis point decrease versus prior year, as improvements in price mix and productivity initiatives were unable to compensate for the lower overall volumes and increased input costs, primarily in raw materials, due to year-over-year inflation. In Flooring Rest of the World, sales were $895 million, or a 7.7% increase as reported, or 18.8% on a constant FX basis. Pricing and mix actions drove the improvement across all product lines, led by panels and insulation, along with the year-over-year benefit from the smaller acquisitions. Operating margin as a percentage of sales was 14.1%, with a decline of about 560 basis points versus prior year. The main drivers to the decrease was higher inflation, mainly raw material, unfavorable productivity with temporary plant shutdowns, and lower volume, especially compared to the peak output in 2021 Q2, partially offset by favorable price and mix initiatives. Corporate and elimination costs were $10 million for Q2, with full-year corporate and elimination costs estimated to be between $40 and $45 million. Turning to the balance sheet. Cash ended the quarter at $224 million, with free cash flow relatively flat for the quarter, primarily due to increases in working capital driven by the impact of inflation and increasing sales. Receivables were just over $2.1 billion, with DSOs slightly higher at 56 days compared to 53 in the prior year. Inventories finished the quarter at just over $2.8 billion. That's an increase of 36% from prior year, or $740 million. 70%, which was inflation-related, and that was also an increase of about 12% versus Q1. Inventory days finished the quarter at 116 days, slightly up from Q1 at 111 days. Property, plant, and equipment finished the quarter at just under $4.6 billion, with CapEx of $151 million and depreciation and amortization of $142 million. For the full year, and depreciation and amortization are forecasted at approximately $570 million and CapEx at $785 million. Finally, our balance sheet is in a very strong position with overall $1 billion of liquidity and net debt to EBITDA at 1.1 times, enabling our business to continue to grow through internal investments, acquisitions, and stock buybacks. With that, I'll turn the call over to Chris for our operational review. Thank you, James. Of our three segments, Global Ceramic delivered the best performance during the second quarter, with significant year-over-year operating income improvement, of which the greatest part came from the U.S. ceramic business. Builder sales remained strong in most of our ceramic markets, and an increased number of commercial renovation and new construction projects were also initiated. Most of our markets have seen some softening in residential activity as inflation and higher interest rates affected remodeling investments. The cost of natural gas continued to rise across the world, with European natural gas prices spiking again due to supply uncertainty. As energy and raw material price increases across our ceramic businesses, we continue to implement new pricing actions. Our U.S. ceramic business expanded its operating income to its highest level in four years. The commercial and new home construction sector showed the strongest growth, with softening demand in residential remodeling and the home center channel. During the quarter, our mix and margins were enhanced by improved commercial sales. Our premium product introductions are gaining traction in the market as alternatives to higher-cost European imports. We continue to improve our sales and manufacturing costs with productivity initiatives and improved product discipline. To offset higher energy, material, and transportation costs, we continue to implement price increases and freight surcharges. We have introduced new distribution strategies to mitigate the impact of rising fuel costs. Our countertop sales are growing in the high-end quartz, porcelain, and stone categories. Our quartz countertop plant is operating at maximum capacity, and we are improving our mix by expanding our premium product offering. To meet growing demand, we are sourcing products and expanding our countertop production. Our European ceramic business improved sequentially during the quarter with higher sales and enhanced mix. Though our pricing actions during the quarter improved our margins, they did not fully offset inflation versus the prior year. We continue to invest in innovative new features to improve our mix and add capacity to satisfy growing demand for our porcelain slab business. Sales of our premium products increased during the quarter, while our low and medium price categories softened as they are more sensitive to price changes. Our inventory levels remain historically low and are further limiting our overall sales. Our R&D teams are reengineering body formulations with alternative materials and reducing the use of Ukrainian clays. Recently, reduced supplies of natural gas have significantly increased energy prices across Europe. Going forward, our volume and margins will be under greater pressure as our gas costs will be higher. We are initiating restructuring actions to lower our costs and manage these market conditions. In our other international ceramic markets, sales growth was primarily driven by pricing and mix, with commercial outpacing residential. Our results in these regions could have been stronger if our sales were not limited by production constraints and low inventory levels. Our pricing actions and improved mix are offsetting higher energy and material costs. The impact of inflation on energy and materials in these regions has not abated, and we have announced