Good morning, everyone. My name is Jamie, and I'll be your conference operator today. At this time, I would like to welcome everyone to Mohawk Industries third quarter 2022 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 one using a telephone keypad. To withdraw your questions, you may press star two. Should anyone need assistance at any time during this conference, please press star zero, and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, October 28, 2022. Thank you. At this time, I'd like to introduce Mr. James Brunk. Mr. Brunk, you may begin your conference. Thank you, Jamie. 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 and provide guidance for the fourth 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 8K and press release in the investor section of our website. I'll now turn the call over to Jeff for his opening remarks. Jeff? Mohawk's third quarter sales increased to $2.9 billion, up 3.6% as reported, or approximately 8.3% on a constant basis, primarily from price increases and strength in the commercial sector. Our sales in the quarter were weaker than we anticipated, as sales in the retail channel softened across all regions and product categories. The strengthening dollar also negatively impacted our translated sales for the quarter by $117 million or 4.1%. Our operating income declined as lower volume resulted in higher unabsorbed cost and material, energy, and transportation inflation impacted our results. Our global organization responded to the economic challenges with additional actions to optimize cost, productivity, and inventory levels. There are substantial differences in the economic conditions affecting our various global markets and product categories. Our businesses in Europe have been impacted more than others due to the unprecedented energy crisis and high inflation that has slowed the region's economy. Recently, spot gas prices in Europe have fallen drastically, though future prices have not correspondingly declined. Our costs have continued to rise and our pricing in Europe has not kept up with recent material and energy inflation, which has compressed our margins. The Italian government provided energy subsidies during the third quarter, and additional actions from both the European Union and individual countries are being discussed. The high cost of energy has forced European consumers to concentrate on necessities and defer discretionary purchases. Our sales and margins in the market will remain under pressure until the region overcomes these challenges. These postponed purchases will increase demand when the economy rebounds and enhance our results. The U.S. is being more impacted by higher overall inflation and mortgage rates that have risen from below 3% to approximately 7%. The residential market, which is the most significant part of our business, is expected to decline further before we see an inflection point. Remodeling has slowed and our product mix has been impacted as consumers trade down to options that better fit their budgets. It is estimated that the U.S. has a housing deficit of 5 million units and more than half of U.S. homes are over 50 years old. Remodeling investments are expected to grow long term as U.S. housing stock ages and families with low mortgages choose to remain in their homes. Up until this point, our other geographies have been less impacted by inflation and higher interest rates. Our selling prices in those regions are better aligned with our costs, and their margins remain strong even with their economies slowing. While we manage through the current conditions, we're also investing in our businesses for the long term. We're expanding our capacity and growing product categories, including LVT, laminate, quartz countertops and premium ceramic and insulation. These projects should satisfy strengthening demand as our markets recover. We have recently completed a number of smaller acquisitions that will enhance our product offering and leverage our existing market positions. In Europe, these include a sheet vinyl business, a mezzanine flooring company and a wood veneer plant. In the U.S., we acquired a nonwoven flooring producer and a flooring accessories company. We're awaiting government approval of our Vitromex acquisition, which, combined with our legacy business, will make us the number two ceramic producer in Mexico. Our strong balance sheet provides us with additional opportunities to enhance our business. We recently published our thirteenth Annual Environmental, Social, and Governance Report, which highlights how doing what's right for the people and the planet is also benefiting our business. Our sustainable products excite both residential and commercial customers, and our bottom line is enhanced by increasing recycled content, reducing waste, and lowering our water and energy consumption. Now, Chris will review our third quarter financial performance. Thank you, Jeff. Sales for the quarter were just over $2.9 billion. That's a 3.6% increase as reported, or 8.3% on a constant basis. Due to the favorable impact of price and product mix, partially offset by declining volume and unfavorable FX. Gross margin for the quarter as reported was 24.5% and excluding one time items was 25.6% versus 29.8% in the prior year. The year-over-year margin decrease is due to lower demand, increasing temporary manufacturing shutdowns, lower sales volume and FX headwinds, partially offset by productivity and pricing and mix, which successfully offset the increased year-over-year inflation impact. The actual detailed amounts of these items will be included in our MD&A of the 10Q, which we filed after the call. SG&A, as reported, was 17.9% of sales and 16.3% excluding one time items. The adjusted absolute dollar expense was slightly favorable due to the impact of FX and cost containment actions, partially offset by inflation and price and mix. Operating margin as reported was a negative 17.3%, but excluding charges was 9.3%. As the company's current market capitalization, along with challenging economic conditions and higher discount rates, resulted in a non cash goodwill and trade name impairment charge of $696 million in the quarter. The 9.3% operating margin excluding charges is 350 basis points decrease versus prior year, primarily driven by higher inflation, temporary plant shutdowns, which accounted for $55 million of the decrease in operating income and lower volumes, which accounted for $45 million of the decrease in operating income. Partially offset by favorable price and mix and productivity gains along with net FX. Interest expense for the quarter was $14 million, in line with prior year, reflecting the full benefit of paying off the 2021 euro bond late in the fourth quarter of 2021. Our non-GAAP tax rate was 17.9% for Q3 versus 21.4% in the prior year. We expect the Q4 tax rate to be approximately 20%, bringing the full year 2022 rate to approximately 21%. That leads us to an earnings per share excluding charges of $3.34. Now turning to the segments. In Global Ceramic, sales were just shy of $1.1 billion. That's a 9.8% increase as reported, or 12.4% on a constant basis. Favorable pricing and mix initiatives more than compensated for the volume declines in the quarter. The sales growth was led by Europe, U.S. and Brazil. Operating income excluding charges was $132 million, increasing approximately 11% versus the prior year, and adjusted operating