Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded, today, November 4, 2011. Thank you. I would like to introduce Jeff Lorberbaum, Chairman and CEO of Mohawk Industries. Please go ahead, sir.

Good morning. Thank you for joining our third quarter 2011 conference call. With me on the call is Frank Boykin, our CFO, who will review our Safe Harbor statement and later our financial results.

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 risk 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.

Thank you, Frank. Our third quarter earnings per share were $0.68 as reported or $0.83, an increase of 12% excluding unusual items over 2010. Volume increases, process improvements and lower interest expense all contributed to our earnings improvement. Our sales during the period exceeded last year by 10% despite declining consumer confidence and an uncertain housing market impacting flowing demand. All business segments reflected growth over the prior year. Our cash position remained strong with $276 million at the end of the quarter and leverage remains low with our debt to adjusted EBITDA ratio at 2.1x. The company's third quarter results reflect an improvement over last year even with the increasing raw materials and consumer reluctance to invest in renovation projects. Sales in both the residential and commercial categories expanded with our commercial renovation leading the growth and new residential continuing to lag. The architectural billings index rose in August, indicating future growth in commercial construction. Longer term, our sector should recover from the depressed levels and expands faster than the overall economy, as renovation and housing sales rebound. Frank, could you give the financial report, please?

Thank you, Jeff. Good morning, everyone. Net sales for the quarter were $1,443,000; up 10%, as reported; or 8% on a constant exchange rate basis. All 3 segments grew with both residential and commercial up in the U.S. We were positively impacted by both volume and price increases during the quarter. Our gross margin was 24.8% compared to 26.3% last year, down year-over-year with rising raw materials and continuing mix pressure. We were also impacted in our Dal-Tile margins, while last year, insurance proceeds covering the loss from the flood in our Mexican plant resulted in a higher-than-normal margin in 2010. SG&A was $266 million or 18.5% of sales. That compares to 19.8% of sales last year. SG&A cost control is at positive, with that dollars flat compared to last year on a constant exchange rate basis. Restructuring charges were $2 million during the quarter and all within the Mohawk segment, with about half in cost of goods sold and the remaining half in SG&A. Operating margin, excluding charges, was 6.5% compared to 6.8% last year. Interest expense was $25 million and was favorably affected by lower interest rates this year. Other expense was $14 million and includes a $9 million loss related primarily to the peso devaluation. Since our Mexican Dal-Tile business is based on U.S. dollars, the accounting rules required that the balance sheet be revalued from the peso to the dollar and the change recorded as mix expense. This is different than our other international operations for the changes recorded to equity. In the third quarter, the revaluation reduced income by $9 million, which is an unusually high number. Usually, this amount runs in the range of $1 million to $2 million each quarter over the last 10 years. Our income tax rate, excluding charges, was 11%…

Thank you, Frank. Our Mohawk segment sales were up 6% as we improved our position and grew on both residential and commercial categories. Operating margins were lower due to price increases, lagging material inflation, as well as continued pressure on our product mix as consumers remain cautious about larger discretionary investments. During the quarter, residential grew across most channels and product categories. Our performance in the Home Center channel improved with additional product placements and expansion of our SmartStrand products. Through specialty retailers, we accelerated new SmartStrand where they had product introductions and lots of joint carpet and pad programs with enhanced warranties to improve the value proposition. And the multifamily channel support for our Triexta, Tri-Star carpets continue to grow through its superior durability, stain resistance and value. Our new extrusion capacity has allowed us to expand our sales in the fast-growing Polyester segment. Sales growth was also achieved in most categories of our Mohawk residential hard-surface products through new placement and program expansions. Commercial sales momentum continued from the previous quarter, with both broadloom and carpet tile achieving gains. Commercial sales have increased from gaining national and regional specifications and expanding partnerships with foreign contractors. Our courtship program has tailored to commercial projects with short lead times and has been expanded to include a wider variety of price and product solutions. We've installed advanced printing technology with the next generation of precision designing for our hospitality carpets. We have broadened our commercial SmartStrand product, targeting corporate and institutional channels, offering fashionable carpet tiles with low-maintenance and a compelling environmental advantage. We continue to gain sales on all commercial categories for offering leading product designs, service and support to architect and designer communities. During 2011, we implemented 2 price increases that were fully realized by the end of the…

[Operator Instructions] Your first question is from the line of Eric Bosshard with Cleveland Research Company.

