Mohawk Industries Exec Insights: Margins, Strategic Opportunities
Michael Rehaut – JPMorgan: First question on the price increases that you expect to more fully benefit in the second quarter. We’ve seen, I think, over the past two or three years, this constant lagging affect in terms of following the higher resins in oil-based materials. What do you think ultimately this means for margins for the segment over the next couple of quarters on a year-over-year basis? As obviously, on a longer term basis, people are looking towards return towards a more normal high single-digit type margin for this – as this business has historically done?
Jeffrey S. Lorberbaum – Chairman and CEO: Most of our raw materials are bought at market based on either some – either market prices or some contractually agreed upon basis, and so our raw materials go up and down each period. We tried to cover what we believe to be the raw materials based on best guesses, and we think we’ve done that at this point. The future raw materials are going to be based on if something dramatically happen with the oil, and depending upon who you listen to, it can go to $120 or go to $80, we have no idea which. We’re going to continue watching them, and if it requires additional changes we’ll make them. Our best guess at this point is that we’re expecting stable material prices in the future, but that could change.
A Closer Look: Mohawk Earnings Cheat Sheet>>
Michael Rehaut – JPMorgan: But just to make sure we understand it correctly, looking forward into the second quarter, can you give us a sense of given that you expect the fuller impact of the price increases from the first quarter, would you expect there to be 50, 100, or 150 basis points of expansion for the Mohawk segment?
Frank H. Boykin – CFO: Our margins, Mike, will be up compared to second quarter a year ago in the Mohawk segment, as a result not just of price increases, but also some of the productivity improvements we’ve put in place, but they will be up year-over-year in the second quarter.
Jeffrey S. Lorberbaum – Chairman and CEO: The amounts are built into the estimate, you’re going to have to decide what you want to put in each segment.
Michael Rehaut – JPMorgan: Right. I appreciate that. Just one last one on Unilin – I’m sorry, on Dal-Tile, great results, you face a little bit of tougher comps in the back half of the year, based on current trends do you expect to continue to grow at this double digit rate in for the back half or would that moderate due to the comps?
Jeffrey S. Lorberbaum – Chairman and CEO: I don’t believe that we are going to continue at the double-digit rate going forward, that’s a significant improvement over the market and I will be delighted if it happens, but we are not building that into our forward projections.
Joshua Pollard – Goldman Sachs: You made a comment in your prepared remarks and on your press release about pursuing new strategic opportunities. You talked as well about a new joint venture with the South American board company, I’m really ultimately trying to understand how deep, how broad, and how far you guys want to go with some of the strategic opportunities out there? Are you guys looking to make larger acquisitions given the strength of your balance sheet right now?
Jeffrey S. Lorberbaum – Chairman and CEO: Yes, and historically we have grown the business through acquisition. We believed we’re well positioned in the marketplace. We believe that we have the infrastructure and our business to support what’s going on in our businesses. We continuously look at new opportunities in the marketplace, typically as you go through downturns, there are more people looking to exit the businesses as you come out of the business and we constantly look at whatever comes available to the marketplace in all parts of the world.
Joshua Pollard – Goldman Sachs: I guess one quick follow-up to that, it seems that you guys talked a lot about our the international side of the business, but as staying – stands right now, it’s less than 20% of your businesses, is it right in assuming that you guys are looking outside of the U.S. and then from a management standpoint, I remember when I first looked at the Company a few years ago, I was surprised to see that the distribution base and some of the management of the different merged pieces were sort of (indiscernible) and it wasn’t necessarily all one sales force, all one distribution. When you guys think about bringing on new companies, is there anything that lead you guys towards doing more consolidation on the on the operations of the business?
Jeffrey S. Lorberbaum – Chairman and CEO: We take each one and each business and we decide what to do with it. What you see is that we basically have broken the U.S. business into three parts. We have a carpet and rug business, we have a laminate and wood business and we have a ceramic and stone business. Each of those we operate relatively separate from each other. We do get advantages in the distribution system. We do get advantages in the customer relationships. We do get advantage in finding opportunities in the marketplace. The reason we don’t meld them together further is that the different products actually have different attributes, in many cases different customers buy them even when they are going into the same building, the ceramic in many plants is bought by someone different than the carpet and the timing of the installation and shipments are done at different point in time. So, we use all the intellectual pieces that we have. We use the knowledge of manufacturing, but in each case it’s unique.
Frank H. Boykin – CFO: Just to address your question on international. We are looking at international opportunities. We also look at domestic, but we probably look at it more international, I would say, than domestic.
Jeffrey S. Lorberbaum – Chairman and CEO: But if there are tiling acquisition in the U.S. we’re willing to look and if they make sense, we would like to buy that.
Frank H. Boykin – CFO: Yeah. The strategic fit, and right valuation.
Joshua Pollard – Goldman Sachs: Well, I’m glad to hear you guys are out there hunting. My other question is around your productivity improvement compared to last year. You called out $100 million last year. I wanted to see, what you guys were thinking for full-year 2012 and how much of that was realized in 1Q?
Jeffrey S. Lorberbaum – Chairman and CEO: I’m not sure I have that in front of me. Frank, do you have it?
Frank H. Boykin – CFO: I think we need to get back to you on that one.
Jeffrey S. Lorberbaum – Chairman and CEO: We’ll have to get back to you on that you on that piece. I can tell you that every division has significant internal savings that they’re doing based on productivity increases improvements in the raw material costs and product innovations to upgrade the mix as we go through. Frank, will have to get back to you with the number for the total.