Mohawk Industries, Inc. (“Mohawk” or the “Company”) is a leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. The Company's vertically integrated manufacturing and distribution processes provide competitive advantages in carpet, rugs, ceramic tile, laminate, wood, stone, luxury vinyl tile ("LVT") and vinyl flooring. The Company's industry-leading innovation has yieldeddevelops products and technologies that differentiate its brands in the marketplace and satisfy all flooring related remodeling and new construction requirements. The Company's brands are among the most recognized in the industry and include American Olean^®, Bigelow^®, Daltile^®, Durkan^®, KarastanIVC^®™, Kerama MarazziKarastan^®, Lees^®, Marazzi^®, Mohawk^®, Pergo^®, Quick-Step^® and Unilin^®. During the past decade, theThe Company has transformed its business from an American carpet manufacturer into the world's largest flooring company with operations in Australia, Brazil, Canada, China, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States. The Company had annual net sales in 20142015 of $7.8$8.1 billion. Approximately 71%67% of this amount was generated by sales in North Americathe United States and approximately 29%33% was generated by sales outside North America.the United States.

During the second quarter of 2015, the Company realigned its reportable segments to reflect how the Company’s results will be reported by management. The Company has reorganized its business into three reporting segments:segments, Global Ceramic, Flooring North America ("Flooring NA") and Flooring Rest of the CarpetWorld ("Flooring ROW"). In order to leverage its relationships and distribution capabilities, the Company organized its carpet, wood, laminate, LVT and vinyl operations by geography into the Flooring NA segment and Flooring ROW segment. The Company did not make any changes to the Global Ceramic segment, which includes the Company's ceramic, tile and stone operations. Previously reported segment results have been reclassified to conform to the current period presentation. The Global Ceramic, Flooring NA and the LaminateFlooring ROW segments contributed approximately 37%, 45% and Wood segment with a18%, respectively, of net sales distribution of approximately 40%, 40% and 20%, respectively.in 2015. Selected financial information for the Carpet, Ceramic and Laminate and Woodthree segments, geographic net sales and the location of long-lived assets are set forth in Note 18 to the consolidated financial statements.16-Segment Reporting.

The Flooring ROW segment designs, manufactures, sources, distributes and Wood segment also producesmarkets laminate, hardwood flooring, roofing elements, insulation boards, medium-density fiberboard ("MDF"), chipboards, and other wood products.vinyl flooring products, including LVT, used primarily in the residential and commercial markets for both remodeling and new construction. In addition, the Flooring ROW segment licenses certain patents related to flooring manufacturers throughout the world. The Flooring ROW segment markets and distributes its flooring products under various brands, including the following brand names: IVC, Moduleo, Pergo, Quick-Step and Unilin which it sells through retailers, wholesalers, independent distributors and home centers.

The Global Ceramic segment designs, manufactures, sources, distributes and markets a broad line of ceramic tile, porcelain tile and natural stone products. Products are distributed through various distribution channels including independent distributors, home center retailers, Company-operated service centers and distribution centers that sell to floor covering retailers,stores, ceramic specialists, and commercial dealers,contractors, Kerama Marazzi branded stores and directly to commercial end users. The business is organized to address the specific customer needs of each distribution channel with dedicated sales forces that support the various channels.

The Company provides customers with one of the ceramic tile industry’s broadest product lines—a complete selection of glazed floor tile, glazed wall tile, glazed and unglazed ceramic mosaic tile, porcelain tile, quarry tile and stone products, as well as installation products. In addition to products manufactured by the Company’s ceramic tile business, the Company also sources products from other manufacturers to enhance its product offering.

The Global Ceramic segment markets its products under the American Olean, Dal-Tile, KAI, Kerama Marazzi, Marazzi and Ragno brand names. These brands are supported by a fully integrated marketing program, displays, merchandising boards, literature/literature, catalogs and internet websites. Innovative design, quality and response to changes in customer preference enhances the recognition in the marketplace. The Company is focused on sales growth opportunities through innovative products and programs in both the residential and commercial channels for both remodeling and new construction.

The Global Ceramic segment utilizes various distribution methods including regional distribution centers, service centers, and direct shipping and customer pick-up from manufacturing facilities. The Company’ssegment’s sales forces are generally organized by product type and sales channels in order to best serve each type of customer. The Company believes its distribution methods for the Global Ceramic segment provide high-quality customer service and enhance its ability to plan and manage inventory requirements.

Through its Flooring NA segment, the Company designs, manufactures, sources, distributes and Woodmarkets carpet, laminate, carpet pad, rugs, hardwood and vinyl, including LVT, in a broad range of colors, textures and patterns. The Flooring NA segment positions product lines in all price ranges and emphasizes quality, style, performance and service. The Flooring NA segment markets and distributes its product lines to independent floor covering retailers, home centers, mass merchandisers, department stores, shop at home, buying groups, commercial contractors and commercial end users. Some products are also marketed through private labeling programs. Sales to residential customers represent a significant portion of the total industry and the majority of the segment's sales.

The Laminate and WoodFlooring ROW segment designs, manufactures, sources, licenses, distributes and markets laminate, hardwood and hardwood flooring.vinyl flooring, including LVT. It also designs and manufactures roofing elements, insulation boards, MDF, chipboards and other wood products in Europe.products. Products are distributed through separate distribution channels consisting of retailers, independent distributors, wholesalers and home centers. The Laminate and Wood segment's U.S. operations also manufacture Mohawk branded laminate and hardwood flooring, which sells through the Carpet segment's channels and also directly through home centers and mass merchandisers. The majority of the Laminate and Wood segment's laminate sales are for residential replacement. The business is organized to address the specific customer needs of each distribution channel.

