Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Second Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today Friday, July 26, 2019. Thank you. I would now like to introduce Ken Huelskamp. You may begin your conference.

Thank you. Good morning everyone, and welcome to Mohawk Industries quarterly investor conference call. Today, we'll update you on the company's results for the second quarter of 2019 and provide guidance for the third quarter. I would like to remind everyone that our press release and statements that we make during this call may include forward-looking statements as defined by 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 discussions of non-GAAP numbers. For a reconciliation of non-GAAP to GAAP amount, please refer to our Form 8-K and press release in the Investor section of our Web site. The key speakers today are Jeff Lorberbaum, Chairman and Chief Executive Officer; Chris Wellborn, Chief Operating Officer and Glenn Landau, Chief Financial Officer. I will now turn the call over to Jeff for his opening remarks. Jeff?

Thank you, Ken. In the second quarter, our business delivered results at the high end of our guidance. Our sales were $2.6 billion up slightly as reported and up 2.4% on a constant basis. Our adjusted operating income was $277 million or 10.7% of sales. The U.S. dollar strength when compared to the prior year reducing our translated results for the quarter by approximately $9 million, most markets we operate and remain soft and with pressure; with pressure on volume and pricing. We anticipate the environment to remain difficult. In the U.S. housing sales remain below last year's level impacting flooring demand in our largest market. LVT continued to grow significantly affecting our other product categories. Many of our other geographic markets soften with their economies reducing flooring sales and increasing pricing pressure from excess capacity. In Europe, political and Brexit concerns slowed the economic growth, Australia was further impacted by a housing bubble. The Russian economy has softened and Brazil has slowed to political uncertainties. The Mexican ceramic industry is growing despite a slowing local economy. Given these uncertainties, we are taking actions to improve our business. We are streamlining our operations, consolidating facility and taking out higher cost assets. We are reducing production to control inventory level introducing new product categories and increasing promotions to address change in markets. We are reducing overhead structures and controlling investments. We benefited in the period from lower material cost offset by labor and energy cost that continue to arrive. To recover inflation, we implemented many price increases in the first half of the year, though much of the benefit has been offset by mix and competitive pressures. We are improving our administrative cost, while investing in sales support, new products and entering new geographies. Our LVT manufacturing has improved significantly with increased speed, efficiencies and yield in both rigid and flexible products. As our LVT processes improve, we are initiating trials on new features to enhance our differentiation. We will implement additional process enhancement this year as we further improve our output. While managing these challenges, we are enhancing the long-term value of the business. The utilization of our new investments in U.S., Europe and Russia is increasing as we broaden our product offering, expand our customer base and had shift to increase production. The critical integration of our acquisitions in Australia, New Zealand and Brazil as largely been executed. Our management teams there are focused on improving our market position, offerings, and cost structure. In each acquisition, we are progressing with new investments to enhance our capability and introduce new products. These acquisitions are contributing to our results as we build a foundation for growth and margin expansions. The margins of our greenfield projects will increase over time as our sales, production and mix improve and cost decline. For the specifics on the period, I will turn the call over to Chris Wellborn.

Thank you, Jeff. For the quarter, our global ceramic segment sales increased about 3% as reported and were up about 5% on a constant days and exchange rate. And the segment suggested operating margin was 12.4%, headwinds from slower markets and competitive pricing impacted the results at most of our businesses. The U.S. ceramic market has declined this year due to lower home sales, the continued growth at LVT and customers trading down. Prior to the increase in Chinese ceramic tariffs a significant amount of inventory was imported, increasing pressure on the industry. We believe our ceramic sales are in line with the U.S. market with commercial outperforming residential. Increased competition and excess inventory have impacted both our pricing and mix. The government investigation of Chinese ceramic dumping has progressed and appears likely to be implemented. If approved, the present tariffs would go up significantly and remain in place for many years. In the retail market, a greater focus on LVT is impacting ceramic and customer inventories are being lined with present sales levels. In the market, we're also seeing a greater emphasis on selling lower quality product to stimulate ceramic volume. Due to these conditions, we expect the U.S. ceramic market to remain soft in the second half of the year and we're taking any actions to improve our sales and cost. We are launching new collections to compete with premium porcelain being imported. We're adding salespeople in key markets and increasing our activity in the commercial channels. We are initiating promotions to increase volume and we're introducing products at lower price points to align with the market. To complement our ceramic offering, we've introduced Dovetail branded LVT in commercial channels to increase our participation in the category. We are installing equipment for our new ceramic installation system which…

