10-K405 1 0001.txt FORM 10-K405 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [Mark One] [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission File Number to 01-19826 MOHAWK INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 52-1604305 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P. O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (706) 629-7721 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Common Stock, $.01 par value New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [X] The aggregate market value of the Common Stock of the Registrant held by non- affiliates of the Registrant (31,035,979 shares) on March 6, 2001 was $937,286,566. The aggregate market value was computed by reference to the closing price of the Common Stock on such date. Number of shares of Common Stock outstanding as of March 6, 2001: 52,393,392 shares of Common Stock, $.01 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Definitive Proxy Statement for the 2001 Annual Meeting of Stockholders--Part III ================================================================================ PART I Item 1. Business General Mohawk Industries, Inc. ("Mohawk" or the "Company," a term which includes the Company and its subsidiaries, including its primary operating subsidiaries, Mohawk Carpet Corporation ("Mohawk Carpet") and Aladdin Manufacturing Corporation ("Aladdin Manufacturing", formerly known as Mohawk Manufacturing Corporation) is a leading producer of woven and tufted broadloom carpet and rugs for principally residential applications. The Company is the second largest carpet and rug manufacturer in the United States, with 2000 net sales of approximately $3.3 billion. The Company designs, manufactures and markets carpet and rugs in a broad range of colors, textures and patterns. The Company is widely recognized through its premier brand names, some of which are "Mohawk," "Aladdin," "Mohawk Home," "American Weavers," "Bigelow," "Custom Weave," "Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image," "Karastan," "Mohawk Commercial," "Newmark Rug," "World" and "WundaWeve," and markets its products primarily through carpet retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. Mohawk's operations are vertically integrated from the extrusion of resin and post- consumer plastics into fiber, to the conversion of fiber into yarn and to the manufacture and shipment of finished carpet and rugs. History The Company was organized in Delaware in 1988 to acquire Mohawk Carpet Corporation from its predecessor owner, Mohasco Corporation, in a leveraged buyout transaction. The Company completed its initial public offering of Common Stock in April 1992, raising approximately $42.5 million in proceeds, which were used to retire indebtedness and redeem preferred stock outstanding at that time. Mohawk acquired Horizon Industries, Inc. in October 1992 for approximately $63.9 million in cash and 4,009,500 shares of Common Stock valued at approximately $22.5 million. Mohawk purchased American Rug Craftsmen, Inc. in April 1993 for approximately $32.0 million in cash and Karastan Bigelow in July 1993 for approximately $155.5 million, which was substantially all cash. In May 1993, the Company completed an offering of 4,725,000 shares of Common Stock. Of the total number of shares, 3,600,000 shares were sold by the Company and 1,125,000 shares were sold by selling stockholders. The net proceeds to the Company were approximately $46.0 million. On February 25, 1994, Mohawk acquired all of the common stock of Aladdin Mills, Inc. ("Aladdin") in exchange for approximately 20,343,000 shares of Common Stock, valued at $386.5 million, based upon the closing stock price at the date the agreement was executed. On January 13, 1995, Mohawk acquired all of the capital stock of Galaxy Carpet Mills, Inc. for $42.2 million in cash. On July 23, 1997, the Company acquired certain assets of Diamond Rug & Carpet Mills, Inc. ("Diamond") and other assets owned by Diamond's principal shareholders for approximately $36.0 million, which consisted of $19.6 million in cash at closing, $7.0 million in cash over the six-month period following closing and a $9.4 million note payable in seven annual installments of principal plus interest at 6%. The acquisition was accomplished through a plan of reorganization filed by Diamond under Chapter 11 of the United States Bankruptcy Code. The Company completed its acquisitions of Newmark & James, Inc. ("Newmark") and American Weavers, LLC ("American Weavers"), on June 30, 1998 and August 10, 1998, respectively. On November 12, 1998, the Company acquired all of the outstanding capital stock of World Carpets, Inc. ("World") in exchange for approximately 4.9 million shares of the Company's common stock valued at $149.5 million, based on the closing stock price on the day the agreement was executed. On January 29, 1999, the Company acquired certain assets of Image Industries, Inc. ("Image") for approximately $192 million, including the assumption of $30 million of tax exempt bonds, and on March 9, 1999, the Company acquired all of the outstanding capital stock of Durkan Patterned Carpets, Inc. ("Durkan"), for approximately 3.1 million shares valued at $116.5 million based on the closing stock price the day the letter of intent was executed. 2 On November 14, 2000, the Company acquired certain fixed assets and inventory of Crown Crafts, Inc. ("Crown Crafts") for approximately $37 million. Industry According to the most recent figures available from the United States Department of Commerce, worldwide carpet and rug sales volume of American manufacturers and their domestic divisions was 1.9 billion square yards in 1999. This volume represents a market in excess of approximately $12 billion at the "mill level," which management believes, based on standard industry mark-ups, translates into approximately $19.0 billion to $21.5 billion at the retail level. Based upon data obtained from recent industry publications, the worldwide carpet and rug sales volume of American manufacturers in 2000 was approximately 1.8 billion square yards and $11.0 billion. The overall level of sales in the carpet industry is influenced by a number of factors, including consumer confidence in spending for durable goods, interest rates, turnover in housing, the condition of the residential and commercial construction industries and the overall strength of the economy. Broadloom carpet (defined as carpet over six feet by nine feet in size) represented 81% of the volume shipped by the industry in 1999. Tufted broadloom carpet (a category that refers to the manner of construction in addition to size) represented 95% of the broadloom industry volume shipped in 1999. The broadloom carpet industry has two primary markets, residential and commercial, with the residential market making up approximately 74% of industry volume shipped and the commercial market comprising approximately 26% in 1999. An estimated 54% of industry shipments is made in response to replacement demand, which usually involves exact yardage (or "cut order") shipments that typically provide higher profit margins than sales of carpet sold in full rolls. Because the replacement business generally involves higher quality carpet cut to order by the manufacturer, rather than the dealer, this business tends to be more profitable for manufacturers than the new construction business. Products and Markets The Company designs, manufactures and markets hundreds of styles of carpet, rugs and mats in a broad range of colors, textures and patterns. In addition, Mohawk sells hard surface floorcovering products, which include tile, laminate, vinyl and wood products. Mohawk positions its products in all price ranges and emphasizes quality, style, performance and service. The Company is widely recognized through its premier brand names, "Mohawk," "Aladdin," "American Rug Craftsmen," "American Weavers," " Mohawk Home," "Bigelow," "Bigelow Commercial," "Custom Weave," "Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image," "Karastan," "Karastan Contract," "Mohawk Commercial," "Newmark Rug," "World" and "WundaWeve," and markets its products primarily through carpet retailers, home centers, mass merchandisers, department stores, commercial dealers, and commercial end users. Some products are also marketed through private labeling programs. Mohawk markets certain of its products outside the United States, but does not consider sales of such products to be material. Sales to residential customers represent a significant portion of the total industry and the majority of the Company's sales. The Company currently markets approximately 750 residential products to more than 30,000 customers, which include independent retailers, department stores, mass merchandisers, buying groups, and building and tenant improvement contractors. The Company has positioned its premier residential brand names across all price ranges. "Mohawk," "Custom Weave," "WundaWeve," "Bigelow," "Galaxy," "Horizon," "Helios," "Karastan" and "World," are positioned to sell primarily in the medium-to-high retail price range in the residential broadloom market and these lines are also sold under private labels. These lines have substantial brand name recognition among carpet dealers and retailers with the "Karastan," "Mohawk" and "Bigelow" brands having the highest consumer recognition in the industry. "Karastan" is the leader in the exclusive high-end market. The "Aladdin" brand name competes primarily in the low-to-medium retail price range. The Company believes it is considered a leader within the industry of U.S. carpet manufacturers providing marketing support. Through dealer programs like Karastan Gallery, Mohawk Color Center and Mohawk 3 FloorScapes, the Company offers intensive marketing and advertising support. These programs offer varying degrees of support to dealers in sales and management training, display racks, exclusive promotions and assistance in certain administrative functions such as consumer credit, advertising and insurance. The Company generally markets its residential products through its residential sales forces that report to common management on a regional basis. All of the regional vice presidents report to one senior vice president of sales. Each region has responsibility for sales, distribution and inventory management in its region, all of which is coordinated by the senior vice president of sales at a national level. The inventory management on a regional level is accomplished by a hub-and-spoke distribution network. In this system, Company trucks generally deliver carpet from mill sites to regional warehouses. From there, it is shipped to local distribution warehouses, then to retailers. The Company believes that the current structure of the residential sales group has contributed to a more efficient and profitable organization. The commercial customer base is divided into several groups: educational institutions, corporate office space, hospitality facilities, retail space and health care facilities. In addition, Mohawk produces and sells carpet for the export market, the federal government and other niche businesses. Different purchase decision makers and decision-making processes exist for each group. The sales distribution channels for the commercial products have been divided into five groups based upon traditional marketing paths: Main Street, Dealer Negotiated, Performance Specified, Fashion Specified and Hospitality. The main street channel traditionally offers lower price point carpets sold through retail dealers under the "Aladdin" brand and is distributed through the residential sales force. Products sold into this channel are service driven and price sensitive. The dealer-negotiated channel is serviced through the "Bigelow Commercial" and "World Contract" brands. In this channel large commercial flooring contractors play the most important role in product selection on negotiated project work such as leased commercial office and retail space. This channel is relationship driven and service oriented where top performers are rewarded with a higher percentage of a contractor's discretionary business. The performance specified channel is serviced through the "Mohawk Commercial" and "Mohawk Modular" brands, where long term appearance retention and durability are key buyer criteria for more demanding project environments such as auditorium, airports, schools, institutional buildings and high traffic retail outlets. Woven products are strategically advantaged over tufted products in this market channel due to differentiated performance characteristics that are more highly valued in high traffic installations. The "Karastan Contract" and "Durkan Commercial" brands are sold into the fashion specified channel where distinctive styling and custom product variations are more commonly required for project work. This market channel, almost entirely specified through the architect and specifier channel, includes end use installations such as higher end corporate offices, law firms, boutique retail, and high profile institutional projects. Because of the distinctive styling and tailored pattern detail that can be achieved through the weaving process, woven styling is highly valued among the design community. Both the performance and fashion specified sales groups also solicit business from large end user accounts that typically make product selections centrally for their company through internal facilities managers and purchasing agents. The hospitality and lodging channel markets the "Durkan Hospitality" brand that specializes in complex printed carpets commonly seen in higher end hotels, resort facilities and casinos. The hospitality channel is generally specified through a designer but ultimately sold through independent purchasing agents that consolidate interior furnishings purchase decisions for hotel property owners. Durkan Hospitality has historically offered a premium print product due to an extensive pattern offering distinguished by visually sharper and cleaner color separation in the final product. 4 The Company's ability to make woven carpet under the Mohawk Commercial and Karastan Contract brand names in large volume for commercial applications differentiates it from other manufacturers, most of which produce tufted carpet almost exclusively. Woven carpet and specifically the Company's woven interlock products sell at higher prices than tufted carpet and generally produce higher profit margins. Management believes that the Company is the largest producer of woven carpet in the United States and that the Company has several carpet weaving machines and processes that no other manufacturer has, thereby allowing the Company to create carpet to meet specifications that its competitors cannot duplicate. The machine-made rug market is currently the fastest growing product line of the U. S. carpet and rug industry with an annual growth rate estimated to be approximately 5% in 2000. Much of this growth has occurred at the low-to-medium retail price ranges. The distribution channels for the rug market primarily include department stores, mass merchants, floorcovering stores, catalog stores, home centers and furniture stores. The Company's product lines include a broad array of rugs. The Karastan brand name rugs represent the higher retail price ranges with one of the most valued brand names in the industry and are distributed through specialty stores, along with department and furniture stores. These are higher quality woven wool rugs manufactured primarily on Axminster looms. The Company emphasizes the fast growing lower retail price ranges through the Mohawk Home Division. The rugs sold are primarily woven and tufted polypropylene area rugs, tufted border rugs and decorative mats. These products are distributed primarily through mass merchants and home centers under the brands American Rug Craftsmen and American Weavers. The Company also sells to the bath mat and washable scatter rug components of the rug market through its Townhouse, Newmark and Aladdin brand names. The Aladdin products are tufted nylon and polyester products, which are distributed through department stores and mass merchants. Both the Townhouse and Newmark products are high-end washable cotton bath rugs that are distributed to the luxury market of department stores, specialty stores, and catalogue businesses. Advertising and Promotion The Company promotes its products in the form of co-operative advertising, point-of-sale displays and marketing literature provided to assist in marketing various carpet styles. Mohawk also continues to rely on the substantial brand name identification of its "Aladdin," "Alexander Smith," "American Rug Craftsmen," "American Weavers," "Mohawk Home", "Bigelow," "Bigelow Commercial," "Custom Weave," "Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image," "Karastan," "Karastan Contract," "Mohawk," "Mohawk Commercial," "Newmark Rug," "World" and "WundaWeve" lines. The cost of producing display samples, a significant promotional expense, is partially offset by sales of samples and support from raw materials suppliers. Manufacturing and Operations The Company's manufacturing operations are vertically integrated and include the extrusion of resin and post-consumer plastics into polypropylene, polyester and nylon fiber, yarn processing, tufting, weaving, dyeing, coating and finishing. Capital expenditures are primarily focused on increasing capacity, improving productivity and reducing costs. Mohawk incurred $538 million in capital expenditures over the past three years, including acquisitions. These expenditures increased manufacturing efficiency and capacity, while improving overall cost competitiveness. Raw Materials and Suppliers The principal raw materials the Company uses are nylon staple fibers; nylon filament fibers; raw wool; polypropylene filament fibers; polyester staple fibers; polypropylene, nylon and polyester resins and post-consumer plastics; synthetic backing materials, polyurethane and latex; and various dyes and chemicals. Mohawk obtains all of its major raw materials from independent sources and all of its externally purchased nylon fibers from four major suppliers: E.I. du Pont de Nemours and Company, Solutia, Inc., BASF Corporation and Honeywell, Inc. Most of the fibers the Company uses in carpet production are treated with stain-resistant 5 chemicals. The Company has not experienced significant shortages of raw materials in recent years. The Company believes that the loss of any one supplier would not have a material effect on the Company and that an alternative supply arrangement could be made in a relatively short period of time. Competition All of the markets in which the Company does business are highly competitive, with less than 100 companies engaged in the manufacture and sale of carpet in the United States. Certain of the Company's competitors may have greater financial resources than the Company. Carpet manufacturers also face competition from the hard surface floorcovering industry. Based on industry publications, the top twenty North American carpet and rug manufacturers (including their American and foreign divisions) in 1999 had worldwide sales in excess of $17 billion, and the top twenty manufacturers in 1990 had sales in excess of $6 billion. In 1999, the top five manufacturers had worldwide sales in excess of $12 billion. Mohawk, with 2000 net sales of approximately $3.3 billion, is the second largest producer of carpet and rugs (in terms of sales volume). The principal methods of competition within the industry are price, style, quality and service. In each of the Company's markets, price competition and market coverage are particularly important because there is relatively little perceived differentiation among competing product lines. Mohawk's recent investments in modernized, advanced manufacturing and data processing equipment, the extensive diversity of equipment in which it has invested and its marketing strategy contribute to its ability to compete primarily on the basis of performance, quality, style and service, rather than just price. Trademarks Mohawk uses several trademarks that it considers important in the marketing of its products, including "Aladdin," "Alexander Smith (R)," "Mohawk Home," "Bigelow (R)," "Ciboney (R)," "Commercial Horizons (R)," "Custom Weave" "Galaxy (R)" "Hamilton (R)" "Harbinger (R)," "Helios (R)," "Horizon (R)," "Image," "Karastan (R)," "Mohawk (R)," "Mohawk Color Center (R)," "Mohawk Commercial," "Tommy Mohawk (R)," "Townhouse (R)," "World (R)" and "WundaWeve (R)." Sales Terms and Major Customers The Company's sales terms are the same as those generally available throughout the industry. The Company generally permits its customers to return broadloom carpet purchased from it within 30 days from the date of sale if the customer is not satisfied with the quality of the carpet. This return policy is consistent with the Company's emphasis on quality, style and performance and promotes customer satisfaction without generating enough returns to affect materially the Company's operating results or financial position. During 2000, no single customer accounted for more than 10.0% of Mohawk's total net sales. The Company believes the loss of one or a few major customers would not have a material adverse effect on the Company's business. Backlog Backlog of orders is generally insignificant in the carpet manufacturing business because most residential orders are filled within several days and commercial backlogs reflect the terms of the relevant contracts, which generally require delivery within four to six weeks. Employees As of December 31, 2000, the Company employed 24,005 persons. Approximately 261 Mohawk employees are members of the Union of Needletrades, Industrial and Textile Employees, AFL-CIO, CLC with which the Company is party to a collective bargaining agreement. Other than with respect to these employees, the Company is not a party to any collective bargaining agreements. Additionally, the Company has not experienced any strikes or work stoppages. The Company believes that its relations with its employees are good. 6 Environmental Matters The Company's operations must meet federal, state and local regulations governing the discharge of materials into the environment. All of the plants operated by the Company were built or have been upgraded to meet current environmental standards. The Company believes it is in material compliance with all applicable regulations. The Company estimates that any expenses incurred in maintaining compliance with these regulations will not materially affect earnings. Cyclical Nature of Industry; Current Economic Conditions The carpet industry is a cyclical business, influenced by a number of general economic factors, including consumer confidence, spending for durable goods, disposable income, interest rates, turnover in housing and the condition of the residential and commercial construction industries (including the number of new housing starts and the level of commercial construction). During economic downturns, the carpet industry can be expected to experience a general decline in sales and profitability. Item 2. Properties The Company owns a 47,500 square foot headquarters office in Calhoun, Georgia on an eight acre site. The following table lists the principal manufacturing and distribution facilities owned by the Company:

Approx. Enclosed Area in Square Location Primary Products or Purposes Footage ---------------------- ----------------------------------------------------------- --------------- Dalton, GA............ Carpet and rug manufacturing and warehousing............. 2,089,000 Dalton, GA............ Carpet manufacturing, distribution and offices........... 1,103,200 Dalton, GA............ Carpet manufacturing, distribution and offices........... 396,900 Dalton, GA............ Carpet and yarn manufacturing............................ 1,101,600 Chatsworth, GA........ Carpet manufacturing, warehousing and offices............ 787,800 Dublin, GA............ Carpet manufacturing, warehousing and offices............ 831,000 Lyerly, GA............ Carpet manufacturing and warehousing..................... 820,000 Eden, NC.............. Carpet and rug manufacturing............................. 784,200 Calhoun, GA........... Carpet manufacturing and distribution center............. 792,000 Dalton, GA............ Carpet manufacturing..................................... 342,000 Eton, GA.............. Carpet manufacturing..................................... 577,205 Armuchee, GA.......... Carpet manufacturing..................................... 232,000 Chatsworth, GA........ Distribution center...................................... 812,075 Shannon, GA........... Distribution center...................................... 567,000 Landrum, SC........... Weaving and finishing of carpet.......................... 350,000 Dalton, GA............ Carpet dyeing............................................ 259,000 Dalton, GA............ Carpet dyeing............................................ 216,000 Dalton, GA............ Sample storage and distribution.......................... 123,000 Eden, NC.............. Carpet and rug distribution.............................. 194,000 Summerville, GA....... Sample manufacturing and distribution.................... 235,000 Chatsworth, GA........ Sample manufacturing..................................... 291,800 Sugar Valley, GA...... Rug manufacturing, warehousing and offices............... 472,500 Dalton, GA............ Rug manufacturing and offices............................ 135,000 Calhoun, GA........... Rug manufacturing and warehousing........................ 250,000 Chatsworth, GA........ Yarn extrusion........................................... 257,800 Summerville, GA....... Yarn extrusion........................................... 579,000 Dahlonega, GA......... Yarn manufacturing....................................... 380,000 Calhoun Falls, SC..... Yarn manufacturing....................................... 425,000 Bennettsville, SC..... Yarn manufacturing....................................... 412,000 Dalton, GA............ Yarn manufacturing....................................... 105,400 Laurel Hill, NC....... Yarn manufacturing....................................... 203,000

7 Fort Oglethorpe, GA... Yarn manufacturing....................................... 194,000 Dalton, GA............ Yarn manufacturing....................................... 231,000 Dalton, GA............ Yarn manufacturing....................................... 180,000 Calhoun, GA........... Yarn manufacturing....................................... 121,000 Calhoun, GA........... Yarn manufacturing....................................... 113,800 Dillon, SC............ Yarn manufacturing....................................... 102,000 South Pittsburg, TN... Yarn manufacturing....................................... 102,000 Chatsworth, GA........ Yarn manufacturing....................................... 138,100 Rome, GA.............. Yarn manufacturing....................................... 240,400 Rome, GA.............. Yarn manufacturing....................................... 224,000 Cartersville, GA...... Yarn manufacturing....................................... 178,100 Milledgeille, GA...... Yarn manufacturing....................................... 255,000 Ulmer, SC............. Yarn manufacturing....................................... 238,666 Chatsworth, GA........ Yarnset plant............................................ 121,200 Chatsworth, GA........ Commercial warehouse..................................... 128,000 Eton, GA.............. Storage warehouse........................................ 121,300 Greenville, NC........ Wool processing.......................................... 103,000 Calhoun, GA........... Textile and rug manufacturing............................ 287,688 Chatsworth, GA........ Warping, warehousing..................................... 112,121 Calhoun, GA........... Textile manufacturing, distribution and offices.......... 207,432 Calhoun, GA........... Distribution center...................................... 300,248 _________ The following table lists the Company's material leased office, manufacturing and warehouse facilities:

Approx. Enclosed Area in Square Lease Term Location Primary Products or Purposes Footage Through (1) ---------------------- -------------------------------------------------- ------------- -------------- Calhoun, GA........... Mat manufacturing and warehouse (2)............. 164,400 Jun-2004 Calhoun, GA........... Rug manufacturing, warehouse and offices........ 131,865 Mar-2008 Calhoun, GA........... Yarn manufacturing.............................. 110,700 Mar-2008 La Mirada, CA......... Distribution warehouse.......................... 360,200 Jan-2011 La Mirada, CA......... Distribution warehouse.......................... 100,000 Jan-2011 Grand Prairie, TX..... Distribution warehouse.......................... 202,890 Jun-2012 Bowlingbrook, IL...... Distribution warehouse.......................... 201,959 Nov-2019 Glen Burnie, MD....... Distribution warehouse.......................... 187,200 Apr-2007 Pembroke Park, FL..... Distribution warehouse.......................... 258,270 Jul-2020 Pompton Plains, NJ.... Distribution warehouse.......................... 164,437 Jul-2011 Columbus, OH.......... Distribution warehouse.......................... 135,000 Sep-2004 Romeoville, IL........ Distribution warehouse.......................... 108,000 Oct-2004 Lathrop, CA Distribution warehouse.......................... 101,112 Feb 2012 Calhoun, GA........... Carpet manufacturing............................ 263,162 Mar-2006 Bentonville, AR....... Textile manufacturing........................... 134,067 Nov-2004 Kensington, GA........ Warehouse....................................... 277,484 May-2001 Kent, WA.............. Distribution warehouse.......................... 120,950 Nov-2020

____________ (1) Include renewal options exercisable by the Company. (2) Includes a number of separately leased adjoining or adjacent buildings with varying lease terms. The expiration date shown in the table is the earliest expiration date of the respective group of leases. The Company's properties are in good condition and adequate for its requirements. The Company also believes its principal plants are generally adequate to meet its production plans pursuant to its long-term sales goals. In the ordinary course of its business, the Company monitors the condition of its facilities to ensure that they remain adequate to meet long-term sales goals and production plans. 8 Item 3. Legal Proceedings The Company is involved in routine litigation from time to time in the regular course of its business. Except as noted below, there are no material legal proceedings pending or known to be contemplated to which the Company is a party or to which any of its property is subject. In December 1995, the Company and four other carpet manufacturers were added as defendants in a purported class action lawsuit, In re Carpet Antitrust Litigation, pending in the United States District Court for the Northern District of Georgia, Rome Division. The amended complaint alleges price-fixing regarding polypropylene products in violation of Section One of the Sherman Act. In September 1997, the Court granted the plaintiffs' motion to certify the class. In October 1998, two plaintiffs, on behalf of an alleged class of purchasers of nylon carpet products, filed a complaint in the United States District Court for the Northern District of Georgia against the Company and two of its subsidiaries, as well as certain competitors. The complaint alleges that the Company acted in concert with other carpet manufacturers to restrain competition in the sale of certain nylon carpet products. The Company filed an answer, denied the allegations in the complaint and set forth its defenses. On August 11, 2000, the Company presented to the Court the terms of an agreement in principle to settle these two cases. Under the terms of the settlement agreement, the Company will contribute $13.5 million to a settlement fund to resolve price-fixing claims brought by a class of purchasers of polypropylene carpet and a proposed settlement class of purchasers of nylon carpet. The Company recorded a charge of $7 million in the third quarter of 2000, in connection with the lawsuit. The Company denies all liability and wrongdoing and has agreed to settle these claims in order to avoid the costs of further litigation. The court dismissed all claims against the Company and granted final approval to the settlement on February 5, 2001. The Company is a party to two consolidated lawsuits captioned Gaehwiler v. Sunrise Carpet Industries, Inc. et al. and Patco Enterprises, Inc. v. Sunrise Carpet Industries, Inc. et al., both of which were filed in the Superior Court of the State of California, City and County of San Francisco, in 1996. Both complaints were brought on behalf of a purported class of indirect purchasers of polypropylene carpet in the State of California and seek damages for alleged violations of California antitrust and unfair competition laws. In February 1999, a similar complaint was filed in the Superior Court of the State of California, City and County of San Francisco, on behalf of a purported class based on indirect purchasers of nylon carpet in the State of California and alleges violations of California antitrust and unfair competition laws. The complaints described above do not specify any specific amount of damages but do request injunctive relief and treble damages plus reimbursement for fees and costs. The Company believes it has meritorious defenses and intends to vigorously defend against these actions. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders of the Company during the fourth quarter ended December 31, 2000. 9 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Market for the Common Stock The Company's common stock is quoted on the New York Stock Exchange ("NYSE") under the symbol "MHK." The table below shows the high and low sales prices per share of the Common Stock as reported on the NYSE Composite Tape, for each fiscal period indicated.

Mohawk Common Stock ------------------------- High Low ----------- ---------- 1999 ---- First quarter.......................................... $ 42.00 25.94 Second quarter......................................... 38.56 28.19 Third quarter.......................................... 30.44 18.38 Fourth quarter......................................... 26.81 19.69 2000 ---- First quarter.......................................... $ 26.00 18.94 Second quarter......................................... 26.25 20.50 Third quarter.......................................... 27.81 21.13 Fourth quarter......................................... 29.13 19.06 2001 ---- First quarter (through March 6, 2001).................. $ 32.60 26.69

As of March 6, 2001, there were 396 holders of record of Common Stock. Mohawk has not paid or declared any cash dividends on shares of its Common Stock since completing its initial public offering. The Company's policy is to retain all net earnings for the development of its business, and it does not anticipate paying cash dividends on the Common Stock in the foreseeable future. The payment of future cash dividends will be at the sole discretion of the Board of Directors and will depend upon the Company's profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board of Directors. The payment of cash dividends is limited by certain covenants within various Company loan agreements. 10 Item 6. Selected Financial Data The following table sets forth the selected financial data of the Company for the periods indicated, derived from the consolidated financial statements of the Company. On July 23, 1997, the Company acquired certain assets of Diamond and other assets owned by Diamond's principal shareholders using the purchase method of accounting. On November 12, 1998, the Company acquired all of the outstanding capital stock of World in exchange for approximately 4.9 million shares of the Company's common stock in a transaction recorded using the pooling-of-interests method of accounting. On January 29, 1999, the Company acquired certain assets and assumed certain liabilities of Image. The acquisition was recorded using the purchase method of accounting. On March 9, 1999, the Company acquired all of the outstanding capital stock of Durkan in exchange for approximately 3.1 million shares of the Company's common stock in a transaction recorded using the pooling-of-interests method of accounting. On November 14, 2000, the Company acquired certain fixed assets and inventory of Crown Crafts. The acquisition was accounted for using the purchase method of accounting. All financial data have been restated to include the accounts and results of operations of World and Durkan. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and notes thereto included elsewhere herein.

