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Mohawk Industries Inc. Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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Mohawk Industries Inc. (MHK) filed Quarterly Report for the period ended 2010-07-03.

Mohawk Industries Inc. has a market cap of $3.34 billion; its shares were traded at around $48.71 with a P/E ratio of 20.9 and P/S ratio of 0.7. MHK is in the portfolios of Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Wallace Weitz of Weitz Wallace R & Co, Ron Baron of Baron Funds, Chuck Royce of Royce& Associates, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Prem Watsa of Fairfax Financial Holdings, Inc., Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

For the six months ended July 3, 2010, the Company reported net earnings attributable to Mohawk Industries, Inc. of $88.6 million or EPS of $1.29 compared to net loss attributable to Mohawk Industries, Inc. of $59.6 million or loss per share of $0.87 for the six months ended June 27, 2009. The change in EPS is primarily the result of a tax benefit of approximately $30 million related to the settlement of certain tax contingencies in 2010 and the pre-tax $110.2 million carpet sales allowance and a $12.4 million inventory write-off recognized in 2009. During 2009, the Company recognized an increased number of warranty claims related to the performance of commercial carpet tiles that used a newer carpet backing technology. The Company discontinued sales of carpet tiles using this backing technology in 2009. The amounts recorded reflect the Companys best estimate but the actual amount of total claims and related costs could vary from such estimate. The Company now manufactures these types of commercial carpet tiles with a different backing technology that has been used for many years by the Company.

Mohawk Segment Operating income was $26.3 million (3.5% of segment net sales) in the second quarter of 2010 reflecting an increase of $5.8 million compared to operating income of $20.6 million (2.7% of segment net sales) in the second quarter of 2009. The increase in operating income was primarily due to the net effect of price and product mix of approximately $26 million, partially offset by lower sales volume of approximately $10 million, higher manufacturing costs of approximately $6 million and 2010 restructuring costs of approximately $4 million.

Net sales for the six months ended July 3, 2010 were $2,747.3 million, reflecting an increase of $133.0 million, or 5.1%, from the $2,614.4 million reported for the six months ended June 27, 2009. Included in net sales for the six months of 2009 is a carpet sales allowance of $110.2 million. For the first six months of 2010, sales increased approximately $89 million due to additional shipping days as compared to 2009 and by approximately $3 million due to favorable foreign exchange rates. This increase was partially offset by the net effect of price and product mix of approximately $64 million, as customers traded down to lower priced products and selling prices on commoditized products compressed, and lower sales volume of approximately $5 million.

Mohawk Segment Net sales increased $102.0 million, or 7.5%, to $1,464.2 million in the current six months compared to $1,362.1 million in the six months of 2009. Included in net sales for the first six months of 2009 is a carpet sales allowance of $110.2 million. For the first six months of 2010, sales increased approximately $45 million due to additional shipping days as compared to 2009, and by approximately $4 million due to the net effect of price and product mix partially offset by lower sales volume of approximately $58 million primarily related to continued weakness in the commercial real estate market.

Dal-Tile Segment Net sales decreased $30.2 million, or 4.1%, to $705.0 million in the current six months compared to $735.2 million in the first six months of 2009. The decrease was primarily driven by the net effect of price and product mix of approximately $47 million, as customers traded down to lower priced products and a decrease in sales volume of approximately $11 million primarily related to continued weakness in the commercial real estate market, partially offset by higher sales of approximately $21 million due to additional shipping days in 2010 compared to 2009 and by approximately $7 million due to favorable foreign exchange rates.

Operating income for the first six months of 2010 was $143.3 million (5.2% of net sales) reflecting a $214.6 million increase compared to an operating loss of $71.2 million in the first six months of 2009. Operating loss for the first six months of 2009 includes a carpet sales allowance and inventory write-off of $122.6 million and the unfavorable impact of higher raw material costs flowing through cost of sales of approximately $62 million. For the first six months of 2010, operating income was favorably impacted by lower manufacturing and selling, general and administrative expenses of approximately $24 million, primarily related to 2009 restructuring actions and cost savings initiatives, and higher sales volumes of approximately $25 million, partially offset by the net effect of price and product mix of approximately $24 million.

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