Mohawk Swings to Loss

Mohawk, which has Bruce Berkowitz, Raune / Cunniff and Wally Weitz as major holders saw operating profits fall 38%.

Mohawk Industries Inc.,(MHK) the Calhoun, Ga., producer of flooring and carpet, swung to a $1.39 billion third-quarter net loss, after impairment write-downs on intangibles and deferred tax assets. The loss equaled $20.37 a share, after the charges of $1.22 billion for intangibles and $253 million for tax assets. Adjusted profit was $76 million, or $1.10 a share. That’s off 38% from the year-earlier period’s net income of $122 million, or $1.78 a share. Sales fell 9% to $1.76 billion from $1.94 billion, Mohawk reported late on Monday. A survey of analysts by FactSet Research produced consensus estimates of $1.11 of profit on $1.77 billion of sales. Accounting rules required the write-offs due to the company’s lower stock price and to weakening industry conditions, Mohawk said. U.S. consumers are “reducing discretionary expenditures,” Chairman and CEO Jeffrey S. Lorberbaum said.

“Residential home sales and remodeling are at low levels and commercial projects are being impacted by tightening credit and softening business conditions. The European economy has become significantly weaker and affected both our flooring and non-flooring products.” The company expects to earn an adjusted 20 cents to 30 cents a share in the fourth quarter. The figures exclude a charge of $25 million to $30 million tied to closing facilities. FactSet’s survey was looking for 95 cents. Results in 2009 should improve from second-half 2008, Mohawk said.

Mohawk follows building materials maker USG (USG) who also slipped to a loss this quarter.

Bottom fishers might find large value here in these names. They will also have to exercise extreme patience as the recovery might be a rocky one.

Disclosure (“none” means no position):none
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