Thank you, Chris and good morning everyone. Moving right into our financial performance and year-over-year bridges, second quarter net sales were $2.6 billion up 0.3% as reported or up 2.4% on a constant basis adjusted for FX and days compared to prior year. Organic growth in legacy businesses on a constant basis was down 2.9% in the second quarter bringing our year-to-date growth down 1% on a constant basis versus the first half of 2018. In terms of earnings, the company's adjusted operating income as Jeff already shared was $277 million in the second quarter or 10.7% of sales up seasonally from the first quarter by 220 basis points with an improvement in our year-over-year decline in margins by over 100 basis points both as we expected. Bridging from the prior year second quarter, adjusted operating earnings were impacted by the lower price mix of $30 million weaker volume of $8 million and a net increase in inflation of about $10 million helped by low raw materials. Additionally, temporary production curtailments to match our supply with our customer demand cost $3 million and productivity less reduced startup costs was down to $2 million negative. FX translation impact was favorable approximately $9 million. SG&A per net sales was 18.1% excluding unusual items down 60 basis points from the first quarter and up 120 basis points year-over-year due to investments in selling and marketing to drive sales including roll out of initiatives from new startups. Special items in the quarter were $10 million for continued restructuring and integration costs of which most were cash. In the second half, we anticipate additional charges of approximately $42 million associated with ongoing restructuring efforts as well as remaining acquisition integrated expenses -- integration expenses. Bringing full year unusual and non-repeating costs counter for special items…

Thank you, Glenn. The general conditions in our flooring markets around the world have become more challenging and competition more intense. We're taking actions to improve sales, reduce our costs, manage our inventory and adjust our offerings. The U.S. flooring market is the most difficult and we're taking actions to increase our volume and reduce our costs. In the U.S. ceramic lower demand and purchases ahead of tariffs, have created excess inventory in a market which is impacting sales and margins. Our LVT production has increased substantially in the U.S. and Europe and will continue to improve throughout the year as we introduce more sophisticated technology. Our flooring rest of the world segment is delivering solid results despite softening markets. Our new plants in the U.S., Europe and Russia have made substantial progress increasing output and we're increasing our sales to achieve our planned results over time. Taking all this into account, our EPS guidance for the third quarter is $2.68 per share excluding any onetime charges. As we manage through the current conditions, impacting the flooring sector, we're focused on optimizing the long-term growth of our business. We are implementing numerous changes that will enhance our future results. We have leading positions in our products and markets and our new investments will provide solid returns when further developed. Our balance sheet and cash flow are strong with our net debt to adjusted EBITDA 1.8x which will further decrease by the end of the year. We will now be glad to take your questions.

[Operator Instructions] Your first question comes from the line of Tim Wojs from Baird. Please go ahead. Your line is open.

I think, I was on mute. Good morning everybody.

Hi, Tim.

Hey. So I guess maybe just -- maybe first on just the inventory, I guess when we think about how you're managing production, what type of growth rate for the industry are you kind of assuming around that I guess, if we look into 2020 and theoretically if the industry was down, I guess how much would production need to be reduced to kind of right-size the inventory to get to that level? I mean would it have to go into Q4 and Q1 at this -- under that kind of theoretical situation?

You just have to take the turns in the inventory times whatever the volume is going to be and that's the change in the inventory. I will have to guess or whatever, you'd have to guess or whatever you've wanted to be -- expected to be.

Is there any -- I guess any sense of kind of how you guys are thinking about it over the next couple of quarters?

