Frank H. Boykin - Chief Financial Officer Jeffrey S. Lorberbaum - Chairman and Chief Executive Officer.

Desi DiPierro - RBC Capital Markets, LLC, Research Division Mike Wood - Macquarie Research Stephen F.

East - ISI Group Inc., Research Division Dennis McGill - Zelman & Associates, LLC Michael Jason Rehaut - JP Morgan Chase & Co, Research Division Sam Darkatsh - Raymond James & Associates, Inc., Research Division Susan Maklari - UBS Investment Bank, Research Division Michael Dahl - Crédit Suisse AG, Research Division Kathryn I.

Thompson - Thompson Research Group, LLC Stephen S. Kim - Barclays Capital, Research Division Eli Hackel - Goldman Sachs Group Inc., Research Division Eric Bosshard - Cleveland Research Company David S. MacGregor - Longbow Research LLC John A. Baugh - Stifel, Nicolaus & Company, Incorporated, Research Division Kenneth R.

Zener - KeyBanc Capital Markets Inc., Research Division Keith B. Hughes - SunTrust Robinson Humphrey, Inc., Research Division.

Good morning. My name is Sean, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Friday, August 1, 2014. Thank you.

I would now like to turn the call over to Mr. Frank Boykin, Chief Financial Officer. Sir, you may begin your conference..

Thank you. Good morning, everyone, and welcome to the Mohawk Industries quarterly investor conference call. Today we'll update you on the company's progress during the second quarter of 2014 and provide guidance for the third quarter and the full year.

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. You can refer to our Form 8-K and press release in the Investor Information section of our website for a reconciliation of any non-GAAP to GAAP amounts. I'll now turn the call over to Jeff Lorberbaum, Mohawk's Chairman and Chief Executive Officer..

Thank you, Frank. During the second quarter, our earnings per share were $2.08 as reported, or $2.21 excluding unusual charges, an increase of 20% over adjusted second quarter 2013 results and the highest quarterly adjusted earnings per share in the company's history.

Our adjusted operating income increased 160 basis points as productivity initiatives, cost reductions, price increases and manufacturing consolidation drove higher earnings across the business.

During the period, sales rose 4% as reported, or 3% on a constant exchange rate, over the prior year primarily driven by the strengthening euro and partially offset by the weakening ruble. Top line growth was less than we anticipated due to slower improvement in the U.S. housing and remodeling.

However, profits were in line with expectations as a result of successful product introductions, productivity improvements and better controls. We reduced SG&A costs compared to last year across the enterprises -- enterprise, even as we reinvested into the business to promote new product collections and enhance our sales strategies.

Our entire management team is focusing on enhancing the organizational structures, sales and marketing strategies, product collections and operational performance, as well as further integrating our acquisitions into Mohawk. We're continuing to invest in our acquisitions to improve profitability, increase mix and streamline the business.

And we anticipate these actions will result in even higher earnings as the European and Russian economies improve. During 2014, we expect our capital expenditures to reach $550 million as we have identified additional opportunities to improve our future results.

These investments will support sales and income growth and include new product innovations, upgrading assets of acquired businesses, increased yarn capacity for carpet, greater ceramic tile capacity and an LVT plant to support our growing commitment to this category.

In the U.S., continuing improvement in the job market and a growing GDP should support a stronger second half of the year. Although housing growth has slowed in the first 6 months of 2014, it is expected to continue growing from its currently historically low level.

Both the National Association of Home Builders and Harvard's Joint Center for Housing Studies expect residential remodeling to grow for the remainder of the year, with pent-up demand driving increased spending.

The AIA's Architectural Billings Index rose to a 9-month high in June, and the new project inquiry index increased to an 11-month high, reflecting stronger nonresidential growth trends. In Mexico, the economy should improve on its first quarter growth as consumer confidence hit a 7-month high in May and GDP is projected to rebound almost 4%.

The European Commission is projecting limited growth across the European Union during 2014, citing positive impact of declining deficits, rebounding investments, improving employment and continued reforms.

In Russia, the Central Bank is predicting declining economic conditions in the second half of the year, although the forecasted recession has not arrived yet and the ruble has rebounded.

As we look at our second quarter performance by segment, our carpet business adjusted operating income increased 15% over last year, as a result of increased productivity, improved quality and cost reductions in operations and administration.

Net sales were up 1%, and we anticipate improvement in both our residential and commercial categories in the second half of this year. We reduced SG&A costs through systems improvement, lower selling costs and reductions in force that yielded greater efficiency and enhanced customer service.

Our investments in new equipment delivered increased productivity and throughput, contributing to the profitability of the business. In the residential channel, the segmentation of our sales organization into retail, builder and multifamily has improved our execution, and we are adding personnel to maximize our brand penetration in the major markets.

Investments in new Continuum technology is supporting growth in our product collections made from up to 100% recycled polyester in the mid and value price points. Our patented Continuum process produces a better, cleaner, bulkier carpet from postconsumer recycled content with outstanding stain and soil resistance, as well as more luxurious softness.

Our super soft carpet collections, such as SmartStrand Silk and Wear-Dated Embrace continue to capture a greater share of the premium carpet category, as homeowners upgrade their remodeling projects.

We're also expanding the distribution of our premium Karastan carpets by providing a broader offering and increasing the number of retailers selling our high-end brand. Commercial orders improved through the quarter, led by hospitality and corporate sectors.

Orders are growing now that we have substantially completed the transition to our own fibers, which deliver industry-leading style and performance and improve our efficiencies and margins. We have reorganized our commercial sales organization into smaller regions, segmented by customer type, with the complete product portfolio for each channel.

At the annual industry exhibition, our new breaking form carpet tile collection was named the best modular carpet with new shapes, colors and patterns that create sophisticated visually appealing commercial spaces.

Our investment in extrusion and yarn capacity is supporting our increased Continuum polyester sales with our state-of-the-art manufacturing project 75% complete at this point. We continue to drive numerous productivity projects across the segment, including operational enhancements, improved SG&A costs and capital investments.

Our April price increase was fully implemented at the end of the quarter to cover the raw material inflation we incurred. We announced an additional freight increase in July to cover increased trucking and logistics costs. During the period, our ceramics segment's adjusted operating income grew 21% due to productivity, volume, pricing and mix.

