Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mohawk Industries' fourth quarter 2014 earnings conference call. [Operator Instructions] I would like to now introduce Frank Boykin, Chief Financial Officer. Mr. Boykin, you may begin your conference.

Thank you. Good morning, everyone, and welcome to the Mohawk Industries quarterly investors conference call. Today, we will update you on the company's progress during the fourth quarter of 2014 and provide guidance for the first quarter of 2015. 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 a 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. Our fourth quarter performance was strong with earnings per share of $2 as reported. Excluding unusual charges, our adjusted fourth quarter EPS was $2.27, an increase of 27%, including a $0.09 per share negative impact from foreign exchange. This was the highest fourth quarter adjusted EPS in the company's history. During the period, we significantly increased our adjusted operating income by 18% compared to the prior year, as a result of productivity initiatives, aggressive cost containment and benefits from our acquisitions. Fourth quarter sales increased about 1.4% over 2013 as reported and 5% at a constant exchange rate. In our U.S. business, our commercial new home and rental channels were stronger than the retail remodeling sales. On a local basis, our European operations improved across all product categories in a challenging market. Across the enterprise, we reduced SG&A as a percentage of sales and held total dollars flat, while still investing in growth areas of the business. For the full year 2014, our sales rose 7% on a constant exchange rate or 2.5% excluding acquisitions. For the year, without unusual charges, our EPS increased 24% to $8.15 and our operating margins improved 130 basis points to 10.7%, as we leverage our acquisitions. During 2014, we invested $560 million in capital expenditures to drive sales with innovative new product collections, increased our margins and improved our operational efficiencies. Across the business, process improvements enhanced yields, reduced waste, lowered conversion cost, improved product management and increased quality. Last year, in our Carpet segment, we expanded our polyester footprint and differentiated our offering with proprietary Continuum process that yields superior performance and value. We expanded our leadership in the super soft product category and grew our luxury Karastan brand. We enhanced our commercial margins in both broadloom and carpet tile,…

Thank you, Jeff. Net sales for the quarter were $1.951 billion, up 1% over last year or 5% using a constant exchange rate. FX impacted sales $73 million compared to last year. All segments grew in local currency with stronger performance in the U.S. businesses. If we look at our gross margin, it was 27.8% as reported or excluding restructuring 28.3%, which is up 80 basis points over the comparable amount last year. Higher productivity, volume and mix, drove this improvement. SG&A dollars came in as $335 million or 17.2% of sales. Excluding restructuring, SG&A was 17% of sales, which is 80 basis points better than last year. Our SG&A dollars excluding both restructuring and also at a constant exchange rate basis were flat compared to last year. Cost cutting continue to improve results, even as we reinvest to support growth. Restructuring charges were $15 million. This includes $12 million in cost of good sold and another $3 million in SG&A, primarily related to the Marazzi and the Spano integrations. We estimate another $35 million to $40 million of restructuring cost in 2015, as we complete the integration of our acquisitions. Our operating income margin, excluding charges, was 11.3%. That compares to 9.7% last year, which is up by 160 basis points. Operating income would have been $8 million higher, if we had a constant exchange rate. Foreign currency impacts our results in three different ways. First, translation differences from converting foreign denominated income statements into U.S. dollars compared to FX rates one year earlier. To put this in perspective, if we use more current rates, with a euro of 1.14, which is down 15% from last year and a ruble of 61, which is down about 60% from last year; to translate our 2014 annual results, operating income would…