margin improved 20 basis points to 12.1% due to strong price and mix actions which offset higher year-over-year inflation, productivity gains and net favorable FX, partially offset by lower volumes. In Flooring North America, sales were just under $1.1 billion as well. That's a 3.7% increase year-over-year as reported. The growth in commercial, laminate and resilient offset weakness in residential carpet and rugs. Similar to Q2, excluding the decline in the major retailers' rug demand, the reduction of that demand, net sales increased approximately 8% versus prior year. Operating margin excluding charges was 8%, equating to a 340 basis point decline versus prior year. Due to the higher inflation, which was nearly offset by price and mix initiatives, temporary plant shutdowns and lower sales volumes, partially offset by productivity gains. Finally, Flooring Rest of the World with sales of $731 million. That's a decrease of 4.8% as reported, but an increase of 9.4% on a constant basis, with price and mix actions driving solid growth in panels, Oceania, and the installation businesses. Operating margin excluding charges was 8.5%, a significant decrease versus prior year. The primary drivers of the decline were higher inflation, partially offset by the price and mix actions, temporary plant shutdowns and related unfavorable productivity, plus lower sales volumes. Corporate elimination costs were $11 million for the quarter and expect the full year to be between $40-$45 million. Now turning to the balance sheet. Cash for the quarter ended at $327 million with free cash flow of $75 million in the quarter. Receivables ended at just over $2 billion, with DSOs slightly higher at 58 days compared to 57 in the prior year. Inventories for the quarter ended at $2.9 billion. That's a 31% increase versus prior year. A 3% increase versus the second quarter. The year-over-year increase is primarily driven by inflation, making up approximately 76% of the increase. Versus prior year, or prior quarter, excuse me, inflation and acquisitions drive the increase. Q3 inventory days stand at 131 days. Property, plant and equipment was just over $4.5 billion, with Q3 capital spending at $150 million and D&A at $153 million. To better align with the slowing demand, we have aggressively reduced our full year capital plan by 20% to approximately $620 million, with D&A projected at $559 million. Finally, our balance sheet is in a very strong position, with liquidity exceeding $1.8 billion at the end of the quarter, with the planned payout of our 2023 $600 million bonds in November, and net debt to EBITDA at 1.2x, enabling us to manage through the current environment and optimize long term results. With that, I will turn it over to Chris. Thank you, Jim. Our Global Ceramic segment delivered the strongest performance during the quarter, even with substantial inflation headwinds in Europe. Sales in new home construction channel were solid in most geographies, and the commercial channel showed resilience with new construction and remodeling projects continuing. In most markets, residential remodeling has slowed due to tightening consumer discretionary spending and higher interest rates. We are managing through pricing and mix to reduce the impact of material and energy inflation on our cost. Natural gas prices remain in a major headwind, with volatile pricing in Europe significantly impacting our results. Recently, European spot gas prices have declined significantly as available storage nears capacity, though the future pricing for the winter has not followed the decline. Across the segment, we continue to reduce SG&A spending, operational cost, and capital projects to align with market conditions. Sales in our U.S. Ceramic business expanded during the quarter, with the greatest growth in the commercial and new home construction sectors. Residential remodeling demand continued to lag in the retail channel, and customers are reducing orders to better align their inventories. During the quarter, our margins were driven by our pricing actions, and strong commercial sales improved our mix. We are gaining support with our new higher margin introductions that are an alternative to European imports. To offset material inflation, we are identifying further process improvements, utilizing alternative materials, and reformulating glazes. To align with seasonal demand and manage our inventory, we are scaling back production in the fourth quarter and reducing source purchases. Our countertop sales grew during the quarter, led by our high end quartz collections. Our quartz manufacturing plant is operating at full capacity, and we are sourcing products from around the world to satisfy demand. We expect that our new quartz production line will start up in early 2024 and will allow us to further expand our sales and improve our mix. Our European ceramic results in the quarter exceeded our expectations due to our sales and pricing actions, positive mix, and Italian energy subsidies. Subsidies are approved through November and may extend further. During the quarter, sales of our premium collections remained strong, while increased gas prices impacted our outdoor and lower-end products. European consumers are postponing residential flooring investments as high energy costs squeeze their budgets. Given lower spot gas prices and government subsidies, we are increasing production in the fourth quarter to raise inventory levels and improve service. In the first quarter, we anticipate lower production rates with winter energy prices expected to peak. Our operations teams are adjusting our production across our European plants to optimize mix, cost, and flexibility as demand evolves. We have addressed the shortage of Ukrainian clay by re-engineering formulations with material from alternative sources. In our other markets, third quarter sales grew primarily through pricing, mix, and strength in the commercial channel. Mexico's central bank has implemented additional interest rate increases, which is slowing the economy and ceramic sales. In Brazil, interest rates remain high and retail sales are slowing. We are increasing our activities in the A&D community and expanding our commercial product offering. Our pricing actions improve mix and productivity gains enhance results. All businesses are reducing production in the fourth quarter, which will increase our cost. Our team in Mexico has a detailed strategy to integrate our Vitromex acquisition to optimize short term results. The combined organization will have a stronger product offering and a competitive position to address the $1.7 billion Mexican ceramic market. Government approval of the transaction may be finalized in the first quarter. For the quarter, Flooring Rest of the World sales rose year-over-year, primarily from price increases and growth in our panels, insulation, and Oceania businesses. The segment sales are mostly residential and were more impacted by constrained consumer spending. In Europe, inflation is reducing discretionary purchases, so we did not see the typical seasonal improvements after the summer holidays. The retail sector is reducing inventories, and consumers are trading down in all categories. Our margins in the quarter were compressed by inflation, lower sales volume, and reduced production. The weakening markets are making additional price increases more difficult to implement. Natural gas prices in