Net sales rose 5% as reported, with a constant exchange rate compared to the prior year which, for the first time, includes the Marazzi acquisition and its comparisons. In the quarter, U.S. sales improved less than anticipated as demand did not rebound as strongly as we anticipated, and larger customers adjusted inventories.

In flooring retail stores, we continue to expand our ceramic store-within-a-store program with a special merchandising and promotions. We will open 6 additional American Olean and Marazzi combined sales service centers on the West Coast by the end of the year for a total of 16 overall.

All of the combined service centers in operation are providing a broad product selection and are attracting new customers to increase our market position. We continue to grow our relationships with national and regional builders by providing the best ceramic program available with a high level of local service.

The commercial sector is accelerating, with hospitality, retail and corporate expected to lead the growth through the remaining part of the year. Our innovative new collections are leading the market shift to larger sizes, planks and rectangles.

We are expanding our Reveal printing technology to mosaic tiles, creating enhanced visuals that coordinate with our wall and floor tile. Our new production line in Dallas has begun operation and will satisfy the increasing demand for ceramic planks in larger sizes.

We will transition some Salamanca production to the expanded Dallas facility to free up capacity to support our growing business in Mexico. Our new ceramic plant in Tennessee remains on track to start production the beginning of 2016.

Across the business, we delivered productivity improvement, implemented enhanced formulations and added new equipment to improve service. We continue to find logistics and productivity improvements across our transportation system.

Daltile received the Award of Excellence for ceramic for the 16th straight year in Floor Covering News, and ranked first in quality, surface and design by Floor Focus Retailer survey. Sales in Mexico are growing significantly and outperforming the market.

We are gaining share as we expand the distribution of new products from our Salamanca plant by offering innovative collections that provide market-leading style and value with superior availability.

We continue to expand the number of distributors and retailers supporting our brand, while growing our margins through improved mix and from our larger sizes in planks. In Russia, we outperformed the market with sales continuing to grow on a local basis.

We overcame slower retail sales through growth in the new construction and DIY channel, with specialized products tailored for each of these sectors. The current Russian economic situation is impacting major consumer purchases, including flooring. The economy has slowed and is expected to be sluggish through the end of the year.

For the period, sales and profitability increased on a local basis, but the 11% decline in the ruble reduced our sales and income when translated to U.S. dollars. Sales of -- of our 2013 product introductions continue to grow and have improved our product mix.

Our 2014 introductions have been similarly well-received and enhance our position as the style and innovation leader in the Russian marketplace. During the period, we opened 4 new franchise retail shops and started up a new production line to support future growth.

Through improved production planning, we have reduced inventories and manufacturing costs. We're continuing to improve the Russian organization by enhancing the management team and accelerating sales, manufacturing and system initiatives.

In Europe, our sales and margins continue to progress due to increased sales outside of Southern Europe, as well as growth in Spain and improved mix from larger sizes and unique styling. We continue to lead the European market with ceramic wood planks and have expanded the collection with even larger sizes.

During the period, we consolidated all of our wall tile production into our Spanish facility. We've committed the capital to upgrade all the floor tile lines in 2 plants in Italy by the end of 2015, with the first kiln conversion to be completed during this quarter.

In the third quarter, we expect normal seasonal slowing in Europe, where our margins should continue to improve over the prior year from lower SG&A, higher productivity and better mix.

Our European organization has been significantly improved over the past year with the addition of new talent, a single European sales strategy and investments in state-of-the-art equipment. We continue to streamline the organization, refine processes and improve our sales and administrative functions to reduce cost and improve efficiencies.

Across our global ceramic business, we are increasing productivity and enhancing quality through best practices that improve our costs and throughputs. We are leveraging the manufacturing and product strengths of our international assets to provide differentiated products in our other markets and give us a competitive advantage.

During the period, the adjusted operating income for laminate and wood segment rose 21% from acquisition synergies, productivity improvements and cost reductions.

Net sales for the segment increased 6% over the prior year as reported, or 3% on a constant exchange rate, with most of the increase from the Spano acquisition, higher wood flooring sales and growth in insulation board sales. In the U.S., slower-than-anticipated store traffic reduced the segment sales in line with our other U.S. businesses.

Greater participation in the new construction channel drove higher sales of wood flooring. We're successfully leveraging the Quick-Step brand with the new wood collection featuring sophisticated styling, reduced maintenance and our patented installation system. Productivity and cost initiatives are being aggressively implemented across the U.S.

laminate and wood flooring manufacturing facilities. The second wood flooring price increase this year was implemented in July to cover higher U.S. wood and transportation costs. European sales on a local currency were up and flat on a pro forma basis compared to the prior year.

Sales were stronger in the Nordic countries and the U.K., although softer Western European markets continue to create headwinds. Overall, our wood and LVT categories grew during the period but were impacted by slower laminate sales.

By the end of July, we will complete the transition to our updated Pergo laminate products, which should improve our sales and margins due to their enhanced styling, performance, all with easier installation.

The improved productivity of our Belgian facility, where we consolidated our Pergo and Unilin laminate, is reducing our manufacturing and raw material costs as expected. SG&A expenses in Europe were lowered significantly by improving administrative efficiencies.

At our recently acquired wood plant in the Czech Republic, we have invested in new equipment to produce higher-value products under the Pergo and Quick-Step brands. The new wood collections from this facility will be launched in October and will expand our wood business across Europe and Russia.

We will utilize some of our Malaysian wood capacity to increase sales in Australia and the Asian markets. Construction of our LVT plant in Belgium remains on-target, with new equipment being installed and tests under way.

We anticipate a longer start-up period to allow more extensive testing of our new LVT processes to ensure our high quality standards. To support our future LVT capacity, we are growing sales in both the residential and commercial channels in Europe, the U.S. and Australia.

Our European insulation business continued to expand in France and the Benelux region, supported by additional production in our new French facility. Our roof panel sales and margins remain under pressure, and we announced the closure of a small French plant, with production to be consolidated at other facilities.

We are also improving our sales organization to maximize the sale of the products in all channels. The integration of our Unilin and Spano businesses continue to progress, with a single sales force providing a comprehensive product offering to every customer.

Many initiatives to reduce costs in our board business are at various stages of completion, including the closing of 2 manufacturing facilities, closing of a production line, integrating management and administrative functions, consolidating information systems and reducing raw material costs.

I'll now turn the call over to Frank, to review our financial performance for the period..