Thank you, Frank. In the U.S., rising consumer confidence supported by lower gasoline prices, low interest rates, increased home values and an improving job market, should drive higher growth in the flooring market. The National Association of Builders is projecting robust growth in single-family construction in 2015, with Harvard's LIRA index predicting greater residential remodeling investments. The consensus among commercial construction forecast is for mid-single digit growth during 2015. In Europe, changing challenging economic conditions remain. We expect our sales in local currency to be slightly up with product innovations and manufacturing upgrades improving our mix and operating margins. Our market share in Russia is expected to grow, as we leverage our brand and leading market position. With the Russian recession, we anticipate lower product mix and higher costs, partially offset by higher selling prices. The U.S. dollar has recently strengthened considerably relative to the euro, ruble and other currencies. Our U.S. translated 2014 sales would have been lower by approximately 5% and operating income lower by about $55 million, if the current exchange rates had been in effect for the entire year. While we cannot affect the translational impact to our earnings, we are aggressively implementing productivity initiatives, SG&A reductions and other cost containment projects to minimize the impact. We continue to invest in product innovation and operational improvements to drive our topline growth and margins. For the total business, we anticipate stronger organic growth on a local basis and continued margin expansion in 2015. The first period has four additional days, increasing sales 6%, and the fourth quarter will have four fewer days. Taking all of these factors into account, our guidance for the first quarter earnings is $1.54 to $1.63 per share, excluding any restructuring charges and new acquisitions. In January we announced the continuation of our…

[Operator Instructions] Your first question comes from the line of Bob Wetenhall with RBC Markets.

I wanted to ask you in terms of your expectations about U.S. consumer demand. You highlighted lower input costs on the energy side and some optimistic demand side picture in terms of home building activity and commercial construction. If you could take a minute and just delve deeper in terms of what you're seeing in the verticals, both on the commercial and residential side, and how you think that plays out for the year that would be great.

In the U.S., I think, we estimate that the flooring industry grew about 3% to 4% this year, and we're anticipating with the additional improvements in the labor markets and economy that it should grow even faster than that. If you look at our business, our sales grew about 2.5% organically in 2014 over the whole business. At the same time in the year, we improved our overall margins by 130 basis points. We are anticipating the U.S. to be stronger. We are anticipating a slight improvement in the European business and headwinds in the Russian market place. With that, we're expecting improved sales growth of our own business on a local basis with continued margin expansion. Although, we'll have to still overcome the FX headwinds, Frank, went through.

And just as a follow-up question. There is a lot of M&A activity, two years ago, you just got the IVC acquisition going into 2015. Do you view this as a year where you're going to focus on integration or are you actively looking for new M&A opportunities? And how would you rank that? Would you rather buy stuff or continue to invest in the business like the ceramic plant?

We are focused on integrating the two acquisitions we have. We also have several startup of plants going on this year, so that's the primary focus. We'll use capital to support the present businesses and pay down debt, but we always are looking at significant time to put acquisition together usually, so we're always continually looking.

Your next question comes from Dennis McGill with Zelman & Associates.

First question, Frank, could you maybe with the deals coming, and it looks like there was some movement in the debt in the fourth quarter; just maybe walk through the moving pieces of how you're thinking about the cash flow and the capital structure for the year?

Well, I would say in terms of financing the acquisitions, we're looking at raising capital in the Eurobond market and then also looking at utilizing some short-term debt as well. So we've got access to the commercial paper market, which rates at about 80 basis points right now and Euro market now is running around 200 basis points.

What was the movement in the fourth quarter? Was that the long-term into commercial paper?

The cash flow in the fourth quarter, is that your question?

No, the debt movement -- the debt retirement.

Yes, it was about a $120 million, I think. Hold on Dennis, I'll get it for you.

But was there a shift on long-term into the commercial paper?

So about $130 million is what we pay down in the fourth quarter.

I'll follow-up with you. And then separately, the comments, I think you had said something about retail being weak here in the US. Can you maybe just elaborate there? And then if that's product-specific or if you're seeing that across the portfolio?

I am not sure we said retail was weak, but I think what we said is that the residential replacement business has not shown the same improvement as the other parts of the business that we have, and that it's been that way for a period of time and we're hoping this year that with the improvement in the economy, lower cost of energy, a higher job market that will see a improvement in the residential placement, which will help our business, since it's a very large part of our business.

And that relative weakness right now you're seeing it across product categories?

Dennis, if I can maybe, I think I understand your earlier question in terms of the movement between long-term and current debt. I will just try to answer that if that was the question. We did have an increase in the current portion of our long-term debt, because we have got the 2016 bonds, about $650 million that will be due in January of '16, so that would have moved into long-term debt, I think from there.

Your next question comes from Mike Wood with Macquarie.