the period temporarily reached 12x historical levels, and governments are reviewing ways to assist industry and consumers with the spike in gas and electricity prices. Our wood supply and pricing is also being impacted as it is being consumed as an alternative source for both heat and electricity. As flooring sales softened, we increased promotional activity to encourage consumers to trade up. While our premium laminate and LVT faced greater pressures, our more value oriented sheet vinyl sales grew. In the quarter, we implemented price increases that partially offset rising material and energy costs. We anticipate sales volumes in the fourth quarter will remain weak, and we are reducing production, substituting alternative materials, implementing process improvements, and postponing non critical projects. We completed the acquisition of a small Polish sheet vinyl producer that will expand our business in Central and Eastern Europe. Our urethane insulation products provide the highest thermal resistance as consumers seek ways to reduce energy costs. New building projects in Western Europe are beginning to slow, and we are enhancing our distribution by expanding our customer base and exports. Our selling prices were slightly behind inflation, and we are reviewing alternatives to optimize our costs. Our new insulation plant in the U.K. continues to ramp up as we increase our sales and distribution. Our panels results weakened as demand softened and competition intensified. Our margins declined due to the impact of lower sales and production volumes from the weakening market. The French panels plant we acquired last year is increasing sales, and we have improved its productivity and operating expenses. We expanded the distribution of our higher end decorative panels and acquired a small mezzanine flooring company that will bolt on to our existing business. In Oceania, our sales improved primarily from pricing and mix. The Australian market is improving as the country relaxes COVID restrictions, and New Zealand is more difficult, with residential sales weakening. Our increased pricing is covering inflation, and inventories increased as imported material arrived faster than expected. For the quarter, our Flooring North America segment sales increased primarily from pricing. The commercial sector was stronger than residential, with hospitality leading the other channels. Hard surface products outperformed, benefiting from technology and capital investments in premium laminate and LVT. The residential market softened as inflation impacted consumer discretionary spending and retailers reduced their inventories. Our pricing in the period offset material and energy inflation, though lower manufacturing volumes led to unfavorable absorption. We managed our sales, marketing and administration spending to align with volumes and offset inflation. We are implementing our restructuring plans to lower both our fixed and variable costs by shutting higher cost assets, reducing staffing and aligning production with demand. We are executing many projects to improve productivity, reduce waste, re-engineer products, and lower energy costs. We are also deferring non essential capital projects to align with the present environment. Our residential sales continue to improve with our strongest performance in the new home construction, multifamily, and commercial channels. We have introduced assortments tailored to regional preferences and optimized our portfolio to improve productivity and service. Our WetProtect and antimicrobial technologies are being well accepted as desirable features by consumers. Sheet vinyl sales strengthened as inflation has increased in value oriented flooring options. The first phase of our new West Coast LVT plant is operating at planned output levels. We are ramping up production and training the workforce for additional lines that will be installed throughout next year. Our East and West Coast operations will enhance service to our customers, lower our costs, and improve transportation efficiencies. Demand for our premium laminate continued to grow as high performing value alternatives to other flooring. Sales of our waterproof collections and more realistic visuals are expanding in all channels. Inflation in other materials has reduced our margins, though we are beginning to see some cost decline. Our new manufacturing line is operating at our targeted levels to satisfy increasing demand. We have commitments to saturate our current capacity and have initiated further expansion investments. Market conditions for carpet softened in the third quarter more than we had anticipated, and we reduced production, resulting in unabsorbed costs. In the second quarter, we announced price increases that were implemented in the third quarter as inflation continued to rise. With demand softening, we were not able to increase prices further to recover the inflation after the announcement. We are seeing reductions in raw material costs that should align with our current pricing when our higher-cost inventory is depleted. To reduce our costs, we are eliminating less efficient capacity, streamlining operations and lowering marketing and administration costs, as well as reducing production to lower inventories. Our commercial business remains good, and Architectural Billings Index reflects continued construction activity. The hospitality channel grew the strongest as postponed projects and renovation are increasing demand. Our margins remained strong as pricing and mix covered our inflation in the quarter. Our commercial hard surface sales growth is outpacing carpet, with flexible LVT being the preferred option. Our new, more sustainable carpet tile, EcoFlex ONE, is gaining acceptance with its low carbon footprint, recycled content, and acoustic advantages. To complement our flooring accessories business, we acquired a small rubber manufacturer that produces trim primarily used with commercial installations. The acquisition expands our current accessories business, which produces laminate, vinyl, and wood trim. In the quarter, sales in our rug business were lower than last year as major national retailers continued to adjust inventories. We are taking restructuring actions to reduce our costs and lower our production with demand. In July, we completed the acquisition of a nonwoven rug and carpet business and the integration is delivering synergies. With that, I'll return the call to Jeff. Thanks, Chris. It's challenging to predict either the duration of the current economic conditions or the impact on our industry. As central banks around the world continue to raise interest rates and inflation reduces discretionary expenditures, we expect our business to remain under pressure. Residential remodeling drives the majority of our sales, and customers are deferring purchases and trading down. In Europe, gas and electricity prices are reducing demand and increasing our manufacturing and material costs. We anticipate that governments in Europe will take action to lower the impact on the economy, businesses, and consumers. We're focused on managing through the current environment while investing to maximize our long term profitability. We anticipate demand will slow further in the fourth quarter and we will reduce production, resulting in greater unabsorbed overhead. To enhance sales, we're increasing promotional activity, introducing differentiated