Thank you, Jeff. Net sales -- we had net sales of $2,048,000,000 during the quarter, which grew 4% as reported, or 3% on a constant exchange rate basis. We had growth in all segments, with stronger performance in the ceramic and laminate segments.

Our gross margin was 28.1% as reported, or, excluding restructuring, 28.4%, which is up 70 basis points over last year. We had higher productivity, lower cost in acquisitions that drove this improvement. SG&A dollars were $353 million, with 17.2% of net sales. On a pro forma basis, excluding restructuring, SG&A dollars actually declined.

Cost-cutting continued to improve results, allowing reinvestment back into the business. Restructuring charges for the quarter were $11 million and included $7 million in cost of goods sold and $4 million in SG&A. We estimate there will be $38 million in additional restructuring in the second half of 2014 as we continue to integrate our acquisitions.

Our operating income margin was up 160 basis points to 11.4% for the quarter. Interest expense was $21 million and improved over last year due to our ratings upgrade and our entry into the commercial paper program.

Recently, we announced that we will purchase $200 million of our outstanding January 2016 bonds, using commercial paper to fund the repurchase. Currently, we have $900 million of bonds at 6 1/8% coupon outstanding. We'll pay approximately $17 million in a make-whole premium during the third quarter to buy the bonds, realizing some cash savings.

This will reduce interest expense by $4 million in the second half of 2014 and $11 million in 2015. Our income tax rate was 24% for the quarter and compares to 21% last year. We expect our full year tax rate to be 22%, with approximately 20% in the second half. However, timing of deductions could impact quarters differently.

Earnings per share excluding charges came in at $2.21, up 20% from last year, an all-time quarterly record for Mohawk. We turn to the segments. In the carpet segment, sales were $780 million, up slightly over 1% during the quarter. We've seen growth from new products in both residential and in commercial.

Our operating income excluding charges -- the operating income margin excluding charges was 8.1%, up 100 basis points compared to last year, with productivity increases supporting the higher margins. In our ceramic segment, sales were $797 million, a 5% improvement. We had growth in all regions around the world, with our largest improvement in Mexico.

The Marazzi acquisition continues to benefit top line, as well as bottom line results. Operating income margin, excluding charges, in the ceramic segment was 13.4%. That's up 180 basis points due to volume, productivity and mix, which offsets start-up costs from one of our plants.

In the laminate and wood segment, sales were $501 million, up 6% over last year. Sales were up 3% on a constant exchange rate basis, as the euro benefited our results. Operating income, excluding charges, was 14.3% of sales. That's up 170 basis points, with acquisitions and cost reductions driving higher profitability.

In the corporate segment, we had an operating loss of $8 million and are estimating a $30 million number for the full year. If we jump to the balance sheet. Receivables ended the quarter at $1,262,000,000. Our days sales outstanding for the quarter were 52 days, and that compares favorably to last year. Inventories ended the quarter at $1,645,000,000.

Our days inventory outstanding were 109 days. We were impacted by slower -- a slower rebound in demand and some larger customers adjusting inventory levels. We expect to improve our inventory turns in the second half of this year.

Our fixed assets ended the quarter at $2,830,000,000 and included capital expenditures of $128 million, with depreciation and amortization of $84 million. We estimate that capital expenditures for the full year will be $550 million, primarily for capacity expansion and to continue expanding -- or assimilating our acquisitions.

D&A is estimated for the full year at $350 million. And the long-term debt ended the quarter at $2.4 billion, with leverage at 2.1x debt-to-EBITDA. We expect the ratio to improve to 1.7x by the end of the fourth quarter. Jeff, I'll turn it back over to you..

Thank you, Frank. During the period, we once again demonstrated our ability to deliver earnings growth through sales improvement, productivity initiatives and leveraging acquisitions.

In each of our segments, we're optimizing the efficiency of our operations, the advantages of our leading market positions, the breadth of our distribution and the strength of our brands to grow our business. We anticipate that our sales will strengthen as we move through the second half of the year, supported by continued U.S.

job creation and improved economic growth. We continue to take appropriate action to pass through raw material and freight increases, as required. We're improving efficiencies in manufacturing, logistics and administrative functions, and we continue to consolidate operations as needed to reduce costs and improve service.

In the third quarter, we anticipate further improvement in the U.S. market, with limited growth in our -- in the European and Russian markets. With these factors, our guidance for the third quarter earnings is $2.38 to $2.47 per share, and for the full year, $8.09 to $8.25 per share, excluding any restructuring charges.

We remain committed to enhancing Mohawk's results and we are optimistic about the improvement of the floor covering industry and our participation in it. We continue to bring innovation to our products and processes to expand our revenues and margins. The integration of our acquisition continues to reduce costs and improve our market position.

We continue to pursue acquisition opportunities where we can leverage our knowledge, resources and capital. We'll now be glad to take your questions..

[Operator Instructions] Your first comes from the line of Robert Wetenhall from RBC Capital Markets..

This is actually Desi filling in for Bob. Just looking at the ceramic segment. Margin performance was really excellent this quarter, 13.4%. You had previously mentioned that you were targeting an operating margin in the range of 13% to 14%, longer term.

And as you integrate Marazzi and realize better productivity levels, do you think there's maybe some upside to your long-term forecast, given where the business is currently operating?.

I mean, one thing, you have to look at the annual margin, which we were talking about rather than the quarterly since we have seasonal variation through it. So we're still aiming in those ranges as we think on an annual basis..

And then also on the SG&A line, you had mentioned the dollar value had decreased, as well as the ratio.

And as we look out towards the back half of the year, are there continued -- do you continue to see cost reduction initiatives that you can take to maybe keep SG&A flattish or even a little lower in the second half?.

We always have initiatives to control our cost and improve them. What we expect is the per sale will be down going forward and the dollars will be up somewhat in the prior -- for the rest of the year..

Your next question comes from the line of Mike Wood from Macquarie..

You guys have done a lot of investments driving outgrowth with -- you mentioned the new tile printing, distributor expansion, other product innovations.

Since you haven't had a lot of help from market growth to date, can you give us an indication of what you're expecting from the end market growth in the back half and what you saw in the quarter, particularly in the U.S.?.

So your question is the outlook for sales as we move through the rest of the year, Michael?.

No. I mean, I know you're going to continue to drive the outgrowth. I'm actually interested in what you think the actual markets that you're operating in will grow in the back half of the year and whether or not they were helping you in the first half or this quarter..