I would just appreciate your take in terms of your decision to not provide guidance, what the main uncertainty was that you still believe is out there that you need to get more confirmation before you give an update on the year?

I mean, historically, we have only given one year of guidance and we decided to return, but we did that one-time. We decided to return to the quarterly guidance, given all the variables that are in the marketplace that are just going to be guesses at this point from us.

Can you provide some clarity in terms of the SG&A directionality on an absolute dollar basis over 2015?

As a percentage of the sales, it will continue to go down, but the dollars will probably be slightly higher.

Your next question comes from line of Stephen East with Evercore ISI.

Jeff, if you could just talk a little bit more on the Carpet segment. You highlighted the drivers of the business, commercial, hard surface, rugs. Can you just elaborate a little bit more what -- I assume that was the rank order of it too, but you mentioned hospitality. Is there anything else going on? And then also in the carpet business, it sounds like you are not seeing any raw material relief yet, what you all expected, at least what you think you are going to see coming through and any timing around that?

The segment has commercial carpet, hard surface and rugs in it. And have grown faster than the residential carpet. The residential carpet has a large part going back to the remodeling business and we haven't seen the uptick that we had hoped we'd have. And the other pieces therefore have grown faster than the average with the residential carpet business growing slower than the average at this point. And we are hoping to see that remodeling piece pick up more so than it has up to now.

You mentioned hospitality, is it broad-based or is that really the driver of what's been --

It's broad-based across, it's just that that was the faster growing of all of them. All the commercial pieces are doing better.

And then, on the raw material side of the world, are you seeing [multiple speakers] yet?

Let's see how to give you some view of it. The oil is a component for both our chemicals and resins along with other things that we have such as natural gas, corn, we use a lot of soda bottles and other materials that all make up the components. So there is a broad-based piece of components, not all oil-based. The components are based on worldwide demand. And with those we have some that are even constrained today that are higher than they have been in the last quarter. The combination of all those things, we have a very long supply chain for the components before it flows through our suppliers cost as well as flowing through our own inventory when we see an impact. At the moment our costs in the first quarter are actually higher than the prior year that we have. Under right circumstances we could have some tailwinds later in the year, but there are so many variables, it's difficult to predict where they're all going to end up.

And then just quickly on Europe, you gave some good color. Let's put Russia aside for a second. Do think that the European market for your categories has finally turned or maybe much ado about nothing, what came through the quarter? And then on Russia, just how big was the sell-in impact?

Well, let's see. The European economy could be at a bottom, I am not sure. We have the increase in the cash that the banks are shoving through the marketplace, but low interest rate should have a positive effect on it. We're hoping that next year will be slightly better as we go through, but it's a little early to know for sure. And then the other part of the question was in Russia. Russia, we had a significant upturn, it could be in the mid-to-high teens for a temporarily thing, we believe that we are taking business from the future and what happens is, it's happened in Russia before, that as they see huge inflation people start buying ahead of the inflation, which is what's going on now. Now, another positive to our business is that as the economy slows down in our ceramic and laminate businesses, there is a significant portion of the European sales that have been imported. And those sales are dropping dramatically and we think those sales are going to offset a large chunk, but not all of the decrease. And we are trying to take market share of what is left.

Your next question comes from Steven Kim with Barclays.

My first question, I wanted to come at the carpet raw material exposure slightly differently. One of the things that we have in our minds is that you in your carpet business have a majority of products I believe that don't really have direct competition in the sense of that you've got Continuum and SmartStrand. And both of these have really boosted performance in your segment, we've seen that in the margins. But I guess my question is sort of a multiple one, but it's, first of all, are we right that in that segment that these differentiated products are about a majority of the sales in the segment? And then do these inputs for those like Continuum and SmartStrand, the bottles and the similar fiber, do they move kind of similarly with the virgin materials? And then lastly, do you think that your differentiation will allow you to keep whatever raw material benefit you get because of your differentiation?

