Mohawk Increases Earnings Estimates

Calhoun, GA, Sept. 26—Mohawk Industries is increasing its estimate of diluted earnings per share (EPS) for the third and fourth quarters of 2002. The new estimate is 12% to 15% above the third quarter of 2001 and 5% to 10% above last year’s fourth quarter. The previous estimate was 2% to 5% above the same two quarters. The company earned $1.05 EPS in the third quarter a year ago and $1.11 EPS in the fourth quarter of 2001. This anticipated improvement in EPS is the result of increased emphasis on controlling manufacturing and selling, general and administrative expenses; reduced debt resulting in lower interest costs; a lower effective income tax rate from additional tax credits that will be realized in the second half of 2002; and an average reduction of approximately 743,000 shares of stock for the third quarter of 2002. The company repurchased 1,128,300 shares during the third quarter under its stock repurchase program and has approximately 4,879,000 shares open to repurchase from its original authorization. Potential improvements in manufacturing and selling, general and administrative expenses are expected at both Mohawk and Dal-Tile. Some of the anticipated improvements are a result of synergies through joint efforts to reduce administrative and logistics costs. The reduced debt is expected to result from strong earnings and effective working capital management offset by stock repurchases made during the third quarter. The impact of the income tax credits is estimated to be $2.5 million a quarter in the third and fourth quarters. As anticipated, sales growth is expected to be slower than last quarter due to economic conditions but still above last year by approximately 3.5% on a proforma basis. There’s still a lot of uncertainty whether the economy will improve or deteriorate, which makes forecasting future periods very difficult. The revised estimate for the third quarter is based on limited data that the company has to date. Since the end of the third quarter has not been completed, many of the expenses included in this forecast are estimated at this time. The fourth quarter estimate is also based on the best information available at this time, but economic conditions could significantly change actual results.



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