At or for the Years ended December 31, ---------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- -------------- -------------- -------------- -------------- (In thousands, except per share data) Statement of earnings data: Net sales............................. $ 3,255,846 3,083,264 2,744,620 2,429,085 2,239,471 Cost of sales......................... 2,432,997 2,306,405 2,063,333 1,869,221 1,726,765 -------------- -------------- -------------- -------------- -------------- Gross profit........................ 822,849 776,859 681,287 559,864 512,706 Selling, general and administrative expenses............................ 505,734 482,062 432,191 383,523 367,251 Restructuring costs (a)............... - - - - 700 Carrying value reduction of property, plant and equipment and other assets (b).......................... - - 2,900 5,500 3,060 Class action legal settlement (c)..... 7,000 - - - - Compensation expense for stock option exercises (d)................ - - - 2,600 - -------------- -------------- -------------- -------------- -------------- Operating income.................... 310,115 294,797 246,196 168,241 141,695 -------------- -------------- -------------- -------------- -------------- Interest expense...................... 38,044 32,632 31,023 36,474 39,772 Acquisition costs - World Merger (e) - - 17,700 - - Other expense, net.................... 4,442 2,266 2,667 338 4,586 -------------- -------------- -------------- -------------- -------------- 42,486 34,898 51,390 36,812 44,358 -------------- -------------- -------------- -------------- -------------- Earnings before income taxes........ 267,629 259,899 194,806 131,429 97,337 Income taxes.......................... 105,030 102,660 79,552 51,866 40,395 -------------- -------------- -------------- -------------- -------------- Net earnings........................ $ 162,599 157,239 115,254 79,563 56,942 ============== ============== ============== ============== ============== Basic earnings per share (f).......... $ 3.02 2.63 1.91 1.33 0.96 ============== ============== ============== ============== ============== Weighted-average common shares outstanding (f)..................... 53,769 59,730 60,393 59,962 59,310 ============== ============== ============== ============== ============== Diluted earnings per share (f)........ $ 3.00 2.61 1.89 1.32 0.95 ============== ============== ============== ============== ============== Weighted-average common and dilutive potential common shares outstanding (f).................... 54,255 60,349 61,134 60,453 59,899 ============== ============== ============== ============== ==============

11

At or for the Years ended December 31, ---------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 -------------- -------------- -------------- -------------- -------------- (In thousands, except per share data) Balance sheet data: Working capital....................... $ 427,192 560,057 438,474 389,378 390,889 Total assets.......................... 1,792,641 1,682,873 1,405,486 1,233,361 1,226,959 Short-term note payable............... - - - - 21,200 Long-term debt (including current portion)......................... 589,828 596,065 377,089 402,854 486,952 Stockholders' equity.................. 754,360 692,546 611,059 493,841 409,616

(a) During 1996, the Company recorded pre-tax restructuring costs of $0.7 million, related to certain mill closings whose operations have been consolidated into other Mohawk facilities. (b) During 1996, the Company recorded a charge of $3.1 million arising from the write-down of property, plant and equipment to be disposed of related to the closing of a manufacturing facility in 1996 and a revision in the estimate of fair value of certain property, plant and equipment based on current market conditions related to mill closings in 1995. During 1997, the Company recorded a charge of $5.5 million arising from a revision in the estimated fair value of certain property, plant and equipment held for sale based on current appraisals and other market information related to a mill closing in 1995. During 1998, the Company recorded a charge of $2.9 million for the write-down of assets to be disposed of relating to the acquisition of World. (c) The Company recorded a one-time charge of $7.0 million in 2000, reflecting the settlement of two antitrust class action price-fixing lawsuits. (d) A charge of $2.6 million was recorded in 1997, for income tax reimbursements to be made to certain executives related to the exercise of stock options granted in 1988 and 1989 in connection with the Company's 1988 leveraged buyout. (e) The Company recorded a one-time charge of $17.7 million in 1998 for transaction expenses related to the World Merger. (f) The Board of Directors declared a 3-for-2 stock split on October 23, 1997, which was paid on December 4, 1997 to holders of record on November 4, 1997. Earnings per share and weighted-average common share data have been restated to reflect the split. 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations General During the three-year period ended December 31, 2000, the Company continued to experience significant growth both internally and through acquisitions. The Company completed its acquisitions of Newmark and American Weavers on June 30, 1998 and August 10, 1998, respectively. Both of these acquisitions were accounted for using the purchase method of accounting. On November 12, 1998, the Company acquired all of the outstanding capital stock of World in exchange for approximately 4.9 million shares of the Company's common stock valued at $149.5 million, based on the closing stock price on the day the agreement was executed. The acquisition of World was accounted for using the pooling-of- interests method of accounting. On January 29, 1999, the Company acquired certain assets of Image for approximately $192 million, including acquisition costs and the assumption of $30 million of tax-exempt debt, and on March 9, 1999, the Company acquired all of the outstanding capital stock of Durkan for approximately 3.1 million shares of the Company's common stock valued at $116.5 million based on the closing stock price the day the letter of intent was executed. The Image acquisition was accounted for using the purchase method of accounting, and the Durkan acquisition was accounted for using the pooling-of-interests method of accounting. On November 14, 2000, the Company acquired certain assets of Crown Crafts. Under the agreement, the Company paid approximately $37 million in cash for substantially all of the fixed assets and inventory of the division. The acquisition was accounted for using the purchase method of accounting. These acquisitions have created opportunities to enhance Mohawk's operations by (i) broadening price points, (ii) increasing vertical integration efforts, (iii) expanding distribution capabilities and (iv) facilitating entry into niche businesses, such as rugs, decorative throws, bedspreads and coverlets. Effective November 1, 2000, the Company entered into an agreement with Congoleum Corporation, Inc. to become a national distributor of their vinyl products. This gave the Company access to a complete line of soft and hard floor covering products to supply to customers throughout the United States. In conjunction with this program and the other hard surface floor covering initiatives being undertaken by the Company, the Company anticipates significant start up costs with the roll out of these product lines into all sales regions during 2001. In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue Recognition" was issued requiring that revenue be recognized when certain criteria are met. In addition, the Emerging Issues Task Force ("EITF") reached a consensus on issue EITF 00-10 in September 2000, "Accounting for Shipping and Handling Fees and Costs". The Company has analyzed the implications of both SAB 101 and EITF 00-10 and believes that these pronouncements did not have a material impact on the Company's consolidated financial statements. As the Company looks forward at this time, it sees the impact of a slowing economy. In May 2000, industry unit shipments turned negative when compared to the prior year and have remained negative for each subsequent month through December 2000. Raw material prices rose over the last twelve months but appear to have peaked while natural gas and utility costs continue to increase. On the positive side the Company has announced a price increase for selected residential carpet, effective March 2001.The hard surface product expansion is progressing very favorably with customers but significant sampling and personnel costs will be incurred during the first half of 2001 without the offsetting growth in margins. The Company is encouraged by its customer acceptance of its programs and brand recognition efforts. In addition, the Company is pleased by the Federal Reserve's recent move to lower interest rates and congressional consideration of potential tax reductions. These impacts are expected to have a long-term favorable impact on the economy. 13 Results of Operations Year Ended December 31, 2000 as Compared with Year Ended December 31, 1999 -------------------------------------------------------------------------- Net sales for the year ended December 31, 2000 were $3,255.8 million, reflecting an increase of $172.6 million, or approximately 5.6%, over the $3,083.3 million reported in the year ended December 31, 1999. The Company believes that the 2000 net sales increase was attributable primarily to internal growth. Quarterly net sales and the percentage changes in net sales by quarter for 2000 versus 1999 were as follows (dollars in thousands):

2000 1999 Change ------------------ --------------- --------------- First quarter...................... $ 765,083 707,167 8.2% Second quarter..................... 852,808 790,617 7.9 Third quarter...................... 838,514 809,933 3.5 Fourth quarter..................... 799,441 775,547 3.1 ------------------ --------------- --------------- Total year.................. $ 3,255,846 3,083,264 5.6% ================== =============== ===============

Gross profit for 2000 was $822.9 million (25.3% of net sales) and represented an increase over the gross profit of $776.9 million (25.2% of net sales) for 1999. Gross profit dollars for the current year were impacted by favorable product mix and the change in depreciable lives of fixed assets as of the beginning of the year and offset by higher material and fuel costs. Selling, general and administrative expenses for 2000 were $505.7 million (15.5% of net sales) compared to $482.1 million (15.6% of net sales) for 1999. In the third quarter of 2000, the Company reached an agreement in principle to settle two antitrust class actions. The Company will contribute $13.5 million to a settlement fund to resolve these claims. The court approved the settlement on February 5, 2001. During the third quarter, the Company recorded a charge of $7 million in connection with the settlement. Interest expense for the current year was $38.0 million compared to $32.6 million in 1999. The primary factors contributing to the increase were higher debt levels, attributable to the stock repurchase program and capital expenditures, and an increase in the weighted average borrowing rate compared to 1999. In the current year, income tax expense was $105.0 million or 39.2% of earnings before income taxes. In 1999, income tax expense was $102.7 million, representing 39.5% of earnings before income taxes. Year Ended December 31, 1999 as Compared with Year Ended December 31, 1998 -------------------------------------------------------------------------- Net sales for the year ended December 31, 1999 were $3,083.3 million, reflecting an increase of $338.6 million, or approximately 12.3%, over the $2,744.6 million reported in the year ended December 31, 1998. All major product categories achieved sales increases in 1999 as compared to 1998. The Company believes that the 1999 net sales increase was attributable to internal growth and the acquisition of Image. Quarterly net sales and the percentage changes in net sales by quarter for 1999 versus 1998 were as follows (dollars in thousands):

1999 1998 Change ------------------ --------------- --------------- First quarter...................... $ 707,167 589,473 20.0% Second quarter..................... 790,617 689,488 14.7 Third quarter...................... 809,933 718,772 12.7 Fourth quarter..................... 775,547 746,887 3.8 ------------------ --------------- --------------- Total Year.................. $ 3,083,264 2,744,620 12.3% ================== =============== ===============