Well, you asked a lot of questions. In SmartStrand we have a unique product that is different than everything else. We believe it's the premium product in the marketplace, but there are other alternatives for buying premium product such as nylon at the high-end. We have a large nylon business that we offer as an alternative to that, so we participate in both pieces. So we do have a position, but the customer always has alternatives to move between different pieces. The same answer applies to our Continuum with polyester that there are other alternatives in virgin polyester that people are selling that have similar looks. So we believe that we get some advantage out of our environmental story and out of our ways of making it. But the customer always has alternatives to move between, so they have to be priced relative to each other or they gain and lose market share in that one. I forgot the next piece of where you wanted to go.

Well, I wondered whether the inputs move kind of similarly with the virgin materials, for example.

Yes and no. In our polyester we are primarily making it from recycled bottles. And the recycle bottles will move a little bit, but the cost of the collecting and moving and transportation don't change as the oil prices move up or down. So those will have limited movement relative to the virgin ones. The same thing with the SmartStrand, it tends to move, but not 100% with it as you go through, as you go with each one. Presently polypropylene there is some limitations in the supply around the world. And polypropylene is a little tight at the moment. So they're all moving around.

And so, I'll just make this my last question is to repeat this question of -- do you think this differentiation you have will allow you to retain whatever raw material benefit you get, because that's a big question mark and I think you have addressed that in the past, that you might get the raw material benefit, but then the industry has a habit of sort of giving it back on the other hand. And I am wondering whether you think your differentiation will help you as a company, sort of retain that maybe better than you have in the past?

Differentiation always helps you improve margins because you're selling things that have something different about them. Presently the market prices in carpet have been relatively stable and given that our costs haven't changed our goal is to maintain our prices. And on the other hand we have to be competitive in the marketplace and we'll continue to be.

Your next question comes from Michael Dahl with Credit Suisse.

My first question, I wanted to ask if you could provide a little more detail around the Eastern European ceramic acquisition. I think you mentioned it was €195 million purchase price, $0.10 to $0.15 accretive. But could you give us any color on what the sales and margin profile looks like in that business?

It's really relatively small to our total business. For competitive reasons we are really not planning to give out details of it, because we think it will be detrimental to our competitive position in the marketplace.

I think secondly, I just wanted to make sure we understand some of the comments around FX. It sounds like, you said 5% on sales and $55 million to operating income, all things equal to 2014. If you look at the guide for 2015, or for the first quarter, at least, it still seems like even if you back out the extra selling days you're seeing earnings increase year-over-year. So is it fair to say that you are going to see reported sales x-acquisitions fairly flat, but you can still improve profitability? And then we are obviously layering on these couple of acquisitions, so you're still going to see healthy earnings growth?

Well, first thing I would say, in Q1 there will be no impact of any of the two acquisitions that we just announced. Neither of them will close until the second quarter. What we have tried to address is earnings and then how we grew cost savings, productivity initiatives, et cetera, plan to continue to grow the earnings even with the FX headwinds that we have, that we are expecting in the quarter and throughout the year. So we have got all that built into the estimate that we gave you for the quarter.

Your next question comes from Kathryn Thompson with Thompson Research.

Going back to Russia, what was the Russian revenue and earnings contribution in fiscal 2014?

We don't break out the earnings on a local basis by piece within each segment. We have a lot of regions and pieces.

And I think as I was trying to help you guys with the FX impact, I think we said for the ceramic business from a top-line standpoint Russia is about, the ruble is about 10% of the total ceramic business there.

Just maybe helping us relatively to understand directionally at least how were earnings in 2014 in Russia relative to the prior year?

The earnings in total were up on a ruble basis, but as a percentage they were slightly lower.

And then on your Uniclic patented product, what was the contribution to 2014 for this particular product or that patent?

For all the patents, it was over a €100 million.

Your next question comes from James Armstrong with Vertical Research Partners.

The first is could you talk a little more about your small ceramic acquisition? Who are they and what do they bring to the table?