This is actually Tom Mahoney calling in for Eric today. I wanted to ask about the demand trends through the quarter and what you guys saw, I guess, in October and early read on November that makes a little more conservative on the fourth quarter?

I think that we saw a little bit of softening as we went through the quarter, but I mean it started out softer than we expected a little bit due to all the impact of the government settling, what they were doing has impact on consumer confidence. The consumer confidence still remains low, so we're just a little cautious as we look forward.

And then the follow-up on raw materials. I think last quarter, you guys, you were thinking 3Q would be favorable versus the second quarter and you relayed that pressure in the third quarter. When did you guys see or what is the timing of the moderation that you guys have seen? And is there any change in how that flows through, maybe with lower demand in the market, the timing of the 60 or 90-day lag when that first do the cost?

We came out of the second quarter and we have made certain assumptions about our raw materials wood for our pricing. And as we went through the third quarter, the raw materials were not coming down as we had anticipated. As we went into the fourth quarter, we have seen some moderation. However, oil and chemical prices are really volatile and we'd have to continue monitoring it as we go forward. Given that goal, we would expect some positive impacts on our cost in the first quarter.

And just to answer the question regarding the FIFO timing, inventory turns about once a quarter so that -- it takes about 3 months to get the raw material cost into the P&L.

And so you guys saw that input cost moderate late in the third quarter or early during in the fourth quarter is when that moderation happened?

Most of our prices are bought at market and they move all the time. As you see, oil prices going up and down weekly, we don't actually see it that minute, but it goes up and down. The oil -- the chemical prices are much more volatile than the oil prices as they're being influenced by worldwide supply and demand. And so we're reading them every day and it's just we keep monitoring to try to see how are they going to fit.

Your next question is from the line of Joshua Pollard with Goldman Sachs.

I really want to understand how all of the productivity improvements that you guys are talking about, and there's a significantly long list of them and I think you guys are doing the right things. How those impact the financials as we look out to 2012? Is there anyway you can begin to put a $1 figure or range of dollar figures on how those should support your earnings as you look at 2012 and beyond?

We do have a long list of changes that we do. We have a good system for -- in our planning for setting up what the changes are and are holding each group accountable for executing against them on a quarterly basis driven down through the entire organization. The questions really are, and as you go through with those things, what happens to the product mix and what happens to pricing offsetting or helping those conditions. And what we have this year was a large part of the changes have been absorbed in the different mix changes and product changes we go through, but they have impacted our results. We haven't gotten the full impact of what we've already done and we'll see more of them in the future. Up to this point, we haven't given a specific number for the pieces, though.

Okay. Is giving a number something that -- or at least on a productivity side, AKA -- also known as the things that you guys can control, is that something that you guys look to do in the future or is that something that will sort of have this stand by and wait for commodities go the right direction to see those benefits?

I mean, this year, I mean, we estimate approaching $100 million worth of various benefits, though all the changes have actually been achieved during the year, or will be achieved through the year.

That's an annual number, Josh.

Your next question is from the line of John Baugh with Stifel, Nicolaus. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: I was curious if you had any thoughts about '12 CapEx plans and update us where '11 come in as well? And then you're the only sector that seems to be showing signs of life is multifamily construction and I was curious how you're positioned vis-à-vis your competitors in that end market?

I'll take the CapEx question. We have said $280 million for the year. I think the spend is going to be closer to $260 million and then that other $20 million will probably falls over in the next year, John. We haven't finalized our budget for next year so we're not ready to give a number for 2012 yet. But it could be…

It will be in the same range.

We're still working at it, though. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: Multi-family?

Multi-family. We participate in the multifamily. The multifamily business is a much more lower-end product. It typically has a low -- it typically use very inexpensive products and turn them over. We have increased our participation in that over the last year or 2. We've put positioning our SmartStrand products in it and addition to the other products. I think that there's probably ourselves and Shaw [ph] have a large share of it. We would -- Shaw [ph] would have a larger share than we do, though. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: And then as a follow-up, you didn't brag about it, so I'll brag for you. You seem to gain market share within the quarter within carpet and rug. Was that primarily the positioning with Home Center channels or were there other areas where you saw a lot of strength as well?