The Company uses regional distribution centers and direct shipping from manufacturing facilities to provide high-quality customer service and enhance the Company’s ability to plan and manage inventory requirements.

The Company promotes its brands through advertising in television, print, social and internet media, as well as cooperative advertising, point-of-sale displays, sponsorship of a European cycling team and marketing literature. The Company also continues to rely on the substantial brand name recognition of its product lines. The cost of point-of-sale displays and product samples, a significant promotional expense, is partially offset by sales of samples to customers.

The Company’s tile manufacturing operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile. The Company believes that its manufacturing organization offers competitive advantages due to its ability to manufacture a differentiated product line consisting of one of the industry’s broadest product offerings of colors, textures and finishes and its ability to utilize the industry’s newest technology, as well as the industry’s largest offering of trim and angledecorative pieces. In addition, the Global Ceramic segment also sources a portion of its product to supplement its product offerings. The Global Ceramic segment continues to invest in capital expenditures, primarily in equipment utilizingthat utilizes the latest technologies, which supports the Company's efforts to increase manufacturing capacity, improve efficiency, meet the growing demand for its innovative products and develop new capabilities.

The principal raw materials used in the production of ceramic tile are clay, talc, industrial minerals and glazes. The Company has long-term clay mining rights in the U.S. and Russia that satisfy a significant amountportion of its clay requirements for producing quarry tile. The Company also purchases a number of different grades of clay for the manufacture of its non-quarry tile. The Company has entered into long-term supply agreements for a portion of its talc requirements. Glazes are used on a significant percentage of manufactured tiles. Glazes consist of frit (ground glass), zircon, stains and other materials, with frit being the largest ingredient. The Company manufactures a significant amount of its frit requirements. The Company believes that there is an adequate supply of all grades of clay, talc and industrial minerals that are readily available from a number of independent sources. If these suppliers were unable to satisfy the Company's requirements, the Company believes that alternative supply arrangements would be available.

The principal raw materials used in producingthe production of carpet and rugs are nylon, triexta, polyester, polypropylene, recycled post-consumer plastics, synthetic backing materials, latex and various dyes and chemicals, the majority of which are petroleum based. The Company uses wood chips, wood veneers, lumber, and resins in its production of laminate and hardwood products. In its vinyl flooring operations, the Company uses plasticizers and pvc resins. Major raw materials used in the Company’s manufacturing process are available from independent sources and the Company obtains most of its raw materials from major suppliers providing inputs to each major product category. If these suppliers were unable to satisfy the requirements, the Company believes that alternative supply arrangements would be available. Although the market for raw materials is sensitive to temporary disruptions, the North American flooring industry has not experienced a significant shortage of raw materials in recent years.

The principal raw materials used in the production of boards, laminate and hardwood flooring are wood, paper resins, coatings and stains. Wood supply is a very fragmented market in Europe.resins. The Company has long-standing relationships with numerous suppliers. Thesewood suppliers provide a wide variety of wood species varying from fresh round wood to several kinds of by-products of sawmills and recycled wood, giving the Company a cost-effective and secure supply of raw material. In its vinyl flooring operations, the U.S.,Company uses glass fiber, plasticizers and pvc resins. Major raw materials used in the Company’s manufacturing process are available from independent sources and the Company has a long-term contractlong-standing relationships with a contiguously located lumber company that supplies most of its total needs for HDF board production. The supply of various species of hardwoods and hardwood veneers used in the production of solid wood and engineered flooring is both localized and global.

The Company is the largest flooring manufacturer in a fragmented industry composed of a wide variety of companies from small privately held firms to large multinationals. In 2013,2014, the U.S. floor covering industry reported $20.1$21.8 billion in sales,

The principal methods of competition within the floor covering industry generally are service, style, quality, price, product innovation and technology. In each of the markets, price and market coverage are particularly important because there is limited differentiation among competing product lines. The Company’s investments in manufacturing equipment, computer systems and

Globally, the ceramic tile industry is significantly fragmented. Based on industry publications, the 2014 market sales globally for ceramic tile and stone surfaces was over $73 billion. The Company faces competition in the ceramic tile flooring channelmarket from a large number of foreign and domestic manufacturers who all compete for sales of ceramic tile to customers. The Company believes it is the largest manufacturer, distributor and marketer of ceramic tile in the world. The Company also believes it is the largest manufacturer and distributor of ceramic tile in the U.S.

The Company faces competitionNorth American carpet and rug industry is highly competitive. Based on industry publications, the top five North American carpet and rug manufacturers (including their foreign divisions) in the laminate2014 had carpet and hardwood flooring channel from a large numberrug sales in excess of domestic and

The Company faces competition in the laminate and hardwood flooring business from a large number of domestic and foreign manufacturers. The Company believes it is one of the largest manufacturers and distributors of laminate flooring in the world, with a focus on high-end products. In addition, the Company believes it has a competitive advantage in the laminate flooring channelmarket as a result of the Laminate and WoodFlooring ROW segment’s industry leading design, patented technologies and brands,brand recognition, which allow the Company to distinguish its laminate and hardwood flooring products in the areas of finish, quality, installation and assembly. The Company faces competition in the resilient flooring channel from a large number of domestic and foreign manufacturers, but believes it has a competitive advantage in the sheet vinyl and vinyl tile (including LVT) market due to industry leading design, patented technologies, brand recognition, and vertical integration.