So we're going to see how the world develops over the next six months and we'll have a better view of it.

Okay. And then, I guess just maybe on LVT, how do you feel about the productivity of the European facility today? Is it covering the overhead cost of the new line? Is it covering the overhead costs yet, or is it still modestly negative?

We've made dramatic progress in the last quarter stabilizing the LVT lines increasing speeds in yield. In Europe, the market today is still primarily flexible LVT, with rigid gaining acceptance just at the beginning of it. The new line is presently running flexible LVT at higher rates and it's running rigid almost as fast as the older production lines. With further changes this year, with its improved fee, yields and costs that will make our manufacturing more competitive improve our margins. Just as a note, the products floor performance is the best in the marketplace. And this fall, we'll be adding new features to increase it. Relating to the U.S., in the U.S. our production increased 30% over the prior period. The line is about three months behind the European line in its progress and they're collaborating really well with people going back and forth almost weekly to keep them in the sync. In both markets we're focused on expanding sales and product offering and adding new features. We continue to improve our sales mix, but just it takes time because when the production moves up it takes time to align the market with the changes in the production it doesn't happen overnight.

Okay. Is there any sense of or timeline in terms of when you think the European facility can become beyond break even?

It's moving towards that now as we have to keep making changes. We expect next year for the thing to turn and then the profits will take time. I don't know how fast we can align the sales with the mix to get it optimized. It may happen in the latter of next year or may take longer to get fully optimized.

Your next question comes from the line of Stephen Kim from Evercore ISI. Please go ahead. Your line is open.

Hi, Steve.

Hey. Thanks very much guys. I wanted to ask you about some of the word wording you used in your press release and also on today's call relative to what it was in late April when we last spoke with you in this forum. In April you said that floor North America business had improved entering the second quarter supported by an improving housing environment. And then, today, we seeing that residential carpet sales are down and you said you are going to increase promotions and you intended to -- I think you said defend your market position. It's kind of a big change in tone and it made me wonder, have you lost some customer accounts or something flooring North America? Can you talk about what happened in that segment in the last two months of the quarter? And how long it's going to take to reverse this trend?

Coming out of the first quarter, we thought we were seeing trends that were going to improve and we thought that the mortgage rate decline would have improved housing. And here we are three months later and the housing market still remains slow. And competition has increased. The LTV is still impacting all the other categories and putting pressure on them. With it you have a decline in industry units in both and almost all the other categories, but we do as you go through. And then in the residential carpet business, we underperformed the market that we did, but we changed leadership to address it. The new team is in place. They've made dramatic improvements throughout the business. But, at the same time, the mix has declined. We're increasing more promotional activities along with the marketplace. We're expanding our polyester offering as it grows in the marketplace and we're taking actions to improve our results by increasing -- by reducing the headcount replacing high cost assets. We've closed inefficient plants and will continue to take more actions through the fall.

Okay. That's helpful. Yes. Through the fall. Okay. And then, I wanted to talk about the inventory, in particular you use a phrase in your 10-Q temporarily reducing production. I think in 1Q, it was 7 million mostly in ceramic. I was wondering Glenn, could we get a sense of what that number was that that temporarily reducing production that sort of right-size inventory levels. What was that in the second quarter and where do you think it's going to peak this, where and when do you think it's going to peak out this year?

Yes. That's a good question. So, we rebalanced in the first quarter, our inventories. We came out of the first quarter with inventories where we wanted them. We took a very modest amount of downtime about $3 million or so in the second quarter. But looking forward that uncertainty relative to the big buildup in inventory in ceramic not inventory at Mohawk, but inventory in the industry that is peeling away some of our sales, we will have a more meaningful downtime expense in the third quarter and that's dialed into our outlook.

Steve, I'll just comment. The industry units are off in ceramic due to lower housing and LVT. There's excess inventory in the market now that was purchased ahead of these tariffs and that's complicating the conditions and estimates. Also you've got a strong dollar right now has increased pressure on pricing. In the fall, we have this Chinese anti-dumping duties that are likely and we expect the market to stabilize as the inventory rebalances.