additional price increases to offset higher costs. Across these regions, we are beginning to see softening in the residential sector as inflation and rising interest rates impact consumer spending and home purchases. In June, we agreed to acquire Vitromex, a leading ceramic tile manufacturer in Mexico, for $293 million. The company produces glazed ceramic, porcelain, mosaics, and decorative tiles and has a broad distribution network. Vitromex operates four manufacturing facilities and had approximately $200 million in sales last year. Ceramic is the primary flooring category in Mexico, and the market has grown even 11% per year in pesos over the last five years. In 2021, the Mexican ceramic tile market generated sales of $1.7 billion or about 2.9 billion sq ft. During the past 10 years, we have significantly expanded our participation in the Mexican ceramic market by investing in state-of-the-art manufacturing and developing world-class operations and sales organizations. Together with Vitromex, we anticipate many opportunities to expand the product offering, distribution, and efficiencies of the combined enterprise. In Flooring Rest of the World sales rose year-over-year, primarily from price increases, product mix, and contributions from our small panels and insulation acquisitions. Inflation is increasing household costs and reducing consumer disposable income. We are seeing a slowdown in retail traffic, which is reducing industry volume in most categories. European energy prices are substantially higher than in other regions and are significantly impacting our raw material and electricity costs. We have raised prices as inflation continued to rise and announced further increases as natural gas and chemical prices escalated at the end of the quarter. Our wood costs are also rising, as it is being increasingly utilized as a substitute for natural gas to provide heat and electricity. Our flooring sales softened as we progressed through the quarter, and our customers are reducing their inventories. Laminate, LVT, and sheet vinyl are all following similar demand trends. In the period, our costs continued to escalate and material supply improved. We implemented price increases during the quarter and have announced additional price increases for the third quarter. We are taking actions to address the changing environment, including cost reductions, process improvement, and postponing non-critical projects. Our Insulation business continues to deliver excellent results with growth in volume as well as price. We have passed through rising chemical costs and are integrating our recent acquisition. Our new manufacturing plant is adding a second shift as we ramp up our sales and distribution. Sales of insulation products remain strong as they benefit from increasing investments to reduce energy costs. Our Panels business performed well, though volume slowed as we progressed through the quarter. We continued to raise prices and improve our mix with higher value products. We're integrating the small French panels plant that we acquired last year and are improving its cost and output. We are expanding the distribution of our higher-end decorative panels and more durable HPL products. Our investments in energy production from waste wood are benefiting both our cost and the environment. For the quarter, our Flooring North America segment growth was primarily driven by pricing gains, stronger commercial sales, and improved mix. The commercial sector improved across all channels, while the residential market is softening as consumers face the pressure of household inflation and rising interest rates. As our service levels improve, customers reduce their inventory in the residential channel. We continue to execute pricing actions to offset material and energy inflation, though lower plant volumes are reducing absorption and raising costs. We are strategically investing to maximize our share in the faster-growing LVT and premium laminate categories. We have launched numerous productivity initiatives to mitigate the impact of fuel, freight, energy, and labor inflation. Our LVT sales continue to improve with our new products gaining traction in the market. We experienced fewer material disruptions in the quarter, which furthered operational improvements and benefited our margins. Our new West Coast LVT plant has begun shipping to customers, and we continue to refine processes to improve throughput, productivity, and material costs. Our East and West Coast operations will provide superior service to our customers and improve our transportation efficiencies. Our premium laminate is mostly used in residential remodeling, and inventory adjustments in home centers impacted our sales in the quarter. Our waterproof laminate collections are increasing our sales in the specialty retail and new construction channels as an alternative to LVT. Our new manufacturing line continues to ramp up to targeted production levels and is fulfilling demand for our next-generation products. Though we have raised laminate prices, our raw material costs continue to increase substantially. As the commercial sector rebounds, sales and margins of our carpet tile and commercial LVT collections are improving. All channels continue to expand, with the recovery in the hospitality and corporate sectors accelerating. Based on the most recent Architecture Billings Index, commercial design activity remains strong, with a pipeline of projects that support continued sales growth for the foreseeable future. To offset raw material and transportation inflation, we are taking additional pricing actions as well as reducing costs