Intellectual property is important to the Company’s business and the Company relies on a combination of patent, copyright, trademark and trade secret laws to protect its interests.

The Company’s sales terms are substantially the same as those generally available throughout the industry. The Company generally permits its customers to return products purchased from it within specified time periods from the date of sale, if the customer is not satisfied with the quality of the product.

    

During 2014,2015, no single customer accounted for more than 10% of total net sales and the top 10 customers accounted for less than 20% of the Company’s net sales. The Company believes the loss of one major customer would not have a material adverse effect on its business.

As of December 31, 2014,2015, the Company employed approximately 32,30034,100 persons consisting of approximately 23,10020,400 in North America,the United States, approximately 4,7005,000 in Europe, approximately 3,4003,900 in Mexico, approximately 3,500 in Russia, approximately 1,000 in Malaysia and approximately 200300 in various other countries. The majority of the Company’s European and Mexican manufacturing employees are members of unions. Most of the Company’s U.S. employees are not a party to any collective bargaining agreement. Additionally, the Company has not experienced any strikes or work stoppages in recent years. The Company believes that its relations with its employees are good.

The Company’s Internet address is http://www.mohawkind.com. The Company makes the following reports filed by it available, free of charge, on its website under the heading “Investor Information”:

Downturns in the U.S. and global economies, along with the residential and commercial markets in such economies, negatively impact the floor covering industry and the Company’s business. TheDuring times of economic uncertainty or decline, end consumers tend to spend less on remodeling their homes, which is how the Company derives a majority of its sales fromsales. Likewise new home construction - and the replacement segment of the market, followed by sales associated withcorresponding need for new construction activities.flooring materials - tends to slow down during recessionary periods. Although the impact of a decline in new construction activity is typically accompanied by an increase in remodeling and replacement activity, these activities lagged in the most recent downturn. Although the difficult economic conditions have improved in the U.S., European and other markets have not recovered as quickly and there may be additional downturns that could cause the industry to deteriorate in the foreseeable future. A significant or prolonged decline in residential or commercial remodeling or new construction activity could have a material adverse effect on the Company’s business and results of operations.

    

The Company operates in a market sector where demand is strongly influenced by rapidly changing customer preferences as to product design and technical features. Failure to quickly and effectively respond to changing customer demand or technological developments could have a material adverse effect on our business.

Despite recent improvement in overall economic conditions in the U.S., continued weakness elsewhere in the world or changes in market conditions could impact the Company’s ability to obtain financing in the future, including any financing necessary to refinance existing indebtedness. The cost and availability of credit during uncertain economic times could have a material adverse effect on the Company’s financial condition.

Further, negative economic conditions may factor into the Company’s periodic credit ratings assessment by Moody’s Investors Service, Inc. ("Moody's"), Standard & Poor’s Financial Services, LLC ("S&P") and Fitch, Inc. Any future changes in the credit rating agencies’ methodology in assessing our credit strength and any downgrades in the Company’s credit ratings could increase the cost of its existing credit and could adversely affect the cost of and ability to obtain additional credit in the future. The Company can provide no assurances that downgrades will not occur.

On September 25, 2013,March 26, 2015, the Company entered into a $1,000.0$1,800 million, 5-year, senior revolving credit facility (the "2013"2015 Senior Credit Facility"). As of December 31, 2014,2015, the amount utilized under the 20132015 Senior Credit Facility, including the commercial paper issuance, was $534.6$892.3 million resulting in a total of $465.4$907.7 million available. The amount utilized included$301.6included $756.9 million of commercial paper issued, $195.7$134.1 million of direct borrowings, and $37.4$1.4 million of standby letters of credit related to various insurance contracts and foreign vendor commitments. In addition, on December 19, 2012, the Company entered into a three-yearan on-balance sheet U.S. trade accounts receivable securitization agreement (the "Securitization Facility") that after an amendment on September 11, 2014 allows the Company to borrow up to $500 million based on available accounts receivable and is secured by the Company's U.S. trade accounts receivable. At December 31, 2014,2015, the amount utilized under the Securitization Facility was $500.0 million.

During the term of the credit facilities, if the Company’s cash flow is worse than expected or the U.S. trade accounts receivables are lower than expected, the Company may need to refinance all or a portion of its indebtedness through a public and/or private debt offering or a new bank facility and may not be able to do so on terms acceptable to it, or at all. If the Company is unable to access debt markets at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption, or weakness in the Company's businesses, the Company’s ability to finance its operations or repay existing debt obligations may be materially and adversely affected.

Additionally, the credit facilities include certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on liens, indebtedness, investments, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, payments and modifications of certain existing debt, future negative pledges, and changes in the nature of the Company’s business. In addition, the 20132015 Senior Credit Facility requires the Company to maintain a Consolidated Interest Coverage Ratio of at least 3.0 to 1.0 and a Consolidated

The results of the Company’s foreign subsidiaries reported in the local currency are translated into U.S. Dollars for balance sheet accounts using exchange rates in effect as of the balance sheet date and for the statement of operations accounts using, principally, the Company’s average rates during the period.consolidated reporting. The exchange rates between some of these currencies and the U.S. Dollar in recent years have fluctuated significantly and may continue to do so in the future. The Company may not be able to manage effectively the Company’s currency translation risks, and volatility in currency exchange rates may have a material adverse effect on the Company’s consolidated financial statements and affect comparability of the Company’s results between financial periods.

