Mohawk’s 4Q Earnings Inch Up

Calhoun, GA, February 15--Mohawk Industries, announced net earnings in the fourth quarter of 2004 of $102.5 million and diluted earnings per share (EPS) of $1.52 for the fourth quarter of 2004. This compares to $102.1 million and $1.51 in EPS for the fourth quarter of 2003. Analysts were expecting 1.53 per share in the quarter. Net sales for the quarter increased 8% to $1.47 billion from $1.37 billion in 2003. This increase was primarily the result of strong internal growth of both Mohawk and Dal-Tile products and the Lees Carpet acquisition. The fourth quarter of 2004 had four less days when compared to the fourth quarter of 2003. This reduced comparable sales by approximately 7% with a larger impact on earnings. The Mohawk segment net sales of $1.1 billion in the fourth quarter of 2004 were up 7% from $1.03 billion due to internal sales growth as well as the Lees acquisition, which positively impacted segment sales by 3%. The Dal-Tile segment net sales of $371.6 million in the fourth quarter of 2004 grew 11% from $335.7 million primarily from internal growth. Net earnings for the year 2004 were $368.6 million (19% above last year), or $5.46 in EPS (18% above last year), compared to $310.1 million in net earnings, or $4.62 in EPS, for the year 2003. Analysts were expecting EPS for 2004 of $5.47. This increase in EPS and earnings is attributable to strong sales growth, better leverage of selling, general and administrative costs and the Lees acquisition, offset by higher raw material and energy costs. Net sales for the year 2004 increased 18% to $5.88 billion from $4.99 billion. This sales increase resulted primarily from internal growth in both the Mohawk and Dal-Tile segments and the acquisition of Lees. Prior period amounts have been reclassified to reflect certain distribution costs in selling, general and administrative expense (previously in cost of sales) and certain freight backhaul credits in cost of sales (previously in revenues) to conform to current classification. In commenting on the fourth quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "We are pleased with the positive fourth quarter results in this time of rising raw material costs. Our company continues to manage costs and pricing to offset raw material and energy costs increases during the quarter. "Although the timing of selling price and material cost increases continues to impact earnings, our gross margin as a percent of sales for the quarter was down only slightly from last year largely due to the fewer days in the quarter. This also impacted selling, general and administrative expense as a percent of net sales during the quarter. "The full year comparison showing improvement from 17.0% to 16.8% is more reflective of our business. Our overall results for the quarter would have been stronger when compared to 2003 if a comparable number of days were used. "The Mohawk segment continued its strong growth in all channels as consumers are more optimistic about their financial future. Our customers are embracing our regional market concept and are positive about the coming year. Additionally, new residential housing remains strong with the commercial business continuing to improve. "The Dal-Tile segment continued its strong growth driven by our investment in new products, inventory availability, additional sales personnel and updated sales service centers. All product categories are achieving positive growth led by floor tile and stone. The Muskogee plant is running at full capacity with an improving product mix. "Our suppliers for the Mohawk segment have continued to raise their prices since our October price increase. We have announced price increases in the first quarter to offset these changes but there will be a lag between the cost increases and the implementation of new selling prices. We believe these cost increases will moderate over the long-term but the short-term trend of these costs remains uncertain. "Our balance sheet is strong with 25% debt to capitalization providing much flexibility for future investments. We continue to invest in our business with major expansions planned in ceramic tile production, extrusion and yarn processing and warehousing. "During the fourth quarter, we introduced our latest Mohawk fiber brand, SmartStrand made with Dupont Sorona polymer. SmartStrand is a superior carpet fiber with the resilience of nylon, engineered-in stain resistance and an inherently soft touch. By offering the consumer a revolutionary product with the strength of two of the most recognized brands in flooring. Mohawk's SmartStrand is poised for success. "We recently completed the acquisition of Wayn-Tex Inc., a carpet-backing manufacturer. The purchase of these assets enhances our position in the marketplace. Mohawk requirements exceed the current production of the facilities and we are implementing changes to improve the efficiencies. "Finally, I am proud to report that Forbes Magazine has recognized Mohawk Industries as one of the 400 Best Companies in America. In addition, Sears and Home Expo named Karastan 'Vendor of the Year' as recognition for our outstanding service & superior product. Dal-Tile was voted 'Best Business Experience' by commercial designers. These are additional indications of the strength of our organization as we strive to continue providing superior value to our customers." The company believes the economy will continue to expand with the flooring industry expected to grow at historical rates. However, commodity prices remain uncertain and passing them through to our customers will affect the short-term future. After considering these factors, the first quarter of 2005 earnings forecast range is from $1.03 to $1.12 EPS.


Related Topics:Karastan, Mohawk Industries, Daltile