Your next question comes from the line of John Baugh from Stifel. Please go ahead. Your line is open.

Hey, John.

Thank you and good morning. I wanted to talk a little bit about carpet and I think you mentioned you underperformed the residential market. Number one, any kind of specificity around that and we keep hearing about mix of erosion in carpets. Of course, we've seen the move to polyester for some time, but I guess you're seeing within polyester mixed, and so I guess I'm wondering specifically are you going to be going to this like phase two cost reduction, how do we get EBIT dollars particularly the carpet area to improve?

Yes. We did under perform the market, which is the reason that we made the changes in the leadership a while back. The new team has put a lot of things in place. We've realigned the organization by product category. We've increased our operational performance, our product and pricing management is better as well as our customer focus. There have been many changes that have already improved, the cost, quality and service. And I'm confident we're addressing the right issues. The mix, the customers are trading down from higher quality to lower quality, which is typical to when you raise prices they do tend to trade down to try to maintain the price points. And then trying to increase volume, everybody tends to sell price, there is more attention to selling price in the marketplace. And the higher differentiated products, we have higher margins, so as you trade down the margins compress in addition. Not sure I answered all the questions, you have still one.

Well, any sense, Jeff, as a follow up where kind of volumes for the trade or residential in carpet and kind of where you came out. And then also I believe laminate the other big piece of the North American segment revenue I assume volumes were down there although you alluded to mix being a little better there?

The carpet industry was down. I think about 6% in units and we underperformed in the residential and we performed well in the commercial business. In the laminate business, what you see is lower end laminates declining and premium laminates actually growing both in the U.S. and in Europe. We're the leader in premium laminate with a very limited low-end business where we have superior visuals, the waterproof technology, we're ahead of the marketplace, scratch resistance, we are all making those grow as alternatives to both wood and LVT in certain markets. And we're seeing it being used in more markets both in the U.S. and in Europe.

Great. Thanks for that and good luck.

Thank you.

Our next question comes from the line of Matthew Bouley from Barclays. Please go ahead. Your line is open.

Hi, Matt.

Hi. Thank you for taking my questions. I wanted to ask about the promotional activity that you mentioned in both floor in North America and ceramic. You just help us understand exactly what you're doing there? Should we anticipate that, I guess price mix would decline further from what we just saw in Q2? And how long do you think these promotions will last? Thank you.

With the industry volumes under pressure, this excess inventory and excess capacity in the marketplace and as you would expect people try to promote more volume and we too those are putting pressure on it and the pricing is all embedded in our third quarter estimate that we gave.

Okay. Understood. Thank you. And then, just secondly, on LVT, in the U.S. specifically as you've increased the production at the new facility and you just rolled out some of the Pergo branded LVT. What's your sense so far of the customer response to Mohawks LVT products relative to the competitive LVT products out there? Thank you.

Products actually have better floor performance than the alternatives that are similar to them. But the difference performance features and we just have to keep expanding the alternatives and options in the marketplace to catch up with the production moves that we've already made.

Your next question comes from the line of Phil Ng from Jefferies. Please go ahead. Your line is open.

Good morning. Just first on a clarification question. Glenn, I think you called out a [70 million] [ph] cash flow number is that free cash flow or operating cash flow for '19 and appreciating...

That is free cash flow. So after our CapEx spending.

Okay, great. And increasing your spacings on headwinds in the near-term. Is there a good way to anchor us to a free cash flow number for 2020? And when you expect to work through some of these issues, you're seeing, when you kind of expect an inflection on a year-over-year basis for EBITDA, could we expect that to turn maybe early 2020?

Yes. We've gone over with this trailing review, the conditions and what's going on in the businesses and the changes in different geographies. And we're taking all these actions to improve the pieces but the market is in really hard to anticipate how all this is going to level out both with volume and margins. So, we're not giving out future estimates beyond where we are.