collections, and reacting to competitive actions. We're executing restructuring actions, lowering administrative and manufacturing costs, and reducing investment in marketing. Material prices spiked in the period and have begun softening in many categories. In Europe, flooring projects are being deferred, compressing industry volumes, and we are raising inventories of specific products ahead of higher energy costs this winter. After our second quarter US pricing announcement, we incurred peak carpet material costs that will compress our margins until they flow through our inventory. We are postponing capital projects that do not impact our long term strategies while completing those that are critical to near term performance of the business. Finally, we expect the strengthening US dollar will continue to reduce our translated results. Given these factors, we anticipate our fourth quarter adjusted EPS to be $1.40-$1.50, excluding any restructuring charges. During the past decades, Mohawk has successfully managed through many challenging periods and industry recessions. The fundamentals of our business remain strong and flooring remains an essential component of all new construction and remodeling. Mohawk has built leading positions in key markets around the globe with well known brands and extensive product offering. During this period, we're investing for the market rebound that always occurs after our industry contracts. We're expanding our higher growth categories of LVT, laminate, quartz countertops, premium ceramic and insulation, which will increase our revenue and profitability with the next growth cycle. We've also made strategic bolt-on acquisitions for our business that create significant synergies that will enhance the combined results. Mohawk has a strong balance sheet with low net debt of 1.2x EBITDA and available liquidity exceeding $1.8 billion to manage through the current environment and optimize our long term results. We'll now be glad to take your questions. Ladies and gentlemen, at this time, we'll begin the question and answer session. If you would like to ask a question, please press the star and the number one on your telephone keypads. Management requests that you limit your questions to one primary and one follow up. Our first question today comes from Susan Maklari from Goldman Sachs. Please go ahead with your question. Thank you, and good morning, everyone. Good morning. My first question, Jeff, is just thinking about demand at a high level. Can you talk about how things slowed during the quarter? How do you think about the consumer's elasticity in flooring? What is their willingness to reenter the market and how are you thinking about demand as we do move through a weaker global macro? Our sales in the period increased with pricing and mix as the commercial sector strengthened. The sales were weaker, and the residential channels softened across all regions and product categories, and it got weaker as we went through the period. The income was lower with the reduced sales and production levels and higher unabsorbed inflation we had in the period. Our global organization responded by, you know, changing our production, managing inventories, finding more productivity, and optimizing our costs. Residential remodeling does drive the majority of our sales. As you know, the residential remodeling, unlike other product categories, customers can defer them almost indefinitely. So when you have slowdowns, our category is impacted more than most. Interest rates and inflation are impacting the spending both in the U.S. as well as Europe. Europe is in, you know, a crisis, and people are just pulling back from spending, and they're gonna have to get through it. There's all kinds of discussions going on how to help both the consumers as well as businesses, and we believe that something will come out of it. Some countries have already done things like Italy has already started helping with the gas costs. Let's see. What else have I missed? Covered it. Susan? Okay. You know, you mentioned obviously the balance sheet, the liquidity that you are generating. You've got a better balance sheet going into this downturn than you probably just about have ever had in a downturn. Can you talk about what that'll mean in terms of thinking about investing in the business in the long run, and where Mohawk will be as we eventually come through this, and what the profile of the business could look like? Listen, there's a lot of differences in this time versus other ones. You know, in other cycles, employment wasn't strong like it is now. We have wages increasing. We have housing remaining strong. We have aging homes that'll help. This whole cycle is really different than the last couple we've been through, where housing was majorly overbuilt and had to adjust. We have strong positions in all of our markets and we're continuing to invest in each of the different categories. As I said before, the major growth categories of the business are in LVT, which is the industry's continuing to grow. Laminate, which we have been able to take market share and expand the entire category. Quartz countertops is taking share from all the other alternatives, which includes stone and laminate countertops. It's in a growth mode. Premium laminate continues to grow, and our insulation business in Europe is in a good position as people invest more to reduce their energy. We're in really good shape with those. We've also made strategic acquisitions, all of which bolt onto the business, and every single one of them has dramatic synergies with our present business, enhancing both the existing businesses and it. With all this, we think we're taking the right actions in the short term, and we think we're well positioned to grow. As always, we would expect the volume to increase, our margins to expand, and we think we're in good shape to have a dramatic impact on the business. As Jeff noted, this is not being driven by really the housing market as we're underbuilt still in the U.S. especially and have aging homes. That should mean that you have a rebound with strong pent-up demand. As that's released, you'll get a higher EBITDA for the company and multiple expansion. Okay. Thank you for the color, and good luck. Thank you. Thank you. Our next question comes from John Lovallo from UBS. Please go ahead with your question. Great. Thanks for taking my questions, guys. The first one is, you know, how should we think about decremental margins here as we move through the quarter and maybe into 2023, just given the volume declines, production cuts, you know, continued investment? You know, with the volumes declining in most businesses, you know, you're gonna see also pricing increasing due to inflation. In the period, as I kind of pointed during my prepared remarks, we had the negative impact from volumes of about $45 million and on unabsorbed overhead, about $55 million. We would expect the volumes to be lower and continuing into the fourth quarter and anticipate the production below sales in most areas. That unabsorbed overhead, I would expect to see that increase a little bit in the fourth quarter. Great. That's helpful. You know, can you just maybe expand a little bit on some of these restructuring initiatives that you're initiating and what the cash costs will be? As we announced earlier in the year, we're implementing restructuring plans. We talked about $90-$95 million