The Company’s businesses rely on sophisticated inventory systemssoftware applications to obtain, rapidly process, analyze and manage data. The Company relies on these systems to, among other things:

In addition, we rely on information management systems to monitor the daily operation of points of sale controlled and managed by us and to maintain accurate and up-to-date operating and financial data for the compilation of management information. We also rely on our computer hardware, software and network for the storage, delivery and transmission of data to our sales and distribution systems, and certain of our production processes are managed and conducted by computer.

Any damage by unforeseen events or system failure whichevent causes interruptions to the input, retrieval and transmission of data or increase in the service time, whether caused by human error, natural disasters, power loss, computer viruses, system conversion, intentional acts of vandalism, various forms of cybercrimes including and not limited to hacking, intrusions, and malware or otherwise, could disrupt our normal operations. There can be no assurance that we can effectively carry out our disaster recovery plan to handle the failure of our information systems, or that we will be able to restore our operational capacity within sufficient time to avoid material disruption to our business. The occurrence of any of these events could cause unanticipated disruptions in service, decreased customer service and customer satisfaction, and harm to our reputation and loss or misappropriation of sensitive information, which could result in loss of customers, increased operating expenses and financial losses. Any such events could in turn have a material adverse effect on our business, financial condition, results of operations, and prospects.

The Company intends to grow its business through a combination of organic growth and acquisitions. Growth through acquisitions involves risks, many of which may continue to affect the Company after the acquisition. The Company cannot give assurance that an acquired company will achieve the levels of revenue, profitability and production that the Company expects. Acquisitions may require the issuance of additional securities or the incurrence of additional indebtedness, which may dilute the ownership interests of existing security holders or impose higher interest costs on the Company.

Failure to successfully manage and integrate an acquisition with the Company’s existing operations could lead to the potential loss of customers of the acquired business, the potential loss of employees who may be vital to the new operations, the potential loss of business opportunities or other adverse consequences that could have a material adverse effect on the Company’s business. Even if integration occurs successfully, failure of the acquisition to achieve levels of anticipated sales growth, profitability, or productivity, or otherwise perform as expected, may result in goodwill or other asset impairments or otherwise have a material adverse effect on the Company’s business.

In addition, we have made certain investments, including through joint ventures, in which we have a minority equity interest and lack management and operational control. The controlling joint venture partner in a joint venture investment may have business interests, strategies or goals that are inconsistent with ours, and businessours. Business decisions or other actions or omissions of the controlling joint venture partner, or the joint venture company, may result in harm to our reputation or adversely affect the value of our investment in the joint venture.

As part of the Company’s business strategy, the Company intends to pursue a wide array of potential strategic transactions, including acquisitions of complementary businesses, as well as strategic investments and joint ventures. Although the Company regularly evaluates such opportunities, the Company may not be able to successfully identify suitable acquisition candidates or investment opportunities, to obtain sufficient financing on acceptable terms to fund such strategic transactions, to complete acquisitions and integrate acquired businesses with the Company’s existing businesses, or to manage profitably acquired businesses or strategic investments.transactions.

The Company's international activities are significant to its manufacturing capacity, revenues and profits, and the Company is further expanding internationally. The Company sells products, operates plants and invests in companies around the world. Currently, the Company's Laminate and WoodFlooring ROW segment has significant operations in Europe, Russia, Malaysia, Australia and AustraliaNew Zealand, and the Company's Global Ceramic segment has significant operations in Europe, Russia and Mexico. In addition, the Company has invested in a joint ventureventures in Brazil and India related to laminate flooring and has an investment in a Chinese tile manufacturer.flooring.

The Company cannot assure investors that it will succeed in developing and implementing policies and strategies to address the foregoing risks effectively in each location where the Company does business, and, therefore that the foregoing factors will not have a material adverse effect on the Company’s business.

The Company is subject to the tax laws of the many jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to our facts is sometimes open to interpretation. In calculating the provision for income taxes, we must make judgments about the application of these inherently complex tax laws. Our domestic and international tax liabilities are largely dependent upon the distribution of profit before tax among these many jurisdictions. However, it also includes estimates of additional tax which may be incurred for tax exposures and reflects various estimates and assumptions, including assessments of future earnings of the Company that could impact the valuation of our deferred tax assets. Our future results of operations and tax liability could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of the Company, changes in tax legislation and rates, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns, and ongoing assessments of our tax exposures.

The Company is subject to increasingly numerous and complex laws, regulations and licensing requirements in each of the jurisdictions in which the Company conducts business. The Company faces risks and uncertainties related to compliance with such laws and regulations. In addition, new laws and regulations may be enacted in the U.S. or abroad that may require the Company to incur additional personnel-related, environmental, or other costs on an ongoing basis, such as recently enacted healthcare legislation in the United States.

In particular, the Company’s operations are subject to various environmental, health and safety laws and regulations, including those governing air emissions, wastewater discharges, and the use, storage, treatment, recycling and disposal of materials and finished product. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations of agencies or courts. The Company could incur material expenditures to comply with new or existing regulations, including fines and penalties and increased costs of its operations. For example, our manufacturing facilities may become subject to further limitations on the emission of “greenhouse gases” due to public policy concerns regarding climate change issues or other environmental or health and safety concerns. While the form of any additional regulations cannot be predicted, a “cap-and-trade” system similar to the system that applies to our businesses in the European Union could be adopted in the United States. The Company’s manufacturing processes use a significant amount of energy, especially natural gas. Any such “cap-and-trade” system or other limitations imposed on the emission of “greenhouse gases” could require us to increase our capital expenditures, use our cash to acquire emission credits or restructure our manufacturing operations, which could have a material adverse affecteffect on our business.

