Mohawk Industries (MHK) Valuation

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Company Profile (obtained from Google Finance): Mohawk Industries, Inc. (Mohawk) is a producer of floor covering products for residential and commercial applications in the United States and residential applications in Europe. The Company is a carpet and rug manufacturer and also a manufacturer, marketer and distributor of ceramic tile, natural stone and hardwood flooring in the United States. Mohawk also produces laminate flooring in the United States and Europe. The Company’s operating subsidiaries include Mohawk Carpet, LLC, Aladdin Manufacturing Corporation, Dal-Tile International Inc., Unilin Flooring BVBA and Unilin Holding Inc. The Company operates in three segments: the Mohawk segment, the Dal-Tile segment and the Unilin segment. During the year ended December 31, 2008, the Company acquired certain stone center assets in the Dal-Tile segment.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 1/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
4. Dividend Record – currently pays a dividend – FAIL
5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary:

• Last Updated    11/2/2009
• MG Value    $0
• MG Opinion    Overvalued
• Current Ratio    2.54
• PB Ratio    0.90

Key Data:

Balance Sheet – 9/26/2009

• Current Assets    $2,359,110,000
• Current Liabilities    $929,740,000
• Total Debt    $1,802,140,000
• Total Assets    $6,488,460,000
• Intangible Assets    $817,590,000
• Goodwill    $1,424,390,000
• Total Liabilities    $3,242,370,000
• Outstanding Shares    68,450,000

Earnings Per Share – Diluted

• 2009 (estimate)    $0.00
• 2008    -$21.32
• 2007    $10.32
• 2006    $6.70
• 2005    $5.72
• 2004    $5.49
• 2003    $4.62
• 2002    $4.39
• 2001    $3.55
• 2000    $3.00
• 1999    $2.61

Earnings Per Share – Modern Graham

• 2009 (estimate)    -$2.35
• 2008    -$1.89
• 2007    $7.41
• 2006    $5.77
• 2005    $5.12
• 2004    $4.61

Valuation History:

• 11/2/09 – Value $0, Actual Price $42.83, Overvalued & Speculative
• 7/25/09 – Value $0, Actual Price $43.12, Overvalued & Speculative