of cost, cash being about $15-$20 million. The largest are really in Flooring North America, where we're taking out high cost assets and reducing rug manufacturing. In Europe, we're also reducing costs and overhead accordingly. It should generate savings somewhere between $35 million and $40 million annually starting with next year. Great. Thank you, guys. Our next question comes from Michael Rehaut from J.P. Morgan. Please go ahead with your question. Thanks. Good morning, everyone. Thanks for taking my questions. First, I just wanted to circle back to some of the comments earlier around capacity additions for next year. How do you think about those in the face of the softer demand backdrop? You know, obviously, there's a big difference from perhaps what you did back in, you know, 2017, 2018, 2019. Can you just remind us on a rough basis, you know, the capacity that's coming online next year from a revenue standpoint, in terms of revenue capacity, what that might mean in terms of startup costs, and, you know, if there's any risk that, you know, the P&L impact might be a little more negative if, you know, demand remains where it is today? Let's go through all the different ones. Some of them aren't gonna start up until 2024, to tell you the truth. It depends on which one. Our laminate business is growing in the U.S. We have new capacity is put on. We have full commitments for all of that we have, and we have been unable to satisfy the demand. In laminate, it's taking. It's really become an alternative as a waterproof option for every other product, including LVT in the marketplace, and it has some benefits it doesn't have. It's growing, and we're continuing to invest in it. Quartz countertops, the business has been sold up. We're using imported products to support the business, and that should start up in 2024, enabling us to grow it. LVT is the expansion of the West Coast plant, which is probably about 30% done now, and the rest of it will come in over time. We have expanding commitments for it, and we're also importing products from around the world, which also offer opportunities to use it. We're investing in premium ceramic. The biggest piece is in slabs in Europe. It's also oversold, and we have been sourcing significant product from other people to support that business as it grows. We have the insulation business, which when we bought an acquisition, they were in the process of finishing the plant. It's starting up, and it has some regional advantages given where the locations of other ones are. We think that we're expanding our customer base already and starting to fill it up. Those are the biggest ones. Really, Mike, when you kind of take the combination of all those activities, it should lead us to sales opportunities about $800 million. Great. No, that's helpful. I guess just my follow up, maybe just switching back to nearer term sales, and the outlook for the fourth quarter. Just want to be clear, on a revenue basis, you know, obviously, you know, volume plus price, and obviously, price continues to be a big driver of results here. But on a consolidated revenue basis, are you expecting sales to be down year-over-year in the fourth quarter? And if so, how much of that impact do you estimate is from continued channel inventory reduction? And if you could just remind us again, I'm sorry if I missed it, what that impact was on a net basis to 3Q sales. In terms of the year-over-year sales, you know, as we've talked about, we are you know, highly exposed to residential remodeling. I would anticipate on a year-over-year basis, sales to be, you know, flat to down, given the decline, especially, in Europe, you know. Across the business, you know, as well, we'll reduce production, which is resulting in the unabsorbed overhead that's gonna impact margins as well. Just wanted to make sure we pointed out, we talked about the peak carpet material costs, you know, flowing through in the quarter. That should impact the Flooring North America segment somewhere in the $30-$35 million range. So most of it will come out in Q4 with a much smaller piece in Q1. The destocking, we get feedback from customers. They're all more pessimistic about the future. The feedback's telling us that they're reducing inventories, but we really don't have a good way to quantify it. We're hoping that the bottom is in the near term, and that it'll improve in the future once it bottoms out. We don't have good information to give you. Thank you. Our next question comes from Keith Hughes from Truist. Please go ahead with your question. Thank you. Questions on the carpet business. You refer in the release and the presentation, the initial statements about some raw material inflation that was not covered given some of the weak volume. Now, given how much input costs are up, that's, I know it could be a big number. Can you give us any sort of feel for what impact that had in the third or the fourth quarter? Yeah. That's what I was just saying, Keith, to Mike, is that, in the fourth quarter, that should impact us, and including our guidance, was about $30 million-$35 million, and then you'll have a much smaller piece carrying over to Q1. Okay. You had talked earlier about producing more in Europe right now, given where spot energy and costs are. Are you still on your energy in Europe or are you still running basically spot or are there some hedges in place? The biggest part of it's in our ceramic business, and we have hedged some of it, but we're still on spot on a large part of it, too. The most, basically short term, trying to minimize the spikes and the periods where we are. Okay. Thank you. Our next question comes from Phil Ng from Jefferies. Please go ahead with your question. Hey, guys. You know, Jeff, you've kind of highlighted you've seen a few cycles. Curious, once you kind of work through the destock, how are you thinking about volumes going out to 2023 or maybe just the end markets and thoughts with geographic exposure, whether it's Europe, North America, Latin Am. You know, some of your indirect peers have called out mid single digit declines in R&R, maybe down ten in single family. Just kind of help us unpack how you're thinking about 2023 once you kind of work through some of the inventory in the channel. Listen, that answer may be above my pay grade. Is it? No, seriously. There's really dramatically different scenarios that can play out next year. If you go through the two, we have an optimistic one, which starts out with the assumption that Europe has limited problems with gas as they go through the winter, and then they have adequate supplies going forward. In the U.S., the version would be that the interest rates peak, and they start declining, and we see a significant rebound in the second and third quarter as the economy starts repairing themselves. The alternative on the other one, which we're also preparing for, is that Europe struggles with energy throughout the entire year, and that the U.S. inflation remains high and escalates through 2023. In that scenario, you get industry volume remaining low throughout the year and being pressured by unabsorbed overhead and a more competitive environment. Given where we are, you can get two dramatically different conclusions to it. Keep in mind that either way, we always enter a growth cycle after the contraction because of all the postponed sales in our category. Our top line expands. This time, we'll