Michael Rehaut: Hi – excuse me. Good morning. Thanks for taking my question. First, I would love to get your thoughts around price mix trends for Flooring North America and Global Ceramic. And as we look into the second quarter and even the second half of the year, given the current demand backdrop, would you expect pricing and mix to remain negative as we get into the back half? And what kind of trends would be driving that or would be driving any type of change into the positive?
James Brunk: Given right now, the low housing sales industry volumes are still down significantly, we think price/mix remains under pressure especially given the high fixed cost of operations. The industry will start to rebound as you start to see consumer confidence and housing activity certainly increase – but we do believe we should start to get towards the bottom of the cycle, but I would anticipate price/mix being that headwind for the balance of the year.
Chris Wellborn: I mean one thing that should help us in the future as remodeling comes back, the margins in that, at least on ceramic, tend to be higher.
Michael Rehaut: Right. Okay. I guess the margins on commercial, though, are also a little bit higher. So that would be depending on how much commercial slows a little bit of an offset as well? Or is that the right way to think about that?
James Brunk: That is the right way to think about it that’s more specified in nature and tends to be a richer blend of product and margin.
Michael Rehaut: Right. Second question, would love to get your thoughts. You do a continuous amount of productivity, restructuring adjustments to your footprint. I know there’s a lot of moving pieces there, but I would love to try and get a sense for what benefits of cost-saving benefits your restructuring actions contributed to the second quarter in aggregate. And if that type of contribution or benefit that you’re seeing right now on a quarterly pace would increase into the back half of the year or just kind of stay consistent with what you’re seeing this past quarter?
James Brunk: Let me frame a little bit better for you, Mike, in terms of the restructuring actions. We continue to execute the actions that we have previously identified we’ve realized about $90 million of the savings of about $150 million goal through the first quarter. So that’s last year through the first quarter of this year. So we have another $60 million of benefit that is going to flow through the P&L. Most of the – much of the restructuring has been executed, including the closure of high-cost assets restructuring of LVT operations, discontinuing low-margin products and reducing administrative structure. And all the businesses are continuing cost reductions and SG&A operations and logistics. In the first quarter, that certainly was a part of the benefit of the $47 million that I noted in our productivity and that will help as we go through the balance of the year.
Michael Rehaut: Great. Thanks so much.
Operator: Our next question comes from Mike Dahl from RBC. Please go ahead with your question.
Mike Dahl: Hi. Thanks for taking my questions. First one is, obviously, on a year-on-year basis, there is a lot of noise looking at kind of the price mix comparisons. On a sequential basis and maybe specifically for North America and Global Ceramic, can you talk to kind of the sequential trends that you have seen year-to-date or versus 4Q and price mix? What’s embedded in the 2Q guide? And then the flip side, obviously, on cost, you addressed some of the year-on-year dynamics we have seen, obviously, a pickup in oil. So, can you also speak to whether or not in Flooring North America, in particular, you are starting to see some upward pressure sequentially on your cost basket?
James Brunk: So, from – let me start with your comment on the sequential on price/mix. From Flooring North America and Global Ceramic, from Q4 to Q1, it was relatively flat. But from Q1 to Q2, I would anticipate that you will see more pressure in Flooring North America. Again, that’s sequentially Q1 to Q2. Some of that is around seasonality. Some of that is in the price/mix pressures in that segment. But from an overall company standpoint, I still would say that for rest of the world remains under probably the most pressure because of what we have talked about in the panels area.
Jeff Lorberbaum: There is still going to be additional productivity and cost reductions to help offset that. And as you look forward with it, we think we are coming the raw materials and input costs coming into the year were the low. We have seen some movements in the first quarter, and we expect limited increases given the present environment that we are in. We think that as business improves in the future, at some point, we would expect the suppliers to raise prices and we will have to follow with increases to pass them through. And then it’s also possible, given all the economic events and/or regional conflicts that they could change our view on it overnight.