I think it was across all the different pieces over the last year. We had put it in place a lot of things to improve our business. We had talked earlier in the year about not fully participating in the polyester participation as we put more capacity in, we've been able to participate there, as well as broadening our SmartStrand products, which are differentiated in those categories. We've improved our carpet tile offering. And across all the segments, we've enhanced our sales team and execution of our strategy.

Your next question is from the line of Stephen Kim with Barclays Capital.

I wanted to follow up on a couple of questions, if you don't mind. You had mentioned the $100 million in savings you expect this year as a result of some units in the many initiatives you take. And I was wondering if you could put that in some context for us? I know, you're avoiding maybe specific numbers, but is that number significantly greater or less than what you benefited from last year and do you have a view of where that number may go next year? I mean, do you expect savings to be greater than that next year?

I don't remember the last year number so I don't have the reference points for you. The changes are across all the different categories and segments. I would expect next year probably not to be as much as we've made a lot of positive changes this year. Some of it also applies to benefits putting in new equipment and the productivities achieved from those, as well as redesigning our product strategies and re-engineering products across all the different businesses to create process improvement. So I mean, next year I would assume it's going to be less than this year. I don't have the number to give you.

Okay. That's fine. And then I wanted to follow up, with respect to market share gains, it appeared you gained share in the laminate business. I was curious if you could just comment broadly about what your strategy is in the U.S., what are some of the gains you've seen or sort of due to short-term tactics or if you think there's some fundamental shift that is -- that were seen taking place in your laminate business. And, if you could also then extend that abroad, because obviously, you're expanding the laminate pretty aggressively into Russia and Australia? If you could talk about maybe the different dynamics that may exist in those markets for laminate versus U.S.?

We've been discussing for quite some time. The laminate business in the U.S., there's a large part of it in the Home Center channels. And if you go back primarily, we were focused on the specialty channels. We still are but we have gotten additional commitments in the Home Center channel to expand our participation of markets here. Again, pushing our strengths, which is our style and design and differentiated fabric products in the business. And so we're doing that. The European business is a little different. We're positioned different in the European business with a little higher-end position. We have a more recognized consumer brand in that marketplace. But again, we're focused on in that marketplace the medium to high end of the marketplace. We have started in that marketplace also selling into they call it DIY channels in each country as a step-up product in those and we're achieving some successes with those. We started broadening our business in some ways to other places like Russia. We started a few years ago. We thought that we would only be able to have a small niche position within Russia if we didn't build a plant in Russia, so the plant is actually up and operating as we speak. We'll go through probably about $5 million worth of start-up cost this year in starting it up. The plant will be running about half capacity probably by sometime the first of next year. It will take a few years to increase our business there. We've been developing business in Australia. We're supporting it with wood out of Malaysia, as well as laminate out of Europe. We think that this gives us an opportunity to have even a larger share of that marketplace. We think we've gotten the best distributor that's down there that really has huge share of the laminate wood business. We think in Australia, due to the size of the continent, that having offshore production may be advantageous where in some countries, that's disadvantageous because the cost of moving it from a central point in Australia and around the continent. So we think we're well-positioned there. Over a long time, we'll have to consider if we broaden it to other product categories or not. But we're happy with our positions.

Your next question is from the line of Michael Rehaut with JPMorgan. Michael Rehaut - JP Morgan Chase & Co, Research Division: First question on carpet mix. Certainly, it continues to be an issue, I think, in a negative margin impact. I was hoping to get some clarity around if you could give us a rough idea of the negative, on a basis point, is it 100, 200 basis points, year-over-year, incremental negative impact from the lower mix in carpet? And have you seen that mix -- certainly, I think you've seen it continue to go down on a year-over-year basis, but has it stabilized to any degree on a sequential basis?

