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

November 05, 2010 | About:
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10qk

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Mohawk Industries Inc. (MHK) filed Quarterly Report for the period ended 2010-10-02.

Mohawk Industries Inc. has a market cap of $3.87 billion; its shares were traded at around $57.08 with a P/E ratio of 24.3 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, Eric Mindich of Eton Park Capital Management, L.P., Ron Baron of Baron Funds, Chuck Royce of Royce& Associates, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, Prem Watsa of Fairfax Financial Holdings, Inc..

Highlight of Business Operations:

Gross profit for the third quarter of 2010 was $344.9 million (26.3% of net sales) and represented a decrease of $24.5 million compared to gross profit of $369.5 million (26.7% of net sales) for the prior years third quarter. The decrease in gross profit is primarily attributable to higher manufacturing costs of approximately $48 million, primarily related to higher raw material costs, lower sales volume of approximately $24 million, and unfavorable foreign exchange rates of approximately $6 million, partially offset by the net effect of price and product mix of approximately $40 million, insurance settlement proceeds as a result of the flood in Mexico of approximately $9 million, of which approximately $5 million was related to the recovery of lost margin on lost sales and approximately $4 million related to other reimbursements, and lower restructuring charges of approximately $4 million.

Dal-Tile Segment Operating income was $33.9 million (9.8% of segment net sales) in the third quarter of 2010 reflecting an increase of $12.7 million compared to operating income of $21.2 million (5.9% of segment net sales) for the third quarter of 2009. The increase was primarily driven by the insurance settlement proceeds as a result of the flood in Mexico of approximately $9 million, of which approximately $5 million was related to the recovery of lost margin on lost sales and approximately $4 million related to other reimbursements, lower restructuring charges of approximately $7 million and lower manufacturing and selling, general and administrative expenses of approximately $4 million, partially offset by lower sales volume of approximately $8 million.

Net sales for the nine months ended October 2, 2010 were $4,056.9 million, reflecting an increase of $60.0 million, or 1.5%, from the $3,996.9 million reported for the nine months ended September 26, 2009. Included in net sales for the nine months of 2009 is a carpet sales allowance of $110.2 million. For the first nine months of 2010, sales increased approximately $89 million due to additional shipping days as compared to 2009. This increase was offset by lower sales volume of approximately $100 million, primarily related to continued weakness in the residential and commercial real estate market, the net effect of price and product mix of approximately $22 million, as customers traded down to lower priced products, and unfavorable foreign exchange impact of approximately $18 million.

Gross profit for the first nine months of 2010 was $1,060.9 million (26.2% of net sales) and represented an increase of $170.4 million compared to gross profit of $890.5 million (22.3% of net sales) for the prior years first nine months. Gross profit for the first nine months of 2009 includes a carpet sales allowance of $110.2 million and inventory write-off of $12.4 million and the unfavorable impact of higher raw material costs flowing through cost of sales of approximately $62 million. For the first nine months of 2010, gross profit was favorably impacted by the net effect of price and product mix of approximately $16 million, lower restructuring charges of approximately $10 million and insurance settlement proceeds as a result of the flood in Mexico of approximately $9 million, of which approximately $5 million was related to the recovery of lost margin on lost sales and approximately $4 million related to other reimbursements, partially offset by higher manufacturing costs of approximately $44 million, primarily related to higher raw material costs, and the impact of unfavorable foreign exchange rates of approximately $6 million.

Operating income for the first nine months of 2010 was $228.5 million (5.6% of net sales) reflecting a $231.7 million increase compared to an operating loss of $3.1 million in the first nine months of 2009. Operating loss for the first nine 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 nine months of 2010, operating income was favorably impacted by lower restructuring charges of approximately $20 million, the net effect of price and product mix of approximately $16 million, insurance settlement proceeds as a result of the flood in Mexico of approximately $9 million, of which approximately $5 million was related to the recovery of lost margin on lost sales and approximately $4 million related to other reimbursements, and lower manufacturing and selling, general and administrative expenses of approximately $5 million, partially offset by the impact of unfavorable foreign exchange rates of approximately $4 million.

Dal-Tile Segment Operating income was $77.4 million (7.4% of segment net sales) in the first nine months of 2010 reflecting an increase of $4.8 million compared to operating income of $72.6 million (6.6% of segment net sales) for the first nine months of 2009. The increase was primarily driven by lower manufacturing and selling, general and administrative expenses of approximately $20 million, insurance settlement proceeds as a result of the flood in Mexico of approximately $9 million, of which approximately $5 million was related to the recovery of lost margin on lost sales and approximately $4 million related to other reimbursements, and lower restructuring charges of approximately $7 million, partially offset by the net effect of price and product mix of approximately $28 million and lower sales volume of approximately $4 million.

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