Many of the Company’s business activities involve substantial investments in manufacturing facilities and many products are produced at a limited number of locations. These facilities could be materially damaged by natural disasters, such as floods, tornados, hurricanes and earthquakes, or by fire or other unexpected events. The Company could incur uninsured losses and liabilities arising from such events, including damage to its reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on its business.

In the ordinary course of business, the Company is subject to a variety of product-related claims, lawsuits and legal proceedings, including those relating to product liability, product warranty, product recall, personal injury, and other matters. A very large claim or several similar claims asserted by a a large class of plaintiffs could have a material adverse effect on the Company's business, if the Company is unable to successfully defend against or resolve these matters or if its insurance coverage is insufficient to satisfy any judgments against the Company or settlements relating to these matters. Although the Company has product liability insurance, the policies may not provide coverage for certain claims against the Company or may not be sufficient to cover all possible liabilities. Further, the Company may not be able to maintain insurance at commercially acceptable premium levels. Moreover, adverse publicity arising from claims made against the Company, even if the claims are not successful, could adversely affect the Company’s reputation or the reputation and sales of its products.

In the past, third parties have claimed that certain technologies incorporated in the Company’s products infringe their patent rights. The Company cannot be certain that the Company’s products do not and will not infringe issued patents or other intellectual property rights of others. Historically, patent applications in the U.S. and some foreign countries have not been publicly disclosed until the patent is issued (or, in some recent cases, until 18 months following submission), and the Company may not be aware of currently filed patent applications that relate to the Company’s products or processes. If patents are later issued on these applications, the Company may be liable for infringement.

As a result, the Company might be required to pay substantial damages (including punitive damages and attorney’s fees), discontinue the use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses authorizing the use of infringing technology. There can be no assurance that licenses for disputed technology or intellectual property rights would be available on reasonable commercial terms, if at all. In the event of a successful claim against the Company along with failure to develop or license a substitute technology, the Company’s business would be materially and adversely affected.

To be successful, the Company must attract, develop and retain qualified and talented personnel in management, sales, marketing, product design, and innovation and operations, and as it considers entering new international markets, skilled personnel familiar with those markets. The Company competes with multinational firms for these employees and invests resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect the Company’s competitive position and its operating results.

The Company’s stock is publicly traded. As a result, the Company is subject to the rules and regulations of federal and state agencies and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the Securities and Exchange Commission and the New York Stock Exchange, frequently issue new requirements and regulations. The Company’s efforts to comply with the regulations and interpretations have resulted in, and are likely to continue to result in, increased general and administrative costs and diversion of management’s time and attention from revenueprofit generating activities to compliance activities.

A significant or prolonged decrease in the Company’s market capitalization, including a decline in stock price, or a negative long-term performance outlook, could result in an impairment of its tangible and intangible assets which results when the carrying value of the Company’s assets exceed their fair value.

Certain of the statements in this Form 10-K, particularly those anticipating future performance, business prospects, growth and operating strategies, and similar matters, and those that include the words “could,” “should,” “believes,” “anticipates,” “expects” and “estimates” or similar expressions constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, 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. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; inflation and deflation in raw material prices and other input costs; inflation and deflation in consumer markets; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; integration of acquisitions; international operations; introduction of new products; rationalization of operations; tax, product and other claims; litigation; and other risks identified in Mohawk’s SEC reports and public announcements.

The Company owns a 0.2 million square foot headquarters officeand leases manufacturing and distribution facilities worldwide. The table below lists the primary owned and leased facilities at December 31, 2015. The Company owns its Corporate Headquarters in Calhoun, Georgia on an eight-acre site.GA. The Company also owns a 2.1 million square foot manufacturing facility locatedand operates service centers and stores in Dalton, Georgia and a 1.4 million square foot manufacturing facility in Glasgow, Virginia used by the Carpet segment; a 2.4 million square foot manufacturing facility located in Orel,United States & Russia, a 1.7 million square foot manufacturing facility located in Monterey, Mexico, a 1.4 million square foot manufacturing facility located in Sunnyvale, Texas and a 1.5 million square foot manufacturing facility located in Sassuolo, Italy used by the Ceramic segment; and a 2.1 million square foot manufacturing property and a 1.1 million square foot manufacturing facility located in Wielsbeke, Belgium, a 1.2 million square foot manufacturing facility in Oostrozebeke, Belgium and a 0.5 million square foot manufacturing facility located in Thomasville, North Carolina used by the Laminate and Wood segment.

The following is a list of the principal plants are generally adequate to meet its production plans pursuant tomanufacturing and distribution facilities owned or leased by the Company’s long-term sales goals. In the ordinary course of business, the Company monitors the condition of its facilities to ensure that they remain adequate to meet long-term sales goals and production plans.Company:

The Company is involved in 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 by the Company to be contemplated to which the Company is a party or to which any of its property is subject.

In these actions, the plaintiffs, on behalf of themselves and/or a class of purchasers, seeksought damages allegedly suffered as a result of alleged overcharges in the price of polyurethane foam products from at least 1999 to the present. The direct purchaser class currently claims damages from all of the defendants named in the lawsuit of up to approximately $867 million which amount may be reduced further by the value of claims made by plaintiffs that opt out of the class. Any damages actually awarded at trial arewould have been subject to being tripled under US antitrust laws.