We have 2 things going on in the carpet business. One is the consumer trading down. The second, and related to not only consumer, retailers using price as a motivation to try to create value to the customer, so that's compressing prices. You have, in addition to that, you have a huge change in the industry where we're moving from nylon to lower cost polyester so the industry is growing in order to help maintain price points, which the industry is trying to do and the improvement in polyester product categories were also trailing down so that the industry is moving to lower cost polyester replacing the nylon products at the same time. And then while the earlier call, like the multifamily is growing faster than the other one as well as you have a change in the channels. The Home Center seemed to be doing a little better, more focused on price value at the moment, which also compresses the mix. And we have all those things going on at the same time. I don't have a number to give you, though. Michael Rehaut - JP Morgan Chase & Co, Research Division: Well, yes, I mean, that's really what I'm trying to get to. It's not just perhaps what the year-over-year change was and, Frank, I don't know if you have any thoughts around this, in terms of the basis point impact on a year-over-year basis. But the other part of the question, on a sequential basis, have you seen that mix stabilize or does it continue to go down every quarter? I know you've talked about mix worse on a year-over-year basis but do you see any -- what are the trends on a sequential basis, quarter-to-quarter?

It's really hard to read on a very short time frame. We know that last year, compared to this year, it's all going down quarter-to-quarter. I mean, there's a lot of movement. It's really hard to read.

And Mike, to your other question to me, it's almost impossible to separate price and mix with the number of customers and products and that type of thing. So that's why we presented it in that number. Michael Rehaut - JP Morgan Chase & Co, Research Division: Okay, just one more. The tax rate benefit, I guess, continues to be lower than expected. How should we start to think about 2012? I mean, obviously there's a mix of U.S. versus international, but I think you mentioned there was a benefit that's driving the mid-single digit in 4Q. How should we think about 2012?

High teens to maybe 20%. We're still trying to finalize it, but probably somewhere in that range right now. It's our best guess.

Your next question is from the line of Sam Darkatsh with Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Just a couple of quick questions and most of my questions have been asked and answered. Regarding specifically the Mohawk segment, again, everybody's I think, really happy to see the share gains there and they are really impressive. Related to the mix within the Mohawk segment, could you rank for me the carpet versus rugs versus hard surfaces? What -- where you saw the most growth in that segment?

The carpet is so much larger than the rest of it. It overwhelms everything so it doesn't really -- you can forget the rest. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: So the plus 6 -- the carpet constituted the majority of the plus 6?

Correct. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: And then second thing, on the residential side. You mentioned that you were up in residential. Is that units and dollars or just dollars?

Yes.

Your next question is from the line of Dan Oppenheim with Crédit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: I was wondering just a quick question here, talk about CapEx plans for next year. Will the Russians still be coming online and such? How do you think about the CapEx internationally? Any part that you're looking at, any part of the world where you focus in terms of new capacity right now?

We continue to look around the world. The focus would be on high-growth marketplaces, which are easy to spot. That would be China, Australia, Brazil, Mexico. Mexico sort of separating off, also from the U.S. economy doing better. So those would be primary, but we continue to look around for opportunities, as well as in the present markets we're in. We assume that over the next year or so, there will be businesses for sale that could create opportunities to tie-on additions to both our U.S. and European businesses as well.

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

You're making tremendous progress here, in terms of expanding your distribution. And you talk about DIY growth in Europe, you talk about specialty retail growth in the United States. I just wanted to tie that back into the observation about volume growth. If you were to exclude kind of the new store sales, what are the same-store sales look like? In other words, does the core volume that would be comparable with what you're doing a year ago is it still up?

I don't have the numbers in front of me. What happens is in the specialty store part, given the huge decrease in the industry volume since the decline, there's probably 15% to 20% less units in the industry. At the same time, the Home Center channel has increased its share and that's about as good as I can give you at this city.

I guess you've got some forward perspective on the extent to which you can continue to grow your distribution -- new distribution volume here. Does this continue on for another quarter or 2, or is it sustainable through 2012?

I mean, a lot of it has got to do with the entire marketplace and what's going on. The outlook for next year is uncertain. We believe that we're going to still be able to improve our results next year even with that. I mean, that's really hard to read. The consumer with a consumer confidence is down to almost historical low. I mean, it's really difficult at the same time, commercial business is still tended to be good. The question is will businesses continue spending at those levels. We have very limited forward views of purchasing. So I mean, your guess is always as good as mine for the overall pieces.