across the business. As our residential carpet volumes decline due to softening markets and inventory reductions in the channel, we are aligning capacity with demand, reducing expenses, and announcing additional price increases due to continued material and energy inflation. Our rug business is concentrated with major national retailers, and during the quarter, they all dramatically cut orders to reduce inventory as their sales forecasts weakened. With the impact of a $50 million decline in rug purchases, the segment's sales would have increased approximately 6.5% versus prior year. In July, we closed the acquisition of Foss Floors, a leading non-woven flooring manufacturer, for approximately $150 million. Foss adds a new product category to our portfolio that complements our existing lines and includes needle punch, rugs, carpet, DIY tile, and artificial turf. Foss Floors' 2022 sales have been strong, with a current run rate of approximately $100 million. To adapt to current conditions, we are taking actions to restructure our cost across the enterprise to improve our results. We are finalizing plans to rationalize older, less efficient assets and optimize processes to lower cost. The most significant actions will be in our Flooring North America segment, including reducing some yarn assets and rug capacity. In our Flooring Rest of the World segment, we are consolidating insulation products and streamlining our organizations. In Ceramic Europe, we are simplifying administrative and manufacturing organizations. We estimate these initiatives will reduce our costs by $35-$40 million annually with an estimated cash cost of $15-$20 million, with a total cost of $90-$95 million. With that, I'll return the call to Jeff. Thanks, Chris. During the first half of 2022, we delivered solid results despite the pressure of significant inflation, rising interest rates, and geopolitical instability. In the U.S., rapidly rising interest rates are impacting housing sales, and inflation is causing changes in consumer discretionary spending. Residential remodeling is softening as consumers postpone upgrading their homes. New home and multifamily flooring channels remain strong, and the commercial sector continues to improve as new and deferred projects are initiated. Though interest rates are lower in Europe, dramatically higher natural gas prices and constrained supply are reducing economic growth. Given these factors, we anticipate softening demand and increased pressure on our margins going forward. We're taking targeted actions across the enterprise to adjust to these changing market conditions. Material and energy costs continue to rise, and we're implementing further price increases in response. We're introducing higher value products and enhancing our service levels to expand sales. We're reducing expenses and initiating new process improvements. We'll be implementing multiple restructuring projects across the company to reduce our cost. We also expect improvements in material supply and transportation as we go through the remainder of the year. In the U.S., we anticipate that rising interest rates will strengthen the dollar and reduce our translated results. Given these factors, we anticipate our third quarter adjusted EPS to be $3.33-$3.43, excluding any restructuring charges. Mohawk has successfully managed through economic cycles many times before. Over the long term, flooring grows at a faster rate than the overall economy. Around the world, a deficit in housing stock requires additional construction in most regions. In the US, housing demand exceeds supply by an estimated five million units and it will take years to satisfy. In addition, over 20 million homes are between 20 and 40 years old and in need of significant renovation. Our business is well positioned to benefit from the long-term growth in new home construction, residential remodeling and commercial projects. We have a strong balance sheet that supports growing the business through internal investments as well as acquisitions and stock buybacks. We will enhance the performance of our acquisitions, and we'll continue to seek opportunities in new products and geographies. We remain optimistic about Mohawk's future, and the actions we are taking today will improve our results. We'll now be glad to take your questions. Thank you. Ladies and gentlemen, at this time, if you would like to ask your question, please press star then one on your telephone keypad. Management requests that you limit your question to one primary and one follow-up. Our first question comes from Stephen Kim with Evercore ISI. Please go ahead. Yeah. Thanks very much, guys. It's Stephen Kim from Evercore. Regarding your guidance, the 3Q guide, does this assume that inputs are fully offset by price mix, without any contribution from productivity? I'm hoping you can speak to how volume did as you moved through the quarter. Is it fair to think that the exit rate of volume growth was maybe, you know, 300 basis points lower than for the 2Q as a whole? Has that worsened, more in July? Let's start with the order trends. The order trends slowed as we went through the quarter, and we exited with a lower order demand than we saw at the earlier part. When you look forward into Q3, it's normally slower than Q2 historically due to seasonality. In addition, last year, we ran at higher levels to improve our service. Inflation is impacting discretionary spending and remodeling across the world, and we have assumed it's going to slow the business and demand down. Our view of European demand and cost is much more pessimistic today than it was a quarter ago. We