have additional opportunities from the product expansions that we're doing, as well as the acquisition investments. Okay. That's helpful perspective. In your press release and prepared remarks, I think you alluded to some competitive activity, given the weaker demand backdrop. Is that more on the price mix side of things, more mix? Any slippage on, you know, like for like pricing? And then your ceramics business has held up really well, just from a profitability standpoint. You know, just given where imports have historically benefited from a stronger dollar ocean freight containers with some of those changes, how are you thinking about pricing and competitive activity, particularly on the ceramic side? Well, on the ceramic side, imported prices, up until now, imported prices have increased. As we look forward, we could expect, with a stronger dollar, they could decrease. We're well positioned with our U.S. manufacturing and sourcing capability to handle that. Okay. Any like for like slippage in some of the categories that you're seeing outside of ceramics? Listen, all the categories have had problems recovering the last increment of pricing because as the market softens and then at the same time, you have material prices peaking. All the businesses are under pressure with the last increment of pricing. What else? At the same time, you know, we've started more promotional activities where it makes sense to try to improve volume. In some cases, we've tried to get people to trade up more in the business. As the costs flow through, it should improve our margins. Yes, that's the key. The good news is that we're seeing a reduction of the raw material costs, and therefore it's better aligned with our pricing. As you know, that will improve the margins as it turns through the inventory. Okay. Thank you. Great color. Our next question comes from Adam Baumgarten from Zelman & Associates. Please go ahead with your question. Hey, good morning, everyone. You know, maybe just on commercial, you know, stood out as a bright spot. I think you mentioned hospitality being one of the areas that was strong. Could you maybe walk through some of the other verticals, maybe like office, that are also maybe contributing? The different channels in commercial? Yes. The question? Yeah, just maybe some color. You'd called out hospitality, but are there any other areas within the broader commercial market that you're seeing strength? For the most part, there's still a lot of activity across the board with planned projects coming in. The projects that you get from the index, they still show that they're still running at a positive rate. You have the hospitality is doing better because the hospitality quit spending money during COVID, and there's a lot of projects that were postponed, and you have to update those as they come through. The office you have, in some cases, more of them coming back to work and things that are postponing. In some cases, people have to redo their offices for a different environment where they are going through. The government projects are still coming through as they keep spending money. In the healthcare piece, we're doing okay. Yeah. Really, if you think about what commercial was led by in the beginning was really government and healthcare with hospitality lagging. As Jeff pointed out, now hospitality, and that includes, you know, the hotels, casinos, airports, anything along the route of travel as consumers have moved their spending from kind of the day-to-day and now more into the travel and entertainment area, hospitality is having to catch up because of those low investments over the last couple of years. Got it. Thanks. Just, you know, you called out the Italian energy subsidies that you received in the quarter, and that sounds like they're expected to continue at least partially through the fourth at this point. Can you maybe size the benefit there? It's about $15 million a quarter so far and I think they've been approved through November. Just as a comment, the government in Italy is turning over so that they keep approving these things almost month by month. Yeah. You'll see a benefit of that, in Q3 and Q4, and a little bit will carry over into Q1 as it turns through the inventory. Great. Thanks. Our next question comes from Mike Dahl from RBC Capital Markets. Please go ahead with your question. Hi. Thanks for taking my question. Just as a follow up, can you quantify what the year-on-year headwind was for European nat gas in 3Q? What's that expectation for 4Q? If current spot prices hold, how much would that change as you look out over the next couple of quarters? Well, as you know, the costs are up dramatically year-over-year. When you look just specifically at the fourth quarter, I think we're roughly about 60% hedged now, 60%-70% hedged just for the fourth quarter. In terms of the headwind, you know, they've done a very good job of pushing price, running the premium end of our products. There's really not a significant difference between price mix and energy at this point in ceramic Europe. We don't have the energy, just the energy costs in front of us at this point. Just as a quick clarification, if it's kind of neutral at this point, is that inclusive of the subsidies? My second question is, you know, there's some puts and takes around how you're managing production in European ceramic. You're ramping production, you know, into the fourth quarter to take advantage of the spot prices. Jeff, I think you said, or maybe Chris said, as you look to one, two, that production will decline. I don't think we wanna give you the impression it's a neutral impact. It's not. We're raising. Okay Prices almost weekly, monthly over there. We have surcharges we're changing. We're walking away from product categories that the economics don't make any sense. We're moving products between different regions based on the costs of it. We're starting and stopping the plants, I mean, week to week based on what the energy costs are in different countries and regions. So I mean, it's a full effort to manage through changing environments. Yeah. The comment about producing, what we're deciding to do is produce more in the fourth quarter, where we anticipate having lower energy prices, and then reducing it in the first quarter when we expect the prices to be significant. Okay. Thank you. Just as a comment, the future prices in Europe are somewhere in the EUR 130-EUR 140 range last time I looked. They may be lower than that right now. I mean, they move around so much in any given week, as you go through. The spot prices today were under EUR 40, is it. Yeah. I mean, nobody knows where it's gonna end up. All right. Thank you. Appreciate that. Our next question comes from Laura Champine from Loop Capital. Please go ahead with your question. Thanks for taking my question. If I look at the inventory balance at the end of the quarter, up 31% year-over-year, how much of that is a cost inflation versus how much are units up in that inventory number? The costs make up about the 75%-76%, so in terms of the inflation. It's by far the largest piece. Remember, when we came out of last year, the inventories were low in most of the businesses, and the service was poor in most. What you also see, Laura, I think it's important to look at, sequentially as well, and you see that, you know, quarter-over-quarter, you know, we've definitely slowed the pace of that