Got it. Okay. That's right. And just given some of the excess inventory, you called out in the channel for ceramics and those increased competition outside of the inventory drawdown, that's going to weigh on profitability in the back half of the year. Do you expect demand and pricing trends to kind of worsen from what we've seen in 2Q or is it kind of more of the same?

It's going to be difficult in the near term until the inventory gets all managed out. There's a high likelihood of these duties from China. China makes up about in 2018 over 30% of the imported products that are coming in. And if these duties get put on there's going to be a reshuffling that go dramatically around the industry and some of it's already started. So, we'll have to see how that plays out.

And I'd just add, as that inventory gets rebalanced which it will. We're doing a lot to enter new ceramic markets with this new installation method, roofing, outdoor products. We're also increasing sales, managing cost and matching our production with demand. So, we'll be in a good shape when it does.

The next question comes from the line of Justin Speer from Zelman & Associates. Please go ahead. Your line is open.

Morning. Thanks guys. Appreciate it. The implied third quarter guidance, I know there's a lot of moving parts in terms of the inventory situation, but just wanted to get a little characterization around roughly 200 plus basis points of margin pressure implied in that guidance, I assume but just help us understand or rank order, some of the primary pressure points and maybe some of the potential offsets, particularly, we have our eyes on what oil prices are doing and a lot of your peers building products [brethren] [ph], it's not flooring, but building products that are benefiting from those dynamics. Would expect you to get some offsets there to transportation costs a little bit better. So just trying to get a sense for phasing of this guidance, the pushes and the pulls as you think about the next quarter?

We've gone through the third quarter with the excess inventories and the pressures in all the economy. As you look out further, we don't see anything that's going to change the softening markets in most of the places and the difficulties unless we get a surprise in the U.S. with housing and the economy, which could help. In the third quarter, we built in lower volume and margins relative to these pieces as well as increased competition and reduced production. And we have a lot of actions going on, the actions to take out costs. It takes up over a quarter to flow through before they show up. So, there'll be some benefit show up in the fourth quarter, and then after that next year you'll see most of the benefit of the different actions we've taken. Just to remind you the fourth quarter margins last year were significantly depressed, so it makes the comparison easier this year.

I will just add to that. You're starting to see in ceramic, you're starting to see these imports come down, but it's going to take a while to do that. And we've temporarily reducing production while that's happening until we get a view of it. Once that -- we're also doing -- that's coming down we're doing a lot of things to take advantage of it when it finally turns.

So, couple of follow up questions, just in terms of that 28 million cut cash cost, the one-year payback, should we view that is largely North America. Should we think about that? I guess the return of that on the other side of the payback from that, shall we think about that as a productivity good guys next year. Should we model that as a positive productivity next year?

Consolidating warehouses, in Europe, we are optimizing headcount in the ceramic business and we are reducing wood capacity both in the U.S. and Europe or the actions, the restructuring costs, again, the restructuring savings, first you have to complete them. Then it has to flow through inventory, so the timing in it depends on it, some of them are already complete, some of them are just beginning and some of them haven't started yet.

I don't know, if I cut out, but I don't think I heard the answer, is that -- so the payback from these productivity issues or productivity initiatives, should we think about that as being a positive next year in terms of the way we think about the model?

Yes. They should be next year. The point is that some of the stuff that doesn't get completed till the fourth quarter, you won't get the benefit till the second quarter next year. So some of it you won't get the full benefit for the year.

Your next question comes from the line of Mike Dahl from RBC Capital Markets. Please go ahead. Your line is open.

Hey, Mike.

Hi. How are you? Thanks for taking my questions. My first question, I guess Jeff, just going back to your last comment or one of your last comments about just nothing that you can see that would necessarily change the softness in the markets, and obviously, it's been pretty dynamic in terms of the environment. But it seems fair from the outside not clear now at this point in the cycle what would change kind of the growth in some of these mix issues. So the question is, really when you think about these restructuring actions you've taken, is this sufficient, or is this kind of you're following the market a bit over the next couple of quarters, you'll take a little action right now, you'll reassess 2020? Or is this kind of, is this a hard enough reset to your tier capacity and your cost base to position you now for the next year or a couple of years?

