Mohawk Industries, Inc. Announces Record Quarterly Earnings for Third Quarter
Net earnings for the first nine months of 2002 were $200,288,000 (55% above last year), or $3.13 in EPS (28% above last year), compared to $129,399,000 in net earnings, or $2.44 in EPS, for the first nine months of 2001. This improvement in EPS and net earnings is attributable to (i) the Dal-Tile acquisition, (ii) sales growth, (iii) operating earnings growth and (iv) an average reduction of approximately 538,000 shares of stock for the first nine months of 2002. Net sales for the first nine months increased 30% to $3,318,860,000 from $2,550,147,000. The Mohawk segment sales of $2,703,738,000 grew 6% and the Dal-Tile segment proforma sales of $851,166,000 grew 9%. Total company net sales increased 7% on a proforma basis.
In commenting on the third quarter results, Jeffrey S. Lorberbaum, President and CEO, stated, "We were able to produce all-time record results this quarter even though economic conditions were slower. We are very pleased with our ability to continue to perform at a high level even in difficult times. The structure of our company allows us to react and respond quickly to economic and market changes.
"We are very pleased with the performance of Dal-Tile and its contribution to our results since the acquisition was completed. The growth prospects for the Dal-Tile products are very good with the opportunity to increase their distribution through new residential channels. We successfully completed the first phase of the Dal-Tile integration during the third quarter. The company can now ship tile products carried in the Dal-Tile warehouses to customers through the Mohawk distribution channels using the existing Mohawk order entry system. We are on schedule with our long-term plan to leverage our two businesses and provide additional value to our customers.
"Our strategic move to position our company as a leader in all floorcovering products is progressing as planned with approximately 30% of our total sales in hard surface products. With our strong financial position, we are optimistic about our future when the economy fully recovers."
The debt to capitalization ratio decreased to 33% this quarter with approximately $75,000,000 of debt reduction. This debt reduction was the result of strong earnings and effective working capital management offset by the repurchase of 1,128,300 shares of stock. The company has reduced debt by approximately $206,000,000 since the acquisition of Dal-Tile. The company plans to continue with its stock repurchases. The Company has approximately 4,879,000 shares open to repurchase from its original authorization. The effective income tax rate was reduced when compared to the first half of 2002 due to tax credits realized in the third quarter of $2,500,000 with a comparable amount expected in the fourth quarter.
The total company third quarter and year-to-date gross profit percentage to net sales increased from 24.2% in 2001 to 27.8% in 2002 and from 24.0% in 2001 to 27.0% in 2002, respectively, due to Dal-Tile's higher gross profit levels. The gross profit percentage for the Mohawk segment increased due to better cost control. The gross profit percentage for the Dal-Tile segment was also slightly up from last year due to improved manufacturing efficiencies. The total company SG&A percentage to net sales for the third quarter and nine months increased from 14.0% in 2001 to 16.2% in 2002 and from 15.0% in 2001 to 16.2% in 2002, respectively, due to Dal-Tile's higher SG&A levels. When the Mohawk and Dal-Tile segments are compared to the nine month amounts for 2001 separately, both segments achieved a reduction in the SG&A percentage. Operating income as a percentage for the third quarter and nine months increased from 10.2% in 2001 to 11.7% in 2002 and from 9.0% in 2001 to 10.7% in 2002, respectively, primarily due to the Dal-Tile acquisition.
There continues to be much uncertainty in the economy which makes forecasting future periods very difficult. Based on the present economic conditions, we anticipate that the fourth quarter earnings will be 5% to 10% above 2001.
Certain of the statements in the immediately preceding paragraphs, particularly anticipating future financial performance, business prospects, growth and operating strategies, proposed acquisitions, and similar matters, and those preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "estimates," or similar expressions constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Those statements are based on many assumptions including assumptions regarding the Company's ability to maintain its sales growth and gross margins and to control costs. These or other assumptions could prove inaccurate and therefore, there can be no assurance that the "forward-looking statements" will prove to be accurate. Forward-looking statements involve a number of risks and uncertainties. The following important factors affect the future results of Mohawk and could cause those results to differ materially from those expressed in the forward-looking statements: materially adverse changes in economic conditions generally in the carpet, rug and floorcovering markets served by Mohawk; competition from other carpet, rug and floorcovering manufacturers; raw material prices; timing and level of capital expenditures; the successful integration of acquisitions including the challenges inherent in diverting Mohawk's management attention and resources from other strategic matters and from operational matters for an extended period of time; the successful introduction of new products; the successful rationalization of existing operations; and other risks identified from time to time in the Company's SEC reports and public announcements.