anticipate having lower production in the third quarter, which will raise our costs as we align it with demand. In addition, don't forget, the U.S. dollar has really strengthened, especially against the euro since last year, and will lower our translated results. Thanks. I mean, it sounds like you're describing, you know, that volume is gonna sort of stay low in 3Q, partly due to some seasonality. You also mentioned that some of the what you saw in 2Q was due to inventory destocking. I'm wondering, is it fair to think that at least that portion could ease in 3Q? Wondering how big it was. Lastly, your management reorganization, it seems that that's included in your, you know, $35 million-$40 million savings program. You know, I'm assuming that's mostly personnel, but Mohawk's a pretty lean organization already. I'm wondering how the management reorg might affect the company's ability to take advantage of a meaningful rebound in demand should we actually see that, you know, in the next couple of quarters. Let's start with your first question again, Stephen. That was the inventory destocking. Is that portion meaningful, and is it reasonable to think that that could ease in 3Q? We think it's possible. We don't have a clear view into all of our customers' inventory levels, and it differs by product, by category, by country. We believe that they reduced them in the second quarter, and we think there could be some more reductions in the third quarter, but our visibility is limited at best. As to then the second part of it, the restructurings, we are not taking any meat out of the business. We are taking costs out in operations that we anticipate running less. We are, in Europe, doing some organizational changes in both our Rest of World business and our ceramic business in order to get them aligned with how we see the future business is gonna be in Europe. Great. Thanks very much, guys. The next question comes from Susan Maklari with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone, and thanks for taking the questions. Morning. My first question is, you know, Jeff, can you just help us think about some of the seasonality factors combined with the slowing macro, and how we should be thinking about the performance of the different segments as we look past the third quarter, but think about later this year, and then going into the early parts of 2023. Let's see. Let's just give you a broader, then we'll try to get in the details for you. We anticipate softening demand, as we just said before, across all the different businesses. We're seeing the same changes in every geography. We see continued increases on the pressure of our margins given the slowing environment, and we haven't seen a significant change in the materials. The residential remodeling is slowing, with new construction commercial remaining strong, again in most of the geographies. Europe, at this time, is being more affected by energy and will have a significant impact on our results, especially in our ceramic business. We're implementing pricing actions, we're introducing higher value products, and we're improving service to try to maximize the sales. We talked about the restructuring initiatives a minute ago, and we have methods to reduce our expenses in all the businesses going forward as we go through. In each of the businesses, the margin. James, can you help her on the segment a little bit? From a segment standpoint, obviously we're seeing pressure in the ceramic segment, mainly due to energy. Also remember, in Flooring Rest of the World, it's not a consumption issue, but more in the raw materials. The current environment really in Europe is somewhat unpredictable with the geopolitical events. We are seeing some decline in consumer spending. All the energy and chemical-based materials are rising and are costly. We continue, though, to push increases in prices, and we do have some advantages in our Flooring Rest of the World segment with investments that we have made in waste energy and windmills as an advantage. I'd also say that with commercial being strong, that helps the ceramic business in the U.S. and in Europe, and also the Flooring North America business as well. Okay. That's very helpful color. Just following up a bit on the restructuring actions, Jeff, how do you think about the areas where you're taking costs out? You know, you mentioned carpet as one of the places where you are reducing some capacity relative to the areas where you are continuing to invest in adding production and growing. How are you thinking about the way the business will look as we come through this macro slowdown and get to the other side of it? Let's see. Well, you asked a lot of questions. Let's see if I can get to them all. The restructuring plans are still being finalized that we talked about. It's all in order to adapt the conditions as we see them for the near term. We talked about the restructuring. The largest is in Flooring North America. In Europe, where we expect a significant change in the environment, we are also changing it so that we're right for it as for the near term. On the expansion pieces, the current expansion projects are really focused on the areas where we have increasing sales opportunities and/or capacity constraints. The areas where they're focused, there's laminate in the United States, which we're shipping all we can make. We have a new production line going in, and it's already all committed for. We have the countertops that we are oversold in the business. We're importing products from around the world to supplement it. The LVT, we have the plant in Mexico starting up. We believe we