Pergo Reports on First Nine Months

Trelleborg, Sweden, Oct. 27--In the first nine months of 2003, Pergo reported net sales of 2.07 billion Swedish Kronas (US $266.9 million), a decline of 4%, excluding currency effects, compared with the preceding year. The decline is primarily attributable to lower sales in Europe. Sales in the North American market were marginally lower than during last year. Sales to Lowe's, a new customer this year, virtually compensates for the lower sales mainly to The Home Depot. Excluding currency effects, third-quarter sales rose 10% compared with the corresponding quarter in the preceding year. The increase was attributable to favorable sales growth in the North American market. The gross margin for the first three quarters of 2003 amounted to 22.2%, which was 0.6% percentage points higher than the preceding year. The increase was primarily attributable to the action program, which includes cost reducing as well as margin improving measures. This was also the main reason for the increase of 1.5 percentage points in the gross margin in the third quarter, compared with the corresponding period last year. After a positive operating income in the third quarter amounting to 18 million Kronas (USD 2.5 million), the accumulated operating result for the year, excluding items affecting comparability amounting to an expense of 150 million Kronas (USD 19.4 million), was 9 million Kronas (USD 1.1 million). The result was affected negatively, amongst others, by currency movements, a customer loss incurred in North America during the second quarter of 17 million Kronas (USD 2.2 million) and Pergo’s participation in Witex earnings for the first six months, which amounted to a loss of 14 million Kronas (USD 1.8 million). Sales in North America during the first nine months amounted to 1,266 million Kronas (USD 163.4 million). Excluding currency effects, this represents a decline of 1% compared with the corresponding period in the preceding year. Sales to Lowe’s offset virtually the entire decline in sales to the specialty segment and The Home Depot. Sales during the third quarter amounted to 455 million Kronas (USD 58.7 million), an increase of 16%, excluding currency effects, compared with the year-earlier period. Sales to Lowe’s and the specialty segment more than compensated for the decline in sales to The Home Depot. The laminate flooring market is estimated to have shown continued growth in an otherwise soft market for flooring products. The growth occurred mainly in the low-price segments in the market. Price increases have been announced by some competitors in the marketplace. Due to the development of the USD, companies with domestic production are expected to strengthen their competitiveness in relation to European competitors. Sales to The Home Depot during the first nine months were lower than sales during the comparable period last year. The decline is attributed to The Home Depot’s sell-out of excess competitor inventories during the first quarter, lower accessory sales, the absence of a summer campaign similar to the one conducted last year and reduced pricing. The lower level of sales during the third quarter, compared with the corresponding period a year earlier, was due mainly to lower sales of accessories. Sales to the specialty segment in the US reflect a continued favorable trend and increased for the second consecutive quarter. Sales during the third quarter were also higher than sales during the corresponding period last year. The launch of Pergo Select with click joints, which started towards the end of the second quarter, has been completed and has been well received in the marketplace. Products with preglued joints as well as the medium-price product Pergo Accolade with click-joint have also shown favorable results.