Mohawk surprises with big 3Q
By Don Hogsett -- Home Textiles Today, 10/22/2001 12:00:00 AM
Calhoun, GA — Driven by solid gains in its rapidly expanding home fashions business, as well as a deep reduction in interest expense, third-quarter profits at Mohawk Industries leaped up by almost a third, rising by 32.9 percent to $55.7 million from $42.1 million the prior year.
Easily surpassing Wall Street estimates, Mohawk recorded a per-share profit of $1.05 per share, compared with analysts' expectations of an 87 cents per-share profit. Cheered by the news, Wall Street boosted the stock by more than 4 percent in value, to $42.86 a share, after the news came out.
Spurred by growing home sales, and the recent buyout of the Crown Crafts woven products business, sales at the big carpet and home fashions producer advanced by 3.8 percent, to $869.7 million from $838.5 million last year.
Most of the gain in sales was generated by the fast-track home fashions business, which offset modestly declining sales in Mohawk's core broadloom carpeting business, said Jeffrey Lorberbaum, president and ceo. Contributing to sales growth to a lesser extent, said Lorberbaum, was Mohawk's growing hard-surface floor coverings business.
Much of the gain in home fashions sales was triggered by the buyout earlier this year of the Crown Crafts woven products business, which at the time of the acquisition was generating about $85 million in sales. But even without the contribution of the former Crown Crafts business, sales throughout all of Mohawk's other home fashions businesses recorded solid gains, said Lorberbaum.
In a big lift to the bottom line, Mohawk continued to hack away at its long-term debt, interest expense and overall cost structure.
Firming up what was already one of the industry's most solid balance sheets, Mohawk slashed its long-term debt by almost two-thirds from year-ago levels, to $219.6 million from $592.7 million. That resulted in a deep cut in interest expense, which was pared by 32.5 percent, to $6.9 million from $10.2 million last year, a cash savings of $3.3 million.
Still whittling down its overhead, Mohawk trimmed its expenses by 50 basis points, or one-half of 1 percent, to 14.7 percent from 15.2 percent the previous year, the cost cuts more than offsetting modest gross margin erosion.
Continuing to knock down its stockpiles, Mohawk trimmed its inventories by 2.8 percent, to $576.2 million from $592.8 million.
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