Unum and Mohawk Industries report lower quarterly profits

Profits for the biggest publicly traded companies headquartered in the Chattanooga area fell in the first quarter and failed to meet analysts projections for the period, according to quarterly earnings reports released Monday by Unum Group and Mohawk Industries.

The coronavirus pandemic, which forced the closing of many businesses starting in mid-March, weakened both consumer demand and delivery channels for many businesses in the first quarter and is expected to make an even bigger hit in the current spring quarter.

“The world changed during the first quarter, and we are now managing through an unprecedented situation,” said Jeff Lorberbaum, CEO of the Calhoun, Georgia-based Mohawk Industries. “Across all of our markets, demand has dropped dramatically, with residential remodeling being impacted the most up to this point and do-it-yourself products performing best, as some people started projects while staying home.”

Mohawk, the world’s biggest floorcovering company, said Monday that its first quarter sales fell 6.4% from a year ago and its adjusted profits slipped to $119 million, or $1.66, per share, from $122 million, or $1.67 a year earlier.

Unum, the world’s biggest disability insurer, said Monday its adjusted operating earnings fell in the first quarter to $274.1 million, or $1.35 per common share, compared to $280.3 million, or $1.31 per share in the first quarter of 2019.

Per share earnings were higher this quarter because Unum bought back some of its stock in the past year. But the company is suspending future stock repurchases this year.

Unum said its net income in the first quarter of 2020 totaled $161 million, or 79 cents per share, compared to net income of $280.9 million, or $1.31 per share, for the first quarter of 2019.

“While our firstquarter results were solid, the

emergence of the COVID19 pandemic and resulting economic contraction have created uncertainty for both businesses and individuals worldwide,” Unum CEO Rick McKenney said.

The Maine Bureau of Insurance determined that the reserves for Unum Life Insurance Co. of America were below what is needed to cover all of the expected costs for its long term care (LTC) policies.

Unum announced Monday an agreement with the Maine regulators to shore up funding for Unum’s long-term care business by providing $2.1 billion of extra reserves over the next seven years.

Unum no longer markets or sells long term care insurance, but the company’s book of LTC business continues to be costly. The long-termcare insurance industry has been hurt by persistently low interest rates, increasing longevity and the increase in health care costs.

Unum said it expects to fund the extra reserves required for the long term care policies from its future cash flows and “will build additional margin over our best estimates and should reduce market uncertainty over the block.”

Unum said it maintains a strong balance sheet and liquidity with holding company cash of $1 billion.

At Mohawk, Lorberbaum said the company has furloughed workers, cut production and trimmed expenses in the wake of lower sales caused by the current global recession.

“We are reducing capital expenditures, cutting non-essential expenses and putting our stock purchases on hold until the environment improves,” Loberbaum said.

Mohawk’s results were a penny per share below what industry analysts had predicted, while Unum’s earnings were 3 cents per share below the average consensus of analysts, for the first quarter.

Neither company offered earnings guidance for the balance of 2020.