On March 23, 2015, the Company entered into an agreement to settle all claims brought by the class of direct purchasers, and the trial court entered an order granting final approval of this settlement on November 19, 2015. On April 30, 2015, the Company entered into an agreement to settle all claims brought by the class of indirect purchasers, and the trial court entered an order granting final approval of this settlement on January 27, 2016. The Company has also entered into settlement agreements resolving all of the claims brought on behalf of all but one of the consolidated individual lawsuits. The Company denies all allegations of wrongdoing but settled the class actions and individual lawsuits to avoid the uncertainty, risk, expense and distraction of protracted litigation.

The Company remains a defendant in one case involving an individual purchaser of polyurethane foam products not sold by the Company. This sole remaining case is in its early stages, no trial date has been set, and the amount of damages in the remaining cases varies ordamages has not yet been specified by the plaintiffs. Eachplaintiff. In addition to as yet unspecified actual damages, the plaintiff also seeks attorney fees, pre-judgment and post-judgment interest, court costs and injunctive relief against future violations.

During the twelve months ended December 31, 2015 the Company recorded a $122.5 million charge within selling, general and administrative expenses for the settlement and defense of the antitrust cases. The Company believes that adequate provisions for resolution of all of the allegations in these actions and will vigorously defend itself.cases have been made. The Company has reached an agreement in principledoes not believe that the ultimate outcome of the remaining case will have a material adverse effect on its financial condition.

In January 2012, the Company received a €23,789€23.8 million assessment from the Belgian tax authority related to its year ended December 31, 2008, asserting that the Company had understated its Belgian taxable income for that year. The Company filed a formal protest in the first quarter of 2012 refuting the Belgian tax authority's position. The Belgian tax authority set aside the assessment in the third quarter of 2012 and refunded all related deposits, including interest income of €1,583€1.6 million earned on such deposits. However, on October 23, 2012, the Belgian tax authority notified the Company of its intent to increase the Company's taxable income for the year ended December 31, 2008 under a revised theory.

During the second quarter of 2015, the Company realigned its reportable segments to reflect how the Company’s results will be reported by management. The Company has reorganized its business into three reporting segments: Global Ceramic, Flooring North America ("Flooring NA") and Flooring Rest of the World ("Flooring ROW"). In order to leverage its relationships and distribution capabilities, the Company organized its carpet, wood, laminate, luxury vinyl tile ("LVT") and vinyl operations by geography into the Flooring NA segment and Flooring ROW segment. The Company did not make any changes to the Global Ceramic segment. Previously reported segment results have been reclassified to conform to the current period presentation.

This new segment structure is consistent with the strategic objective that management now applies to manage the growth and profitability of the Company’s business. The Global Ceramic segment includes all worldwide tile and natural stone operations. The Flooring NA segment includes North American operations in all product categories except tile and natural stone. The new segment combines the former Carpet segment with the CeramicNorth American operations of the former Laminate and Wood segment and the North American operations of the Company’s newly acquired LVT and vinyl flooring businesses. The Flooring ROW segment includes operations outside of North America in all product categories except tile and natural stone. The new segment combines the European and Rest of the World operations of the former Laminate and Wood segment. segment and the European and Rest of the World operations of the Company’s newly acquired LVT and vinyl flooring businesses.

The Carpet segment designs, manufactures, sources and markets its floor covering product lines, including carpets, rugs, carpet pad, ceramic tile, laminate, hardwood and resilient, which it distributes primarily in North America through its network of regional distribution centers and satellite warehouses using company-operated trucks, common carrier or rail transportation. The segment’s product lines are sold through various selling channels, which include independent floor covering retailers, home centers, mass merchandisers, department stores, shop at home, buying groups, commercial dealers and commercial end users. TheGlobal Ceramic segment designs, manufactures, sources and markets a broad line of ceramic tile, porcelain tile, natural stone and other products, which it distributes primarily in North America, Europe and Russia through its network of regional distribution centers and Company-operated service centers using company-operatedCompany-operated trucks, common carriers or rail transportation. The segment’s product lines are sold through Company-operated service centers, independent distributors, home center retailers, tile and flooring retailers and contractors. The LaminateFlooring NA segment designs, manufactures, sources and Woodmarkets its floor covering product lines, including carpets, rugs, carpet pad, hardwood, laminate and vinyl products, including LVT, which it distributes through its network of regional distribution centers and satellite warehouses using Company-operated trucks, common carrier or rail transportation. The segment’s product lines are sold through various selling channels, including independent floor covering retailers, distributors, home centers, mass merchandisers, department stores, shop at home, buying groups, commercial contractors and commercial end users. The Flooring ROW segment designs, manufactures, sources, licenses and markets laminate, hardwood flooring, roofing elements, insulation boards, MDF,medium-density fiberboard ("MDF"), chipboards, and other wood products and vinyl products, including LVT, which it distributes primarily in North AmericaEurope and EuropeRussia through various selling channels, which include retailers, independent distributors and home centers.

Net sales for 2014 were $7,803.4 million, reflecting an increase of $454.7 million, or 6.2%, from the $7,348.8 million reported for 2013. The increase was primarily attributable to higher sales volume of approximately $498 million, or 7%, and the favorable net impact of price and product mix of approximately $13 million, partially offset by the net impact of unfavorable foreign exchange rates of approximately $56 million. Of the $498 million increase in volume, approximately $328 million was attributable to the Marazzi and Spano acquisitions.

