Mohawk Ind. 4Q and Yearend Tough but Exceeds Expectations
Cecile Corral -- Furniture Today, March 1, 2010
Despite challenged sales and earnings results for its fourth quarter and full year — a period the company called “the most difficult economic decline we have ever experienced in the flooring industry” — Mohawk Industries exceeded expectations thanks to cost-cutting efforts that included consolidating plants and reducing personnel by about 25%.
“During 2009 we continued to take aggressive actions to reduce our infrastructure and align the business with industry demand,” said Jeffrey Lorberbaum, chairman and ceo. “In 2009, we closed all or part of 16 manufacturing facilities and 27 distribution sites to reduce capacity, improve efficiency and lower costs. We reduced personnel by about 4,000 and warehousing by almost four million square feet.”
Sales for the fourth quarter ended Dec. 31, declined by 9% (or 11% with a constant exchange rate) to $1.3 billion compared. Net earnings came in at $20 million and diluted earnings per share were 29 cents, which included a restructuring charge of approximately $30 million primarily related to distribution and manufacturing infrastructure. Excluding the charge, net earnings and EPS would have been $39 million and 56 cents per share, respectively.
By comparison, 2008's fourth quarter posted a net loss of $128 million and loss per share of $1.87. Excluding the 2008 fourth quarter goodwill, intangible and restructuring charges, net loss and loss per share would have been $5.1 million and 8 cents per share, respectively.
Mohawk said “strong working capital management, reductions in capital spending and active cost control” enabled generation of free cash flow of $222 million for the quarter and $563 million for the full year.
Still, full-year fiscal 2009 results were difficult. Sales for the 12 months fell 22% $5.3 billion. Net loss was $5 million, or 8 cents per share, versus a net loss of $1.5 billion, or $21.32 per share, in 2008.
The company pointed to weak consumer spending, a depressed housing market and soft business investment in the United States and Europe.
By segment, sales for Mohawk — which includes the Mohawk Home division of area and accent rugs, bath rugs, doormats and utility rugs — fell 8% for the fourth quarter. “Better than the industry,” the company claimed.
To recover raw material cost inflation, the Mohawk segment is implementing a 4% to 6% price increase in this quarter. Other initiatives underway include expansions of the company's proprietary SmartStrand and EverStrand fibers.
“Our proprietary SmartStrand products have achieved broad consumer acceptance in the marketplace as a high-value alternative to nylon and polyester,” Lorberbaum said. “And in residential we are expanding our new Everstrand extra-soft polyester for the price conscious and Wear-Dated for the high-value conscious.”
Guidance for the first quarter calls for earnings of 10 to 20 cents per share, excluding restructuring charges.
“The economy improved in the fourth quarter and continued growth is expected throughout 2010,” Lorberbaum said. “After our seasonally slower first quarter, future periods should improve as we move through the year. The improvements we have implemented throughout our business and the realization of price increases will benefit us in future quarters. Our business is financially strong, committed to ongoing process improvement and maximizing our long-term results.”
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