But it would be hard to sustain this growth rate we had in this quarter, I think, for a period of time.

Okay, and then a related question. Just you mentioned in passing, and you mentioned it quickly, so I think it's all but you were engaged in expanding your carpet tile capacity and you referenced Phase 1 of I think a 35% capacity increase. Wonder if I could just get you to go back and just talk a little bit -- recap for us what Phase 1 entails and what -- is there Phase 2 and 3, and just maybe talk a little bit about where you're going with that?

Our carpet tile business has continued to increase. Carpet tiles becoming a larger part of the marketplace. As our business has increased, we continue to improve our -- to increase our capacity to support it. We actually have 2 phases going on. The first one has been completed already. The second one will be completed before the first of the year, or close to it. The combination of those will 2 give us an additional 35% production capacity, which will support growth for the near-term future of carpet tile, which we expect to keep going.

And can you give us a revenue number for that incremental capacity what it might represent?

I don't have it with me.

How should we think about that in terms of commercial potential?

What you see over the period of time is there's 2 parts: one, there is a change like commercial carpet tile is replacing broadloom tile. And as it gets more cost effective to manufacture, as the styling increases since it's used in broader price points. It's being used in more jobs and impacting the broadloom piece in the past. We've got our broadloom business has started growing also at this point, but we see ongoing that there will be this continued shift in broadloom tile. Then the question really becomes how much can a commercial tile business continue to grow as an industry and we continue to try to get a larger share of it.

Could you target most of that incremental capacity to the hospitality segment where you've always been so strong?

Actually, the hospitality gives us a small portion of it.

Okay. So these are new end markets that you'd be pursuing with that capacity?

It’s all in the other markets.

Corporate and all the other markets.

All the other markets used much more of it than hospitality.

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

So in just taking the comments you made about fourth quarter seasonality and revenue and then the mid single-digit tax rate. It kind of implies margin being down to 150 basis points or so, year-over-year. Just want to make sure that's kind of how you guys are thinking about the midpoint of the range? And if that's the case, generally, just directionally how you'd think about the different segments within that context?

We were not prepared to give out a margin estimate for the quarter. But I think as we go into the fourth quarter, one of the points we were trying to make was that we're going to have some raw material pressures, particularly in the carpet segment and so that will impact the margins in the fourth quarter. And then we'll have the normal seasonal slowing as we go into the fourth quarter that will impact both our top line and our margins.

Is all of the raw material pressure largely in the Mohawk segment? Or are you still feeling that in the Unilin segment? The incremental pressure I guess?

There is some in the Unilin segment, but it's not as dramatic.

Okay. Second question will just be around with the capacity coming out of Russia. Can you just talk about how you're currently servicing the customers that will be benefiting from that capacity addition, what that means internally from cost savings, anything that would be beneficial to the segment above and beyond the revenue benefits?

It should be both -- we're now paying import duty taxes coming in. We're shipping products from Europe into there. There should be a benefit in cost. On the other hand, you're not going to start to plan up running fully efficient to begin with. So those will have to flow through as we get the plant over time. We would expect it to improve the margins of the products we're selling into it, once the cost get on line.

And the capacity, that gets freed up in Europe and you've already got initiatives in place to absorb that?

We are doing things to increase the sales base within Europe as we mentioned, selling to new channels and new products and categories within it. There will be some decrease in that. We have been preparing that for some time to be able to have our cost more flexible to keep them in line as we move the capacity.

Your next question is from the line of David Goldberg with UBS.

I appreciate all the color you guys have given about the Home Centers and the increase in your sales into the Home Centers. What I'm trying to figure out is can you give us some idea about margin in the Home Centers especially because it seems like that trend is going to continue for the near term? How much of a difference is there when you sell through the Home Centers versus your other channels? What's the possibility difference, the margin difference?

Historically, the margin difference was really dependent upon the average mix of the -- what you sell to customers. So what happens is, in the specialty channel, the specialty retailers are more proficient at providing different options to the consumer and helping them pick better quality products within it. So the margin differences, a lot of it comes from the mix differences between the channels.