I mean, we think that the U.S. market is going to improve in the second half. The question is, it can improve a little or a lot. We don't know at this moment, which is the reason we give you a range as we go through. We believe that it's going to improve from where it is. We were more optimistic about it going into the second quarter.

And as we went through, it didn't rebound as much as we thought so we've modified our view of the second half slightly because of it..

And then in terms of the expanding of the carpet distribution, I'm just curious what the impact is on your current distributor base? And what I'm ultimately getting at is why are you now able to expand the distribution? Is it from new product introduction similar to what you did in Unilin in Europe during the volatility there?.

What we've said was that we were going to expand the distribution of our high-end Karastan brand more. The high-end Karastan brand, we treat differently. We make sure that we find the right retailers who can sell better quality products, and we're expanding that base, is what we meant to say..

Your next question comes from the line of Stephen East from ISI Group..

You talked a lot about the acquisition integration.

If you looked at it in what inning you're in, that type of thing, where do you think you are? And as you move through the process, integrating all of this, does this fundamentally change your incremental Op margins you think you can get as you go over the next few years?.

I think I might have to sort of talk you through the different pieces because they're all a little different. Pergo... the Pergo integration is substantially complete at this time. With the European manufacturing is basically shut down, and now put in our plants. We went through start-up costs in getting them together as we go through.

So we're manufacturing the products there. The new product line is in place so we anticipate having more productivity improvement in our old plant because it had all the different changes going on in it. In the U.S., we're also substantially complete.

But we're putting new equipment in, that's being installed this period, which will enhance our capacity, as well as improve our efficiencies. Marazzi U.S., we have integrated it with the Daltile organization. Organization structures are set up and working.

And basically, the big pieces, going forward, are to optimize the product alignment by plant and keep continuing to optimize the distribution of both brands through the marketplace. In Europe, we have put a new strategy in place, the organization's in place. We have been improving the costs.

We have new equipment, and some of it's just going in this period and it will continue to go in one line after another because we're operating as we change, all the way through 2015. The new equipment will allow us to reduce our costs, as well as improve our mix further.

Just as a comment, in our ceramic business, we're not trying at the moment to drive top line growth. The focus is on driving margins through the changes in mix and reducing the costs until we get the business performing the way we want it to. In Russia, the focus in Marazzi is just to improve the organization's strength.

And we've made progress in expanding into DIY and new construction businesses, which is helping us actually increase our sales in a marketplace that's under a lot of pressure. And we continue to introduce new products.

And we really have a differentiated product strategy, which is giving us higher margins in Russia than the competition and allowing us to outperform the competition. The last acquisition is the Spano acquisition, which we've already integrated. The sales, the management, the systems are all complete.

At this point, we have one manufacturing line that's been closed -- one plant that's been closed, and we're in the middle of closing another plant as we speak. All the changes with the acquisitions are on track. We think they're on-plan to achieve what we want. We think there's more opportunities in the margins and the sales top line as we go forward..

And then Stephen, I'll just address your last -- the last part of your question regarding incremental margins. We don't expect the incremental margins that we've talked about in the past to change. It will add to the profit dollars.

But that 20%, 25% and 30% margins that I gave you for the carpet, tile and laminate businesses we think are going to stay in that same ballpark..

Okay, that helps. And Jeff, if I just look at Marazzi, just listening to you talk, is it fair to say you're probably halfway through or so on that? And then the other question that I had is just on the M&A front. Are you all still in a reactive mode there? Are you now proactive? And you talked a little bit about where your debt was now.

I guess, how much debt capacity do you have right now or you would be comfortable going? That type of thing..

We made huge progress, as we just talked about the acquisitions. Our balance sheet is in good position, as Frank went through the ratios before, which allows us to pursue acquisitions. I think the management is in position to take on other things, and the balance sheet surely is. We continue to assess opportunities around the world.

But you don't have them until you conclude, which you never know when and how that's going to go along. Acquisitions are a core part of our long-term strategy and we believe we are highly competent in bringing them in and putting them together..

And with regards to how much additional debt and our leverage. As you know, in the past, what we've done is we've, as we've bought companies, we've levered up. And then as we've integrated them and generated cash, we've brought our debt and our leverage down. And that would continue to be our strategy.

We're at about 2.1x debt-to-EBITDA right now, and we could go up maybe to 3x, somewhere around there..

And we'll continue to pay off debt as we go through the year..

Yes..

Okay. All right.

And Jeff, if I can sneak in on that, any preferences geographically or product-wise as you think about it right now?.

The preferences are for a return on investment..

Your next question comes from the line of Dennis McGill from Zelman & Associates..

I guess the first question, do you think there's anything to the notion that flooring being more of a planning category and an interior category that, with the harsher winter and kind of later break to spring, that it just got kicked out? And now you're in the summer period, people are thinking outdoors.

So it's really not until the fall that you get back to that remodeling push?.

If you go back over the history of our industry, it tends to be slow from about the first part of January, December because you can't get it in before Christmas. It tends to stay there until you come out. It starts picking up in February, March. And it tends to run fairly level all the way through the rest of the year down.

And then the things that have impacted it lately, the economy impacts it. So I don't see a dramatic change in seasonality other than the normal things that we go through..

I guess the question is -- and I realize it's hard to quantify, but do you feel like that normal seasonality that got kicked out, got kicked out further than 2Q and into 3Q? Or it just completely got eliminated?.

In our own business, I can only answer that we're seeing the normal seasonality. It just didn't jump like we expected it to jump from our thesis in the first quarter [ph]. It still improved as we went from first quarter to second quarter, it's just that we thought that the category would have picked up more than it did..

Got you. Okay. And then the comment you had made on retail, I think that there was some tightness in inventory and maybe some weakness in traffic.

Have you seen that change at all, thus far, in the third quarter?.

The trends we're seeing are, as we said, is that the second quarter wasn't as good as we said, but it is better. We're anticipating the third quarter and the fourth quarter to improve from here..

Your next question comes from the line of Michael Rehaut from JPMorgan..

The first question I had was just going back to your expectation for a little bit of strengthening in the back half in terms of year-over-year growth versus the first half.

And I just wanted to get a sense if that was based on just the, perhaps, easier comps, at least, as it relates to carpet in the second half versus the second quarter? Or some bigger macro drivers or other types of drivers that you see in your business?.