have business expansion to use it, and we also have a sourcing which we can modify if the economy and businesses don't expand as much as we had hoped. Then we have premium ceramic outside, where we have a slab business which is also oversold, and we're sourcing from other people. All of these are technologies that we've used in the past. There's no significant changes which should limit the startup costs in each one. Then the other lower investments are focused on productivity and product features, is it. We have postponed some investments until the visibility of everything improves. Okay. Thank you very much for the color, and good luck. The next question comes from David MacGregor with Longbow Research. Please go ahead. Yeah. Good morning, everyone. Jeff, just a question with respect to the commercial strength that you're seeing right now. My recollection is that this is an area of your business where you'd undertaken some rationalization during slower times. Will this now require some additional investment in terms of, you know, feet on the street or distribution capacity? Are you able to dimension that for us within the context of this $35 million-$40 million savings restructuring program? There is nothing in that that's affecting the commercial business. In the past, we announced that we were gonna consolidate one operation in order to improve the productivity of it, and it's well along the way. We continue to invest in sales people, new products. We believe that the commercial business is gonna stay strong. We look at the projects being worked on in the marketplace, looks like there's still a lot coming in. We see that hospitality and retail have increased, and they're still recovering from a bottom point. There are projects that were delayed that are being reinstated. In the category, we see hard surface growing faster than carpet tile. In the whole category, our margins are expanding with improved mix as well as volume. Good to hear. My second question, just with respect to maybe the residential business or just what you're experiencing there. How much margin recovery is achievable through the price increases that have been announced so far to date? Our ability to project the inflation is really poor. Our current businesses are facing extraordinary inflation, and we're still managing some supply disruptions at this time. We've increased prices during the second quarter, and we've announced additional price increases, which are being implemented in this quarter. We're taking actions to control cost. We're taking actions to improve productivity. The businesses are trying to improve the mix, and we're restructuring in the different businesses that we've talked about where it's appropriate. The energy in Europe remains a problem. The pricing remains unknown, and it will pressure our margins, both in the ceramic business as well as in the other businesses as it evolves. We have, you know, a very limited view of how it's gonna impact the demand there. We'll have to all see together. Okay. Thanks very much, Jeff. Good luck. The next question comes from Phil Ng, Jefferies. Please go ahead. Hey, good morning, everyone. Given the nat gas shortages in Europe, and certainly prices have spiked, assuming some incremental pressure in the winter months, do you have enough prices to cover the cost headwind? When do you kinda expect to be caught up? Separately, are you seeing some of your higher cost competitors in ceramic or flooring in Europe out of their facilities since it's not economical? How are you kind of managing that risk around gas rationing potentially later this year? Well, first of all, the energy volatility in Europe is substantial. Natural gas is significantly raising inflation and is affecting demand. It's also impacting the cost of many of our chemicals, and materials that we use. Okay. You're comfortable around getting gas? How are you kind of managing that? Any of your competitors shutting down, just given the economics currently? I think because of the cost of gas, some smaller competitors in Italy are shutting down. So far, we've been able to get gas, but we can't predict it for the future. Okay. On the productivity side and cost side, the team's obviously done a great job in the last two years in that $180-$200 million range from a productivity standpoint, which is great. When we look out to 2023 and beyond, outside of the $35-$40 million cost out that you're calling out for restructuring, in a declining environment, what's like the realistic target on productivity? When we look at your cost curve globally, outside of some of the higher cost stuff you're taking out in North America flooring, how does it look? Is it pretty flat, or is it still pretty steep where you still have some outliers where that could be an opportunity if demand remains pretty depressed? When you go into recessions, you have a significant volume deterioration. Usually, it's difficult to take out costs and be prepared for coming out of it and not have the margins deteriorate, and we would anticipate the same thing would happen now. Okay. All right. Thank you. The next question comes from Eric Bosshard, Cleveland Research. Please go ahead. Thank you. Two things. First of all, a follow-up on the restructuring. It sounds like you're working through this real time. I just wanted clarity. Is there potentially more than what you've outlined today in terms of spend and savings if trends continue where they're going? Or does this consider the scenarios you can see and this is what it is? We don't have any major restructurings planned beyond this. As we go through downturns when it