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Second quarter 2010 net sales were $1.4 billion, which was flat vs. 2009 net sales. The company’s operating margin has improved to 6.4% (6.8% adjusted) and is at its highest in two years. The company reports free cash flow of $111 million in the quarter, cash of $343 million and an improving net debt-to-EBITDA ratio of 2.1.
For the first half of 2010, net earnings were $89 million, or an EPS of $1.29. Excluding the unusual items noted above, net earnings would have been $77 million and EPS would have been $1.12. In the first six months of 2009, net loss was $60 million and loss per share was $0.87. Excluding the 2009 year-to-date unusual items, net earnings and EPS would have been $64 million and $0.93 per share. Net sales for the first six months of 2010 were $2.7 billion representing a 5% increase from 2009. On a local exchange rate, constant days and excluding 2009 sales adjustments net sales decreased 2.5% during this period.
The Dal-Tile segment net sales decreased 3% as a result of new residential and commercial construction still lagging the economy. The company reports that it is improving manufacturing output, increasing productivity and lowering SG&A costs to expand margins. Its Home Center share is growing and the company is strengthening its position in Mexico by broadening its product offering and customer base. In manufacturing, labor productivity and energy utilization have been increased through process innovations.
“Our earnings were better than anticipated due to higher sales in Unilin, improving product mix in Mohawk, price increases and cost reduction programs,” said Jeffrey S. Lorberbaum, chairman and CEO. “Our second quarter sales were flat compared to the prior year as the residential business improved. The European business grew in most geographic and product categories with volumes increasing. Commercial markets are declining at a slower rate with expectations of a bottom this year. Residential remodeling markets should expand in the second half of the year, driven by higher disposable income and low interest rates. New home construction remains low but above last year. The European economy is gaining momentum with positive industry reports, higher consumer confidence and an improved banking outlook. We have expanded our international presence with a minority interest in one of the top 10 Chinese ceramic tile manufacturers and purchased a building in Russia for laminate manufacturing."