I guess what we evaluated -- there's a lot of things we put together in trying to estimate the future. We get input from our own people, what they're seeing. We get input back from our customers, how optimistic they are about it. We watch the trends that we're doing. And we believe we're going to see an improvement of it.

We're not expecting it to jump through the ceiling, but we think it's going to improve, and we'll find out..

And I guess, also with the second quarter itself, you did note that sales were a little bit below, but you had several drivers that offset that.

Just conceptually here, are we thinking, perhaps, that the delta in sales was maybe 1 or 2 points of growth that was offset by the new products and productivity and cost controls? And if that were to occur in the back half, do you think you have sufficient momentum in those offsetting drivers to continue to allow you to make your guidance?.

I guess, going back to the second quarter, somewhere between 1% and 2%. We had expected to grow probably 1% to 2% more than it actually did. And we've taken that into account as we've estimated the future..

Okay. And then just lastly, you continue to have good margin expansion on the carpet business, despite -- first quarter was down year-over-year in terms of revenue, second quarter up only 1%, and yet, you're still showing some very nice margin improvement. I just wanted to revisit what the biggest drivers of that were.

I mean, last year, I think the big driver in margin improvement was the positive mix in your residential business, with some of the new -- the products and fibers that you rolled out. As far as I understand, that's continued to a degree in residential but also expanded into commercial.

And so I just wanted to get a sense if that is -- I mean, you've listed several things that have improved the margins.

But if that is kind of still the bigger driver, the mix? And how to think about the impact of those drivers going forward, if they would eventually moderate or if you continue to see more in the kitty?.

I mean, first is that we spent the last few years upgrading our organizations, changing some of our strategies and -- both from a product standpoint and a sales standpoint to improve our margins, which we knew we had to do. Those things continue and haven't changed.

The margins in the business, we have hundreds of productivity things going on at all points in time. We're very structured in how we identify them and execute them through the business. It improves both our quality as well as our cost in the different pieces.

We have -- with the changes we've made, we put -- the majority of our people, we consolidated together in a single building so that we could communicate better. It allowed us to actually reduce the number of staff that we've had.

We've become more focused on making sure that we don't do a large number of initiatives with the very -- the initiatives that have the most benefit. So we've reduced the number of activities but put the focus on ones that have higher value to the business and to our customers. All those things continue to pay off in how we go to market..

So are you saying then, Jeff, and I don't know, Frank, if you can weigh in on this as well, that at least the first half of this year in carpet, the bigger driver of improvement then, are you kind of pointing to more on the productivity front than the cost control front? Because it was my understanding that at least last year, the bigger driver was the positive mix..

Well, so I would say the bigger driver this year -- you're right, last year, mix was a big driver. The bigger driver this year in margin improvement is productivity improvements, cost control, both in manufacturing and in SG&A. And then mix, probably, with a little bit of headwind.

We had some volume improvement that helped us in the quarter, a little bit, but volume improvement helped us in the quarter as well..

So mix is actually a little bit of a headwind this quarter?.

A little bit, yes..

As we grow our share in the mid to -- as we grow our business in the mid to lower end, it's going to impact the mix a little bit..

Your next question comes from the line of Sam Darkatsh from Raymond James..

Just following up on that last question. So if mix was a negative driver to carpet margins in the quarter, I guess what that could infer is that, overall, polyester grew faster than nylon.

Is that a fair statement?.

Definitely..

Okay. Just making sure.

I -- there was no material slowdown in polyester demand in the quarter, best you could tell then?.

We are participating more aggressively in the polyester market. But with that, we still improved our margins in the total business by about 15%. The polyester market should continue to grow.

We don't see the growth in the category slowing down and we are -- we have introduced products and we've invested in our manufacturing facility, and so we make it at competitive prices in the marketplace.

But again, the margins in the lower price point products are typically lower-than-average, but not unusual for those price points which we've always participated in..

Understood. And then my final question, also with respect to carpet, specifically on the residential side. Did you -- best you can tell, did you gain share versus the industry in residential? And I think there may have been some benefit in rugs.

I think that Shaw may have walked away from the rugs business earlier this year, so I'm sure there was some benefit to you on that.

If we look at carpet specifically, how would you gauge your performance in carpet versus the residential industry?.

I think that we probably did a little better in the residential piece. We probably did a little worse in commercial because we were still concluding the transition that we had.

And then your comment about the exit of my competitor, we really haven't gotten any benefit because they had a huge amount of inventory they had to push through the system as they exited the business..

Might that be a material growth opportunity for you over the next several quarters?.

We're expecting -- our rug business did improve in quarter. We're expecting it to continue improving. We have introduced more differentiated products using our raw material strategies to differentiate them in the marketplace, and it's also improving our mix.

So we're assuming that -- we believe we're going to have improvement of it over the next 6 months or a year..

Your next question comes from the line of David Goldberg from UBS..

It's actually Susan for David.

Can you talk a little bit about the promotional environment? And given the slowdown, did you see any changes there? And with that, are you seeing that consumers are reacting any differently to them? So are they becoming any less or more effective in getting them to actually get out there and make the purchase to do the project?.

There was some more promotional activity in the period as both retailers tried to drive traffic into their stores and as manufacturers tried to even out the capacities with the sales that are going on. It's hard to break it apart to tell what impact it had. You know the end result was that the industry didn't increase as much as we had hoped.

It's difficult to tell what the government policies, tax changes and a lot of other things also had on the individual consumers..

Okay. And then in terms of a sort of bigger picture question, your growth was really impressive despite all the sort of puts and takes that you had this quarter. And as you look further out, it's still relatively impressive given what's going on. Can you talk a little bit about the role of the U.S. and growth in the U.S.

in terms of the broader picture, now that you've done all these acquisitions and you have a much broader international kind of footprint?.

Oversimplified, about 65%, 70% of our business is based in the U.S., and the others, in the -- other marketplaces. Each of the markets are a little different. We're expecting the U.S. business to improve more in the near term than our European business or our Russian businesses. Our Mexican business in ceramic is doing well.

As we spent the money 2 years ago or more to put in new capacity, we've changed our product lines, so it's growing at significant rates. We think these trends will be in each place. As we talk about the acquisitions, each one is a little different.

