Mohawk increases 2nd-half estimates
Clint Engel -- Gifts & Dec, September 30, 2002
In a rare sign of optimism in a tricky environment for textiles producers and retail sales, textiles powerhouse Mohawk Industries said it's increasing its earnings estimates for both the third and fourth quarters.
The floor coverings and home fashions producer said it now estimates third-quarter profits will come in about 12 percent to 15 percent higher than year-ago levels and said fourth-quarter profits are now expected to rise about 5 percent to 10 percent from last year.
Mohawk said the anticipated improvement stems from a number of factors, including "increased emphasis on controlling manufacturing and selling, general and administrative expenses" and lower interest expense due to reduced debt levels. The company also cited "a lower effective income tax rate from additional tax credits." Further boosting earnings per share, a stock buyback program has reduced the number of shares outstanding for the third quarter by 1.1 million shares.
Mohawk said "potential improvements" in manufacturing and white-collar costs "are expected at the newly acquired Dal-Tile operation and at Mohawk. Some of the anticipated improvements are a result of synergies through joint efforts to reduce administrative and logistics costs."
In addition, "The reduced debt is expected to result from strong earnings and effective working capital management offset by stock repurchases made during the third quarter," Mohawk said.
The impact of income tax credits is estimated to be $2.5 million per quarter for both the third and fourth quarters.
The good news was released after the close of trading last Thursday, Sept. 26, so it had little impact on the company's share price as of press time. In the hours before the news was put out, Mohawk shares had risen only slightly, by 0.4 percent, or $0.21 a share, to $48.15.
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