Listen, we're reacting on what we see for the near-term if the industry gets worse, the economies change. We'll have to re-evaluate what we're doing and enjoy. I mean one event that we know we're going to have in the ceramic is that these excess inventories will eventually adjust themselves with the imports coming down. And then, you have the Chinese tariffs kicking in. Those are things that we have in front of us that should improve it.

Got it. Okay. And my second question is on LVT, there's clearly been a shift, first from flexible to rigid and now within rigid there's a lot of different innovations in design around the product itself and the core? Can you talk a little bit more about what you're seeing in terms of the -- some of the shifts which products are taking share within rigid? And when you talk about the differentiation that you're hoping to achieve with your line, can you just help us understand what is different about your product?

So, you have to start out with -- some of the different products are different materials and different pieces that don't change the product at all. People just use different formulations of different pieces. And so that's just alternatives which don't change anything different ones to. Second, there are some niche things coming in that have yet to evolve with different cores that may or may not do something or may not, it's too early to tell and most of them. The production that we have -- we can make all of the stuff that's selling at high volumes today and compete with them with the equipment that we have. And then, in the U.S., Our plan is to continue sourcing significant amounts and if there's some niche products or other pieces we need as well as the same things we can -- resourcing those too, so we don't see any limitations in what we can do. On the differentiation you try to continue to bring either visual performance enhancements, surface textures, different ways of stalling the product. So you try to keep creating incremental improvements about those things as well as performance on how they scratch, how they [indiscernible] and how it's going to improve the long-term ease of clean and care? And so all the different things we're doing are around all those different premises.

Your next question comes from the line of Keith Hughes from SunTrust. Please go ahead. Your line is open.

Hi, Keith.

Thank you. A question for Chris in ceramics. Given the levels of inventory you're discussing in the call, is this something you think the market can work off by the end of this year or will this spill into 2020?

I don't know exactly how long it's going to take to work it off. What we are seeing is that the imports are coming down now and any -- I think buying for Chinese product. There's not too much longer of a period left before they have the potential to get hit with the higher tariffs in September. But how quickly that gets worked off, I don't know, it'll take some time though.

Given this Chinese, I assume this has come at the low-end of the market, is that correct?

No Chinese comes in at all levels of the market. High, low, metal all level and it's about 30% of the imports. So it's a substantial amount of the imports.

Okay. Thank you.

Your next question comes from the line of Eric Bosshard from Cleveland Research. Please go ahead. Your line is open.

Hi, Eric.

Good morning. A question and a follow-up. The U.S. flooring market growth, obviously, a lot of pieces of it, but I'm curious what you think the total U.S. flooring market growth looks like in 2019 and what that number would have been in 2018?

I assume you've seen the data that somebody published, the data is, it's all impacted by they are counting the inflow of units into the United States from imports. So what happens is, every product category that's been imported there was a huge amount of inventory brought in. So, all the numbers that are published in their methodology they're not measuring sales. They're measuring inventory change in the system as well as sales. So, the numbers lead you to different things and it is -- it's all got to come back through and flatten out. My estimate is still that maybe there was about 3% to 4% growth last year and we're expecting it to be probably something less this year.

Less meaning slightly less than the 3% to 4%?

Yes. But most of them being taken up by LVT, all of it.

So, I guess within that -- step up with that, I have a second question. Is the change that is driving the different performance in your profitability in the U.S., it seems like the demand isn't that different, it's more of the LVT impact and competition across the businesses, or am I missing or is it really that the demand -- the underlying demand is meaningfully different, which is it?

Well, we talked about the carpet industry units being down year-to-date about 6%. The ceramic numbers are down. So, all the pieces are down. Then you have inventories that have to be adjusted through the stream, which compress it further and then you have the competitive action of everybody trying to utilize their assets and inventories. So, the margins get compressed. And all those pieces and it's all adjusted.