happens, we cut back on inventories, we cut back on production, we reduce investment in marketing and staffing. We don't replace people that leave, and we shrink the business without destroying our ability to go back, which is just, you know, I think about every 8-10 years we do this. Yeah, Mohawk has a really strong history, and the management team out in each of the segments is well prepared to monitor their demand and the cost, and match the cost appropriately. This is, you know, something that we've gone through before, and I think the teams are well prepared to take the challenge on again. Just as another note, you know, going into this thing at this point is really different. You know, the housing demand. You know, has been exceeding supply. Normally, we've been overbuilt that has to get taken out of the system. The rental markets are really at low vacancy rates and commercial is still expanding, and you have employment at high levels. I mean, this is a really unusual environment. Okay. That's helpful perspective. Also, Eric, again, I'd remind you that, you know, the strength of the balance sheet that Mohawk finds itself in with strong liquidity and low leverage, you know, certainly gives us a lot of flexibility. Secondly, you've done a good job over the past four or five quarters of price and mix relative to raws, and I guess we'll see those numbers later today. My question is that in an environment, price and mix is easier in an environment where the consumer wants to spend money than an environment where the consumer is retrenching, which appears now. My question is, what should we expect? What are you expecting in regards to price and mix in an environment where the consumer is putting at least one foot on the brake? We're trying to do everything with the businesses to maximize the mix and bring out products that customers will pay more. However, in slowing environments that you're in, increasing prices always gets more difficult as demand slows. All the players in the market are trying to operate their assets. Usually, when you go through these environments, the material costs also start declining. Those would be typical. Thank you. The next question comes from Kathryn Thompson with Thompson Research Group. Please go ahead. Hi. Thank you for taking my questions today. Wanted to follow up on the inventory question from earlier in the Q&A, focusing in on Flooring North America. The industry has implemented three price increases this year, a fourth in the works in a variety of categories. We're hearing in the channel that orders started to see a more meaningful slowdown in the last month of the quarter, last three-four weeks of Q2. How do you balance obscured inventory optics for retailers that are naturally buying ahead of price increases and construction cycles continue to be extended versus a fundamental slowdown? What are your building partners saying in terms of tapping the brakes to wait for inflation to abate versus more fundamental concern about demand? You have to put it in perspective of where they came from. When the industry and us, when our service levels were poor, they were trying to maintain their operations, so they raised their inventories because they couldn't depend on we and the rest of the industry to deliver it on time at the last minute. Through that, they raised inventories. In the last quarter, I can't speak for the industry, but our supply has gotten much better, so their need to have it, they have to take out, and they don't have to have those investments as they go through. Remember, in our business, flooring is one of the last things you put in a home when you build it because you don't want all the people walking through it, doing the things they are, scratching it, and the owner comes in and doesn't like it. We're one of the last things that go in as you go through. It's the tail of it. Okay. Helps a little bit. Then you had touched on this earlier, but pulling the string a little bit more on squaring prior expansion projects with current restructuring initiatives. Between the U.S. and Europe, how do you focus on continuing those expansion projects when really you're faced with a lot of uncertainty, which has, of course, driven the cutback? I mean, how much do you press forward in those expansion projects, really putting forward, and why? Well, first you have to start out with that most of the expansion projects, the big ones, we've been discussing for over a year. So Yep. The orders for the equipment are just now coming in, and some of it won't even come in for you know, till later. These things take from when you start them to when you end them, most of them take minimum, 18 months and could take two years or more, is it. These are all long-term pieces. There have been some of them that, you know, we're in different stages with. We've postponed the investments we were gonna make in Brazil in that business at the moment, and we postponed the other smaller ones. The big ones that are three-quarters through, you can't stop the baby. Yep, understood. Thank you. Best of luck. The next question comes from Michael Rehaut with JP Morgan. Please go ahead. Great. Thanks. Good morning, everyone. Wanted to just be clear on some earlier comments around price mix versus cost. You know, specifically just around number one, if during 2Q, if you could just review briefly across your three segments, if possible, or on a consolidated basis, whatever is easier, where you were in terms of price cost. Do you expect 3Q to be better than that or worse? Or would it, you know, when would you expect to get to a positive stance, if that's not 3Q, would