Mohawk boosts profits after cutting costs
By Don Hogsett -- Home Textiles Today, 2/18/2002 12:00:00 AM
Calhoun, GA — Seeming to defy the laws of gravity in a brutally punishing environment for most textiles producers, fourth-quarter profits at Mohawk Industries Inc. rocketed up by 50.8 percent, to $59.2 million from $39.3 million last year.
Driving the strong earnings gain, the diversified textiles producer widened its margins, slashed costs, whittled down stockpiles and pared its long-term debt and interest expense.
Boosted in part by the earlier acquisition of the Crown Crafts woven products business, Mohawk beat the recession blues that have stunted sales for most other textiles players, and the top line grew by 6.9 percent, to $895.8 million from $837.9 million last year.
Driving the strong earnings growth, Mohawk continued to reduce its overhead, cutting expenses by 140 basis points, to 13.7 percent of sales from 15.1 percent a year ago. Measured in absolute dollars, costs were whittled down by 3.4 percent, a cash savings of $4.3 million during the closing quarter.
At the same time, Mohawk grew its average gross margin by 50 basis points, to 24.6 percent from 24.1 percent a year ago. Gross margin dollars increased by 8.8 percent, to $220.0 million from $202.2 million.
Fueled by the strong sales, margin growth and lower costs, operating profits shot up by almost a third, growing by 29.4 percent, to $97.6 million from $75.4 million a year ago.
In another big lift to the bottom line, the company cut its interest expense by almost 40 percent as it continued to work off its long-term debt. Interest expense fell by 39.4 percent, to $5.7 million from $9.5 million last year, dropping $3.7 million straight to the bottom line. Enabling the savings in interest expense, over the past 12 months, Mohawk has reduced its long-term debt by 58.9 percent to $150.1 million from $365.4 million.
Working off its stockpiles despite the jump in sales, Mohawk trimmed its inventories by 7.5 percent, to $531.4 million from $574.6 million.
"These are outstanding results, particularly in the face of the recessionary economy we have seen for the last few quarters," said Jeffrey Lorberbaum, president and ceo. "With stronger-than-expected sales growth, reduced selling, general and administrative expenses, lower interest expense, more favorable income tax rates and record net earnings, we were able to exceed out goals in every area. We have reduced our inventory levels by $43 million since the beginning of the year, improving our fourth-quarter inventory turnover from 4.4 to 5.1 turns. We have made $281 million in debt repayments, reducing our debt-to-capitalization ratio to 25 percent and reducing our debt by 48 percent for the year. Our management has decreased working capital and capital expenditures in our core business in 2001 while investing in working capital for our hard surface products."
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