Mohawk’s 3Q Earnings Off 4%
Calhoun, GA, October 19, 2005--Mohawk posted earnings for the third quarter that were off 4% to $108.7 million and diluted earnings per share for the period that were off 4% to $1.61. The company matched analysts’ estimates.
Net sales for the quarter increased 11% to $1.7 billion from $1.5 billion for the third quarter of 2004.
In the third quarter, the Mohawk segment posted net sales of $1.2 billion, an increased of 11%. Net sales in the Dal-Tile segment were up 11% to $449.4 million.
EPS for the first nine months of 2005 were $4.03, a 2% over last year. Net earnings for the period were $272.5 million, also a 2% increase over the prior year.
Net sales for the first nine months were $4.8 billion, a 9% increase over 2004 sales.
In commenting on the results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "The effect of both Hurricanes Katrina and Rita has reduced our results in the third quarter as we previously reported. As our raw material supply chain has begun to bring production capacity back on line, we are seeing cost increases and some supply disruptions. Additionally, natural gas, diesel fuel, and gasoline prices have substantially increased in the quarter. As disclosed earlier, Mohawk implemented carpet price increases of between 5% to 8% in early October and also increased hard surface prices. In addition, Mohawk announced another carpet price increase of similar size to be implemented in mid-November to offset the continuing cost increases.
"The petrochemical industry on the Gulf Coast continues to struggle with the aftermath of the storms. We expect to see continued high costs and some supply limitations until these issues are resolved. Given the present conditions, we believe we will be able to maintain reasonable service levels as we manage the business with lower inventory. Although it is difficult for both Mohawk and our customers to adapt to these rapidly increasing costs, I believe we both will be successful in passing these to the end consumer. The industry will benefit as the Gulf Coast is being rebuilt over the next few years.
"The Mohawk segment grew 11% in sales with new residential construction and commercial channels continuing to out pace the residential replacement business. During the latter part of the quarter, we saw carpet purchases and shipments increase ahead of our price increase. Price increases continue to lag the rapidly rising costs for energy and raw materials. Lower consumer confidence and the impact of the storms on gas and energy costs could influence spending in the future. The Dal-Tile segment continues to perform well with sales growing at 12% from the previous year. The segment was impacted by higher energy, transportation and product introductions in the third quarter. The expansion of our ceramic manufacturing operations in Mexico and Oklahoma is on track for completion.
"The acquisition of Unilin is scheduled to close in the fourth quarter of this year. As previously reported, we have determined to permanently finance the transaction with debt. We are currently evaluating the appropriate combination of prepayable and term debt. The acquisition is not expected to have a significant impact on the fourth quarter before any one-time non-cash purchase accounting charges. Our outside advisors are reviewing these charges and the intangible asset amortization amounts as required under the purchase accounting rules. The Unilin acquisition will be another transformational event for our company making Mohawk a leader in the fast growing U.S. laminate market.
"Our economy continues to show strength but the short term impact of the Gulf Coast storms on energy and the petrochemical industry has created uncertainty and higher costs. Additionally, consumer confidence and interest rates could impact the economy. Unforeseen changes in our supply chain may affect our results. Based on these factors, our fourth quarter earnings forecast is from $1.49 to $1.58."
Related Topics:Mohawk Industries, Daltile
