Mohawk 3Q profit improves, but year-to-date still posting a loss
October 30, 2009,
Calhoun, Ga. – Mohawk Industries Inc. saw its business pick up compared to a year ago, albeit “slightly,” with improvements in earnings per share during the third quarter. But these were dampened by year-to-date results – including a net loss of $25 million, or 37 cents per share, and a 25% decline in sales.
Profit for the three-month period ended Sept. 26 was $34 million compared to a loss of $1.49 billion in last year’s third quarter. The 2009 quarter included a restructuring charge of approximately $16 million primarily related to Mohawk Ind.’s distribution and manufacturing infrastructure. Excluding the restructuring charge, net earnings and EPS would have been $44 million and 64 cents, respectively.
Sales fell 22% to $1.38 million. Watching costs, reducing capital spending and lowering working capital, Mohawk generated free cash flow of $128 million for the quarter.
“Our earnings were slightly better than our guidance because of the changes we made to manage through this difficult environment,” Lorberbaum explained.
Also in the quarter, Mohawk’s gross margin improved by almost 200 basis points over last year thanks to lower raw material and freight costs, personnel cuts and plant consolidations.
Though the third quarter period “remained weak,” Lorberbaum continued, more encouraging news stemming from the period was that “sales were only slightly off from the second quarter – which may be an indication that we’re seeing a bottom. Both home sales and consumer confidence have improved since the beginning of the year, which has historically been followed by a higher investment in remodeling and flooring purchases.”
Year to date, Mohawk’s net loss was $25 million or a 37 cents per share. Excluding year-to-date charges, net earnings would be $108 million and EPS would be $1.57. By comparison, the first nine months of 2008’s net loss and loss per share were $1.33 billion and $19.45 per share, respectively. Excluding the 2008 year-to-date charges, net earnings and EPS would have been $244 million and $3.56 per share, respectively.
Sales for the first nine months of 2009 fell 25% to $3.997 billion.
“All of our segments were down due to lower volume and some declines in price and mix as economic headwinds continued,” said Frank Boykin, cfo.
In the Mohawk segment, which includes Mohawk Home, sales came in at $756 million – down 21% from last year – “due to lower volumes and declines in price and mix.”
While residential remains soft, commercial showed the most significant decline. Lorberbaum said the commercial segment continues its decline, “with limited new projects and delayed remodeling as corporations maintain tight controls on spending. We anticipate commercial continuing to decline this year and bottoming out in 2010.”
In response to increasing consumer demands for “more value-oriented items,” Mohawk Home is introducing lower-priced products.
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