Gross profit for 2014 was $2,154.2 million (27.6% of net sales), an increase of $233.4 million or 12.2%, compared to gross profit of $1,920.8 million (26.1% of net sales) for 2013. As a percentage of net sales, gross profit increased 150 basis points. The increase in gross profit dollars was primarily attributable to higher sales volume of approximately $151 million that was predominately attributable to the Marazzi and Spano acquisitions, operations productivitysavings from capital investments and cost reduction initiatives of approximately $86 million, the fair value inventory step-up adjustment in the prior year related to the Marazzi acquisition of approximately $31 million, the favorable net impact of price and product mix of approximately $26 million, lower restructuring, acquisition and integration-related costs of approximately $18 million, partially offset by operation start-up costs associated with investments in

Selling, general and administrative expenses for 2014 were $1,381.4 million (17.7% of net sales), an increase of $7.5 million compared to $1,373.9 million (18.7% of net sales) for 2013. Selling, general and administrative expenses decreased as a percentage of net sales compared to the prior year primarily due to increased sales volume. As a percentage of net sales, selling, general and administrative expenses decreased 100 basis points.points, primarily due to increased sales volumes. The increase in selling, general and administrative expenses in dollars was primarily attributable to expensesapproximately $71 million of costs associated with acquired businesses,higher sales volumes due to higher legacy sales, acquisitions and new product introductions, and increased employee costs of approximately $12 million, partially offset by lower restructuring, acquisition and integration-related costs andof approximately $32 million, improved efficiencies.

Operating income for 2014 was $772.8 million (9.9% of net sales) reflecting an increase of $225.9 million, or 41.3%, compared to operating income of $546.9 million (7.4% of net sales) for 2013. The increase in operating income was primarily attributable to higher sales volume of approximately $89 million, increases in operations productivitysavings from capital investments and cost reduction initiatives of approximately $86 million, lower restructuring, acquisition and integration-related costs of approximately $60 million, inventory step-up related to the Marazzi acquisition of approximately $31 million and partially offset by higher input costs of approximately $49 million.

Interest expense was $98.2 million for 2014, reflecting an increase of $6.0 million compared to interest expense of $92.2 million for 2013. The increase was primarily attributable to the bond redemption premium and related fees of approximately $20 million, partially offset by lower interest rates.

Other expense was $10.7 million for 2014, reflecting an increase of $1.6 million compared to other expense of $9.1 million for 2013. The increase was primarily attributable to the disposal of a subsidiary of approximately $12.0 million.

For 2014, the Company recorded income tax expense of $131.6 million on earnings from continuing operations before income taxes of $663.9 million for an effective tax rate of 19.8%, as compared to an income tax expense of $78.4 million on

For 2013, the Company recorded a loss from discontinued operations, net of income tax benefit of $17.9 million as discussed in Note 4 of Notes to Consolidated Financial Statements.4-Discontinued Operations.

    

The Company’s primary capital requirements are for working capital, capital expenditures and acquisitions. The Company’s capital needs are met primarily through a combination of internally generated funds, commercial paper, bank credit lines, term and senior notes and credit terms from suppliers.

Net cash flows provided by operating activities for 20142015 were $662.2$911.9 million compared to $525.2$662.2 million provided by operating activities for 2013.2014. The increase in cash provided by operating activities for 2015 as compared to 2014 is primarily attributable to changes in working capital. Receivables, inventories and accounts payable used approximately $7 million of cash in 2015 compared to $224 million 2014. These changes in working capital reflect normal fluctuations relative to the timing and nature of these transactions. Also contributing to the increase in cash provided by operating activities were higher earnings driven by increases in sales volumes, savings from capital investments and cost reduction initiatives, and decreases in income tax and interest expense, partially offset by the polyurethane foam litigation charge and the net impact of unfavorable foreign exchange rates. The increase in cash provided by operating activities of $137 million for 2014 as compared to 2013 iswas primarily attributable to higher earnings driven by increases in sales volumes, savings from capital investments and cost reduction initiatives and lower restructuring charges, and a decrease in deferred income taxes, partially offset by changes in working capital.

Net cash used in investing activities for 20142015 was $565.7$1,874.2 million compared to net cash used in investing activities of $810.0$565.7 million for 2013.2014. The increase was primarily attributable to acquisitions of $1,370.6 million in the current year, partially offset by lower capital expenditures of $57.8 million in the current year. The decrease in cash used in investing activities of $244.3 million for 2014 as compared to 2013 was primarily attributable to acquisitions of $443.5 million in the prior year,2013, partially offset by higher capital expenditures of $195.3 million in the current year.

On September 25, 2013, the Company entered into a $1,000.0 million, 5-year, senior revolving credit facility (the "2013 Senior Credit Facility"). The 2013 Senior Credit Facility providesprovided for a maximum of $1,000.0 million of revolving credit, including limited amounts of credit in the form of letters of credit and swingline loans and serves as a backstop to the Company's commercial paper program.loans. The Company paid financing costs of $1.8 million in connection with its 2013 Senior Credit Facility. These costs were deferred and, along with unamortized costs of $11.4 million related to the Company’s 2011 Credit Facility, are beingprevious credit facility, were amortized over the term of the 2013 Senior Credit Facility.

The obligations of the Company and its subsidiaries in respect of the 20132015 Senior Credit Facility are unsecured.

The 20132015 Senior Credit Facility includes certain affirmative and negative covenants that impose restrictions on the Company's financial and business operations, including limitations on liens, subsidiary indebtedness, investments, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, payments and modifications of certain existing debt, future negative pledges, and changes in the nature of the Company's business. Many of theseThese limitations are subject to numerous exceptions. The Company is also required to maintain a Consolidated Interest Coverage Ratio of at least 3.0 to 1.0 and a Consolidated Net Leverage Ratio of no more than 3.75 to 1.0, each as of the last day of any fiscal quarter.