The company is called KAI, it's in Bulgaria. They have a leading position in the marketplace. They have the low cost position in the marketplace. We believe that it gives us a foothold into Eastern Europe to start building more businesses in flooring into Eastern Europe. We believe that they have the capability of expanding into more geography. The majority of theirs is in Romania and Bulgaria at the moment. We believe that we can use it as a foothold to expand more. They focus on mostly the mid-to-lower end of the business. We believe with our product knowledge and development that we can expand their business into higher-end business and improve their mix of the business. As a low-cost producer they are also located near the water, and we believe there is opportunities to ship product further than they are shipping it into Europe and use it as another production base for our European business. We think it's a good opportunity and a strong business.

And then switching gears. In any of your businesses, are you seeing any capacity constraints in that you will need to build further capacity in any of your businesses?

We have announced expansion in our ceramic business. A new plant is going to be up, it will be running the first of next year with enough expansion of our raw material base in our carpet business to support more business in my carpet business. We're placing assets in Europe. We have a new LVT plant that's coming up in Europe as we speak. The acquisition we did with IVC has a brand-new plant making LVT coming up in the United States. And then across the businesses there is incremental pieces in a lot of places.

Your next question comes from Michael Rehaut with JPMorgan.

First question I had was just circling back to the carpet margins, obviously a lot of impressive improvement there, on a year-over-year basis actually expanding the back half versus the first half. How should we think about that in 2015? You've certainly kind of hit a new level at roughly 11% mark in the back half of '14. Certainly there is a little bit of seasonality as first quarter is usually a low mark. But is this a rate that you can continue to build upon as you continue to benefit from incremental productivity and other efficiency initiatives?

First of all, you have to look at the margins change significantly from quarter to quarter as volume and throughputs are there. So you can't look at the single quarter. The total year was about 8.9% and it was up about 1.5%. Don't hold me to that one. Have you got the number, Frank?

Yes, it was up from 7.5% to 8.9%.

For the year. So we believe that it is going to continue going up from where it is. What's going to drive it up is the innovation that we are putting in, in our products, the reengineering we have done of our fiber systems, new technologies and better sales execution that we've been all working on. And over the past two years we have done a lot of things and each one is building upon each other. We've closed facilities. We have simplified the processes. We have replaced high cost assets in the business. We continue to reduce the administrative cost within the business. So with all those we are expecting next year's margins to improve from where they are today.

And I know you mentioned about input cost for carpet, that it could be a tailwind, but there are a lot of moving parts. Just to sort of get a sense, number one, in the first quarter guidance are you seeing or does that guidance for carpet include any early improvement in input cost for the Carpet segment? Or are you seeing anything down the supply chain that might point to some benefits as we progress through the year?

Our costs in the first quarter are going to be higher than they were last year. So we talked about the long supply chain of things within it. So we are not going to get any benefit at all in the first quarter and we will have to see what happens as we go through the year. I mean, there's too many variables of that. I mean, I don't know what the price of oil is going to be next month, yet alone, by the end of this year.

And so your comment there, Jeff, is that, you're talking specifically regarding carpet that costs are up for carpet in the first quarter?

Correct. So remember, Mike, we have over one quarter's worth of inventory on hand at any point in time. So also whatever we are buying today has got to work its way through inventory over four months or so.

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

The question is in the revenue on the Carpet segment. You had mentioned the hard surfaces as reporting there, the Mohawk hard surfaces had done well. Can you give us any sort of feel of how much that pulled up the number in the report?

No, we don't break out product information by segment for you, but it was above the average.

And I assume commercial was above the average as well?

I don't have the specifics in front of me. It was either equal of slightly above.

Looking at the margins within Unilin and Ceramic, plants were launching or ramping up production being built in both of those. Was that a substantial hit on the margins? And I guess my question really here is more to laminate than it is ceramic.

He's asking about the impact on the startup of the plants. Do you have an estimate?

About $5 million.

Do you have an estimate for this year?

No. For the --

When it's going to hit? Do we have an estimate?

So for this year in terms of startup cost, Keith, we're estimating somewhere between $10 million to $15 million. But that's everything.

That's across all through --

That's the ceramic plant, the European LVT plant, what they're doing over in Europe now in their ceramic plants as well. So that's everything.

That would be the Tennessee plant in ceramic as well as the changes in Marazzi you're making, correct?

Yes, exactly. And that's for 2015. That's not for '14.

