Mohawk said the improvement in EPS was the result of higher sales and gross profits, and the company's stock repurchase program. Net sales for the quarter increased 3% to $799.44 million compared to $775.55 million for the fourth quarter of 1999. The sales increase was primarily attributable to internal growth. The gross profit improvement was the result of favorable product mix and the change in the depreciable lives of fixed assets as of the beginning of the year 2000. This improved profitability was partially offset by higher raw material and fuel costs as compared to 1999, the company added.
EPS for 2000 was the highest in the company's history, at $3.08 per share (18% above last year) or $166.85 million in net earnings before the pre-tax charge of $7 million related to an anti-trust litigation settlement which was recorded in the third quarter of 2000. After the pre-tax charge, EPS was $3.00 or $162.60 million in net earnings. This compares to EPS of $2.61 or $157.24 million in net earnings for the year 1999.
The improvement in EPS was attributable to increased sales resulting primarily from internal growth and improved gross margins which resulted from product mix and the change in depreciable lives. Net sales for the year 2000 were $3.26 billion representing a 6% increase over 1999 sales of $3.08 billion. This increase was primarily due to internal growth.
"We are happy with our results, especially in light of the slowing economy and rising costs,” said Jeffrey S. Lorberbaum, president and CEO. “Our success this quarter is the result of continued focus on cost reduction and internal growth through strong marketing and merchandising. We are continuing the rollout of our new vinyl, laminate, ceramic tile and wood products to all of our regions throughout the U.S.
"We believe our stock continues to trade at an attractive valuation and is a strong long-term investment,” Lorberbaum noted, adding that the company continues to repurchase its own shares. “Although the results this quarter were ahead of last year, and our market share has increased, our sales growth has softened from previous quarters and we have continued to experience higher costs. We will continue to focus heavily on cost control and hard surface flooring growth."
In assessing Mohawk’s future business prospects, the company cited the impact of a slowing economy. In May 2000, Mohawk said, industry unit shipments turned negative when compared to the prior year and have remained negative for each subsequent month through December. Raw material prices rose over the last 12 months but appear to have peaked, while natural gas and utility costs continue to increase.
On the positive side, the company announced a price increase for selected residential carpet for March 2001. Mohawk also said its expansion of hard surface products is progressing very favorably with its customers but significant sampling and personnel costs will be incurred during the first half of 2001 without the offsetting growth in sales and margins.
After considering all of these factors, the company said its first quarter 2001 EPS likely will be below last year's first quarter by 15% to 20%, and second quarter 2001 EPS may be 5% to 10% below last year.
