Mohawk Trims 1Q Earnings Guidance

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Mohawk Trims 1Q Earnings Guidance
Calhoun, GA, March 31, 2006--Mohawk Industries, Inc., announced a revision of its guidance for earnings per diluted share to an estimate of $1.03 to $1.05 for the first quarter of 2006. On February 23, 2006 the company issued first quarter guidance of from $1.17 to $1.26. Analysts on average currently expect $1.22 per share. This revision was attributed to the Mohawk segment which had higher than expected LIFO accounting charges and lower than anticipated growth in sales and margins for the period. The LIFO accounting charge for the segment is estimated to be $13 to $15 million this quarter, compared with $6 million for the prior year. Currently, raw material and energy costs have moderated while the non-cash LIFO charges were the second highest in company history. In a stable cost environment, LIFO charges should diminish. The company said it anticipated greater improvement in sales and margins as the quarter progressed in the Mohawk segment with sales growth of approximately 5% in the period. The lower growth was primarily related to soft retail replacement business, the largest channel in the carpet category. With slower industry sales, the firm saw more pricing pressure on some opening price point products and a higher level of promotion activity. The Dal-Tile segment continues with strong growth in sales and operating profits. The ceramic plant expansion in Mexico is complete and operating. The Oklahoma plant expansion is progressing as planned and investments in the startup will begin in the second quarter. The company adds: The Unilin laminate business is growing in both the U.S. and Europe. The U.S. laminate facility is providing product and improving service levels. Our distributors are reducing their inventories due to the shorter delivery times from this facility. U.S. laminate strategy is proceeding with a new U.S. management structure, the introduction of new products under the Mohawk brand and the training of the Mohawk sales force on the attributes of our new products. The startup for two new distribution sites, a yarn and fiber manufacturing plant, a Mexican ceramic production line, a U.S. laminate flooring plant and a carpet padding plant is substantially complete. In the quarter the startup costs were approximately $10 to $11 million. In the second quarter, Mohawk expects to begin the startup of theMuskogee ceramic plant expansion and complete a third distribution site for the Mohawk segment. Total startup costs for the second quarter should decrease to a range of $3 to $4 million. We believe the economy will continue to grow. Our raw material and energy costs have moderated and presently we have no indications of any significant changes in the coming quarter. We believe flooring sales demand in the replacement channel will improve as employment and consumer confidence gain strength. The commercial channel should continue its positive trends while residential flooring sales for new construction should slow later this year.


Related Topics:Daltile, Mohawk Industries