Mohawk is a leading supplier of flooring for both residential and commercial applications and a producer of woven and tufted broadloom carpet, rugs and ceramic tile. The Company designs, manufactures and markets premier carpet brand names, which include "Mohawk," "Karastan," "Aladdin," "Bigelow," "Custom Weave," "Durkan," "Galaxy," "Helios," "Horizon," "Mohawk Commercial," "World," and "Wunda Weve." Mohawk offers a broad line of home products including rugs, throws, pillows and bedspreads under the brand names Aladdin, Goodwin Weavers, Karastan, Mohawk Home and Newmark. Mohawk manufactures and distributes ceramic tile and natural stone products under the brand names Dal- Tile, Mohawk and American Olean. Mohawk also offers other products that include laminate, wood and vinyl flooring and carpet padding under the Mohawk brand name.
There will be a conference call Tuesday, October 15, 2002 at 11:00 AM Eastern Time. The telephone number to call is 1-800-603-9255. A conference call replay will also be available until Tuesday, October 22, 2002 by dialing 1-800-642-1687 for US/local calls and (706) 634-2294 for international calls and entering Conference ID # 5876683.
DATES FOR FUTURE PRESS RELEASES AND CONFERENCE CALLS:
PRESS RELEASE CONFERENCE CALL
3rd QUARTER 2002 OCT. 14, 2002 OCT. 15, 2002 11:00 AM (800-603-9255)
4th QUARTER 2002 FEB. 6, 2003 FEB. 7, 2003 11:00 AM (800-603-9255)
1st QUARTER 2003 APRIL 16, 2003 APRIL 17, 2003 11:00 AM (800-603-9255)
2nd QUARTER 2003 JULY 16, 2003 JULY 17, 2003 11:00 AM (800-603-9255)
3rd QUARTER 2003 OCT. 16, 2003 OCT. 17, 2003 11:00 AM (800-603-9255)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings Data
(Amounts in thousands, except per share data)
Three Months Ended Nine months ended
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
Net sales $1,224,403 907,850 3,318,860 2,550,147
Cost of sales 883,746 688,426 2,424,422 1,937,247
Gross profit 340,657 219,424 894,438 612,900
Selling, general and
administrative
expenses 197,779 127,016 538,229 383,326
Operating income 142,878 92,408 356,209 229,574
Interest expense 16,426 6,869 42,377 24,053
Other (income) expense,
net 888 1,051 (109) 4,094
Earnings before income
taxes 125,564 84,488 313,941 201,427
Income taxes 44,004 28,761 113,653 72,028
Net earnings $81,560 55,727 200,288 129,399
Basic earnings per
share $1.22 1.06 3.19 2.47
Weighted-average common
shares outstanding 66,824 52,412 62,855 52,347
Diluted earnings per
share $1.21 1.05 3.13 2.44
Weighted-average common
and dilutive potential
common shares
outstanding 67,683 53,211 64,086 53,021
Other Financial Information
(Amounts in thousands)
Depreciation &
amortization $25,024 20,677 75,500 62,696
Capital expenditures $26,831 14,306 74,072 40,953
Consolidated Balance Sheet Data
(Amounts in thousands)
September 28, September 29,
2002 2001
ASSETS
Current assets:
Receivables $569,567 432,651
Inventories 742,647 576,218
Prepaid expenses 22,732 13,337
Deferred income taxes 83,056 66,474
Total current assets 1,418,002 1,088,680
Property, plant and equipment, net 843,782 630,049
Goodwill 1,277,453 109,969
Other assets 165,916 5,831
$3,705,153 1,834,529
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $42,366 238,215
Accounts payable and accrued expenses 681,299 412,075
Total current liabilities 723,665 650,290
Long-term debt, less current portion 903,104 219,571
Deferred income taxes and other long-term
liabilities 180,890 80,614
Total liabilities 1,807,659 950,475
Total stockholders' equity 1,897,494 884,054
$3,705,153 1,834,529
Segment Information
(Amounts in thousands)
As of or for the As of or for the
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
Net sales:
Mohawk $ 927,065 907,850 2,703,738 2,550,147
Dal-Tile 297,338 --- 615,122 ---
Consolidated net
sales $ 1,224,403 907,850 3,318,860 2,550,147
Operating income:
Mohawk $ 96,890 92,838 264,419 232,722
Dal-Tile 47,791 --- 96,928 ---
Corporate and
eliminations (1,803) (430) (5,138) (3,148)
Consolidated operating
income $ 142,878 92,408 356,209 229,574
Assets:
Mohawk $1,733,632 1,729,819
Dal-Tile 1,839,261 ---
Corporate and eliminations 132,260 104,710
Consolidated assets $3,705,153 1,834,529
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SOURCE Mohawk Industries, Inc.
CONTACT: John D. Swift, Chief Financial Officer of Mohawk Industries,
Inc., +1-706-624-2247
URL: http://www.mohawkind.com
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