Mike Dahl: Right. Yes. Okay. Fair enough. Thanks. And then second question. Specifically with respect to the second half and 3Q, you did make a comment highlighting European seasonality, 2Q versus 3Q. I feel like normally, that might be a comment that we see more next quarter. As a reminder, the people as you are thinking about your 3Q guide. Can you just talk to the intent behind that?
Jeff Lorberbaum: We were just trying to – we were trying to remind everybody that the European business is on a different cycle as well as we have some South American businesses here in the middle of their winter is that – so everybody doesn’t always consider the non-U.S. businesses. And we just – as you are putting through the models, we just wanted to remind you.
Mike Dahl: So, in the context of the year-on-year improvement is the idea that sequentially, 3Q earnings could be down sequentially?
James Brunk: So, if you are looking – it’s a little early to tell that while it depends on the rebound. And if we start to see that volume increase, like we talked about earlier. But the real point was that Europe tends to peak in the second quarter from a historic standpoint.
Mike Dahl: Got it. Okay. Thank you.
Operator: Our next question comes from Kathryn Thompson from Thompson Research Group. Please go ahead with your question.
Kathryn Thompson: Hi. Thanks for taking my questions today. So, you talked about the move for tariffs on surfaces in the U.S. But we do acknowledge that, and we have gotten some feedback about the Chinese tariffs have rolled off last year and are hearing just more of dumping activities, particularly for LVT since the end of last year. What are your thoughts or updates on potential reinstatement of tariffs or better yet, what are you seeing in terms of trends in Europe for your products? Thank you.
Chris Wellborn: Well, you asked about LVT in general. So, LVT sales have slowed as in other foreign categories. Pricing has declined with lower raw materials, import cost and transportation. In the U.S., our West Coast facility is increasing our production and our Georgia restructuring is being completed. And in Europe, we completed the restructuring of our LVT operations. We have implemented the change in our residential LVT to rigid and where our sales are expanding, and we are improving our product mix and reducing cost to increase our profitability as we go through the year. That’s specific to LVT.
Jeff Lorberbaum: There hasn’t been any announced actions against dumping on LVT at this point. That’s the answer to the other question.
Kathryn Thompson: Are you seeing competitive pressures just from lower-priced LVT hitting the market in Europe, like additional?
Chris Wellborn: I mean it’s a very competitive environment, but the products that we are putting in the market tend to be at the higher end and are actually doing pretty well.
Kathryn Thompson: Okay. That’s helpful. And then I know that not to beat the commercial end market worse I guess. But maybe pull the string a little bit more and with the preponderance of mega projects. One of the things the market focused on a lackluster ABI number that came out this week. But on the other hand, our industry contacts that we talked to point out that often large kind of mega projects aren’t necessarily captured in that ABI number. So, channel checks are showing a better commercial end market versus what the ABI would suggest. Against the backdrop of these larger-scale projects, what does Mohawk do to get in early in the conversation, I know it’s always a process, you have always said that done in the past, but this is truly a different period of time. How do you position yourself with these larger type projects? And how do you – kind of how do you win in this environment?
Chris Wellborn: Well, I can just answer one thing on that, that in our carpet commercial and our ceramic commercial, we have got a lot of people that are calling on these commercial projects together and are sharing resources, and it works out really well and gives us an advantage.
Jeff Lorberbaum: We are calling on the designers, the architects, the building owners and the contractors all at the same time. We are participating in the planning of the different projects and we have been able to position ourselves well in the marketplace. And our comment, I guess are agreeing with you that it’s holding up a little stronger than we anticipated, but we still think it’s going to continue to slow, and we are being aggressive in our calling on and offerings to the marketplace.
Kathryn Thompson: Okay. Great. Thank you.
Jeff Lorberbaum: Thank you.
Operator: Our next question comes from Laura Champine from Loop Capital. Please go ahead with your question.
Laura Champine: Hi. My question is on excess capacity. I think that you have quantified sort of ballpark running at 75% utilization in the not too recent past, where is that now? And where can – how high can you – how high would you like to get it with your current restructuring initiatives assuming volumes stay where they are today?