it be 4Q assuming you know stability in raw materials for you know just an exercise point? Well, Mike, first of all, as I said, you know, we'll re-release the Q after the call, so we'll have all the detail. I would share the fact that in Q1, we were about $11 million behind when you look at price mix versus total inflation. We're a little bit better than that in Q2. We've closed that gap, again, price mix versus total inflation. As you look forward, as we've said, it's a little bit more unpredictable with the rise of energy in Europe, especially impacting both our consumption of natural gas and our chemicals. We would expect a little bit of spreading of that gap in Q3, and that was all considered in our guidance. Okay. Appreciate that. And you know, also just wanted to circle back to, you know, a couple of the top-line headwinds that you highlighted in 2Q, you know, first, some of the channel inventory reductions and then the impact from the rug business. It'd be very helpful, if possible, if you could kinda give us a rough sense of what the channel inventory reductions, what type of headwinds on a, you know, in terms of sales, you know, sales growth, what type of hit to sales growth that caused. And looking forward into 3Q, I assume, you know, you have some type of an assumption for channel inventory reductions as well as the rug impact. I was curious if you could share that with us as well. As you would suspect, we don't have exact views of our customers. Most of it is intuitive of what's going on rather than fact-based. Given the size and variation of the pieces, there's a lot of differences between businesses and channels. The retail business where there are significant inventories, we believe all those are reducing their inventories as they see a pullback in demand. Many of them had escalated inventories because of the lower service levels they've had the last year and a half. We believe those are pulling back. Where they are and how much is there, we don't have an exact view of it. We believe there's some more to take out as we go through. On the rug side, you know, everything you read about the top 10 retailers and countries, those are our customers, and they're all over inventoried. They're all cutting back in all the things they can do to reduce their inventories, and they're cutting back in things even that are because other inventories are out of line, they're cutting back on a lot of things. The decline of it was a huge amount. We think a big chunk of that one's out, and we expect moderate improvements in the rugs going forward, different than the others. Okay. Thank you. The next question comes from Keith Hughes with Truist. Please go ahead. Thank you. I had two questions on mix. One, you said in the prepared statement that mix in Europe was positive in the quarter. Could you expand a little bit more? In some of the mix pressure you're seeing in North America, is there a lot of variation by product category, how much pressure you're seeing? We have the mix things in Europe. I'm sorry, Keith, can you repeat the last question? It was hard to hear you. Yeah. The mix pressure you're seeing in North America, does it vary by product category in terms of the severity, or is it pretty uniform? The first part of the question on mix, especially in Europe. So ceramic Europe, again, in the second quarter, you know, as we anticipated, they did a very good job of really countering the energy piece of inflation in the quarter. In terms of, you know, across the board, the different product categories, what you see is with commercial increasing, you know, that helps the margin profile in ceramic and in North America, along with ceramic Europe. In many cases, what we are doing is trying to push the premium side of the products in the face of the rising inflation. In North America, is there any difference among the products in terms of pressure, downward pressure? I'm not sure there's that much difference between the categories at this point. The carpet industry slowed down more, so it's probably got more impact. Thank you. The next question comes from Truman Patterson with Wolfe Research. Please go ahead. Hey, good morning, guys. Thanks for taking my question. First, just hoping to get an update on the competitive dynamics for your European ceramic business, you know, given the Ukrainian mine shutdown. Have your competitors been able to bring reformulated product to the market, get access to clay, et cetera? Have you all been able to reformulate your product as well? Truman, we've reformulated our body composition with alternative materials. The majority of the products will change over in the third quarter, and the balance will be changed, as we get into the end of the year. We're not exactly sure where the rest of the group is, but we've made a lot of progress in changing our material. Oh, okay, perfect. You know, as you guys mentioned, the commercial data points that we track have been really strong still. Sounds like, you know, retail in the U.S. has been soft, but could you break out North America, maybe what your commercial sales were up year over year and how it compares to, you know, the U.S. residential or R&R retail sales during the quarter? We don't break it down at that detailed level. The commercial construction remodeling, as you said, is strengthening across all channels. It's led by government, workplace, and healthcare channels. We've seen the hospitality and retail increase, and it hadn't recovered as much, so it's got a lot more to go versus the other channels. We're seeing projects that were delayed being reinstated. I think we said this earlier, the