Now, it wouldn't include anything. All our comments don't include anything for acquisitions. We're assuming the acquisitions, they'll come in somewhere in the second quarter, but none of the comments on this call have assumed that they're in them.

Your next question come David MacGregor with Longbow Research.

I guess first question is just on the Laminate and Wood segment, you talked about plus 4% constant exchange rate. Can you break out just wood and talk a little bit about what you're seeing in the wood space? And what kind of growth are you assuming for the U.S. wood flooring market in 2015?

The U.S. wood sales are getting stronger for us, primarily in the engineered category, which is gaining share. The raw materials that we're using remain high. They look like they have possibly peaked, but the margins have been under pressure, as the costs have gone up. So we could use some relief in the margins, if the wood prices come down some more, which we hope they do during the year. What else do you want to know?

Well, I was just trying to get a sense of what you're assuming in terms of overall category growth for '15?

Just in the wood business or in the laminate business?

The wood business.

Now, we're assuming the wood business is going to grow faster than the industry average. So we'd say the industry average is about 3% to 4% this year. We're assuming industry is a little higher than that, so that would be in 6%, 7% range maybe for the industry.

Second question is just on organic growth, and you've got so much going on here. You're just firing on so many different cylinders. But can you offer some perspective, on which two or three areas of your business you expect to see the greatest organic growth in 2015?

If you look across the businesses in the U.S., the ceramic business is the faster growing of the product categories. So we would anticipate the most growth to be in U.S. ceramic business over here. In Europe, our ceramic business we're really focused on. We bought the business, it was making no money. So we were focused on driving the margins up rather than sales. We were more focused on creating better products, lowering the cost structure and improving the mix with it. Russia, we're doing everything we can to take share from the imports and to grow our market share in that business. The fastest growing piece though will be the LVT business, because it's starting from a very low business. We have the European plant coming up, as we speak. The new business we're acquiring has a brand new LVT business. So as a category, it provide the most opportunity, but it will have cost in the startup of both the U.S. and the European plant. Everything we've said today doesn't include anything for the U.S. startup or the business, because that's in the new acquisition, which we don't own at this point.

Last question, just can you comment on January, February business conditions in Russia?

They are surprisingly good, but we're waiting for them to fall off a cliff.

Your next question comes from David Goldberg with UBS.

I was wondering, Jeff, if you could give maybe some of your thoughts on why the new construction business in the U.S. is improving maybe as faster clip than the R&R part of the business? Is it something you guys are doing or is it maybe a little more aggressive on your side, is it a borrowing issue? Why do you think there is that discrepancy considering, if the consumer is getting healthier, you would expect to see more broad-based recovery from that perspective?

I'm going to give you my guesses, but I don't have anything to back it up. I think we start with that prior to now, the consumer had limited discretionary pieces and they were choosing how they'd put it. So that was farming it up to this point. It is growing. So then you get back to what we think is, up to this point, is that many people bought their houses at a given moment in time, and they thought the house value went up significantly to where it peaked. So even the ones, where the houses have recovered and many of them are still below significantly with their perceived peak value. So there is some question I believe into, when they should put more money in the improvement of the house relative to what they perceive they can sell it for. And my belief is, in many cases, they are not comparing what they bought it to, but they are comparing it to what the peak prices are and it's inhibited some of the investments.

My follow-up question, I wanted to talk a little bit about innovation and a product like the SmartStrand Forever Clean. And what I wanted to get an idea of is, do you think that when you have innovative product like this that really is very differentiated, do you think buyers trade up to that product? In other words, they were going to buy something that maybe was a less expensive product. That was a lower margin product maybe. But then they see the innovation, and it caused them to trade up or is it more of a shift between similar price points on product? So I'm trying to understand kind of if innovation drives a higher sales ticket in the end.

When a consumer goes in a retail store they are assisted by a salesperson, who walks them through the different options. So when you give the salesperson something different to talk about, it allows them to give the features and benefits, and try to convey to the customer a higher value and why they should buy something and tell the story. We believe when they do that, it changes the way that the salespeople present it and it does change the mix of the products within what they're selling, as they upgrade them.

