Mohawk Q2 earnings surpasses their expectations
Mohawk Industries Inc announced 2009 second quarter net earnings of $46 million and diluted earnings per share (EPS) of $0.67. Operating income for the second quarter was $75 million. A restructuring charge of $12 million was recorded in the quarter primarily due to the closure of a European laminate facility. Excluding the restructuring charge, operating income was $87 million and EPS was $0.79. In the second quarter of 2008, net earnings and EPS were $89 million and $1.29 per share, respectively.
Net sales for the quarter were $1,406 million, a decrease of 24% (22% on a constant exchange rate) from 2008. The company generated cash flow from operations of $228 million. We strengthened our balance sheet, by generating over $200 million in free cash flow, paying $122 million of debt and investing $26 million in capital expenditures. We ended the period with a balance of over $225 million in cash. The results benefited from aggressively driving costs down, improving working capital, tighter control over capital expenditures and an intense focus on customers.
For the first six months of 2009, our net loss was $60 million or a net loss per share of $0.87. Our operating loss for the first six months was $71 million. Excluding the year to date charges for carpet tile, FIFO inventory flow through and restructuring, our operating income was $129 million. In the first six months of 2008, net earnings and EPS were $154 million and $2.25 per share, respectively.
Net sales for the first six months of 2009 were $2,614 million representing a 27% decrease from 2008. Sales declined 22% based on a constant exchange rate excluding the first quarter carpet tile charges. The sales decreases for both the quarter and the year to date in the U.S. and Europe are attributable to continuing low home sales, soft business investment and weak consumer discretionary spending.
In commenting on the second quarter results, Jeffery S. Lorberbaum, Chairman and CEO stated, "Our second quarter earnings surpassed our expectations. Our results improved from the first quarter as we benefited from increased sales, lower costs and higher utilization rates. We are transitioning to a leaner, lower cost structure to emerge in a stronger position when the economy recovers."
The Mohawk segment sales were down 21% with the residential decline beginning to stabilize but commercial is expected to continue its contraction. There remains pressure in the commodity categories and product mix has been declining as customers trade down to reduce project costs. After peaking, raw material costs improved and benefited our second quarter results. During the quarter, improved seasonal sales, higher plant utilization and lower costs helped offset the deleveraging of our fixed overhead costs. We continue to cut administrative, manufacturing and logistics costs focusing on productivity, service and quality enhancements.
Dal-Tile sales were down 22% or 21% using a constant exchange rate. Dal-Tile has been impacted greater by the present contraction of the commercial business. Our Mexican business is growing by broadening our product offering and expanding our distribution. Dal-Tile sales and logistics infrastructures differentiate our products and services, however, lower business levels have deleveraged the fixed costs. The Dal-Tile cost structure has been reduced with many initiatives on productivity, quality and product engineering. Our yields have improved, raw material costs decreased, direct labor reduced and controllable unit costs are down.