14 The Company's fiscal calendar reflected differences for the 1999 first quarter, with four more shipping days, when compared to 1998 and four fewer shipping days when the fourth quarter of 1999 is compared to 1998. Gross profit for 1999 was $776.9 million (25.2% of net sales) and represented an increase over the gross profit of $681.3 million (24.8% of net sales) for 1998. Gross profit dollars for 1999 were impacted favorably by better absorption of fixed costs through higher production volume. Selling, general and administrative expenses for 1999 were $482.1 million (15.6% of net sales) compared to $432.2 million (15.7% of net sales) for 1998. Interest expense for 1999 was $32.6 million compared to $31.0 million in 1998. The primary factor contributing to the increase was an increase in debt levels, which was attributable to acquisitions, the stock repurchase program and capital expenditures, which was offset by a decrease in the Company's weighted average interest rate in 1999. In 1999, income tax expense was $102.7 million, or 39.5% of earnings before income taxes. In 1998, income tax expense was $79.6 million, representing 40.8% of earnings before income taxes. The primary reason for the decrease in the 1999 effective income tax rate was that certain costs included in the nonrecurring pre-tax charge of $17.7 million related to the World acquisition recorded in 1998 were not deductible for income tax purposes. Liquidity and Capital Resources The Company's primary capital requirements are for working capital, capital expenditures and acquisitions. The Company's capital needs are met through a combination of internally generated funds, bank credit lines and credit terms from suppliers. The level of accounts receivable increased from $337.8 million at the beginning of 2000 to $356.1 million at December 31, 2000. The $18.3 million increase was attributable to strong sales growth. Inventories increased from $494.8 million at the beginning of 2000 to $574.6 million at December 31, 2000, due primarily to the need for a higher level of inventory to meet the increased sales volume, the expansion of hard surface product lines to meet anticipated sales requirements and the addition of Crown Crafts inventory. Capital expenditures totaled $73.5 million during 2000, and the Company spent an additional $37 million related to the purchase of certain assets of Crown Crafts. The capital expenditures made during 2000 were incurred primarily to modernize and expand manufacturing facilities and equipment. The Company's capital projects are primarily focused on increasing capacity, improving productivity and reducing costs. Capital expenditures for Mohawk, including $235.9 million for acquisitions, have totaled $538 million over the past three years. Capital spending during 2001 is expected to range from $96 million to $111 million, the majority of which will be used to purchase equipment to increase production capacity and productivity. The Company's credit agreement provides for an interest rate of either (i) LIBOR plus 0.2% to 0.5%, depending upon the Company's performance measured against certain financial ratios, or (ii) the prime rate less 1.0% and has a termination date of January 28, 2004. At December 31, 2000, the Company had credit availability of $450 million under its revolving credit line and $70 million under various short-term uncommitted credit lines. At December 31, 2000, a total of approximately $267 million was unused under these lines. The credit agreement contains customary financial and other covenants. The Company must pay an annual facility fee ranging from .0015 to .0025 of the total credit commitment, depending upon the Company's performance measured against specific coverage ratios, under the revolving credit line. During 1999, the Company's Board of Directors authorized the repurchase of up to 10 million shares of its outstanding common shares. During the quarter ended July 1, 2000, the Board of Directors authorized an additional repurchase of 5 million outstanding shares bringing the total authorized repurchase to 15 million shares. For the year ended December 31, 2000, a total of approximately 4.7 million shares of the Company's common stock was purchased at an aggregate cost of approximately $106.7 million. Since the inception of the program, a total of approximately 8.7 million shares has been repurchased at an aggregate cost of approximately 15 $192.6 million. All of this repurchase has been financed through the Company's operations and revolving line of credit. During October 2000, the Company entered into a one-year asset securitization agreement enabling the Company to sell up to $205 million of an undivided interest in a defined pool of trade accounts receivable. The agreement may be extended in one-year terms. The net proceeds from this borrowing were used to reduce borrowings under the revolving credit facility. At December 31, 2000, a total of approximately $191 million was outstanding under the asset securitization agreement. On January 3, 2001, the Company entered into a five-year interest rate swap, which converted approximately $100 million of its variable rate debt to a fixed rate. Under the agreement payments are made based on a fixed rate of 5.82% and received on a LIBOR based variable rate. Differentials received or paid under the agreement will be recognized as interest expense. Impact of Inflation Inflation affects the Company's manufacturing costs and operating expenses. The carpet industry has experienced significant inflation in the prices of raw materials and fuel-related costs, beginning in the third quarter of 1999. For the period from 1998, through the end of the second quarter of 1999, the carpet industry has experienced moderate inflation in the prices of raw materials and fuel-related costs. The Company has generally passed along nylon fiber price increases to its customers although additional costs resulting from recent significant inflationary pressures may not be fully recoverable through such price increases in the near-term. Seasonality The carpet business is seasonal, with the Company's second, third and fourth quarters typically producing higher net sales and operating income. By comparison, results for the first quarter tend to be the weakest. This seasonality is primarily attributable to consumer residential spending patterns and higher installation levels during the spring and summer months. Certain factors affecting the Company's performance In addition to the other information provided in this Form 10-K, the following risk factors should be considered when evaluating an investment in shares of Mohawk common stock. A failure by Mohawk to complete acquisitions and successfully integrate acquired -------------------------------------------------------------------------------- operations could materially and adversely affect its business. -------------------------------------------------------------- Management intends to pursue acquisitions of complementary businesses as part of its business and growth strategies. Although management regularly evaluates acquisition opportunities, it cannot offer assurance that it will be able to: . successfully identify suitable acquisition candidates; . obtain sufficient financing on acceptable terms to fund acquisitions; . complete acquisitions; . integrate acquired operations into Mohawk's existing operations; or . profitably manage acquired businesses. Acquired operations may not achieve levels of sales, operating income or productivity comparable to those of Mohawk's existing operations, or otherwise perform as expected. Acquisitions may also involve a number of special risks, some or all of which could have a material adverse effect on Mohawk's business, results of operations and financial condition, including, among others: . possible adverse effects on Mohawk's operating results; . diversion of Mohawk management's attention and its resources; and . dependence on retaining and training acquired key personnel. 16 The carpet industry is cyclical and a downturn in the overall economy could --------------------------------------------------------------------------- lessen the demand for Mohawk's products and impair growth and profitability. ---------------------------------------------------------------------------- The carpet industry is cyclical and is influenced by a number of general economic factors. Prevailing interest rates, consumer confidence, spending for durable goods, disposable income, turnover in housing and the condition of the residential and commercial construction industries (including the number of new housing starts and the level of new commercial construction) all have an impact on Mohawk's growth and profitability. In addition, sales of Mohawk's principal products are related to construction and renovation of commercial and residential buildings. Any adverse cycle could lessen the overall demand for Mohawk's products and could, in turn, impair Mohawk's growth and profitability. The carpet business is seasonal and this seasonality causes Mohawk's results of ------------------------------------------------------------------------------- operations to fluctuate on a quarterly basis. --------------------------------------------- Mohawk is a calendar year end company and its results of operations for the first quarter tend to be the weakest. Mohawk's second, third and fourth quarters typically produce higher net sales and operating income. These results are primarily due to consumer residential spending patterns and more carpet being installed in the spring and summer months. Mohawk's business is competitive and a failure by Mohawk to compete effectively ------------------------------------------------------------------------------- could have a material and adverse impact on Mohawk's results of operations. --------------------------------------------------------------------------- Mohawk operates in a highly competitive industry. Mohawk and other manufacturers in the carpet industry compete on the basis of price, style, quality and service. Some of Mohawk's competitors may have greater financial resources at their disposal. If competitors substantially increase production and marketing of competing products, then Mohawk might be required to lower its prices or spend more on product development, marketing and sales, which could adversely affect Mohawk's profitability. An increase in the cost of raw materials could negatively impact Mohawk's ------------------------------------------------------------------------- profitability. -------------- The cost of raw materials has a significant impact on the profitability of Mohawk. In particular, Mohawk's business requires it to purchase large volumes of nylon fiber and polypropylene resin, which is used to manufacture fiber. The cost of these raw materials is related to oil prices. Mohawk does not have any long-term supply contracts for any of these products. While Mohawk generally attempts to match cost increases with price increases, large increases in the cost of such raw materials could adversely affect its business, results of operations and financial condition if it is unable to pass these costs through to its customers. Mohawk may be responsible for environmental cleanup, which could negatively --------------------------------------------------------------------------- impact profitability. --------------------- Various federal, state and local environmental laws govern the use of Mohawk's facilities. Such laws govern: . discharges to air and water; . handling and disposal of solid and hazardous substances and waste; and . remediation of contamination from releases of hazardous substances in Mohawk's facilities and off-site disposal locations. Mohawk's operations are also governed by the laws relating to workplace safety and worker health, which, among other things, establish asbestos and noise standards and regulate the use of hazardous chemicals in the workplace. Mohawk has taken and will continue to take steps to comply with these laws. Based upon current available information, Mohawk believes that complying with environmental and safety and health requirements will not require material capital expenditures in the foreseeable future. However, Mohawk cannot provide assurance that complying with these environmental or health and safety laws and requirements will not adversely affect its business, results of operations and financial condition. Future laws, ordinances or regulations could give rise to additional compliance or remediation costs, which could have a material adverse effect on its business, results of operations and financial condition. 17 Forward-Looking Information Certain of the matters discussed in the preceding pages, particularly regarding anticipating future financial performance, business prospects, growth and operating strategies, proposed acquisitions, new products and similar matters, and those preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "estimates" or similar expressions constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended. For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward- looking statements involve a number of risks and uncertainties. The following important factors, in addition to those discussed elsewhere in this document, affect the future results of Mohawk and could cause those results to differ materially from those expressed in the forward-looking statements: materially adverse changes in economic conditions generally in the carpet, rug and floorcovering markets served by Mohawk; competition from other carpet, rug and floorcovering manufacturers; raw material prices; timing and level of capital expenditures; the successful integration of acquisitions, including the challenges inherent in diverting Mohawk management's attention and resources from other strategic matters and from operational matters for an extended period of time; the successful introduction of new products; the successful rationalization of existing operations; and other risks identified from time to time in the Company's SEC reports and public announcements. Any forward-looking statements represent Mohawk's estimates only as of the date of this report and should not be relied upon as representing Mohawk's estimates of any subsequent date. While Mohawk may elect to update forward-looking statements at some point in the future, Mohawk specifically disclaims any obligation to do so, even if Mohawk's estimates change. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company's market risk-sensitive instruments do not subject the Company to material market risk exposures other than as described below. The Company estimates that a 1% increase in the Company's cost of borrowed funds could have yielded an approximate $4.8 million adverse effect on 2000 pre-tax earnings. The Company manages exposure to interest rate risk using interest rate swaps to fix portions of variable rate debt. Item 8. Consolidated Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report................................................................ 19 Consolidated Balance Sheets as of December 31, 2000 and 1999................................ 20 Consolidated Statements of Earnings for the Years ended December 31, 2000, 1999 and 1998.... 21 Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2000, 1999 and 1998....................................................... 22 Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and 1998.. 23 Notes to Consolidated Financial Statements.................................................. 24 18 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors and Stockholders Mohawk Industries, Inc.: We have audited the consolidated financial statements of Mohawk Industries, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in Item 14(a)2. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mohawk Industries, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG LLP Atlanta, Georgia February 2, 2001 19 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2000 and 1999 (In thousands, except per share data)

ASSETS 2000 1999 ------------- ------------- Current assets: Receivables.............................................................................. $ 356,072 337,824 Inventories.............................................................................. 574,595 494,774 Prepaid expenses......................................................................... 26,973 25,184 Deferred income taxes.................................................................... 66,474 76,628 ------------- ------------- Total current assets............................................................ 1,024,114 934,410 Property, plant and equipment, net.......................................................... 650,053 624,814 Other assets................................................................................ 118,474 123,649 ------------- ------------- $ 1,792,641 1,682,873 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt........................................................ $ 224,391 33,961 Accounts payable and accrued expenses.................................................... 372,531 340,392 ------------- ------------- Total current liabilities....................................................... 596,922 374,353 Deferred income taxes....................................................................... 75,808 53,783 Long-term debt, less current portion........................................................ 365,437 562,104 Other long-term liabilities................................................................. 114 87 ------------- ------------- Total liabilities............................................................... 1,038,281 990,327 ------------- ------------- Stockholders' equity: Preferred stock, $.01 par value; 60 shares authorized; no shares issued.................. - - Common stock, $.01 par value; 150,000 shares authorized; 60,838 and 60,657 shares issued in 2000 and 1999, respectively........................................... 608 607 Additional paid-in capital............................................................... 183,303 179,993 Retained earnings........................................................................ 758,531 595,932 ------------- ------------- 942,442 776,532 Less treasury stock at cost; 8,538 and 3,952 shares in 2000 and 1999, respectively..... 188,082 83,986 ------------- ------------- Total stockholders' equity...................................................... 754,360 692,546 Commitments and contingencies (Note 12)..................................................... ------------- ------------- $ 1,792,641 1,682,873 ============= =============

See accompanying notes to consolidated financial statements. 20 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Years Ended December 31, 2000, 1999 and 1998 (In thousands, except per share data)

2000 1999 1998 --------------- ------------- ------------- Net sales......................................................................... $ 3,255,846 3,083,264 2,744,620 Cost of sales..................................................................... 2,432,997 2,306,405 2,063,333 --------------- ------------- ------------- Gross profit............................................................... 822,849 776,859 681,287 Selling, general and administrative expenses...................................... 505,734 482,062 432,191 Carrying value reduction of property, plant and equipment and other assets.................................................................. - - 2,900 Class action legal settlement..................................................... 7,000 - - --------------- ------------- ------------- Operating income........................................................... 310,115 294,797 246,196 --------------- ------------- ------------- Other expense: Interest expense............................................................... 38,044 32,632 31,023 Acquisition costs - World Merger............................................... - - 17,700 Other expense, net............................................................. 4,442 2,266 2,667 --------------- ------------- ------------- 42,486 34,898 51,390 --------------- ------------- ------------- Earnings before income taxes............................................... 267,629 259,899 194,806 Income taxes...................................................................... 105,030 102,660 79,552 --------------- ------------- ------------- Net earnings............................................................... $ 162,599 157,239 115,254 =============== ============= ============= Basic earnings per share.......................................................... $ 3.02 2.63 1.91 =============== ============= ============= Weighted-average common shares outstanding........................................ 53,769 59,730 60,393 =============== ============= ============= Diluted earnings per share........................................................ $ 3.00 2.61 1.89 =============== ============= ============= Weighted-average common and dilutive potential common shares outstanding............................................................ 54,255 60,349 61,134 =============== ============= =============

See accompanying notes to consolidated financial statements. 21 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years Ended December 31, 2000, 1999 and 1998 (In thousands)

Common stock Additional Total ----------------------- paid-in Retained Treasury stockholders' Shares Amount capital earnings stock equity --------- ---------- ---------- ----------- ------------- -------------- Balances at December 31, 1997.................. 60,217 $ 603 167,388 325,850 - 493,841 Stock options exercised........................ 316 3 4,414 - - 4,417 Dividends paid................................. - - - (24) - (24) Tax benefit from exercise of stock options................................... - - 243 - - 243 Adjustments to conform fiscal year end of World.................................. - - - (2,672) - (2,672) Net earnings................................... - - - 115,254 - 115,254 -------- --------- --------- ---------- ------------ ------------- Balances at December 31, 1998.................. 60,533 606 172,045 438,408 - 611,059 Stock options exercised........................ 124 1 1,390 - - 1,391 Purchase of treasury stock..................... - - - - (85,936) (85,936) Grant to employee profit sharing plan.......... - - - - 1,950 1,950 Tax benefit from exercise of stock options................................... - - 836 - - 836 Durkan pooling adjustment...................... - - 5,722 - - 5,722 Adjustments to conform fiscal year end of Durkan................................. - - - 285 - 285 Net earnings................................... - - - 157,239 - 157,239 -------- --------- --------- ---------- ------------ ------------- Balances at December 31, 1999.................. 60,657 607 179,993 595,932 (83,986) 692,546 Stock options exercised........................ 181 1 2,396 - - 2,397 Purchase of treasury stock..................... - - - - (106,689) (106,689) Grant to employee profit sharing plan.......... - - - - 2,593 2,593 Tax benefit from exercise of stock options................................... - - 914 - - 914 Net earnings................................... - - - 162,599 - 162,599 -------- --------- --------- ---------- ------------ ------------- Balances at December 31, 2000.................. 60,838 $ 608 183,303 758,531 (188,082) 754,360 ======== ========= ========= ========== ============ =============

See accompanying notes to consolidated financial statements. 22 MOHAWK INDUSTRIES, INC AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, 2000, 1999 and 1998 (In thousands)

2000 1999 1998 -------------- -------------- -------------- Cash flows from operating activities: Net earnings............................................................. $ 162,599 157,239 115,254 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization....................................... 82,346 105,297 72,591 Deferred income taxes............................................... 32,179 (1,302) (14,194) Provision for doubtful accounts..................................... 15,717 15,804 13,173 Loss on sale of property, plant and equipment....................... 205 2,516 2,121 Carrying value reduction of property, plant and equipment and other assets................................................. - - 2,900 Changes in assets and liabilities, net of effects of acquisitions: Receivables...................................................... (33,965) 2,904 (36,523) Inventories...................................................... (70,209) (32,437) (31,083) Accounts payable and accrued expenses............................ 31,177 (57,274) 57,295 Other assets and prepaid expenses................................ (3,257) (16,086) (7,653) Other liabilities................................................ 27 (5,293) (1,673) -------------- -------------- -------------- Net cash provided by operating activities..................... 216,819 171,368 172,208 -------------- ------------- ------------- Cash flows from investing activities: Additions to property, plant and equipment.............................. (73,475) (145,621) (83,180) Acquisitions............................................................ (36,844) (162,463) (36,574) -------------- -------------- -------------- Net cash used in investing activities......................... (110,319) (308,084) (119,754) -------------- -------------- -------------- Cash flows from financing activities: Net change in revolving line of credit................................... (168,595) 255,530 83,658 Proceeds from asset securitization....................................... 191,104 - - Payments on term loans................................................... (32,226) (32,229) (38,554) Redemption of acquisition indebtedness................................... - (20,917) (102,201) Proceeds (redemption) from Industrial Revenue Bonds and other, net of payments................................................... 3,480 (7,779) 11,329 Change in outstanding checks in excess of cash........................... 522 15,479 (6,486) Dividends paid........................................................... - - (24) Acquisition of treasury stock............................................ (104,096) (83,986) - Common stock transactions................................................ 3,311 8,234 1,988 -------------- -------------- -------------- Net cash (used in) provided by financing activities........... (106,500) 134,332 (50,290) -------------- -------------- -------------- Net change in cash............................................ - (2,384) 2,164 Cash, beginning of year....................................................... - 2,384 220 -------------- -------------- -------------- Cash, end of year............................................................. $ - - 2,384 ============== ============== ==============