increase and really all the quarter-over-quarter increases, inflation, and then the added acquisitions. The plan is to continue to look at production levels in the fourth quarter in most of our areas to lower inventory as we end the year. Again, that's across most of our areas with, you know, some exceptions we've already talked about. Okay. Where you are taking promotion is not the clear excess for the most part. It's because you're trying to drive sales into a better mix of goods. We're trying to utilize the capacities of the equipment. Got it. Thank you. Thank you, Laura. Our next question comes from Stephen Kim from Evercore ISI. Please go ahead with your question. Yeah. Thanks very much, guys. Appreciate it. A lot of interesting information you've given here. Just wanted to clarify a couple of things here. When you talk about your destocking, you said it was kind of hard to know how much destocking, you know, there is in channels, I guess outside of the retail. I wanted to sort of press on that a little bit because I would think that particularly like in the North America new construction residential sector, there, you know, there'd be certain SKUs that would be, you know, most susceptible. You know, you do volume runs that would be most susceptible to destocking in the supply chain to volume builders. My question is, did you see that in the quarter? Are you assuming it worsens in your guide? Regarding the guide, when you talk about price cost headwind for the whole company, do you anticipate that it'll worsen in 4Q from whatever we see it as being in the third quarter? Well, let Jeff start with the demand question, then I'll address your price cost. We know what the buying is. What we don't know is what our customers' inventories are. We have indications that they're reducing their inventories, but I don't know if they're at the bottom or they're somewhere between, or they're gonna change them further. We don't know that. All we know is the business and we can't tell the difference between our shipments to them and their shipments to their customers. On the price mix cost equation in the fourth quarter. Yes, especially because what we've called out, the impact in Flooring North America, I expect the gap to widen in the fourth quarter as compared to the third quarter. Yeah, that makes sense. In terms of the decremental margins, I just wanna clarify a couple of things. You know, you talked about the Italian energy benefit. I'm curious, do you think that you can maintain decremental margins in line with your historical, you know, incremental margin range, even taking out that Italian energy benefit? Regarding that Italian energy benefit, it sounds like in the ceramic business, that's causing you to shift your production into the fourth quarter. You also said that, you know, you might see those subsidies, you know, get extended beyond November. If that happens, would you likely diminish your 4Q production, or would you merely keep your production higher for longer into 1Q? Well, I think the way to think about that is even if you're getting subsidies, the cost of gas should be much lower in the fourth quarter than it will be in the first quarter. That's why we're doing more production in the fourth versus the first. In terms of the decremental margins, Stephen, you have to really watch. They're gonna vary by, you know, each one of our business lines, depending on exactly how much production that we take out, which is gonna equate to your uncovered overhead costs. It really varies across each of the businesses within the segments. I'm not sure if you can kind of just go on historical one percentages at that point. Just as a comment. Yeah. In the incremental, it's much easier to hold your cost as the volume rises than it is to decrease the fixed cost or even the variable cost as the thing goes down. Longer term, we have to make decisions or in the short term, we have to make decisions, how long is it gonna last and where it is and how much you wanna maintain, even though the volume decreases. Yeah. The length of those shutdown periods will definitely impact what that percentage is. Sure. Okay, thanks, guys. Our next question comes from Truman Patterson from Wolfe Research. Please go ahead with your question. Hey, good morning, guys. Thanks for taking my questions. First, Jeff, you mentioned that the European consumer is in a bit of a crisis, which I guess I'll extend to Russia as well. In the rest of world segment, I'm trying to understand how much volumes might have declined in the third quarter. Since we're, you know, a month into 4Q, looking to understand, you know, how that's trending in the fourth quarter. I'm really just trying to understand, you know, how much that consumer is pulling back. Well, if you look at Flooring Rest of the World, sales were up 9% on a local basis, which was driven mainly by price increases in panels and insulation. The segment sales are primarily residential and overall inflation is reducing retail purchases. When we came back from the holidays, we didn't see the normal increase in demand that we normally get. Our customers are reducing inventories, and consumers are trading down in that market. Okay. Gotcha. You know, you all mentioned some temporary manufacturing shutdowns in Rest of World. I know you've previously mentioned some plant rationalization and cost initiatives. Just any incremental initiatives to right-size this business. Well, just talking about what happened in margins. Our margins were compressed by inflation, lower sales and reduced production. There are weakening markets making our price increases difficult to implement. We're assessing alternative sources to lower our material costs. In the markets similar to Italy, governments are reviewing ways to assist the industry and consumers with gas and electricity prices. All right. Thanks, guys. Thanks, Truman. Our next question comes from Kathryn Thompson from Thompson Research Group. Please go ahead with your question. Hi, thank you for taking my questions today. Granted, understandably, a lot of focus on reductions and production and along that line. Often it's in these times of economic stress that M&A opportunities arise. A two part question. In light of a changing world set with deglobalization and also changing consumer preferences post-COVID, how are you thinking about growth opportunities from an M&A standpoint, both from geographic and a product standpoint? Thank you. In past downturns, the compression of the earnings and the compression of the multiples, most companies don't try to sell unless they have to in this environment. Usually most of the transactions are done on the other side of it as you're coming out and the margins are expanding. I would suspect that's where the opportunities are gonna come this time also. Following the part of the question, have you changed thinking from a geographic standpoint, where you would think about growth from an M&A standpoint? In other words, less focus on Europe, greater focus on North America, et cetera. I can't say that we've made a specific decision. We have to take each geography and each opportunity that comes, and we evaluate it given how we perceive the future at this point. I mean, Europe, as you can tell, we don't have a view for the next three, four months, let alone the next year. In Europe, under this circumstance, we'd have to have much more something that got us to do