Mohawk 3Q profits get boost from Dal-Tile biz
October 28, 2002,
Lifted by sharply stronger sales, generated mostly by an earlier acquisition, and given a further assist by substantially wider margins, third-quarter profits at Mohawk Industries Inc. jumped up by 46.4 percent, to $81.6 million from $55.7 million last year.
Sales in the core Mohawk products business grew by 2.0 percent, the company said, to $927.1 million, mostly on the strength of hard surface flooring products. The Dal-Tile business grew at a substantially faster pace of 9.0 percent, to $297.4 million.
Fueling the big gain in earnings, in addition to the stronger sales, average gross margin strengthened by 360 basis points, or 3.6 percentage points, to 27.8 percent from 24.2 percent the preceding year, due to the Dal-Tile segment's stronger profit margins. Gross margin dollars grew by 55.3 percent, to $340.7 million from $219.4 million a year ago.
But somewhat offsetting the wider margins, operating costs climbed higher as well, rising by 220 basis points, or 2.2 percentage points, to 16.2 percent of sales from 14.0 percent in 2001, due to Dal-Tile's higher cost structure, Mohawk reported.
"We are very pleased with the performance of Dal-Tile and its contribution to our results since the acquisition was completed," commented Jeffrey Lorberbaum, president and ceo. "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 floor covering products is progressing as planned, with approximately 30 percent of our total sales in hard-surface products. With our strong financial position, we are optimistic about our future when the economy fully recovers."
Looking ahead, Lorberbaum said, "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 percent to 10 percent above 2001."
Mohawk Industries Inc.
|Qtr. 9/28 (x000)||2002||2001||% change|
|Per share (diluted)||1.21b||1.05b||15.2|
|Average gross margin||27.8%||24.2%||—|
|Oper. income (EBIT)||356,209||229,574||55.2|
|Per share (diluted)||3.13b||2.44b||28.3|
|Average gross margin||27.0%||24.0%||—|
|a-Third-quarter results include $888,000 in miscellaneous expense, compared with $1.1 million last year. For the nine months, the company recorded miscellaneous income of $109,000, compared with miscellaneous costs of $4.1 million in 2001.
b-Earnings per share in the third quarter and nine months were reduced by a greater number of average shares outstanding, 66.8 million shares during the quarter, up 27.5 percent form 52.4 million a year ago; for the nine months, the average number of shares rose to 64,086 from 53,021 a year ago.