See accompanying notes to consolidated financial statements. 23 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements DECEMBER 31, 2000, 1999 AND 1998 (In thousands, except per share data) (1) Summary of Significant Accounting Policies (a) Basis of Presentation The consolidated financial statements include the accounts of Mohawk Industries, Inc. and its subsidiaries (the "Company" or "Mohawk"). All significant intercompany balances and transactions have been eliminated in consolidation. On November 12, 1998, the Company acquired all of the outstanding capital stock of World Carpets, Inc. ("World") in exchange for 4,900 shares of the Company's common stock ("World Merger"). On November 12, 1998, the Securities and Exchange Commission declared effective a shelf registration statement to register for resale 4,900 shares of Company common stock issued in connection with the World Merger. The historical consolidated financial statements have been restated to give retroactive effect to the World Merger. The World Merger is being accounted for as a pooling-of-interests in the accompanying consolidated financial statements. On March 9, 1999, the Company acquired all of the outstanding capital stock of Durkan Patterned Carpets, Inc. ("Durkan") for 3,150 shares of the Company's common stock ("Durkan Merger"). On April 28, 1999, a shelf registration statement was filed with the Securities and Exchange Commission to register for resale 3,150 shares of the Company's common stock in connection with the Durkan Merger. The historical consolidated financial statements have been restated to give retroactive effect to the Durkan Merger. The Durkan Merger is being accounted for as a pooling-of-interests in the accompanying consolidated financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (b) Accounts Receivable and Revenue Recognition The Company is principally a broadloom carpet and rug manufacturer and sells carpet, rugs and other floorcovering materials throughout the United States principally for residential use. The Company grants credit to customers, most of whom are retail carpet dealers, under credit terms that are customary in the industry. Revenues are recognized when goods are shipped which is generally when the legal title passes to the customer. The Company provides allowances for expected cash discounts, returns, claims and doubtful accounts based upon historical bad debt and claims experience and periodic evaluations of the aging of the accounts receivable. (c) Inventories Inventories are stated at the lower of cost or market (net realizable value). Cost is determined using the last-in, first-out (LIFO) method, which matches current costs with current revenues, for substantially all inventories and the first-in, first-out (FIFO) method for the remaining inventories. (d) Property, Plant and Equipment Property, plant and equipment is stated at cost, including interest on funds borrowed to finance the acquisition or construction of major capital additions. Depreciation is calculated on a straight-line basis over the estimated remaining useful lives, which are 35 years for buildings and improvements, 15 years for extrusion equipment, 10 years for tufting equipment and 7 years for other equipment and furniture and fixtures. 24 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) (e) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (f) Earnings per Share ("EPS") The Company applies the provisions of Financial Accounting Standards Board ("FASB") FAS No. 128, Earnings per Share, which requires companies to present basic EPS and diluted EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Dilutive common stock options are included in the diluted EPS calculation using the treasury stock method. Common stock options that were not included in the diluted EPS computation because the options' exercise price was greater than the average market price of the common shares for the periods presented are immaterial. (g) Financial Instruments The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable, notes payable and long-term debt. The carrying amount of cash, accounts receivable, accounts payable and notes payable approximates their fair value because of the short-term maturity of such instruments. Interest rates that are currently available to the Company for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of the Company's long-term debt. The estimated fair value of the Company's long-term debt at December 31, 2000 and 1999 was $590,786 and $605,332, compared to a carrying amount of $589,828 and $596,065, respectively. The Company uses interest rate swaps to manage exposure that arises in the normal course of business. The Company does not use derivatives for speculative purposes. (h) Fiscal Year The Company ends its fiscal year on December 31. Each of the first three quarters in the fiscal year ends on the Saturday nearest the calendar quarter end. (i) Goodwill Goodwill arises in connection with business combinations accounted for as purchases. Goodwill is amortized primarily on a straight-line basis over 40 years. Amortization charged to earnings was $3,184 in 2000, $2,808 in 1999 and $2,437 in 1998. (j) Impairment of Long-Lived Assets The Company accounts for long-lived assets in accordance with the provisions of FAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Under FAS No. 121, the Company evaluates impairment of long-lived assets on a business unit basis, rather than on an aggregate entity basis, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the 25 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss for long-lived assets is based on the fair value of the asset. (k) Effect of New Accounting Pronouncement In 1997, the FASB issued FAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which supersedes FAS No. 14, Financial Reporting for Segments of a Business Enterprise. This statement, which the Company was required to adopt in fiscal year 1998, requires public companies to report certain financial and descriptive information about their reportable operating segments, including related disclosures about products and services, geographic areas and major customers. The implementation of FAS No. 131 did not have a material effect on the Company's consolidated financial statements. In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue Recognition" was issued requiring that revenue be recognized when certain criteria are met. In addition, the Emerging Issues Task Force ("EITF") reached a consensus on issue EITF 00-10 in September 2000, "Accounting for Shipping and Handling Fees and Costs". The Company has analyzed the implications of both SAB 101 and EITF 00-10 and believes that these pronouncements did not have a material impact on the Company's consolidated financial statements. (2) Acquisitions The Company completed its acquisitions of Newmark & James, Inc. and American Weavers, LLC on June 30, 1998 and August 10, 1998, respectively. Both of these acquisitions have been accounted for under the purchase method of accounting and their results are included in the Company's 1998 consolidated statement of earnings from the respective dates of acquisition. On November 12, 1998, the Company acquired all of the outstanding capital stock of World in exchange for 4,900 shares of the Company's common stock. The acquisition of World has been accounted for under the pooling-of-interests basis of accounting and, accordingly, the Company's historical consolidated financial statements have been restated to include the accounts and results of operations of World. The Company incurred before-tax, nonrecurring charges aggregating $20,600 in 1998 related to the World Merger, of which $17,700 of the charge was recorded as non-operating expense and $2,900 of the charge was recorded as a write-down of World computer equipment that was disposed of. On January 29, 1999, the Company acquired certain assets of Image Industries, Inc. ("Image") for approximately $192,000, including acquisition costs and the assumption of $30,000 of tax-exempt debt. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. The estimated fair values were $205,366 for assets acquired and $42,903 for liabilities assumed. On March 9, 1999, the Company acquired all of the outstanding capital stock of Durkan for approximately 3,100 shares of the Company's common stock valued at $116,500 based on the closing price the day the letter of intent was executed. The Durkan acquisition has been accounted for under the pooling-of-interests method of accounting and, accordingly, the Company's historical consolidated financial statements have been restated to include the accounts and results of operations of Durkan. On November 14, 2000, the Company acquired certain fixed assets and inventory of Crown Crafts, Inc. using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and 26 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) the liabilities assumed based on estimated fair values at the date of acquisition. The estimated fair values were $37,284 for assets acquired and $440 for liabilities assumed. (3) Receivables Receivables are as follows:

2000 1999 --------------- --------------- Customers, trade......................................... $ 433,042 405,477 Other.................................................... 4,125 2,826 --------------- --------------- 437,167 408,303 Less allowance for discounts, returns, claims and doubtful accounts..................................... 81,095 70,479 --------------- --------------- Net receivables........................... $ 356,072 337,824 =============== ===============

(4) Inventories The components of inventories are as follows:

2000 1999 --------------- --------------- Finished goods........................................... $ 295,447 254,179 Work in process.......................................... 73,658 65,456 Raw materials............................................ 205,490 175,139 --------------- --------------- Total inventories......................... $ 574,595 494,774 =============== ===============

(5) Property, Plant and Equipment Following is a summary of property, plant and equipment:

2000 1999 --------------- --------------- Land..................................................... $ 23,870 21,767 Buildings and improvements............................... 266,094 236,119 Machinery and equipment.................................. 876,417 791,839 Furniture and fixtures................................... 33,657 33,436 Leasehold improvements................................... 5,727 4,854 Construction in progress................................. 32,435 51,645 --------------- --------------- 1,238,200 1,139,660 Less accumulated depreciation and amortization........... 588,147 514,846 --------------- --------------- Net property, plant and equipment......... $ 650,053 624,814 =============== ===============

Property, plant and equipment includes capitalized interest of $3,097, $3,213 and $1,661 in 2000, 1999 and 1998, respectively. Effective January 1, 2000, the Company changed the estimated useful lives on certain property, plant and equipment. The impact of the change on net earnings for fiscal 2000, was approximately $14,600, or $0.27 per share. During 1998, the Company recorded a charge of $2,900 related to a write- down of computer equipment acquired in the World acquisition and disposed of in 1999. 27 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) (6) Other Assets The components of other assets are summarized below:

2000 1999 --------------- --------------- Goodwill, net of accumulated amortization of $16,355 and $ 112,376 113,560 $13,171, respectively.................................. Other assets............................................. 6,098 10,089 --------------- --------------- Total other assets....................... $ 118,474 123,649 =============== ===============

(7) Long-Term Debt The Company's credit agreement provides for an interest rate of either (i) LIBOR plus 0.2% to 0.5%, depending upon the Company's performance measured against certain financial ratios, or (ii) the prime rate less 1.0% and has a termination date of January 28, 2004. At December 31, 2000, the Company had credit availability of $450,000 under its revolving credit line and $70,000 under various short-term uncommitted credit lines. At December 31, 2000, a total of $266,969 was unused under these lines. The credit agreement contains customary financial and other covenants. The Company must pay an annual facility fee ranging from .0015 to .0025 of the total credit commitment, depending upon the Company's performance measured against specific coverage ratios, under the revolving credit line. On October 25, 2000, the Company entered into a one-year asset securitization agreement enabling the Company to sell up to $205,000 of an undivided interest in a defined pool of trade accounts receivable. The agreement may be extended in one-year terms. The net proceeds were used to reduce borrowings under the revolving credit facility. Interest rates under the facility vary with the commercial paper rates for the Blue Ridge Asset Funding Corporation plus an applicable margin. The interest rate under this facility generally averages slightly lower than the rates under the Company's revolving line of credit. On January 3, 2001, the Company entered into a five-year interest rate swap, which converted approximately $100,000 of its variable rate debt to a fixed rate. Under the agreement, payments are made based on a fixed rate of 5.82% and received on a LIBOR based variable rate. Differentials received or paid under the agreement will be recognized as interest expense. Long-term debt consists of the following:

2000 1999 --------------- --------------- Revolving line of credit, due January 28, 2004.................... $ 215,857 384,452 Asset securitization, due October 24, 2001........................ 191,104 - 8.46% senior notes, payable in annual principal installments beginning in 1998, due September 16, 2004, interest payable quarterly...................................... 57,143 71,429 7.14%-7.23% senior notes, payable in annual principal installments beginning in 1997, due September 1, 2005, interest payable semiannually................................... 47,222 56,666 8.48% term loans, payable in annual principal installments, due October 26, 2002, interest payable quarterly....................................................... 11,429 17,143 7.58% senior notes, payable in annual principal installments beginning in 1997, due July 30, 2003, interest payable semiannually................................... 4,286 5,714 6% term note, payable in annual principal and interest installments beginning in 1998, due July 23, 2004............... 5,343 6,679 Industrial Revenue Bonds and other................................ 57,444 53,982 --------------- --------------- Total long-term debt.............................. 589,828 596,065 Less current portion.............................................. 224,391 33,961 --------------- --------------- Long-term debt, excluding current portion......... $ 365,437 562,104 =============== ===============

28 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) The aggregate maturities of long-term debt as of December 31, 2000 are as follows: 2001..................................................... $ 224,391 2002..................................................... 33,375 2003..................................................... 27,427 2004..................................................... 241,014 2005..................................................... 9,448 Thereafter............................................... 54,173 --------------- $ 589,828 =============== (8) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses are as follows:

2000 1999 --------------- --------------- Outstanding checks in excess of cash..................... $ 42,895 42,373 Accounts payable, trade.................................. 165,108 159,812 Accrued expenses......................................... 101,576 83,253 Accrued compensation..................................... 62,952 54,954 --------------- --------------- Total accounts payable and accrued expenses........... $ 372,531 340,392 =============== ===============

(9) Stock Options, Stock Compensation and Treasury Stock Under the Company's 1992 and 1993 stock option plans, options may be granted to directors and key employees through 2002 and 2003 to purchase a maximum of 2,250 and 675 shares of common stock, respectively. During 2000, options to purchase 105 and 79 shares, respectively, were granted under these plans. Options granted under each of these plans expire 10 years from the date of grant and become exercisable at such dates and at prices as determined by the Compensation Committee of the Company's Board of Directors. During 1996, the Company adopted the 1997 Non-Employee Director Stock Compensation Plan. The plan provides for awards of common stock of the Company for nonemployee directors to receive in lieu of cash for their annual retainers. During 2000, a total of 4 shares were awarded to the nonemployee directors under the plan. During 1997, the Board of Directors adopted the 1997 Long-Term Incentive Plan whereby the Company reserved 2,550 shares of common stock for issuance in connection with options and awards. During 2000, 6 shares were awarded under an executive incentive plan. Additional information relating to the Company's stock option plans follows:

2000 1999 1998 ------------- ------------- -------------- Options outstanding at beginning of year...... 2,043 1,387 1,568 Options granted............................... 184 809 174 Options exercised............................. (181) (124) (316) Options canceled.............................. (178) (29) (39) ------------- ------------- -------------- Options outstanding at end of year............ 1,868 2,043 1,387 ============= ============= ============== Options exercisable at end of year............ 931 873 686 ============= ============= ==============

29 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued)

2000 1999 1998 ------------- ------------- -------------- Option prices per share: Options granted during the year............. $ 20.13-26.26 19.69 - 35.13 17.23 - 32.31 ============= ============= ============== Options exercised during the year........... $ 5.67-19.70 5.67 - 19.17 5.67 - 19.38 ============= ============= ============== Options canceled during the year............ $ 6.67-35.14 9.33 - 35.13 5.67 - 31.94 ============= ============= ============== Options outstanding at end of year.......... $ 5.61-35.13 5.61 - 35.13 5.61 - 32.31 ============= ============= ==============

As allowed under FAS No. 123, the Company accounts for stock options granted as prescribed under Accounting Principles Board Opinion No. 25, which recognizes compensation cost based upon the intrinsic value of the award. Accordingly, no compensation expense has been recognized in the consolidated statement of earnings for any stock options granted in 2000, 1999 and 1998. The following table represents pro forma net income and pro forma earnings per share had the Company elected to account for stock option grants using the fair value based method.

