Mohawk’s 3Q Earnings Up 23%, Beat Estimates

Calhoun, GA October 20--Mohawk Industries announced diluted earnings per share and net earnings for the third quarter of 2004 of $1.67 (23% above last year) and $112,687,000 (23% above last year), respectively. This compares to EPS and net earnings of $1.36 and $91,382,000, respectively, for the third quarter of 2003. Wall Street analysts on average had expected the company to post earnings of $1.50 per share. Net sales for the quarter increased 17% to $1,531,151,000 compared to $1,303,166,000 for the third quarter of 2003. The Mohawk segment net sales of $1,130,922,000 in the third quarter of 2004 increased 17% from $967,405,000 due to growth in all products as a result of economic conditions and the Lees acquisition. The Dal-Tile segment net sales of $400,229,000 in the third quarter of 2004 grew 19% from $335,761,000 primarily from internal growth. EPS for the first nine months of 2004 was $3.94 (27% above last year) and net earnings were $266,152,000 (28% above last year) compared to $3.10 EPS and $208,007,000 in net earnings for the first nine months of 2003. Net sales for the first nine months of 2004 were $4,409,327,000 representing a 21% increase from 2003 sales of $3,635,062,000. In commenting on the third quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "We are pleased with our results in this uncertain economic environment. Our sales in both business segments reflected year over year gains. The Mohawk segment residential replacement business, residential new construction business, and hard surface product offerings all continued their improvement. Sales in the Mohawk commercial category reflected increases over last year. "The Dal-Tile segment sales momentum continues in all product categories with floor tile and stone products leading the others. We believe investments to update the service centers, add sales representatives and increase service levels are continuing to generate gains in market share. The new Muskogee, Oklahoma porcelain tile facility is running well at approximately 90% capacity and should be at capacity by year-end. "There continue to be raw material and energy cost pressures as natural gas and oil are both at or near historic highs. These cost increases have impacted our margins in the third quarter of 2004. To mitigate these, we implemented multiple price increases for carpet products during the first nine months of the year, with the latest increase in October. Although we have not received formal notice of further increases at this time, the continuing high level of commodity costs is troubling. We believe these costs will moderate over the long term but the short-term trend of these costs is uncertain. "In the third quarter, our working capital position remained strong with inventory turns at 4.4 times and our debt to capitalization ratio improving to 26%. Additionally, we repurchased 150,000 shares of stock at an average price of $74.88. "We initiated several major projects in the quarter to support our growth including expansion of the Mexican tile manufacturing operation, additional extrusion and yarn processing capacity and warehouse space to support our hard surface and home products. We expect these projects to be completed in the next 12 to 18 months with most of the capital spending occurring in 2005." The company anticipates the economy will expand moderately the rest of the year. Certain economic factors such as consumer confidence, job trends and oil and other energy costs, could impact our business. In Q4, we expect revenue growth to moderate as comparisons with the prior year become more difficult, also, we have four fewer days in the quarter, (a 7% sales impact), and Lees was acquired during the 2003 fourth quarter. Future raw material cost changes could impact our margins in the last quarter. Based on these factors, our fourth quarter forecast for EPS is from $1.46 to $1.55.

Related Topics:Daltile, Mohawk Industries

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