The European ceramic business, we're really focused on driving margins and in changing their mix and cost structures. And that will continue over the next 1, 1.5 years. The Russian marketplace is going to be -- is suffering a little bit. And I think we're well positioned because we're positioned as the style and design leader in the marketplace.

As well as owning the distribution and having over 300 franchise stores, helps us push products through the marketplace. So I think we're going to gain share. But the profitability of the business, we're going to give up a little as the market gets a little tougher. But we use that to gain share over the next 6 months, is our plan.

And the real big opportunity is how much is the U.S. going to increase? And I think we have a pretty good estimate of it. It could be a little better, it could be a little worse as we go through the year..

Your next question comes from the line of Mike Dahl from Crédit Suisse..

Jeff, I think you've talked about -- mentioned the reductions in force.

I'm curious where specifically that was impacting? And is this something that was contemplated as part of the overall integrations? Or is it something that you may have had on the shelf and hit the button on when the market didn't turn out to be quite as strong as you anticipated?.

Yes to all of those. The acquisition thesis, we continue to adjust the organizations as we've put them together. And as we move through it, we continue to make adjustments in them. At the same time, we talked a minute ago about the carpet management organization, we consolidated into a single building, which was spread out over a lot them.

And in doing so, we were able to reorganize it, but it also got the benefit of the last 1 or 2 years of changing systems and processes, so we actually reduced the SG&A there. We continue to look at our sales organization and make sure we're maximizing the pieces, and we constantly adjust the sales strategy in order to get the products to market.

And it's in all the businesses. In the Spano acquisition in Europe, we've gone to a single sales force, where we just have 2 in each of the businesses. And we've done the same thing in other areas as we go through.

We continue to challenge the methods we go to market, and we try to find better ways of controlling the costs and SG&A on an ongoing basis..

Great. And then secondly, I wanted to ask about LVT. Any update on how you're thinking about as the new capacity comes on? It seems like a lot of others are bringing on capacity more or less around the same time.

Do you think the market can handle that domestically? Do you worry about increasing price competition, any thoughts there?.

Yes to all of those. Basically, the production in the U.S. is being imported from China. So there's going to be capacity put in the U.S. and there's going to be a battle that goes on between moving it into the U.S. marketplace.

Usually, local production, if it's put up in the right capacity, can compete because of its flexibility in the marketplace, and -- if you can have it at the right price. So the question is going to be with the capacity coming on, there's multiple ways of making this stuff. There are going to be different strategies of equipment.

There's going to be different strategies of go-to-market. There's going to be different capabilities in style and design. And we're starting out at -- our third [ph] plant's being put up in Europe, we're going to use it to supply some of the stuff here. This European plant, by the end of the year, should be operating.

And then the question's going to be, when do we put up the second one and the third one in our different regions which we participate in. While that's going on, we are importing product and selling it into all the different marketplaces. And we think we're getting ourselves positioned properly..

Your next question comes from the line of Kathryn Thompson from Thompson Research Group..

The first is really more focused on your U.S. or North American business.

During this year, first half of this year, broadly speaking, are you seeing different performance in terms of sales momentum of higher-end price points versus lower-end price points? And then also, along with that, if you could discuss the willingness of the market to accept pricing and has there been any change relative to historical performance?.

In the quality pieces, there is some improvement in the higher end of the business. And so there is some mix improvement from it. However, at the same time, the new construction of moderate homes is also growing, which tends to use lower quality product, because they're trying to get the home built for the least cost.

So there's a mix thing between them as you go through -- going on. The multifamily business is doing well. It tends to be at the lower, so the average mix through it, I'm not sure, has changed dramatically. But it's because of the growth at the high end and the low end, the middle piece is what's -- hasn't rebounded as much as it should.

We're expecting over time for that middle area to improve. I forgot the second part of your question..

The other question was price increases and market acceptance of price increases..

The marketplace never likes price increases. We are -- have put in and have executed the price increases in the different markets that we have. In the carpet segment, we've increased the prices they are in. We did not change the prices in the commodity part of the carpet business in that one.

We had put in price increases in the wood business, where the wood's been going up significantly. And they've been going in. We've put in price increases in different parts of the business as required in all the different product segments. There's also a thing going on with the transportation cost. As the U.S.

economy has improved, it's gotten tighter in the transportation. And so we've had to raise the cost of the transportation in all the different product categories also..

Great. And just to be clear, on that commodity portion of the carpet, at least the pricing degradation that we saw earlier this year, you've seen stabilization in pricing there.

Is that correct?.

The commodity business has always been, and continues to be, low differentiated products, easy to move. And there's always price pressure on the commodity business, when business doesn't reach the levels that you want. No different than anything, and it tends to be in spot deals as you go around. And it's the same thing for all our product categories..

And along that line, there's -- you've added some capacity. One of your competitors is continuing to add a bit more capacity on that lower end.

How does that, when you think about strategically over the next 12 to 24-plus months, how does that change your thinking about pricing in that commodity portion of the business? And do you see it as a meaningful threat or is it just part of managing your day-to-day business as you come off of a deep construction downturn?.

There is new capacity going into the industry by multiple players. It's been going in over -- sometime over the last couple of years. It's not a new phenomenon.

At the same time, all the capacity isn't new to the industry because in some cases, there are other product types that the capacity is going out of the marketplace, creating some needs to offset it as the market changes in customer desires as you go through.

At the same time, I think the industry and we are expecting improvement in the volume of the industry, which is going to need more raw materials to support it. Over the last 5 years, there used to be significant amounts of nylon staple in the marketplace, which just about disappeared.

There used to be polyester staple, which has declined significantly, almost to 0. And the polypropylene category has also declined. So there's multiple things happening as the capacity is going in to satisfy it..

Okay, that's helpful. And then finally, thank you for giving color on restructuring for the back half of this year.

How should we think about restructuring charges as we enter into 2015, I assumed it will largely be behind you?.

I don't have those in front of me, where they are. Do you know....

We don't have those numbers here in front of us. There will be some more restructuring that Jeff talked a little bit about, continuing through 2015 on some of the work that we're doing. So there will be some more charges tomorrow -- or next year..

Will it be at lower magnitude, just generally speaking, in 2015 versus 2014?.

They should be..

Yes, they should be but let me, before I weigh in, look at the numbers on that..

We finish those. We go through our plan in the next quarter or so..

Your next question comes from the line of Stephen Kim from Barclays..