something immediately, as I would assume the rest of the world is in the same place we are. At this point, we're really trying to get ready for a slowdown and try to minimize things. With the strong capital structure we have, if the right opportunity arises, we would take it. Okay, great. Thanks very much. Our next question comes from Matthew Bouley from Barclays. Please go ahead with your question. Afternoon, everyone. Thanks for taking the questions. Just back on the topic of decrementals, you know, I know, Jim, you mentioned volumes were a $45 million headwind, and the unabsorbed overhead was a $55 million impact. Not to oversimplify, but if we kinda think of those two together as sort of a volume based decremental as we model, you know, should we assume that kinda even or close to even split between the two is how it will continue to look going forward as we model out, you know, the impact from volumes? Or, you know, at what point, you know, will you be able to kind of right-size some of the fixed costs and, you know, maybe that split won't look the same? How should we think about, you know, that kind of combination of the two? Thanks. Well, look, in the short term, you know, just looking at the fourth quarter and what we included in our guidance again, we expect the softening volume to continue and the related shutdowns also to occur. You'll have a very similar pattern to what you saw in Q3. Then I'll let Jeff answer on the longer term, but you know, looking into 2023, as Jeff said, it really comes down to the two scenarios, and we wanna be well positioned for when this pent-up demand comes back to us. A big part of it is we think we're gonna produce less than we're selling in most marketplace and reduce the inventories. As we go into next year, it's gonna be really based on the demand. Usually in the fourth quarter and first quarter, historically, you'd be coming out of a high season in the peak, and we'd actually be building inventories for next year. This year, we're gonna not do that because we don't expect the demand to require it. That's another pressure on just the short term. Remember. Got it. Thanks The key point is how different this situation is and the fact that we're not overbuilt on housing, and you have an aging inventory as well. So both remodeling and new housing, you know, are still poised to have a strong rebound in the future. Certainly do not want to get caught without the ability to produce the required products. Understood. No, that's helpful color, guys. Just second one on the U.S. end markets, you know, you're saying sort of remodeling has weakened, but it sounded like you still had strong performance on the new construction channel in the U.S. You know, given the slowdown that's kinda going on there on the front end, is that slowdown in new construction incorporated in your fourth quarter guidance, or are you still kind of benefiting from sort of the prior backlogs of construction there on the new construction side? Thanks. The answer is yes. Meaning that it is built in, that you may or may not know that the flooring typically is at the end of the construction, so ours holds up a little bit longer than some of the ones that are at the front end. Right before they complete it, they use the flooring, but the number of housings being started is gonna impact our business until it turn, you know, until it turns around in the future. Got it. Well, thanks, Jeff. Thanks, everybody. Thank you. Thank you. Our next question comes from David MacGregor from Longbow Research. Please go ahead with your question. Yes, good morning or good afternoon, as the case may be. Thanks for taking the questions. I guess, first of all, just a mixed question. Just thinking across your various lines and various regional markets, you know, globally, what percentage of your offering would you characterize as premium collections within their respective categories, versus more value position products? I'm not sure we've ever added up like that across all the categories we have. Some of the businesses only. Participate in the premium, and some participate from bottom to top, and it's different by product category and by region. I believe that we would have a much larger position in the medium to high, but I don't have a number to give you, is that, across most of the businesses. Okay. All right. Thanks. As a follow up, I guess, you know, there's been a few questions here about investing for the long run, and I'm just thinking back to Jim's comments at the beginning of the call about taking the CapEx guide down by 20%. I guess the question is around kind of investment discipline at this point. If you think beyond maintenance CapEx, and you just focus on kind of the growth CapEx and acquisitions, how do you think about the limits on what you're prepared to spend until you see convincing evidence of a pending recovery? The first part is the new capital investments. Most of them take anywhere from a minimum of a year to as much as two years to implement. The projects that are coming through now were agreed to the end of a year ago, is it. Once you start them, the ability to stop them is almost none, is it. You have to write off all the investment that's already there. Those are in place and moving forward. Some of the costs of those will flow in the next year, and they're all in growth categories that we're gonna need. We may not need as much of it in the short term as we thought, but we'll need it as soon as the business turns around in all of them as we go through. Beyond those, we're cutting back on anything that doesn't impact the short term business, managing through as we see the business today. Yeah. The key, and I think you hit that word, we have to stay very disciplined as we look into 2023 and go through our budgeting process. It's just that we've initiated a number of projects to have the carryover effect into 2023. Beyond that, you know, we will certainly scrutinize based on the demand levels. Okay. Just another comment about the acquisitions. All the things that we've done recently all have huge synergies between the new business and the old business, that connecting the two together not only improves the margins of the acquired business, but also the existing business, is it. That should help us as we get those together and get all the cost synergies out of them. Then there's also product and sales synergies. Really, when you think about it, this collection of acquisitions, though being small, if you add Vitromex in, which, you know, hopefully, will close in the first quarter, the accumulation of additional sales that those are generating are about $375 million on an annual basis. As you look at those bolt on ones, they are important to the ongoing business as well. Good. Thanks very much, gentlemen. Good luck. Thank you. Thank you. Ladies and gentlemen, we've reached the end of the allotted time for today's question and answer session. I'd like to turn the conference call back over to Mr. Lorberbaum for closing remarks. We're taking the right steps to manage the existing conditions, and we're adjusting as they change over time, and it's a volatile environment. We're putting ourselves and the company in a really good position for when the economy improves and comes out, and we appreciate all of you joining us. Thank you very much. Ladies and gentlemen, that concludes today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.