hard surface businesses continue to grow faster than the carpet tile business. In our business, the commercial has a higher margin than our residential business, so it's improving our mix. Then within the commercial business, as these larger projects go on, they tend to use higher value products, which improves our mix further. I would say the concentration is higher in U.S. ceramic than is in Flooring North America as a percentage of the sales. Okay, thanks, guys, and good luck on the upcoming quarter. Thank you. Thanks. The next question comes from Adam Baumgarten with Zelman. Please go ahead. Hey, good morning, everyone. Apologies if I missed this, but could you give some more color on the temporary shutdowns in Flooring North America, or sorry, Flooring Rest of the World, that you guys had noted, and which maybe products those were? Well, in the quarter, as we saw, demand lessen and the environment become, you know, more unpredictable, we did pull back on some production to keep inventory aligned. Was that in specific product categories out there, or was it across the board? I think it was more in the flooring category, is it? Then also, you have to remember that the vacations are coming up, so we tend to build inventories and take it out during the vacations. We're planning on having higher, more downtime this year. Last year, we were trying to minimize all the downtime to build inventories. This year, we will have more downtime as we go through the period in the vacation time frames. Okay, got it. Just, you know, maybe if you can give us an update on the European ceramic natural gas headwinds that you saw in the quarter and what you're building in for 3Q? Well, I think the best way to look at that, historically, energy is between 10% and 15% of our ceramic cost, and in Europe now, it's 35%-40%. Recently, gas prices have spiked again, and we'll just have to see how the market evolves. In that environment, we focused on the premium end of the market, where energy's less of a percent. We've introduced more differentiated products, and I expect we'll lose a little share in the low end of the market. The only other thing to say. Okay, thanks a lot. If the gas prices stay where they are, it'll have a bigger impact in the fourth quarter as the inventory flows through. Okay, thanks. That's That's helpful. Thanks. The next question comes from Matthew Bouley with Barclays. Please go ahead. Hey, good afternoon, everyone. Thank you for taking the questions. Wanted to ask about North American, I guess, competition versus imports specifically. You know, now that ocean shipping might be loosening a little bit, clearly the U.S. dollar is getting stronger. What's sort of your sense for the competitive landscape evolving there versus imports and, you know, pricing power versus importers? Thank you. Well, in the quarter, import pricing increased given energy and transportation cost. Ocean freight availability is improving, but the cost is still elevated. Our domestic manufacturing is well-positioned with the premium collections, and our commercial demand is improving. We've seen the freight decline a little bit, but it's still elevated. Okay, got it. Secondly, apologies if I missed this, but just the free cash flow result in the quarter, you know, you mentioned building inventory and the inflation around that, but just sort of speak to the outlook on working capital and ability to sort of, you know, generate additional free cash flows as we move through the year. Thank you. Sure. First of all, you know, the balance sheet, again, is very strong, with liquidity of about $1 billion, and the leverage finished the quarter about 1.1x. In terms of cash flow, it was about flat for the quarter, as it really impacted by the increase in inflation and growth in sales, along with some of the investment in our capital projects. We do anticipate, as we go through the year, certainly to have a, you know, strong positive cash flow, with inventory increasing mainly due to inflation, improving service, and some investment in future projects which will help our going forward results. Remember, we've committed to two acquisitions at this point for approximately $440 million, and the full year CapEx is now about $785 million. All right. Thanks very much. The next question comes from John Lovallo with UBS. Please go ahead. Hey, guys. Thank you for fitting me in here. Maybe just two quick ones on my end. The first one is, when do you anticipate hitting the full run rate of that $35 million-$40 million in targeted savings? And how should we think about the cadence of the cash restructuring costs? As we said, we're completing the plans on that. You should see most of the cost hit between Q3 and Q4 with limited savings at the end of the year, and then it will ramp up to the full amount during 2023. Okay, that's helpful. Did you guys repurchase any stock in the quarter? Would you anticipate the buybacks kinda ramping up here, given where the valuation is? We purchased very little in the quarter, with the announcement that we made of the two acquisitions for over $400 million. Based on the strength of the balance sheet that I talked about previously, you know, additional acquisitions and stock buybacks will continue to be opportunities as we go through Q3 and the end of the year. Okay. Thank you, guys. Since there are no more questions, I would like to turn the conference over to Mr. Lorberbaum for closing remarks. Again, thank you for joining us today. We're confident about our future, and we're taking actions to improve our results. Have a good day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.