I wanted to talk to you a little bit about the synergies and the productivity initiatives that have spun out of your -- acquisitions that you've made.

And in particular, what I'm intrigued by is some commentary about that -- from you that the initiatives and the integration has gone on track and yet, you've upped your restructuring guidance, it looks like about $20 million for the back half of the year.

And you said that you've incorporated a more conservative outlook because you didn't get the bounce-back from weather that you had thought and yet, your guidance didn't change. So you put all of that stuff into the hopper.

And what it seems to suggest to me is that the overall basket of opportunity of savings and benefits from these acquisitions is maybe bigger today than -- as we look out, than maybe what we had [Audio Gap] And I was curious if you could sort of frame your commentary around that.

Have you encountered, as you've gotten deeper into these integrations, more things that have sort of reinforced the value of these acquisitions in your mind?.

So Stephen, I would say, the increase in restructuring that you saw in the second half is really some activities that we maybe pulled out of next year and put into this year in terms of restructuring for these acquisitions.

It really doesn't change in terms of our savings, synergies et cetera that we thought we would have at the beginning of the process and where we are right now. If you looked at the total number, I'd say the total hasn't changed, the parts and pieces probably have. We never end up with what we start out thinking.

But we -- I would say that in terms of the total numbers that we talked about a year ago that those haven't changed..

So what I'm hearing you say, then, is that since you've upped your restructuring charge guidance for the back half of the year and since the environment overall has weakened a little bit, you didn't get the snap back from weather and yet your guidance remains the same.

Really, what it sounds like is we should be thinking that you are pulling -- you've pulled some earnings out of next year and into this year.

Is that what I'm hearing?.

No. No, no, we didn't do that. We didn't pull earnings out of next year and put them into this year. We're just -- we're moving more quickly on some of the activities..

Okay, that's fine. The other question that I had relates to your wood flooring. You talked a fair amount about it, about price increases going in to offset the material cost inflation, et cetera. I was curious if you could talk a little bit about the difference between the solid and the engineered wood flooring.

Generally, if there's a significant difference in what has been the dynamics that have been occurring between those 2, in your view. And if you can help us understand to what degree your U.S. wood flooring business relates or has synergies with -- to your European flooring business..

Let's see. The European and U.S. flooring businesses, I mean, other than having best practices that you'd put between them, I mean, it's not anything alike. In the European business, we have a small market share. We're focused on the engineered wood.

We've been making it in Malaysia and using the Malaysian plant to satisfy the European market, the Asian market and the Australian market. We have purchased a new plant that will make products similar in Eastern Europe and that's going to enable us to expand the business.

But we still own very limited share and it's a niche position, and we tend to focus on the mid- to high-end part and we're using our brand to create a premium position within it. In the U.S. business, we have a different strategy, which is made up of an engineered business as well as a solid business.

We participate in the breadth of the marketplace in both categories from high to low. And the marketplace is significantly different than it is in Europe..

And the trends that you've seen in the U.S.

between engineered and solid, is there anything important to talk about there?.

The -- our business is increasing in both. The solid business tends to be a higher percentage in the new construction business. The raw material costs affect the solid business more. So what happens is you've had a spread of the prices between similar products, and solid and engineered has gotten larger and so it costs more.

Over time, it should impact the market share of those because you have to pay a higher price for a similar product as you go through. We think the wood business is -- in flooring, is perceived as one of the aspirational purchases. We think it's got a nice position within the marketplace.

However, you're also seeing various alternatives in the ceramic business. The fastest-growing part of it is ceramic planks that look like wood, and it's growing dramatically as you go through. So that's a relative new competitor to it. You have LVT in a marketplace that's getting bigger. It's becoming a competitor to people who want that visual look.

And then you have laminate that's been there for a long period of time. So there's a lot of options that are going to play out over the next few years..

Your next question comes from the line of Eli Hackel from Goldman Sachs..

Jeff, I know you talked a little bit before about expecting the U.S. to improve. Maybe just from a high level, what's your view, just broadly, on the U.S. consumer? It's sort of an open-ended question, but if you could talk about high-end consumer versus low-end or however you'd want to characterize it.

Just curious sort of your top-down view of what the U.S.

consumer looks like?.

I guess we're surprised from our category that there hasn't been a larger rebound in the remodeling business. We would have thought as the -- historically, as the consumer gets more confident, they start spending more money on their home. And we just haven't seen the rebound because it -- we have seen it, but not to the extent that we would have.

The new home business, we're all looking at the same numbers. And I guess we were surprised that the new home sales, the building, relative to what it was, we thought it would be higher than it is.

And the question is, is it a momentary thing or is it going to reverse it? The one thing we're sure of is the long-term needs for new homes is much higher than it is today and, at some point, it's going to have to equalize.

Another part of it is the young adults that are coming into the marketplace, they have this overhang of debt that earlier generations didn't have from their education and it may be causing them to postpone what they did into a future point.

And then overlaying on top of it is a lot of young people that have gone through this recession and you don't really understand how it's going to change what they purchase and now they act in the future. So there's a lot of variables going on and we'll all get to see how they play out..

Great. And then just one follow-up, Frank.

What's the impact of currency in your guidance for the second half of the year?.

I don't have that here in front of me, Eli. Let me get it to you after the call..

Your next question comes from the line of Eric Bosshard from Cleveland research..

Two things. First of all, the stepped up CapEx -- and I think it stepped up last year and it's stepping up significantly again this year. Can you just talk a little bit about how you think about the payback within that and the impact on returns from those efforts..

Absolutely. One part is the payback has to do with the acquisitions. Upgrading those and integrating them into the business is a portion of it. And then the second piece is that we're -- some of our categories, we're anticipating longer-term growth.

And so we're investing in new piece -- new equipment to satisfy that, such as the new plant in Tennessee we're putting up. We've put new lines in Georgia. We've put a new ceramic line in Russia. And so part of it's getting -- to have enough capacity and supply the demand that we see.

And then the last part of it is all around taking existing equipment and replacing it with new technology that's better than the old technology, which all gives payback. The paybacks could be anywhere from 2 years to 5 years, depending upon which category it is and what it is. In addition, we have -- like going into the -- LVT is a new business.

So that's about $50 million that's going into it this year to get -- to go on a new product category..

