Mohawk’s Earnings Down
Calhoun, GA, Apr. 17--Mohawk Industries, Inc. had net earnings of $41.64 million and diluted earnings per share (EPS) of $0.62 per share for the first quarter. This compares to $43.21 million in net earnings and EPS of $0.77 for the same period a year ago. This reduction primarily was the result of lower sales, reduced production levels and higher raw material costs in the Mohawk segment. Additionally, the Mohawk segment had one less day and the Dal-Tile segment had two less days in the first quarter of 2003 compared to 2002. Net sales for the quarter increased 25% to $1.085 billion compared to $866.71 million for the first quarter of 2002. The net sales increase was attributable to the Dal- Tile acquisition. The first quarter of 2002 included Dal-Tile results for only the seven business days after the acquisition closed on March 20. The Mohawk segment net sales of $808.11 million decreased 4% and the Dal-Tile segment net sales of $276.60 million increased 5% during the quarter. On a proforma basis using the same number of days in first quarter of 2003 and 2002, the total company sales were flat, the Mohawk segment decreased 2% and the Dal-Tile segment increased 8%. The Dal-Tile net sales increase resulted primarily from growth in residential products.
In commenting on the first quarter financials, Jeffrey S. Lorberbaum, president and CEO, stated, "I believe we have delivered reasonable results in this difficult economic environment. In our press release issued on March 14, 2003, we indicated concern about weakening conditions in our markets as demand declined due to geo-political circumstances and harsh winter weather conditions in the northeast and central U.S. Subsequent to that release, the war in Iraq began and it appears the economy deteriorated even further. We are a leading indicator of the economy and many of our customers postpone purchases as consumer confidence falls. This impacted our first quarter net sales. The Mohawk segment operating income was negatively affected, when compared to last year, by the lower sales, unabsorbed overhead costs, more aggressive product promotions and raw material price increases.
"To offset higher costs, Mohawk implemented a price increase of 5% to 8% in carpet. We are continuing to reduce direct labor costs, selling, general and administrative expenses, and capital expenditures. The increase in our inventory balance from the first quarter of 2002 results from higher inventory levels required to meet the growing sales in our hard surface products and purchases of raw material for our Mohawk segment in advance of vendors' price increases. The receivables decreased from the first quarter of 2002 primarily from collection of an income tax refund ($45 million) during the second quarter of 2002 that arose in connection with the Dal-Tile acquisition. Our balance sheet remains strong with a debt to capitalization ratio of approximately 29% and availability in excess of $700 million under our existing credit facilities. We also purchased 492,700 shares of common stock, and we have purchased approximately 10.9 million shares of common stock since the inception of the program in September 1999.
"We are anticipating that carpet price increases, normal seasonal sales improvements and cost containment will improve the second quarter. Based on these factors, our 2003 second quarter earnings forecast range is from $1.05 to $1.15 EPS.
"We believe the present business conditions will improve in the fall of this year. Economists expect the overall economy to improve after the war ends. We expect a rebound in demand such as we experienced following the terrorist attack on September 11. In addition, we anticipate improvements in sales and margins in the second half of 2003 based on higher selling prices and lower oil prices.”
Related Topics:Mohawk Industries, Daltile
