http://www.morningstar.com/earnings/38481287-mohawk-industries-inc-mhk-q1-2012.aspx

Mohawk Industries Inc MHK
Q1 2012 Earnings Call Transcript

Transcript Call Date 05/04/2012

Operator: Good morning. My name is Heather, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries First Quarter 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. As a reminder, ladies and gentlemen, this call is being recorded today, Friday, May 4, 2012. Thank you.

I would now like to introduce Mr. Jeff Lorberbaum, Chairman and CEO. You may begin sir.

Jeffrey S. Lorberbaum - Chairman and CEO: Good morning. Thank you for joining our first quarter 2012 conference call. Joining me on this call is Frank Boykin, our CFO, who will review our Safe Harbor statement and later our financial results.

Frank H. Boykin - CFO: I would like to remind everyone that our press release and statements we make on 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 at the Investor Information section of our website for a reconciliation of any non-GAAP to GAAP amounts.

Jeffrey S. Lorberbaum - Chairman and CEO: Thank you, Frank. Our first quarter earnings per share were $0.58 as reported, an increase of 38% over 2011 adjusted results. Due to volume increases, price increases, cost reductions and lower interest expense. Our sales grew by 5% as reported or 6% on a local basis with year-over-year sales growth for the past four quarters. Price increases in the first quarter will offset the material inflation in our current costs in the second period.

SG&S improved by 90 basis points as a percent of net sales. During the first quarter we generated operating income of $72 million, an increase of 14% over 2011. We paid our 2012 bond obligations using our short-term facility at lower interest rates. Standard & Poor's upgraded our credit rating and Moody's elevated our outlook to positive, reducing our interest rates on our bonds.

Our balance sheet remains strong with our net debt-to-adjusted EBITDA at historically low levels of 2.2 times. We have almost $500 million available for strategic opportunities.

In the U.S. our residential categories reflected generally positive trend in the housing market. The National Association of Homebuilders Index is at one of its highest levels since June 2007 with the positive outlook from record low interest rates and increased approval. The mild winter weather contributed to the strongest existing home sales for the period in five years which support greater remodeling and renovation in this year. Our commercial outlook is for moderate sales growth in line with the AIA Billings Index AIA for commercial construction

Frank, would you give our financial report, please?

Frank H. Boykin - CFO: Sure. I'd be glad to Jeff. Good morning, everyone. Net sales for the quarter were $1.409 billion, up 5% or a 6% increase on a constant exchange rate basis. Both higher volume and pricing benefited our results. Gross profit was $359 million with the margin of 25.5% flat with last year.

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