So does that mean if you had better trained or you had sales people in the Home Centers that could do a better job and kind of either up-selling customers are helping them choose better options that the margin difference wouldn't be that significant? There's no inherent reason it would be?

Let me -- the different cost structures and a lot of different pieces and as you go through -- I'm not prepared to give you margins of different customers in this minute.

I understand. My second question is just on the cost savings you guys have been able to achieve. Just wondering as you look forward and eventually if the market does start to improve and demand starts to get better, about the sustainability of the cost improvement as you look forward?

The cost improvements, they were putting we're really changing the way we operate the business. We've put in a lot more disciplines in the business. We put in a lot more processes to create innovation through and challenge the status quo which I'm excited about. They're continuing, and I think they'll continue forever. As that the management has improved its ability to define and execute these things ongoing.

Your next question is from the line of Keith Hughes with SunTrust.

Most of my questions have been asked. But just back to Unilin real quick. Obviously, a lot of controversy in Europe. Have you seen any source [ph] in September, even in to October, any sort of change in the order pattern in the country that are most prevalent in?

Not really. The market -- when we look over the market, the consumer seems to be a little separated from the banking system and the other may be reading about it or not. We haven't seen a dramatic change in most have said that. There is -- the same thing you have here, and it's hard to separate, over a period of years we've seen trading down, just like we have here, as people tried to minimize costs from sales. But in general, we don't see that major change in the purchasing habits. Typically in Europe, they don't use credit as much as we do. Typically save more before they spend it and so there's potential for having a significant change as this thing gets worst. But at this point, we haven't seen the consumers really dramatically changed.

And would you say the same thing in the United States as you move September through October in residential shipments? In terms of shipments being more or less the same on what you saw in the third quarter?

I think that we see -- it was -- the third quarter was a little softer than we have expected. But I mean, at what point expected? We came into the second half. We were expecting the second half to improve. And given the low consumer confidence level, we didn't see the improvement. There is some softening going on and we built it into our estimates.

Your next question is from the line of Bob Wetenhall with RBC Capital Markets.

This is actually Tom Austin on for Bob Wetenhall. I just wanted to follow up a little bit on your conversation about Unilin and your strategy to move into the DIY channel a little bit more. I'm just wondering what you guys think the impact on margins will be long term from that? And maybe it's so small that it's not going to have a material effect, but I would assume that will put a little pressure on the Unilin margins. Do you have any kind of any color on that?

Let's just make sure that we get a little bit deeper into the strategy. The strategy in Europe is to position our participation of the DIY as a step-up premium product to what they typically sell and be the higher end of their category. We are aligning with that limited number of DIY accounts in each market place, trying to position that they can improve their sales margin by selling better quality products. So we're not trying to become the commodity supplier to the DIY marketplace. On the other hand, the products that -- their average products just like we discussed in the U.S. market, especially retailer, is going to sell at a higher mix of better quality products in the DIY.

Okay, got it. So based on the fact that you're trying to be that specialty provider, you think you'd be able to maintain the margins that you historically had there?

Or close to it.

Your next question is from the line of Carly Mattson with Goldman Sachs.

This is actually Mike Alder on behalf of Carly. I just want to ask you about your kind of cash generation and cash flow expectations for 4Q and into the 2012, usually from your standpoint. I know you guys said you bought about $64 million of that 2012 maturity, but you're still planning paying about half of that with cash by the time it comes due?

The 2012 maturity, I think, we're probably going to, as I mentioned earlier in the call, we bought back about $65 million and rolled that into the revolver. And I think that the majority of what's left will pay a little bit with cash but most of that will be rolled into our revolver.

Your next question is from the line of Steven East with Ticonderoga Securities.

On the Australia business. One, how big is that? And does it make sense for you all to eventually put some type of manufacturing presence there?

It's presently about $50 million in sales. We're presently servicing it from Malaysia and Belgium. We believe at the moment that continuing to supply it from offshore makes sense, but we'll have to see as we go along. We believe that, given the size of the country and the cost of moving it within the country that for instance, shipping it from Malaysia, where there's low-cost labor has been advantageous, and we'll have to see if there's other opportunities as we go along.