The benefit from this, when you look back a couple of years from now, is this a meaningful benefit in terms of incremental revenues and incremental opportunities on margin? Or is this things you have to do to sustain where you are?.

We're expecting them to have a positive impact. Part of the reason the margins are growing this year as you see them is the investments we made last year and the year before..

Okay, that's helpful. And then the second question just relates to how market share is evolving in flooring. And you spoke to this a little bit with engineered floors.

But as you look at the carpet business and your laminate business relative to what's gone on with engineered and with LVT, how do you think about how the landscape is changing with your portfolio and its market position relative to where the market's evolving?.

If you look over the entire flooring category, my expectation is that flooring will grow faster than GDP over the next couple of years. In those pieces, as you look at the segment, I would believe that ceramic would be higher than the average. I have laminate and carpet being lower than the average.

LVT is a new category, so it's coming from a low base. So it should continue growing because the base is relatively low. And then wood, you have to -- wood depends a little bit on price versus unit. There's been a huge inflation in wood due to the raw materials.

So a large part of the wood growth is in price inflation, so if you take that out, I would guess it would be somewhere in the middle..

And those are probably similar answers, except for LVT, to the last couple of years.

Is the intensity of any of those materially different?.

I think the trend is just continuing as they've been..

Your next question comes from the line of David MacGregor from Longbow Research..

I guess, first of all, in the commercial business. You talked about order growth, both in carpet and ceramic.

Is there any chance to getting you to quantify that order growth heading into the second half?.

No..

We don't give that out..

Okay.

Is the commercial business kind of where you want it to be as a percentage or as a proportion of your overall enterprise today?.

We don't really look at it as a percent of the enterprise. What we look at is how we'd maximize each channel that we're in. And we don't have a limitation that says this one needs to be X versus the other one..

So as you stack up those priorities and you look the marginal efficiency of investment in each, does current -- does the commercial business, how does it compare versus residential in terms of incremental investment?.

Incremental investment. A large part of the -- I have to answer it 2 ways. In some cases, a large part of the assets can be utilized in either/or and then some of the assets are unique to commercial because in some cases there are some differences.

So like the plant we're getting ready to put up in Tennessee, some of those assets will be focused on driving commercial business, which is made out of a different body formula than the other so it has some different pieces in them.

In some cases, there's some cuts in [ph] technologies that are different but then when you move away from that, there's a huge part of the asset that can flip between either/or as the demand is needed..

Maybe I can take that up with you offline. And the follow-up question I had was really back to the conversation around LVT. And it just seems as though this quarter, you saw strength in LVT, your laminate business was down.

As we talked to channel contacts, it seems like that's happening across the industry, where laminate is becoming a bit of a victim for growth in LVT as a substitution effect plays out.

I guess, just longer term, do you feel you can grow your LVT business fast enough to offset any potential deterioration in laminate from that substitution?.

They're not all substitutable. If you look at the average price of laminate versus the average price of LVT, they're really at 2 different price points. LVT is much more expensive.

LVT also has a -- probably a large portion of it is going to end up in the commercial business, which a very limited portion of laminate ends up in the commercial business as we go through. So they're not exactly -- the products aren't substitutable, one for the other. I think that LVT is going to take and impact a little bit of a lot of things.

I think it's going to impact laminate -- the higher-end laminate piece somewhat. It's going to impact some carpet in some instances where it's substituted for. It may end up as a piece for ceramic but again, the value proposition in each one of these things are different.

But if you just look at the total market, I think it's going to take bits and pieces from all of them, including wood..

Your next question comes from the line of John Baugh from Stifel..

Just real quick, because this is dragging.

Russia, I haven't done my channel checks yet, but what are you thinking about second half of the year there? What are you assuming? Are you assuming negative sales and/or profits or continued sales and profits? And any way to think about the risk or exposure there if the recession really does hit?.

We're thinking that the Russian economy is going to slow further, that the ceramic business is going to decline. That we're going to attempt to take market share in it, and our percentage margins will go down as we do that..

And so that would translate to an overall profit number second half year-over-year in Russia, flat, negative?.

I think that we'd probably end up, on a margin piece, maybe flat, given that we're trying to push that up. And then the translation, your guess is as good as mine, I have no idea where the ruble is going to go..

Your next question comes from the line of Kenneth Zener from KeyBanc..

You touched -- you mentioned the ABI index which is -- well, it can be a very vague indicator for demand. Can you give us a little flavor for what you're seeing in the domestic commercial market, which I believe for you guys, obviously, in the tile piece there is newbuild [ph] the carpet, specifically, is more retrofit.

So is it that you're seeing growth because you're gaining share, which it certainly sounds like given your product innovation? And could you also give us a sense of what you're seeing in the end market and how much that's driven by the products you're replacing being just worn out? Is it style, discretionary purchase? Just give us a little feel for that commercial channel, please..

We're in the commercial -- when we talk about commercial, I have a ceramic business and a carpet business that are all going into the channels in different ways. They tend to go into different places. My ceramic business has been increasing.

We have a competitive advantage with the breadth of our offering and thesis as we go through our styling and design. And we've been growing that relative to the marketplace. We believe we can continue growing it.

We have some advantages of owning higher ceramic that makes unique things in Italy and in China, that we bring in to support that as we go through to give a much broader offering. The carpet business, we have been lagging as we've changed our entire product line to go through and have a different raw material strategy within it.

We think we're at the end of it and we're expecting our business to grow in it. As we look forward, the inputs we're getting back and what we're seeing, we're hopeful that there will be an improvement in it going forward. But again, our view forward is still limited..

Your last question comes from the line of Keith Hughes from SunTrust..

Just to finish off, you talked about improvement a lot in this call in the second half of the year.

Are you seeing any improvement here in July, as carpet or any of the business orders pick up from the trend you saw in the second?.

We have -- in the second quarter, we have 2 things. One is, we started out that we thought -- we had a more optimistic view of what was going to occur, which didn't. On the other hand, it did improve seasonality and continues to improve seasonality-wise.

It's hard to read the pieces because there's a lot of -- from week-to-week, it's not a straight line and it makes it harder to read on a short-term basis. The indications we have, we believe that ours will be better..

There are no further questions at this time. Presenters, I turn the call back to you..

We appreciate you joining us. We think we have a strong management team and the right strategy to run our business for the long term. And we are optimistic that the second half will be better and continue to be that way. We appreciate you joining us. Have a nice day..

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