Mohawk Industries announced 2009 first quarter sales of $1,208 million, a decrease of 30% from 2008, which includes two fewer days or 3% less than last year. It had an operating loss of $146 million in the quarter.
A charge of $122 million was recorded for a discontinued carpet tile backing which included a $110 million sales allowance and a $12 million inventory reserve. Sales declined 20% excluding the sales allowance on a constant exchange rate with comparable days. Operating income was $42 million excluding the carpet tile charge, a $62 million FIFO inventory flow through and a $4 million restructuring cost. Our loss in the first quarter was $1.55 per share or $106 million. Based on the current business environment, all segments anticipate positive operating income in the second quarter.
In commenting on the first quarter results, Jeffrey S. Lorberbaum, chairman and CEO stated, “In the quarter, we generated $38 million of operating cash flow which is a $118 million improvement over first quarter 2008. Working capital improved with inventories declining $183 million during the quarter. The balance sheet remains strong with a cash balance of $137 million and credit availability of more than $800 million. 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. We have discontinued Encycle, a carpet tile backing technology, which accounted for less than 15% of our commercial volume last year. The majority of our carpet tile products will continue to use our proven vinyl technology which has exceeded market expectations for over 15 years. At the end of the first quarter, we recognized a higher trend of incidents occurring on the discontinued backing and recorded an allowance to cover the estimated costs of remediating where needed. We have developed a new thermoplastic technology that is performing well with select customers across the country and we will increase production over time. We are satisfying our customers and maintaining our strong relationships.
