Mohawk 2Q Earnings Up 22%
Calhoun, GA, July 27, 2006--Mohawk Industries in the second quarter reported earnings that rose 22%, boosted by an acquisition and higher sales of hard surface products.
Earnings for the quarter were $119.5 million, or $1.76 per share, from $98.1 million, or $1.45 per share, in the year-ago period.
Analysts had forecast earnings of $1.55 per share, according to Thomson Financial.
Sales rose 27% to $2.06 billion from $1.62 billion last year, beating the Street's estimate of $2.05 billion.
The growth resulted from the Unilin acquisition, total hard surface sales growth, internal growth, price increases and new patent licenses. Mohawk changed its method of accounting for soft surface inventories from LIFO to FIFO during the second quarter of 2006. If Mohawk had continued on LIFO, then net earnings for the second quarter would have been slightly higher. All prior period amounts have been revised to reflect this change.
For the first half net earnings were up 16% to $198.6 million. Earnings per share rose 15% to $2.92.
In commenting on the quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "I am pleased with our second quarter performance, especially in light of the economic and industry factors we are facing. Hard surface growth and higher selling prices positively affected our sales while replacement demand for carpet remains slow. The change from LIFO to FIFO inventory accounting removes some uncertainty in predicting future results. Our Unilin integration is progressing as planned. We expect to benefit from the many capital projects recently completed and the introduction of Mohawk-branded laminate in the future.
The Mohawk segment grew sales by 5% with margins improving from the first quarter. In the second quarter, carpet raw material costs remained relatively flat, and our suppliers announced increases in July. In August, Mohawk is implementing selling price increases to recover these cost changes. Industry sales improved from the first quarter but were still behind last year in units. Sales trends continued with the commercial channel and residential construction channel performing better than the residential replacement channel. While the economy continues to grow with employment at relatively high levels, the higher gasoline and energy costs appear to be impacting consumer behavior. We incurred greater marketing expenses as a result of a higher level of product introductions due to carpet raw material changes and the new laminate introductions. Our expansion of the South Carolina fiber and yarn manufacturing is complete and running as planned. Overall, quality has improved in carpet manufacturing and our Six Sigma program continues to expand with many cost reduction projects across our business.
Our Dal-Tile segment second quarter sales were strong as revenues grew 15% over 2005 from both volume and price increases. We had higher than normal product introductions, absorbed start-up costs in the Oklahoma ceramic facility, and had higher energy and transportation costs. The Mexican ceramic expansion was completed in the first quarter of the year and is running as planned. The Oklahoma expansion started production at the end of the second quarter. These capacity expansions will support our expected future growth and allow us to produce a greater portion of our sales requirements.
-- Continued
Related Topics:Mohawk Industries, Daltile