Your next question comes from Eric Bosshard with Cleveland Research.

This is Tom Mahoney on for Eric today. I wanted to ask about the drivers of the improvement in growth in the Carpet segment in the fourth quarter from volume and/or a price mix perspective? And then any color on how that might have trended through the quarter?

I think I just have to keep repeating what we've said is that the commercial business was better than the residential business. But in the category we have hard surface branded product under Mohawk, those did better than the average. And the combination of all those things, the business grew more than it has been growing. We believe that we'll be able to improve the growth from where it has been in 2014 and 2015, because of the general conditions in the marketplace as well as the strength of our own business. We think that the rate of growth should go up.

Also a little difficult in the fourth quarter to look at trends and try to come to any kind of collusion, because you've got the holiday period at the end. And it's very difficult to understand what that means, when you look at trends.

And then, last year at this time, you talked about first quarter EPS being roughly one-seventh of the full year. Is that something that's appropriate to assume again in 2015? Are there moving pieces that influence that?

Well, I would say that we are expecting our first quarter '15 to be a larger part of the total year's results than it was in '14. And these comments are all excluding acquisitions. This year we're impacted by number of days, acquisitions, compared to last year weather, FX translation as we've talked about already, and then quarterly tax rates.

Your next question comes from John Baugh with Stifel.

I wanted to just delve into carpet tile a little bit. You took a misstep there a few years ago and seemingly have recovered nicely. I know you won't give me specific numbers, Jeff, but is there any way we can get a feel for the trajectory of that business couched in growth rates or market shares and what your outlook for that business in '15?

Our carpet tile business is on a strong footing. The products are being well accepted in the marketplace. We are increasing our distribution in the marketplace. The product design is improved. The service levels are much higher than they've been. I would put them at the top of the industry to go along with it. So I think we're in good condition to grow, better than the marketplace this year in our carpet tile business.

Did your growth rate accelerate this past year? Is it consistent off the bottom?

The growth has been increasing, as we went through the year.

Your final question comes from Jim Krapfel with Morningstar.

So you have the Uniclic patents expiring now just in two years. And it looks like you've got pretty good growth, at least 15% growth in patent revenue in 2014. So just curious, what percent of the licensing revenue was attributed to Uniclic? And then what's your outlook I guess for replacing the lost sales once that patent expires?

The patent makes up a significant. The one that's expired, we have multiple things that we do. It's making up a significant share of the total. When we look at over the next few years with it, we really look at it as a total of our total business, and how we're going to grow our earnings. So we start out with that we believe that we're going to see continued improvement in the U.S., European and Russian economies over the next year. As we've shown this year and we have talked about next year, we expect the margins in all the segments continue to expand. Between '14 and '15 we're going to invest about $1 billion in capital businesses to expand into new plants and new products to grow our existing business. In 2016 our higher cost debt is going to be paid off and we'll be able to refinance it with much lower cost of debt. We have entered the LVT category, which is a high-growth business, which will give us a new opportunity to grow another leg of our business. And we have acquired with the Pergo business a fold-down technology that we're also trying to expand our licensing with that. For the combination of all things, we think we are well-positioned for the future, but there will be a decrease of the income from that piece of it.

And then looking back at your margins since 2000, you're within 100 basis points of your peak. So just curious to hear your thoughts on breaking through that margin level? And is there anything structural in nature about your business today that you think is different than it was, say, a decade ago?

I mean our business is dramatically different than it was a decade ago. A decade ago we were primarily a carpet company. Today we are an international flooring business. We participate in all the categories of the business. We have a very strong management group across all the categories in the U.S. as well as across the world. We have capabilities of acquiring businesses and adding value to them that we didn't have then. And we have the ability to leverage the knowledge as well as the customer base across all the various categories. So I think we have a lot of opportunity to continue growing our business and keep strengthening it going forward and the margins I think we can keep improving.

There are no further questions at this time. I will turn the call back over to Mr. Lorberbaum for closing comments. End of Q&A

Thank you for joining our fourth quarter call. We are well-positioned in the marketplace, and we think the U.S. business and economy and category has large opportunities to improve significantly this year. Thank you very much.

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