Mohawk Earnings Off in First Quarter

Calhoun, GA, April 23, 2009--Mohawk Industries said it lost $106 million or $1.55 per share in the first quarter, while sales fell 30% to $1.208 billion compared to a year ago.

A year ago, Mohawk recorded net income of $65.4 million.

The quarter included two fewer days or 3% less than last year.

Mohawk had an operating loss of $146 million in the quarter, including a charge of $122 million for a discontinued carpet tile backing.

Operating income was $42 million, excluding the carpet tile charge, and $66 million in other charges.

"In the quarter, we generated $38 million of operating cash flow, which is a $118 million improvement over first quarter 2008," said CEO Jeffrey Lorberbaum.

"The economic conditions in both U.S. and Europe remain weak in all channels. Commercial construction and remodeling projects are being postponed due to the uncertainty in the economy. The government stimulus, low interest rates, and easing credit should improve the residential business. All segments continue to focus on cash generation by reducing infrastructure, operating costs, capital expenditures and working capital. During the quarter we reduced production units below sales levels to lower inventories, negatively impacting overhead absorption. We cut employment levels by almost 2,000, shut down four operations and reduced warehousing space about one million square feet."

The Mohawk segment sales declined by 34%. Sales declined 20%, excluding the carpet tile sales allowance, using comparable days.

Mohawk discontinued Encycle, a carpet tile backing technology, which accounted for less than 15% of commercial volume last year. The majority of its carpet tile products will continue to use vinyl technology, which has exceeded market expectations for over 15 years.

Raw material costs in the Mohawk segment have remained relatively stable since the end of the year, the company said.

The Dal-Tile segment sales were down 20% during the quarter, or 16% on a constant exchange rate with comparable days.

Unilin sales declined 34% as reported or 24% on a constant exchange rate with comparable days. Mohawk said the rate of decline was more challenging in the first quarter than earlier periods with the economic slowdown becoming more difficult and customers reducing their inventories.

Mohawk said its U.S. and European laminate business reflected a slight improvement in the latter part of the quarter due to new introductions reaching the market.

Related Topics:Daltile, Mohawk Industries