Mohawk 1Q Earnings Up Slightly

Calhoun, GA, April 27, 2006--Mohawk Industries announced first quarter net sales of $1.93 billion compared to $1.49 billion in first quarter 2005, an increase of 29%. The net sales growth was primarily attributable to the Unilin acquisition, internal growth and price increases. Adjusted net earnings for the first quarter of 2006 were $72.9 million (4% above last year) or $1.07 diluted earnings per share (EPS), representing a 3% improvement above last year's earnings. The Mohawk segment net sales of $1.15 billion in the first quarter of 2006 were up 5%. This was primarily attributable to increases in prices in all product lines as well as growth in hard surface sales. The Dal-Tile segment net sales of $473.9 million in the first quarter grew 18% from internal growth and improved product mix. The Unilin segment net sales were $302.6 million. In commenting on the first quarter results, Jeffrey S. Lorberbaum, chairman and CEO stated, "The results for the quarter were in line with our guidance that we revised earlier. The revision was attributable to our Mohawk segment which was negatively impacted by a $14 million non-cash LIFO charge as well as lower sales growth and margins in the residential replacement carpet category. The slower carpet industry sales also impacted pricing on some opening price point products more than we anticipated. Our material costs moderated slightly from the high levels after the hurricanes and remained relatively stable through the quarter. "During the quarter, we started up a new manufacturing facility to increase capacity of fiber extrusion and yarn manufacturing in South Carolina. A carpet padding plant in the Northwest was started up during the period. We completed the purchase of a carpet backing plant early in the second quarter of this year. We anticipate improving residential replacement carpet demand which is historically affected by gains in employment levels and consumer confidence. In addition, homeowners usually replace their flooring at a faster rate when interest rates rise and people move less frequently. "Our Dal-Tile segment results included strong sales and operating profit growth. All product categories performed well as this business continues to gain market share. The Oklahoma ceramic expansion is progressing as planned while the Mexican expansion was completed at the end of last year. The management has transitioned smoothly to Harold Turk from Chris Wellborn who was promoted to Mohawk COO. "Unilin results included growing sales in both the U.S. and Europe. Our U.S. laminate strategy is in the implementation stage and we expect a sales benefit in the second half of 2006. The Unilin operating margin is lower in the first quarter due to seasonally lower sales, distribution inventory adjustments, higher wood and energy costs, and slightly lower laminate prices. Our U.S. laminate plant expansion was completed during the quarter to support additional growth in the U.S. The first quarter sales results were negatively impacted by inventory reductions of our distributors' due to shorter delivery times from this facility. There will be additional adjustments in the second quarter. Board price increases are being implemented to reflect higher wood and chemical costs. New products are being introduced under the Mohawk brand to increase our laminate distribution. "The strong economy along with improving consumer confidence should positively affect our business in future periods. We continue to anticipate continued growth in commercial and an improvement in the replacement category, which is our largest channel, with some slowing of new residential construction business later this year. The recent change in oil prices has not presently impacted our raw materials. We cannot predict the affect on our costs or customer demand in the future. After considering these factors, we estimate the earnings forecast for the second quarter of 2006 to range from $1.51 to $1.60.

Related Topics:Mohawk Industries, Daltile

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