Dal-Tile results were included for the seven business days after the closing on March 20, 2002. The Dal-Tile results and related acquisition costs had no material impact on EPS. Net sales for the quarter increased 12% to $866,710,000 compared to $777,339,000 for the first quarter of 2001. The sales increase was attributable to internal growth of Mohawk products and the Dal-Tile acquisition.
In commenting on the first quarter financials, Jeffrey S. Lorberbaum, President and CEO, stated, "We are pleased with our performance this quarter and believe these results along with those from the previous quarter indicate we are on the upside of an economic recovery. Our sales growth was the result of internal growth of 8% in our various product lines and the addition of Dal- Tile sales of $28,484,000. Gross profit as a percentage of net sales improved from 22.8% to 24.8% because of improvement in Mohawk product mix and costs (1.5%) and the impact of Dal-Tile (.5%).
"The selling, general and administrative expenses rose slightly as a percentage of net sales primarily as a result of the Dal-Tile operations. Overall, operating income as a percentage of net sales increased from 6.9% to 8.6%. This increase is mostly related to Mohawk operations. Our debt to total capitalization ratio was 39.2% at the end of the first quarter 2002 even after the Dal-Tile merger. This compares to a 42.8% ratio at the end of first quarter 2001 and this reduction clearly demonstrates our commitment to maintaining an investment grade rating and managing the balance sheet for financial flexibility.
"Our integration of the Dal-Tile acquisition continues as planned. We are especially encouraged by the very positive attitude and actions of the Dal- Tile and Mohawk integration teams. We have developed preliminary strategies that will allow us to grow earnings and cash flow thereby adding greater value for our shareholders. We continue to believe the Dal-Tile acquisition will be slightly positive for earnings by about $0.10 EPS in 2002.
"We were pleased to be named number 455 in the list of the Fortune 500 Largest U.S. Corporations in 2001 which was an improvement from number 491 in 2000. Additionally, we were ranked number 17 out of the top 500 for the total return to shareholders for one year, and number 18 out of the top 500 for growth in profits over five years. We were also honored to receive Floor Covering Weekly Dealers' Choice first place award at Surfaces 2002 for carpet, ceramic, wood and merchandising."
Although we believe that our industry is recovering from the economic recession and are cautiously optimistic about future quarters, the current environment of rising energy prices could have a dampening effect on the economy overall as well as our industry. Additionally, the potential for increasing interest rates could also negatively impact our future results. At this time, Mohawk anticipates that the second quarter 2002 EPS will be 20% to 25% above 2001 and third quarter 2002 EPS will be 10% to 15% above last year. All of the above information includes the impact of Mohawk's merger with Dal- Tile.