Mohawk's profits rise on strong sales

CALHOUN, GA. — Helped by a double-digit gain in sales and deep cuts in interest costs, fourth-quarter profits at Mohawk Industries Inc. shot up by 21.3 percent, to $102.1 million from $84.2 million last year.

Sales at the diversified producer of floor coverings and home fashions climbed by 13.8 percent, to $1.4 billion from $1.2 billion. The growth in sales was helped by gains in all of the company's business units and a fistful of acquisitions made during the year, including the buyout of Lees Carpets from Burlington Industries Inc.

The biggest sales improvement was recorded in the fast-track Dal-Tile hard floor coverings segment, where sales grew by 18.4 percent, to $335.7 million from $283.5 million the preceding year. Sales in the core Mohawk business, including Mohawk Home — now the nation's third-largest home fashions supplier — rose by 12.4 percent, to $1 billion from $920 million a year ago.

Providing an extra kick to the top line, last year's fourth quarter included one more day than the same period in 2002, "which added approximately 2 percent to the sales growth," the company reported.

Fueling the earnings growth, in addition to the stronger sales, Mohawk slashed its interest expense almost in half, by 46.5 percent, to $14.2 million from $26.6 million last year, generating a cash savings of $12.4 million during the closing quarter.

"All of our product categories experienced internal revenue growth," commented Jeffrey S. Lorberbaum, president and CEO. "The Dal-Tile segment growth was exceptionally strong, continuing to support our strategy to grow all hard-surface categories."

Mohawk's operating margin — operating profits measured as a percentage of sales — while strong for a textiles producer, thinned modestly, to 12.7 percent from 13.6 percent a year ago. The dip, the company said, "results from a product mix shift which increased margin dollars but lowered the margin percentage, the impact of the higher Euro cost on imported products, and higher oil and natural gas costs."

Under that combined pressure, average gross margin receded by 80 basis points, or eight-tenths of a percentage point, to 27.7 percent from 28.5 percent in the same period a year ago.