The 20132015 Senior Credit Facility also contains customary representations and warranties and events of default, subject to customary grace periods.

The Company paid financing costs of $2.6 million in connection with its 2015 Senior Credit Facility. These costs were deferred and, along with unamortized costs of $8.7 million related to the Company’s 2013 Senior Credit Facility, is scheduled to mature on September 25, 2018. However,are being amortized over the maturity date will accelerate, resulting in the acceleration of any unamortized deferred financing costs, to October 16, 2015, if on that date anyterm of the Company's 6.125% notes due January 15, 2016 remains outstanding and the Company has not delivered to the Administrative Agent a certificate demonstrating that, after giving pro forma effect to the repayment in cash in full on that date of all of the 6.125% notes that remain outstanding, the amount the Company would be permitted to draw under the 20132015 Senior Credit Facility, together with the aggregate consolidated amount of unrestricted cash and cash equivalents of the Company, would exceed $200.0 million.  While there can be no assurance, the Company currently believes that if any of the 6.125% notes remains outstanding on October 16, 2015, the amount the Company would be permitted to draw under the 2013 Senior Credit Facility, together with the aggregate consolidated amount of the Company’s unrestricted cash and cash equivalents, will exceed $200.0 million on October 16, 2015.Facility.

As of December 31, 2014,2015, amounts utilized under the facility2015 Senior Credit Facility included $195.7$134.1 million of borrowings and $37.4$1.4 million of standby letters of credit related to various insurance contracts and foreign vendor commitments. The Company also considers the outstanding borrowings of $301.6$756.9 million under the Company's U.S. and European commercial paper programs as of December 31, 2014 under its commercial paper program to be a reduction2015 reduce the availability of the available capacity.2015 Senior Credit Facility. Taking the commercial paper borrowings into consideration,account, the Company has utilized $534.6$892.3 million under the 20132015 Senior Credit Facility resulting in a total of $465.4$907.7 million available under the 20132015 Senior Credit Facility.

On January 31, 2013, the Company issued $600.0 million aggregate principal amount of 3.85% Senior Notes due February 1, 2023. The Company paid financing costs of $6.0 million in connection with the 3.85% Senior Notes. These costs were deferred and are being amortized over the term of the 3.85% Senior Notes.

On January 17, 2006, the Company issued $900.0 million aggregate principal amount of 6.125% notesSenior Notes due January 15, 2016. Interest payable on these notes is subject to adjustment if either Moody’s or S&P, or both, upgrades or downgrades the rating assigned to the Company. Each rating agency downgrade results in a 0.25% increase in the interest rate, subject to a maximum increase of 1% per rating agency. If later the rating of these notes improves, then the interest rates would be reduced accordingly. Each 0.25% increase in the interest rate of these notes would increase the Company’s interest expense by approximately $0.1 million per quarter per $100.0 million of outstanding notes. The current rate in effect is 6.125%. Any future downgrades in the Company’s credit ratings could increase the cost of its existing credit and adversely affect the cost of and ability to obtain additional credit in the future.

On December 19, 2012, the Company entered into a three-year on-balance sheet trade accounts receivable securitization agreement (the "Securitization Facility"). On September 11, 2014, the Company made certain modifications to its Securitization Facility, which modifications, among other things, increased the aggregate borrowings available under the facility from $300.0 million to $500.0 million and decreased the interest margins on certain borrowings. On December 10, 2015, the Company amended the terms of the Securitization Facility, reducing the applicable margin and extending the termination date from December 19, 2015 to December 19, 2016. The Company paid financing costs of $0.3 million in connection with this extension. These costs were deferred and are being amortized over the remaining term of the Securitization Facility.

Under the terms of the Securitization Facility, certain subsidiaries of the Company sell at a discount certain of their trade accounts receivable (the “Receivables”) to Mohawk Factoring, LLC (“Factoring”) on a revolving basis. The Company has determined that Factoring is a wholly owned, bankruptcy remote subsidiary, of the Company, meaning that Factoring is a separate legal entity whose assets are available to satisfy the claims of the creditors of Factoring only, not the creditors of the Company or the Company’s other subsidiaries.  To fund such purchases, Factoring may borrow up to $500.0 million based on the amount of eligible Receivables owned by Factoring, and Factoring has granted a security interest in all of such Receivables to the third-party lending group as collateral for such borrowings.  Amounts loaned to Factoring under the Securitization Facility bear interest at commercial paper interest rates, in the case of lenders that are commercial paper conduits,

The Company may continue, from time to time, to retire its outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amount involved may be material.

    

As of December 31, 2014,2015, the Company had cash of $97.9$81.7 million, of which $76.8$61.2 million was held outside the United States. While the Company’sCompany plans are to permanently reinvest the cash held outside the United States, the estimated cost of repatriation for the cash as of December 31, 20142015 was approximately $26.9$21.4 million. The Company believes that its cash and cash equivalents

The Company’s Board of Directors has authorized the repurchase of up to 15 million shares of the Company’s outstanding common stock. Since the inception of the program in 1999, a total of approximately 11.5 million shares have been repurchased at an aggregate cost of approximately $335.5 million. All of these repurchases have been financed through the Company’s operations and banking arrangements. ForThe Company did not repurchase shares during the year ended December 31, 2014, the Company repurchased approximately 2 thousand shares at an average price of $139.92 per share in connection with the exercise of stock options under the Company's 2012 Incentive Plan. For the year ended December 31, 2013, the Company repurchased approximately 1 thousand shares at an average price of $123.16 per share in connection with the exercise of stock options under the Company's 2012 Incentive Plan.2015.