2000 1999 1998 --------------- ------------- ------------- Net earnings As reported.............................. $ 162,599 157,239 115,254 Pro forma................................ 160,313 155,282 114,411 Net earnings per common share (basic) As reported.............................. $ 3.02 2.63 1.91 Pro forma................................ 2.98 2.60 1.89 Net earnings per common share (diluted) As reported.............................. $ 3.00 2.61 1.89 Pro forma................................ 2.95 2.57 1.87

This pro forma impact only takes into account options granted since January 1, 1996 and is likely to increase in future years as additional options are granted and amortized ratably over the vesting period. The average fair value of options granted during 2000, 1999 and 1998 was $13.00, $15.28 and $17.24, respectively. This fair value was estimated using the Black-Scholes option pricing model based on a weighted-average market price at grant date of $22.69 in 2000, $26.48 in 1999 and $30.44 in 1998 and the following weighted-average assumptions:

2000 1999 1998 ------------ ------------ ------------ Dividend yield................................. - - - Risk-free interest rate........................ 5.1% 6.4% 4.7% Volatility..................................... 48.1% 46.7% 48.9% Expected life (years).......................... 7 7 7

Summarized information about stock options outstanding and exercisable at December 31, 2000, is as follows:

Outstanding Exercisable -------------------------------------------------------- ------------------------------------ Number of Average Average Number of Average Exercise price range Shares Life (1) Price (2) Shares Price (2) ------------------------- -------------- -------------- ------------- --------------- ------------- Under $11.00............. 576 4.57 $ 10.40 494 $ 10.25 $12.00 to 17.00.......... 286 3.70 16.53 268 16.49 $17.01 to 19.69.......... 537 8.91 20.39 67 19.72 $19.94 to 31.94.......... 209 8.03 30.15 53 31.07 $32.00 to 36.00.......... 260 8.11 34.91 49 34.74 -------------- --------------- Total 1,868 931 ============== ===============

30 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) ---------------- (1) Weighted average contractual life remaining in years. (2) Weighted average exercise price. During 1999, the Company's Board of Directors authorized the repurchase of up to 10,000 shares of its outstanding common shares. During the quarter ended July 1, 2000, the Board of Directors authorized an additional repurchase of 5,000 outstanding shares bringing the total authorized repurchase to 15,000 shares. For the year ended December 31, 2000, a total of 4,713 shares of the Company's common stock was purchased at an aggregate cost of $106,689. Since the inception of the program, a total of approximately 8,745 shares has been purchased at an aggregate cost of $192,624. All of this repurchase has been financed through the Company's operations and revolving line of credit. (10) Employee Benefit Plans The Company has a 401(k) retirement savings plan (the "Plan") open to substantially all of its employees who have completed one year of eligible service. The Company contributes $0.50 for every $1.00 of employee contributions up to a maximum of 4% of the employee's salary. Effective January 1, 2000, the Company amended the Plan to match an additional $0.25 for every $1.00 of employee contribution in excess of 4% of the employee's salary up to a maximum of 6%. Employee and employer contributions to the Plan were $16,926 and $6,055 in 2000, $14,873 and $5,080 in 1999, and $12,345 and $4,213 in 1998, respectively. The Company also made a discretionary contribution to the Plan of approximately $2,500 and $2,100 in 2000 and 1999, respectively. The World Carpet Savings Retirement Plan (the "World Plan"), a defined contribution 401(k) plan covering substantially all World employees, was merged into the Plan on March 1, 1999. Employees were eligible to participate after completion of one year of service. Under the terms of the World Plan, World would match employee contributions up to a maximum of 2% of the employee's salary and employees vested in the contributions based on years of credited service. For the years ended December 31, 1999 and 1998, the Company contributed approximately $142 and $703, respectively, to the World Plan. Durkan maintained a 401(k) retirement savings plan (the" Durkan Plan") open to substantially all Durkan employees. Durkan contributed $0.50 for every $1.00 of employee contributions up to a maximum of 6% of eligible wages. For the years ended December 31, 2000, 1999 and 1998, Durkan contributed approximately $262, $343 and $328, respectively, to the Durkan Plan. The Durkan Plan was merged into the Plan effective January 1, 2001. 31 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) (11) Income Taxes Income tax expense attributable to earnings before income taxes for the years ended December 31, 2000, 1999 and 1998 consists of the following:

Current Deferred Total --------------- --------------- --------------- 2000: U.S. federal................... $ 64,444 28,466 92,910 State and local................ 8,407 3,713 12,120 --------------- --------------- --------------- $ 72,851 32,179 105,030 =============== =============== =============== 1999: U.S. federal................... $ 92,736 (1,928) 90,808 State and local................ 12,104 (252) 11,852 --------------- --------------- --------------- $ 104,840 (2,180) 102,660 =============== =============== =============== 1998: U.S. federal................... $ 75,985 (11,485) 64,500 State and local................ 17,761 (2,709) 15,052 --------------- --------------- --------------- $ 93,746 (14,194) 79,552 =============== =============== ===============

Income tax expense attributable to earnings before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to earnings before income taxes as follows:

2000 1999 1998 --------------- --------------- --------------- Computed "expected" tax expense............. $ 93,670 90,965 68,182 State and local income taxes, net of federal income tax benefit................. 7,878 7,704 9,784 Amortization of goodwill.................... 700 684 746 Other, net.................................. 2,782 3,307 840 --------------- --------------- --------------- $ 105,030 102,660 79,552 =============== =============== ===============

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 are presented below:

2000 1999 --------------- --------------- Deferred tax assets: Accounts receivable............................... $ 10,751 21,621 Inventories....................................... 11,533 15,533 Accrued expenses.................................. 46,372 41,366 --------------- --------------- Gross deferred tax assets................. 68,656 78,520 --------------- --------------- Deferred tax liabilities: Plant and equipment............................... (65,420) (47,138) Prepaid expenses.................................. (2,182) (1,892) Other............................................. (10,388) (6,645) --------------- --------------- Gross deferred tax liabilities............ (77,990) (55,675) --------------- --------------- Net deferred tax (liability) asset........ $ (9,334) 22,845 =============== ===============

Based upon the level of historical and projected taxable income over periods in which the deferred tax assets are deductible, the Company's management believes it is more likely than not the Company will realize the benefits of these deductible differences at December 31, 2000. 32 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) (12) Commitments and Contingencies The Company is obligated under various capital and operating leases for office and manufacturing space, machinery and equipment. Future minimum lease payments under noncancelable capital and operating leases (with initial or remaining lease terms in excess of one year) at December 31, 2000 are:

Capital Operating Total Future Leases Leases Payments --------------- ---------------- ----------------- 2001................................... $ 1,199 35,224 36,423 2002................................... 1,223 28,518 29,741 2003................................... 913 22,631 23,544 2004................................... 63 16,576 16,639 2005................................... - 11,162 11,162 Thereafter............................. - 20,620 20,620 --------------- --------------- ----------------- Total payments......................... $ 3,398 134,731 138,129 =============== ================= Less amount representing interest...... 324 --------------- Present value of capitalized lease payments with a weighted interest rate of 7.76%.............................. $ 3,074 ===============

The Company assumed several capitalized leases from recent acquisitions for machinery and equipment, at a cost of $7,480, $8,899 and $8,899 for the periods ended December 31, 2000, 1999 and 1998, respectively. The amortization of these capital leases is included in depreciation expense. Accumulated amortization was $3,312, $3,619 and $2,547 in 2000, 1999 and 1998, respectively. Rental expense under operating leases was $36,392, $28,407 and $27,347 in 2000, 1999 and 1998, respectively. In December 1995, the Company and four other carpet manufacturers were added as defendants in a purported class action lawsuit, In re Carpet Antitrust Litigation, pending in the United States District Court for the Northern District of Georgia, Rome Division. The amended complaint alleges price-fixing regarding polypropylene products in violation of Section One of the Sherman Act. In September 1997, the Court granted the plaintiffs' motion to certify the class. In October 1998, two plaintiffs, on behalf of an alleged class of purchasers of nylon carpet products, filed a complaint in the United States District Court for the Northern District of Georgia against the Company and two of its subsidiaries, as well as certain competitors. The complaint alleges that the Company acted in concert with other carpet manufacturers to restrain competition in the sale of certain nylon carpet products. The Company has filed an answer, denied the allegations in the complaint and set forth its defenses. On August 11, 2000, the Company presented to the Court the terms of an agreement in principle to settle these two cases. Under the terms of the settlement agreement, the Company will contribute $13,500 to a settlement fund to resolve price-fixing claims brought by a class of purchasers of polypropylene carpet and a proposed settlement class of purchasers of nylon carpet. The Company recorded a charge of $7,000 in the third quarter of 2000, in connection with the lawsuit. The Company denies all liability and wrongdoing and has agreed to settle these claims in order to avoid the costs of further litigation. The court dismissed all claims against the Company and granted final approval to the settlement on February 5, 2001. The Company is a party to two consolidated lawsuits captioned Gaehwiler v. Sunrise Carpet Industries, Inc. et al. and Patco Enterprises, Inc. v. Sunrise Carpet Industries, Inc. et al., both of which were filed in the Superior 33 MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - (Continued) Court of the State of California, City and County of San Francisco, in 1996. Both complaints were brought on behalf of a purported class of indirect purchasers of polypropylene carpet in the State of California and seek damages for alleged violations of California antitrust and unfair competition laws. In February 1999, a similar complaint was filed in the Superior Court of the State of California, City and County of San Francisco, on behalf of a purported class based on indirect purchasers of nylon carpet in the State of California and alleges violations of California antitrust and unfair competition laws. The complaints described above do not specify any specific amount of damages but do request injunctive relief and treble damages plus reimbursement for fees and costs. The Company believes it has meritorious defenses and intends to vigorously defend against these actions. (13) Consolidated Statements of Cash Flows Information Supplemental disclosures of cash flow information are as follows:

2000 1999 1998 --------------- --------------- --------------- Net cash paid during the year for: Interest....................... $ 39,866 37,740 30,852 =============== =============== =============== Income taxes................... $ 74,592 120,371 75,640 =============== =============== ===============

(14) Quarterly Financial Data (Unaudited) The supplemental quarterly financial data are as follows:

Quarters Ended ------------------------------------------------------------------------------- April 1, July 1, September 30, December 31, 2000 2000 2000 2000 --------------- -------------- ------------------ ----------------- Net sales........................ $ 765,083 852,808 838,514 799,441 Gross profit..................... 190,563 215,882 214,220 202,184 Net earnings..................... 33,997 47,203 42,137 39,262 Basic earnings per share......... 0.61 0.88 0.79 0.75 Diluted earnings per share....... 0.61 0.87 0.79 0.74

Quarters Ended ------------------------------------------------------------------------------- April 3, July 3, October 2, December 31, 1999 1999 1999 1999 --------------- -------------- ------------------ ----------------- Net sales........................ $ 707,167 790,617 809,933 775,547 Gross profit..................... 178,329 200,911 203,246 194,373 Net earnings..................... 27,892 44,093 45,079 40,175 Basic earnings per share......... 0.46 0.73 0.74 0.70 Diluted earnings per share....... 0.46 0.72 0.74 0.70