Okay. That's helpful. And then, the second question you talked about Europe LVT, which was helpful to have you frame once you get the production and then you have to take it to market and it takes time to work through that. And I know you're trying to align the U.S. with Europe. It sounds like by the end of 2020, you think you have Europe optimized, in terms of production and how it goes to market. Does the U.S. operate on a similar cycle? I know expectations have been resolved in the U.S. manufacturing. It's happening sooner, but what should we be in terms of thinking how quickly the U.S. is set and then aligned with taking the product to market? How should we think about that?

We think it'll probably be about 3 months behind, because it could be four, could be more or less, behind. But then, the optimization is, even we get to some point, we'll continue to look at how we take cost out, how to speed up further, how to optimize the mix and margins. And the same thing you typically start out filling up the plant, commodities tend to move faster and bigger [indiscernible] end up starting-off selling more commodities and over time you move the mix up into credit quality alignment as you get through. And then, its features and benefits that you keep adding to it allows you to get a greater margin on versus then you are less differentiated. All that takes time to happen.

Your next question comes from the line of John Lovallo from Bank of America. Please go ahead. Your line is open.

Hi guys. Thank you for taking my question. First question is, do you think the competitive environment has changed to such a degree that you're given new entrants and so forth that industry profitability is just structurally different at this point than it was over the past few years?

It's hard to answer that question, a broad stroke we are in. All kinds of countries, markets, product categories. So, I mean every one of them is different.

Yes. Speaking about the U.S. specifically [indiscernible]?

So, the U.S., what you have is, LVT taking a huge part of the growth. You have what's left is left and then the negative units you have the highest, the strong, the dollar is the strongest it's been in, I don't know, huge time. So, that the imports are coming in at lower prices compressing the pricing of the different industries. And then you have all of the local participants trying to run assets of which the price becomes one of the tools to do that. All of this is causing this short-term pressure on it and it will change the long-term. The dollar -- I have been in this thing for years, the dollar goes from a low point to a high point. When it gets to the high point, all this stuff reversed. All of a sudden, the costs go up. We end up substituting the other way. We push on stocks and we abandon the lower price points, when it goes the opposite way. We have to work it over cycle. It's not a change in the business. It's just a different moments in the cycle.

Got it. Okay. And then, maybe as a follow up Jeff and just kind of dovetailing off of your comments, there, I mean you've been around in the industry for a long time and if we go back you'll pre-downturn. I don't think Mohawk you ever really took restructuring charges? And then kind of fast forward post downturn, it seems like every quarter there was some degree of restructuring that's going on. I guess the question is, is that's just the nature of the business today given it's more complex in many different countries, or do you guys see a point here in the near future where this is going to kind of be behind?

Let me remind you that since from the 2012 to 2017 or '18 -- '17 we were buying two or three companies each year. We were buying big businesses. Every time you buy them you have to integrate the businesses together. You have to realign the assets pieces. You have to upgrade the equipment and stuff you have in order to get it to where you wanted it to go. So I mean that's just a normal part of an acquisition strategy and enhancing if you don't do that you have to enhance the profitability. What's your take? Because the return base is -- the business doesn't improve, the return on the existing profits. Given what you have to pay for them aren't enough to support your ongoing expectations for returns.

That's all the time, we have for questions today. I'll now turn the call back to Mr. Lorberbaum for closing comments.

I think I'd like to leave with it. We're optimistic about our long-term prospects. We have a strong management team. We have some of the best assets and best positions in the marketplace. We're doing many initiatives going into new businesses that take years to get them optimized and mixed margin and distribution. And we're moving well along the path to go forward. Over time, we expect our results to improve and we think that the business hasn't changed -- a little difference at this point is, housing is slowing in the United States and it's slowing before the economy slowed. So that's different at this moment than we've had before and different cycles usually they happen concurrently. They're not happening currently now and they may not be concurrent in the future where many other initiatives to enhance our results, we're taking actions to improve our profitability and we're doing what we need to do for the business. We appreciate you spending time and being on the call with us. Thank you.

This concludes today's conference call. You may now disconnect.