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Mohawk Inc. Has Strong Q1, But Rugs Lag

CALHOUN, GA. - Mohawk Industries Inc. generated first quarter gains in net earnings and sales thanks to improvements in the U.S. market, product mix, and productivity as well as lower amortization and the company's acquisition of Pergo.
     A soft performance in rugs, which experienced lackluster sales in the period, put a damper on overall growth for the Mohawk segment, which includes Mohawk Home. Sales were relatively flat during the first quarter, with operating income rising 24%, excluding unusual charges.
     The company said carpet sales growth was partially offset by home center transitions that were completed late in the first quarter and lower rug sales. Sales of premium products in the specialty channel continued to show strength, with expected improvement in the home center channel as new introductions gain traction in the second quarter.
     "We began implementing a 4% to 6% carpet price increase during the quarter to offset our material cost changes; however, the timing of the implementation will not cover an estimated $5 million to $10 million of those higher costs in the second quarter," Mohawk noted. "We anticipate the price increase will align with our material costs in the third quarter."
     Total company first-quarter net earnings jumped 25% to $50 million, with diluted earnings per share (EPS) of 72 cents. Excluding unusual charges, net earnings were $61 million and EPS was 87 cents, representing a 50% increase over last year's 58 cents. Net sales grew 5.5% to $1.5 billion.
     Jeffrey Lorberbaum, chairman and ceo, added that during the quarter, the Mohawk segment "built upon the success of our revolutionary Smart- Strand Silk collection by adding 12 products that combine Silk's unsurpassed softness with contemporary styling. Our exclusive Dura color commercial broadloom and tile products expanded due to their exceptional styling, superior stain and soil resistance, and improved value. We executed productivity improvements across the business resulting in material yield improvements, waste reduction, increased recycled content and improved efficiencies."

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