34 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures. None. PART III Item 10. Directors and Executive Officers of the Registrant The information required by this item is incorporated by reference to information contained in the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders under the following headings: "Election of Directors-- Director, Director Nominee and Executive Officer Information"; "--Nominees for Director"; "--Continuing Directors"; "--Executive Officers;" and "--Section 16a Beneficial Ownership Reporting Compliance." Item 11. Executive Compensation The information required by this item is incorporated by reference to information contained in the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders under the following headings: "Executive Compensation and Other Information--Summary of Cash and Certain Other Compensation"; "-- Option Grants"; "--Option Exercises and Holdings"; "--Pension Plans"; "--Certain Relationships and Related Transactions"; and "Election of Directors--Meetings and Committees of the Board of Directors." Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is incorporated by reference to information contained in the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders under the following heading: "Executive Compensation and Other Information--Principal Stockholders of the Company." Item 13. Certain Relationships and Related Transactions The information required by this item is incorporated by reference to information contained in the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders under the following heading: "Executive Compensation and Other Information--Certain Relationships and Related Transactions." 35 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Consolidated Financial Statements The Consolidated Financial Statements of Mohawk Industries, Inc. and subsidiaries listed in Item 8 of Part II are incorporated by reference into this item. 2. Consolidated Financial Statement Schedules Schedule I-Condensed Financial Information of Registrant......... 43 Schedule II-Consolidated Valuation and Qualifying Accounts....... 47 Schedules not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits The exhibit number for the exhibit as originally filed is included in parentheses at the end of the description. Mohawk Exhibit Number Description ------ ----------- *2.1 Agreement and Plan of Merger dated as of December 3, 1993 and amended as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin and certain Shareholders of Aladdin. (Incorporated herein by reference to Exhibit 2(i)(a) in Mohawk's Registration Statement on Form S-4, Registration No. 33-74220.) *2.2 Agreement and Plan of Merger by and among Mohawk, WC Acquisition Corp., World Carpets, Inc.and the shareholders of World Carpets, Inc. dated as of October 22, 1998. (Incorporated herein by reference to Exhibit 2 of the Mohawk Registration Statement on Form S-3, Registration No. 333- 66061, as filed October 22, 1998.) *2.3 Asset Purchase Agreement by and among Aladdin Manufacturing Corporation, Image Industries, Inc. and The Maxim Group, Inc. dated as of November 12, 1998, as amended and restated on January 29, 1999. (Incorporated herein by reference to Exhibit 2.1 in Mohawk's Current Report on Form 8-K dated January 29, 1999.) *2.4 Agreement and Plan of Merger by and among Mohawk, Durkan Acquisition Corp., Nonpareil Acquisition Corp, Durkan Patterned Carpets, Inc.; the shareholders of Durkan Patterned Carpets, Inc. and the shareholders of Nonpareil Dying and Finishing, Inc., dated as of February 26, 1999. (Incorporated herein by reference to Exhibit 2.1 of the Mohawk Registration Statement on Form S-3, Registration No. 333-77231, as filed April 28, 1999.) *3.1 Restated Certificate of Incorporation of Mohawk, as amended. (Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *3.2 Amended and Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.2 in Mohawk's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.) *4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk. (Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) 36 *4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.2 in Mohawk's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.) *10.1 Lease dated April 1, 1988 between Horizon and Kay D. Owens concerning the addition between the Tufting and Coater Buildings on South Industrial Boulevard in Calhoun, Georgia. (Incorporated herein by reference to Exhibit 10.24 in Mohawk's Registration Statement on Form S-1, Registration No. 33-53932.) *10.2 Lease dated October 15, 1990 between NBD Trust Company of Illinois and Aladdin related to a finished goods distribution warehouse in Romeoville, Illinois. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) *10.3 Lease dated October 3, 1994 between Almoda and Aladdin related to a finished goods distribution warehouse in Columbus, Ohio. (Incorporated herein by reference to Exhibit 10.29 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.4 Lease dated March 1, 1994 between Design Leasing and Holding Company, Inc. and American Rug Craftsmen, Inc. related to a manufacturing facility and warehouse in Calhoun, Georgia. (Incorporated herein by reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.5 Lease dated May 1, 1997 between Opus East, LLC and Mohawk concerning a distribution warehouse in Glen Burnie, Maryland. (Incorporated herein by reference to Exhibit 10.8 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *10.6 Lease dated September 23, 1996 between West End Road Associates and Mohawk concerning a distribution warehouse in Pompton Plains, New Jersey. (Incorporated herein by reference to Exhibit 10.10 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *10.7 Lease dated November 27, 1996 between CP-Regency Business Park LTD and Aladdin concerning a distribution warehouse in Grand Prairie, Texas. (Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *10.8 Lease dated September 1, 1996 between Catellus Development Corp. and Mohawk concerning a distribution warehouse in LaMirada, California. (Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) 10.9 Lease dated October 15, 2000 between Majestic Realty Co. and Principal Life Insurance Company and Aladdin concerning a distribution warehouse in La Mirada, California. *10.10 Lease dated June 1, 1998 between Intermark USA, Inc. and Aladdin Manufacturing Corporation concerning a warehouse in Kensington, Georgia. (Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.11 Lease dated February 18, 1999 between Aladdin Manufacturing Corporation and Industrial Developments International Inc. concerning a warehouse in Bolingbrook, Illinois. (Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.12 Lease dated February 18, 1999 between Mohawk Industries, Inc. and Senecca G&H, L.L.C. concerning a warehouse in Miami, Florida. (Incorporated herein by reference to Exhibit 10.13 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) 37 10.13 Lease dated November 28, 2000 between Aladdin Manufacturing Corporation. and Lathrop industrial development, LLC a warehouse in Lathrop, California *10.14 Lease dated December 3, 1999 between Aladdin Manufacturing Corporation and Ex-Cell Home Fashions, Inc. concerning a plant in Bentonville, Arkansas. (Incorporated herein by reference to Exhibit 10.14 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) 10.15 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia. 10.16 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia. 10.17 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia. 10.18 Lease dated December 29, 1999 between Aladdin Manufacturing Corporation and Seattle-Tacoma Box Company concerning a warehouse in Kent, Washington. *10.19 Fifth Amended and Restated Credit Agreement dated as of November 23, 1999 among Mohawk, Wachovia Bank, N.A. Suntrust Bank, Atlanta and First Union National Bank. (Incorporated herein by reference to Exhibit 10.15 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.20 Amended and Restated Series Note Agreement dated as of August 31, 1999 for $85 million of senior notes due September 1, 2005 among Mohawk, John Hancock Mutual Life Insurance Company, John Hancock Variable Life Insurance Company, Investors Partner Life Insurance Company, Principal Life Insurance Company, The Franklin Life Insurance Company and The Prudential Insurance Company of America. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form 10- Q for the quarter ended October 2, 1999.) *10.21 Amended and Restated Note Purchase Agreement dated as of August 31, 1999 for $100 million senior notes due September 16, 2004 among Mohawk, The Prudential Insurance Company of America, Principal Life Insurance Company, John Hancock Mutual Life Insurance Company, Massachusetts Mutual Life Insurance Company, Alexander Hamilton Life Insurance Company of America and The Franklin Life Insurance Company. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-Q for the quarter ended October 2, 1999.) *10.22 Registration Rights Agreement by and among Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain Management Investors. (Incorporated herein by reference to Exhibit 10.14 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.23 Voting Agreement, Consent of Stockholders and Amendment to 1992 Registration Rights Agreement dated December 3, 1993 by and among Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition Fund, L.P., David L. Kolb, Donald G. Mercer, Frank A. Procopio and John D. Swift. (Incorporated herein by reference to Exhibit 10(b) of Mohawk's Registration Statement on Form S-4, Registration No. 33-74220.) *10.24 Registration Rights Agreement by and among Mohawk and the former shareholders of Aladdin. (Incorporated herein by reference to Exhibit 10.32 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) *10.25 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of March 23, 1994 to the Registration Rights Agreement dated as of February 25, 1994 between Mohawk and those other 38 persons who are signatories thereto. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the quarter ended July 2, 1994.) *10.26 Stock Restriction and Registration Rights Agreement dated as of October 22, 1998 by and among Mohawk and the former shareholders of World. (Incorporated herein by reference to Exhibit 99.1 of Mohawk's Current Report on Form 8-K dated February 19, 1999.) *10.27 Second Consolidated, Amended and Restated Note Agreement dated as of August 31, 1999 for $50 million of senior notes, $40,000,000 of which are due October 26, 2002 and $10,000,000 of which are due July 30, 2002, among Mohawk and The Prudential Insurance Company of America. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q dated October 2, 1999.) 10.28 Receivables Purchase and Sale Agreement dated as of October 25, 2000 by and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc. 10.29 Credit and Security Agreement dated as of October 25, 2000 by and among Mohawk Factoring, Inc, as borrower, Mohawk servicing, Inc., as Servicer, Blue Ridge Asset Funding Corporation, The Liquidity Banks and Wachovia Bank, N.A., as Agent. 10.30 Interest Rate Swap Agreement dated August 31 2000 by Mohawk Industries, Inc, and First Union National Bank. Exhibits Related to Executive Compensation Plans, Contracts and other Arrangements: *10.31 Mohawk Carpet Corporation Retirement Savings Plan, as amended. (Incorporated herein by reference to Exhibit 10.1 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.32 Mohawk Carpet Corporation Supplemental Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's Registration Statement on Form S-1, Registration No. 33- 45418.) *10.33 World Carpets, Inc. Savings and Retirement Plan dated January 1, 1989. (Incorporated herein by reference to Exhibit 10.70 of Mohawk's Annual Report on Form 10-K for the year ended December 31, 1998) *10.34 Mohawk Industries, Inc. Employee Stock Purchase Plan together with forms of related Management Investment Agreement, Non-Qualified Stock Option Agreement, and amendments thereto. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.35 Stock Purchase Agreement dated as of December 30, 1988 between Mohawk and Mohasco as supplemented by Supplement to Stock Purchase Agreement dated December 30, 1988. (Incorporated herein by reference to Exhibit 10.4 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.36 Securities Purchase and Holders Agreement dated as of December 31, 1988, as amended and restated March 30, 1989, together with amendments thereto and forms of related Non-Qualified Stock Option Agreement and amendments thereto. (Incorporated herein by reference to Exhibit 10.5 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.37 Investment Agreement dated as of March 31, 1989 among Mohawk, Mohawk Carpet, Citicorp Capital Investors Ltd., Citicorp Venture Capital Ltd. and ML-Lee Acquisition Fund, L.P. (Incorporated herein by reference to Exhibit 10.6 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) 39 *10.38 Equity Securities Agreement dated March 31, 1989 among Mohawk, ML-Lee Acquisition Fund, L.P. and Citicorp Venture Capital Ltd. (Incorporated herein by reference to Exhibit 10.7 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.39 Securities Holders Agreement among Mohawk and Certain Management Investors dated as of March 6, 1992. (Incorporated herein by reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) *10.40 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.8 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.41 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.2 in Mohawk's quarterly report on Form 10-Q for the quarter ended July 3, 1993.) *10.42 Second Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.43 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.15 of Mohawk's Registration Statement on Form S-1, Registration Number 33-53932.) *10.44 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.1 of Mohawk's quarterly report on Form 10-Q for the quarter ended July 3, 1993.) *10.45 Second Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.38 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.46 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.39 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.) *10.47 First Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.48 Form of Promissory Note between Mohawk and each of the following; David L. Kolb, John D. Swift and Frank A. Procopio. (Incorporated herein by reference to Exhibit 10.75 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.) *10.49 The Mohawk Industries, Inc. Executive Deferred Compensation Plan. (Incorporated herein by reference to Exhibit 10.65 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.50 The Mohawk Industries, Inc. Management Deferred Compensation Plan. (Incorporated herein by reference to Exhibit 10.66 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.51 1997 Non-Employee Director Stock Compensation Plan. (Incorporated herein by reference to Exhibit 10.79 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) *10.52 1997 Long-Term Incentive Plan. (Incorporated herein by reference to Exhibit 10.80 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) 40 *10.53 Amendment No. 1 to 1997 Non-Employee Director Stock Compensation Plan. (Incorporated herein by reference to Exhibit 10.74 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) *10.54 Consulting Agreement between Mohawk Industries, Inc. and David L. Kolb dated August 1, 2000. (Incorporated herein by reference to Exhibit 10 in Mohawk's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.) 10.55 Amendment and Restated Consulting Agreement between Mohawk Industries, Inc. and David L. Kolb dated January 17, 2001. 11 Statement re: Computation of Per Share Earnings. 21 Subsidiaries of the Registrant. 23.1 Independent Auditors' Consent - KPMG LLP. ___________ * Indicates exhibit incorporated by reference. (b) Reports on Form 8-K. 1. Current Report on Form 8-K: Purchase of Crown Crafts, Inc. Woven Division, dated October 11, 2000. 2. Current Report on Form 8-K: Third quarter earnings press release, dated October 12, 2000. 3. Current Report on Form 8-K: Completion of the purchase of Crown Crafts, Inc. Woven Division, dated November 14, 2000. 41 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Mohawk Industries, Inc. Dated: March 9, 2001 By: /s/ Jeffrey S. Lorberbaum --------------------------------------- Jeffrey S. Lorberbaum, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated: March 9, 2001 /s/ Jeffrey S. Lorberbaum --------------------------------------- Jeffrey S. Lorberbaum, President and Chief Executive Officer (principal executive officer) Dated: March 9, 2001 /s/ John D. Swift --------------------------------------- John D. Swift, Chief Financial Officer, Vice President-Finance and Assistant Secretary (principal financial and accounting officer) Dated: March 9, 2001 /s/ David L. Kolb --------------------------------------- David L. Kolb, Chairman of the Board Dated: March 9, 2001 /s/ Leo Benatar --------------------------------------- Leo Benatar, Director Dated: March 9, 2001 /s/ Bruce C. Bruckmann --------------------------------------- Bruce C. Bruckmann, Director Dated: March 9, 2001 /s/ S. H. Sharpe --------------------------------------- S. H. Sharpe Director Dated: March 9, 2001 /s/ Larry W. McCurdy --------------------------------------- Larry W. McCurdy, Director Dated: March 9, 2001 /s/ Robert N. Pokelwaldt --------------------------------------- Robert N. Pokelwaldt, Director 42 SCHEDULE I MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Condensed Financial Information Of Registrant Mohawk Industries, Inc. Balance Sheets December 31, 2000 and 1999 (In thousands, except per share data)

ASSETS 2000 1999 --------------- ------------- Current assets - intercompany receivable..................................... $ 398,238 507,386 Investment in subsidiaries................................................... 883,163 720,564 --------------- ------------- $ 1,281,401 1,227,950 =============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities-current portion of long-term debt........................ $ 221,982 30,873 Long-term debt, less current portion......................................... 305,059 504,531 --------------- ------------- Total liabilities....................................................... 527,041 535,404 --------------- ------------- Preferred stock, $.01 par value; 60 shares authorized; no shares issued...... - - Common stock, $.01 par value; 150,000 shares authorized; 60,838 and 60,657 shares issued in 2000 and 1999, respectively.............................. 608 607 Additional paid-in capital................................................... 183,303 179,993 Retained earnings............................................................ 758,531 595,932 --------------- ------------- 942,442 776,532 Less treasury stock at cost; 8,538 and 3,952 shares in 2000 and 1999, respectively.............................................................. 188,082 83,986 --------------- ------------- Total stockholder's equity.............................................. 754,360 692,546 --------------- ------------- $ 1,281,401 1,227,950 =============== =============

43 SCHEDULE I (continued) MOHAWK INDUSTRIES, INC AND SUBSIDIARIES Condensed Financial Information Of Registrant Mohawk Industries, Inc Statements of Earnings Years Ended December 31, 2000, 1999 and 1998 (In thousands) 2000 1999 1998 ---------- --------- -------- Equity in earnings of subsidiaries.......... $ 162,599 157,239 115,254 ---------- --------- -------- Net earnings......................... $ 162,599 157,239 115,254 ========== ========= ======== 44 SCHEDULE I (continued) MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Condensed Financial Information Of Registrant Mohawk Industries, Inc. Statements of Cash Flows Years Ended December 31, 2000, 1999 and 1998 (In thousands)

2000 1999 1998 --------------- ------------- ------------- Cash flows from operating activities: Net earnings........................................................ $ 162,599 157,239 115,254 Adjustments to reconcile net earnings to net cash used in operating activities: Equity in earnings of subsidiaries............................ (162,599) (157,239) (115,254) Increase in intercompany receivable........................... (109,148) 459,652 1,964 ------------- ----------- ----------- Net cash (used in) provided by operating activities........... (109,148) 459,652 1,964 ------------- ----------- ----------- Cash flows from financing activities: Net proceeds from revolving line of credit.......................... (168,595) 384,452 - Proceeds from asset securitization.................................. 191,104 - - Net proceeds from term loans....................................... (30,872) 150,952 - Stock options exercised............................................. 2,397 1,391 4,417 Tax benefit from exercise of stock options.......................... 914 216 243 Purchase of treasury stock.......................................... (104,096) (83,986) - Other............................................................... - 6,627 (2,696) ------------- ----------- ----------- Net cash (used in) provided by financing activities........... (109,148) 459,652 1,964 ------------- ----------- ----------- Net change in cash...................................... - - - Cash, beginning of year.................................................... - - - ------------- ----------- ----------- Cash, end of year.......................................................... $ - - - ============= =========== ===========

45 SCHEDULE I (continued) MOHAWK INDUSTRIES, INC AND SUBSIDIARIES Notes to Condensed Financial Information Of Registrant Mohawk Industries, Inc December 31, 2000 and 1999 (In thousands, except per share data) (1) Long-Term Debt The Company's credit agreement provides for an interest rate of either (i) LIBOR plus 0.2% to 0.5%, depending upon the Company's performance measured against certain financial ratios, or (ii) the prime rate less 1.0% and has a termination date of January 28, 2004. At December 31, 2000, the Company had credit availability of $450,000 under its revolving credit line and $70,000 under various short-term uncommitted credit lines. At December 31, 2000, a total of $266,969 was unused under these lines. The credit agreement contains customary financial and other covenants. The Company must pay an annual facility fee ranging from .0015 to .0025 of the total credit commitment, depending upon the Company's performance measured against specific coverage ratios, under the revolving credit line. On October 25, 2000, the Company entered into a one-year asset securitization agreement enabling the Company to sell up to $205,000 of an undivided interest in a defined pool of trade accounts receivable. The agreement may be extended in one year terms. The net proceeds were used to reduce borrowings under the revolving credit facility. Interest rates under the facility vary with the commercial paper rates for the Blue Ridge Asset Funding Corporation plus an applicable margin. The interest rate under the facility generally averages slightly lower than rates under the Company's revolving line of credit. Long term debt consists of the following:

2000 1999 ------------------ ------------------ Revolving line of credit, due January 28, 2004....................... $ 215,857 384,452 Asset securitization, due October 24, 2001........................... 191,104 - 8.46% senior notes, payable in annual principal installments beginning in 1998, due September 16, 2004, interest payable quarterly.......................................................... 57,143 71,429 7.14%-7.23% senior notes, payable in annual principal installments beginning in 1997, due September 1, 2005, interest payable semiannually...................................... 47,222 56,666 8.48% term loans, payable in annual principal installments, due October 26, 2002, interest payable quarterly................... 11,429 17,143 7.58% senior notes, payable in annual principal installments beginning in 1997, due July 30, 2003, interest payable semiannually....................................................... 4,286 5,714 ------------------ ------------------ Total long-term debt................................. 527,041 535,404 Less current portion................................................. 221,982 30,873 ------------------ ------------------ Long-term debt, excluding current portion............ $ 305,059 504,531 ================== ==================

The aggregate maturities of long-term debt as of December 31, 2000 are as follows: 2001................................................................. $ 221,982 2002................................................................. 30,866 2003................................................................. 25,159 2004................................................................. 239,587 2005................................................................. 9,447 Thereafter........................................................... - ------------------ $ 527,041 ================== 46 SCHEDULE II MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Valuation and Qualifying Accounts Years Ended December 31, 2000, 1999 and 1998 (In thousands)

Additions Balance at charged to Balance beginning costs and at end Description of year expenses Deductions(1) of year ----------- --------------- ------------- --------------- ------------- Year ended December 31, 1998: Allowance for doubtful accounts - trade............... $ 17,162 13,173 7,325 23,010 Provision for cash discounts.......................... 10,036 73,349 72,898 10,487 Provision for claims and allowances................... 25,037 101,088 101,389 24,736 --------------- ------------- --------------- ------------- Total............................................ $ 52,235 187,610 181,612 58,233 =============== ============= =============== ============= Year ended December 31, 1999: Allowance for doubtful accounts - trade............... $ 23,010 15,804 4,710 34,104 Provision for cash discounts.......................... 10,487 75,155 76,680 8,962 Provision for claims and allowances................... 24,736 123,515 120,838 27,413 -------------- ------------- --------------- ------------- Total............................................ $ 58,233 214,474 202,228 70,479 ============== ============= =============== ============= Year ended December 31, 2000: Allowance for doubtful accounts - trade............... $ 34,104 15,717 10,968 38,853 Provision for cash discounts.......................... 8,962 81,872 78,641 12,193 Provision for claims and allowances................... 27,413 138,815 136,179 30,049 -------------- ------------- --------------- ------------- Total............................................ $ 70,479 236,404 225,788 81,095 ============== ============= =============== =============

_______________ (1) Represents charge offs, net of recoveries, to the reserves. 47 EXHIBIT INDEX Mohawk Exhibit Number Description ------ ----------- *2.1 Agreement and Plan of Merger dated as of December 3, 1993 and amended as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin and certain Shareholders of Aladdin. (Incorporated herein by reference to Exhibit 2(i)(a) in Mohawk's Registration Statement on Form S-4, Registration No. 33-74220.) *2.2 Agreement and Plan of Merger by and among Mohawk, WC Acquisition Corp., World Carpets, Inc.and the shareholders of World Carpets, Inc. dated as of October 22, 1998. (Incorporated herein by reference to Exhibit 2 of the Mohawk Registration Statement on Form S-3, Registration No. 333- 66061, as filed October 22, 1998.) *2.3 Asset Purchase Agreement by and among Aladdin Manufacturing Corporation, Image Industries, Inc. and The Maxim Group, Inc. dated as of November 12, 1998, as amended and restated on January 29, 1999. (Incorporated herein by reference to Exhibit 2.1 in Mohawk's Current Report on Form 8-K dated January 29, 1999.) *2.4 Agreement and Plan of Merger by and among Mohawk, Durkan Acquisition Corp., Nonpareil Acquisition Corp, Durkan Patterned Carpets, Inc.; the shareholders of Durkan Patterned Carpets, Inc. and the shareholders of Nonpareil Dying and Finishing, Inc., dated as of February 26, 1999. (Incorporated herein by reference to Exhibit 2.1 of the Mohawk Registration Statement on Form S-3, Registration No. 333-77231, as filed April 28, 1999.) *3.1 Restated Certificate of Incorporation of Mohawk, as amended. (Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *3.2 Amended and Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.2 in Mohawk's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.) *4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk. (Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.2 in Mohawk's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.) *10.1 Lease dated April 1, 1988 between Horizon and Kay D. Owens concerning the addition between the Tufting and Coater Buildings on South Industrial Boulevard in Calhoun, Georgia. (Incorporated herein by reference to Exhibit 10.24 in Mohawk's Registration Statement on Form S-1, Registration No. 33-53932.) *10.2 Lease dated October 15, 1990 between NBD Trust Company of Illinois and Aladdin related to a finished goods distribution warehouse in Romeoville, Illinois. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) *10.3 Lease dated October 3, 1994 between Almoda and Aladdin related to a finished goods distribution warehouse in Columbus, Ohio. (Incorporated herein by reference to Exhibit 10.29 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.4 Lease dated March 1, 1994 between Design Leasing and Holding Company, Inc. and American Rug Craftsmen, Inc. related to a manufacturing facility and warehouse in Calhoun, Georgia. (Incorporated herein by reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.5 Lease dated May 1, 1997 between Opus East, LLC and Mohawk concerning a distribution warehouse in Glen Burnie, Maryland. (Incorporated herein by reference to Exhibit 10.8 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *10.6 Lease dated September 23, 1996 between West End Road Associates and Mohawk concerning a distribution warehouse in Pompton Plains, New Jersey. (Incorporated herein by reference to Exhibit 10.10 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *10.7 Lease dated November 27, 1996 between CP-Regency Business Park LTD and Aladdin concerning a distribution warehouse in Grand Prairie, Texas. (Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) *10.8 Lease dated September 1, 1996 between Catellus Development Corp. and Mohawk concerning a distribution warehouse in LaMirada, California. (Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.) 10.9 Lease dated October 15, 2000 between Majestic Realty Co. and Principal Life Insurance Company and Aladdin concerning a distribution warehouse in La Mirada, California. *10.10 Lease dated June 1, 1998 between Intermark USA, Inc. and Aladdin Manufacturing Corporation concerning a warehouse in Kensington, Georgia. (Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.11 Lease dated February 18, 1999 between Aladdin Manufacturing Corporation and Industrial Developments International Inc. concerning a warehouse in Bolingbrook, Illinois. (Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.12 Lease dated February 18, 1999 between Mohawk Industries, Inc. and Senecca G&H, L.L.C. concerning a warehouse in Miami, Florida. (Incorporated herein by reference to Exhibit 10.13 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) 10.13 Lease dated November 28, 2000 between Aladdin Manufacturing Corporation. and Lathrop industrial development, LLC a warehouse in Lathrop, California *10.14 Lease dated December 3, 1999 between Aladdin Manufacturing Corporation and Ex-Cell Home Fashions, Inc. concerning a plant in Bentonville, Arkansas. (Incorporated herein by reference to Exhibit 10.14 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) 10.15 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia. 10.16 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia. 10.17 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia. 10.18 Lease dated December 29, 1999 between Aladdin Manufacturing Corporation and Seattle-Tacoma Box Company concerning a warehouse in Kent, Washington. *10.19 Fifth Amended and Restated Credit Agreement dated as of November 23, 1999 among Mohawk, Wachovia Bank, N.A. Suntrust Bank, Atlanta and First Union National Bank. (Incorporated herein by reference to Exhibit 10.15 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.20 Amended and Restated Series Note Agreement dated as of August 31, 1999 for $85 million of senior notes due September 1, 2005 among Mohawk, John Hancock Mutual Life Insurance Company, John Hancock Variable Life Insurance Company, Investors Partner Life Insurance Company, Principal Life Insurance Company, The Franklin Life Insurance Company and The Prudential Insurance Company of America. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-Q for the quarter ended October 2, 1999.) *10.21 Amended and Restated Note Purchase Agreement dated as of August 31, 1999 for $100 million senior notes due September 16, 2004 among Mohawk, The Prudential Insurance Company of America, Principal Life Insurance Company, John Hancock Mutual Life Insurance Company, Massachusetts Mutual Life Insurance Company, Alexander Hamilton Life Insurance Company of America and The Franklin Life Insurance Company. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-Q for the quarter ended October 2, 1999.) *10.22 Registration Rights Agreement by and among Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain Management Investors. (Incorporated herein by reference to Exhibit 10.14 of Mohawk's Registration Statement on Form S-1, Registration No. 33- 45418.) *10.23 Voting Agreement, Consent of Stockholders and Amendment to 1992 Registration Rights Agreement dated December 3, 1993 by and among Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition Fund, L.P., David L. Kolb, Donald G. Mercer, Frank A. Procopio and John D. Swift. (Incorporated herein by reference to Exhibit 10(b) of Mohawk's Registration Statement on Form S-4, Registration No. 33-74220.) *10.24 Registration Rights Agreement by and among Mohawk and the former shareholders of Aladdin. (Incorporated herein by reference to Exhibit 10.32 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) *10.25 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of March 23, 1994 to the Registration Rights Agreement dated as of February 25, 1994 between Mohawk and those other persons who are signatories thereto. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the quarter ended July 2, 1994.) *10.26 Stock Restriction and Registration Rights Agreement dated as of October 22, 1998 by and among Mohawk and the former shareholders of World. (Incorporated herein by reference to Exhibit 99.1 of Mohawk's Current Report on Form 8-K dated February 19, 1999.) *10.27 Second Consolidated, Amended and Restated Note Agreement dated as of August 31, 1999 for $50 million of senior notes, $40,000,000 of which are due October 26, 2002 and $10,000,000 of which are due July 30, 2002, among Mohawk and The Prudential Insurance Company of America. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q dated October 2, 1999.) 10.28 Receivables Purchase and Sale Agreement dated as of October 25, 2000 by and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc. 10.29 Credit and Security Agreement dated as of October 25, 2000 by and among Mohawk Factoring, Inc, as borrower, Mohawk servicing, Inc., as Servicer, Blue Ridge Asset Funding Corporation, The Liquidity Banks and Wachovia Bank, N.A., as Agent. 10.30 Interest Rate Swap Agreement dated August 31 2000 by Mohawk Industries, Inc, and First Union National Bank. Exhibits Related to Executive Compensation Plans, Contracts and other Arrangements: *10.31 Mohawk Carpet Corporation Retirement Savings Plan, as amended. (Incorporated herein by reference to Exhibit 10.1 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.32 Mohawk Carpet Corporation Supplemental Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.33 World Carpets, Inc. Savings and Retirement Plan dated January 1, 1989. (Incorporated herein by reference to Exhibit 10.70 of Mohawk's Annual Report on Form 10-K for the year ended December 31, 1998) *10.34 Mohawk Industries, Inc. Employee Stock Purchase Plan together with forms of related Management Investment Agreement, Non-Qualified Stock Option Agreement, and amendments thereto. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.35 Stock Purchase Agreement dated as of December 30, 1988 between Mohawk and Mohasco as supplemented by Supplement to Stock Purchase Agreement dated December 30, 1988. (Incorporated herein by reference to Exhibit 10.4 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.36 Securities Purchase and Holders Agreement dated as of December 31, 1988, as amended and restated March 30, 1989, together with amendments thereto and forms of related Non-Qualified Stock Option Agreement and amendments thereto. (Incorporated herein by reference to Exhibit 10.5 of Mohawk's Registration Statement on Form S-1, Registration No. 33- 45418.) *10.37 Investment Agreement dated as of March 31, 1989 among Mohawk, Mohawk Carpet, Citicorp Capital Investors Ltd., Citicorp Venture Capital Ltd. and ML-Lee Acquisition Fund, L.P. (Incorporated herein by reference to Exhibit 10.6 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.38 Equity Securities Agreement dated March 31, 1989 among Mohawk, ML-Lee Acquisition Fund, L.P. and Citicorp Venture Capital Ltd. (Incorporated herein by reference to Exhibit 10.7 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.39 Securities Holders Agreement among Mohawk and Certain Management Investors dated as of March 6, 1992. (Incorporated herein by reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) *10.40 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.8 of Mohawk's Registration Statement on Form S-1, Registration No. 33-45418.) *10.41 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.2 in Mohawk's quarterly report on Form 10-Q for the quarter ended July 3, 1993.) *10.42 Second Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.43 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.15 of Mohawk's Registration Statement on Form S-1, Registration Number 33-53932.) *10.44 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.1 of Mohawk's quarterly report on Form 10-Q for the quarter ended July 3, 1993.) *10.45 Second Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.38 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.46 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.39 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.) *10.47 First Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.) *10.48 Form of Promissory Note between Mohawk and each of the following; David L. Kolb, John D. Swift and Frank A. Procopio. (Incorporated herein by reference to Exhibit 10.75 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.) *10.49 The Mohawk Industries, Inc. Executive Deferred Compensation Plan. (Incorporated herein by reference to Exhibit 10.65 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.50 The Mohawk Industries, Inc. Management Deferred Compensation Plan. (Incorporated herein by reference to Exhibit 10.66 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) *10.51 1997 Non-Employee Director Stock Compensation Plan. (Incorporated herein by reference to Exhibit10.79 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) *10.52 1997 Long-Term Incentive Plan. (Incorporated herein by reference to Exhibit 10.80 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) *10.53 Amendment No. 1 to 1997 Non-Employee Director Stock Compensation Plan. (Incorporated herein by reference to Exhibit 10.74 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) *10.54 Consulting Agreement between Mohawk Industries, Inc. and David L. Kolb dated August 1, 2000. (Incorporated herein by reference to Exhibit 10 in Mohawk's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.) 10.55 Amendment and Restated Consulting Agreement between Mohawk Industries, Inc. and David L. Kolb dated January 17, 2001. 11 Statement re: Computation of Per Share Earnings. 21 Subsidiaries of the Registrant. 23.1 Independent Auditors' Consent - KPMG LLP. ________ * Indicates exhibit incorporated by reference. (b) Reports on Form 8-K. 1. Current Report on Form 8-K: Purchase of Crown Crafts, Inc. Woven Division, dated October 11, 2000. 2. Current Report on Form 8-K: Third quarter earnings press release, dated October 12, 2000. 3. Current Report on Form 8-K: Completion of the purchase of Crown Crafts, Inc. Woven Division, dated November 14, 2000.