Okay. And then if you look at your 3 major raw materials, nylon, polyester, polypropylene in the carpet side of the business. How much are they generally year-over-year, and how much have you recaptured through pricing? In other words, how much more do you have to go to catch up with what's going on?

Let's see. The -- listen, we don't even know what the cost is going to be at this month yet. What happened is the volatility we have to deal with is really difficult to estimate. And most of the products we're buying either at market or on-contract plus cost somewhere. You have oil prices that move up and down on the last month, say, 10% to 15%. You have commodity chemicals within each of those that come through. It's easy to have 20% to 40% movements given the international movements of things and how things are moving across the borders on supply and demand. So we sit back at any given point in trying to try and estimate what we have and react to the changes. It's -- we don't know what we're going to do at the end of this quarter yet. If you could tell me what the oil prices will be next year, it would help me.

Yes, I wish I could. If we just talked about magnitudes, or I mean, are you -- would you ballpark it, say, hey, I'm 50% recovered, 2 quarters, 2/3, 3 quarters. Where do you think you all are at least in big-picture-type numbers?

I can tell you that the increase that we consider putting through earlier was in the 3% to 5% range.

Okay, I get you. And then just one last question, if you look at just your incremental margin per dollar of sales for each unit, where are we now? You talked about taking 100 -- it's framed in the question, you talked about taking $100 million out in productivity cost, et cetera. So I'm just trying to understand what type of operating leverage you have for each dollar of new sales that come in the door?

Yes, I think, we're at for each of the 3 segments, we are at about 15% incremental margin for Mohawk; 20% incremental margin for Dal-Tile; and 25% for Unilin. The operating earnings level.

Your next question is from the line of David Manger with AMI investment Management.

I was wondering what percentage of Unilin's operating profit come from royalty payments? And as a follow up to that, do you have an idea of the impact Uniclic's patent expiration 2017 would have on your estimate for a normalized operating margins of 15%?

The only information we've given out is that when we originally purchased it, it was in the range of around $50 million. And we haven't given out specific information in addition to that since then.

Okay. And then do you have a gauge of how much the patent expiration would maybe change your estimate of normalized margins and kind of a normalized environment then?

What the volume going to do between what's the all the different pieces that we have an investment and there's a lot of things are going here and there that will impact the business.

Okay. I guess just in a normalized environment, if we were at $1.2 million to $1.5 million housing starts, how would that would change that normalized figure?

I don't think I'm going to be able to answer your question.

We don't have that information for you right now.

Your final question is from the line of Kathryn Thompson with Thompson Research Group.

Just on the Mohawk segment. Could you give the growth rate by the different end market, residential versus your non-res or commercial? And then also breaking at a little bit further, could you clarify how much of your sales in that segment were driven by volume versus pricing?

Right, I can, real quick, just give you the volume versus price mix. It's not going to be a price by itself, Kathryn.

Understood.

Volume impacted us by about 2% and, say, 2.5%. Price mix impacted us by about 3%.

And in terms of looking at that your residential versus commercial. And really keep in mind on as modular this could be a bigger portion of your business that is with the commercial. It's really just trying to get a sense of have you seen any change in momentum and what is the sales momentum of your commercial side of the business in the Mohawk segment? Is that is the number that you have generally, you have provided in the past. I was just getting an understanding, I know residential is a little slower but...

Yes, what we said earlier was that both the residential and the commercial businesses were up in the Mohawk segment and the commercial business is up at a higher rate than the residential business.

Substantially higher than the residential.

Is it still up in the low teens?

Yes.

Yes. Okay. And as far as -- I know we've talked a little bit about multifamily. I get the impression that it's not as big of a business, obviously, for you. Have you -- are you able to provide how much of your sales, the Mohawk division, are to multifamily?

I don't have that. I don't have that answer for you.

At this time, you have no further questions. I will now turn the call back over to Jeff Lorberbaum for closing remarks.

Thank you for joining us today. We think we're well positioned for the future. We continue to invest in our business and continue to improve our processes and controls, and we appreciate you joining us. Have a good day.

Thank you. This does conclude today's conference call. You may now disconnect.