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UNITED STATES
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, 2001

[_] 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)

UNITED STATES
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, 2003
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
(State or other jurisdiction of incorporation or organization) (I.R.S. (I.R.S. Employer Identification No.)
P. O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701
(Address
(Address of principal executive offices) (Zip (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
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 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][ 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 thethis Form 10-K. [_][ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ x ] No [ ]
The aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant (28,444,916(50,552,254 shares) on March 15, 2002 was
$1,845,221,701.June 27, 2003 (The last business day of the Registrant's most recently completed fiscal second quarter) was$2,859,235,486. 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 15, 2002:
52,845,6862, 2004: 66,638,900 shares of Common Stock, $.01 par value.

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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 2004 Annual Meeting of Stockholders-Part III.
Table of Contents Page No.
Part I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Item 7A Quantitative and Qualitative Disclosures About Market Risk 22
Item 8. Consolidated Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 49
Item 9A Controls and Procedures 49
Part III
Item 10. Directors and Executive Officers of the Registrant 49
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Relationships and Related Transactions 49
Item 14. Principal Accountant Fees and Services 50
Part IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 50
PART I
Item 1. Business
General
Mohawk Industries, Inc. ("Mohawk" or the "Company,""Company", a term which includes the Company and its subsidiaries, including its primary operating subsidiaries, Mohawk Carpet Corporation, Aladdin Manufacturing Corporation and Dal-Tile International Inc. ("Dal-Tile")) is the leading producer of floorcovering products for residential and commercial applications in the United States. The Company is the second largest carpet and rug manufacturer, and a leading manufacturer, marketer and distributor of ceramic tile and natural stone, in the United States. On a pro forma basis after giving effect to the merger with
Dal-Tile, theThe Company had annual net sales in 20012003 in excess of approximately $4.5$5.0 billion.
The Company has two operating segments, the Mohawk segment and the Dal-Tile segment. The Mohawk segment sells and distributes its product lines, which include broadloom carpet, rugs, pad, ceramic tile, hardwood, vinyl and laminate through independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. The Dal-Tile segment product lines include ceramic tile, porcelain tile and stone products sold through company-operated sales service centers, independent distributors and home center retailers. Selected financial information for the Mohawk and Dal-Tile segments is set forth in Note 17 to the Consolidated Financial Statements.
Through the Company's carpet and rug business,Mohawk segment, the Company designs, manufactures and markets carpet and rugs in a broad range of colors, textures and patterns and is a leading producer of woven and tufted broadloom carpet and rugs for principally residential and commercial applications. The Company also markets and distributes hardwood, laminate, vinyl and ceramic tile under its hardsurface line. The Company positions its products in all price ranges and emphasizes quality, style, performance and service. The Company is widely recognized through its premier brand names, which include "Mohawk," "Aladdin," "Mohawk Home," "Bigelow," "Bigelow Commercial,"
"Custom Weave," "Durkan, Commercial," "Durkan Patterned Carpets," "Goodwin Weavers," "Helios," "Horizon," "Karastan," "Karastan Contract," "Mohawk
ColorCenter," "Mohawk Commercial," "Mohawk Floorscapes,"Lees," "Newmark Rug,"
"Townhouse," "World" and "WundaWeve." The Company markets and distributes its carpet and rug products through over 30,00034,000 customers, which include primarily independent carpet retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. Some products are also marketed through private labeling programs. The Company's carpet and rug 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.
Through the Company's ceramic tile business, itDal-Tile segment, the Company designs, manufactures and markets a broad line of wall floor, quarry and mosaicfloor tile products used in the residential and commercial markets for both new construction and remodeling. Most of the Company's ceramic tile products are marketed under the "daltile""Dal-Tile" and "American Olean" brand names. The Company's ceramic tile business is organized into three strategic business units:channels: company-operated sales and service centers, independent distributors and home center retailers.centers. The Company's
company-operated sales center unitCompany maintains over 200240 sales and service centers in the United States, Canada and Puerto Rico. The Company's independent distributor unit distributes the American Olean brand through approximately 200 independent distributor locations and five company-operated sales and service
centers serving a variety of residential and commercial customers. The Company's home center retailer unit supplies products to more than 2,000 home center retail outlets operating in the do-it-yourself and buy-it-yourself markets. Each business unit has a dedicated sales force supporting that unit. Additionally,
On November 10, 2003, the Company has showroomacquired the assets and design centersassumed certain liabilities of the commercial carpet division of Burlington Industries, Inc. known as Lees Carpet, from W.L. Ross & Company for approximately $350 million in Atlanta, Georgiacash. The results of operations of Lees Carpet have been included with the Mohawk segment results and Dallas,
Texas, where customers of local builders, remodelers, architects, designers and
contractors may view and select ceramic tile and natural stonein the Company's consolidated financial statements since that date. The primary reason for their
building projects.

The Company recently acquired a significant portion of its ceramic tile
businessthe acquisition was to expand the Company's presence in its merger with Dal-Tile. Initially, the Company will operate its
ceramic tile business as a stand-alone entity and will not make significant
changes to integrate the operations with its existing operations. The Company's
management has begun to study the many opportunities to assimilate Dal-Tile's
ceramic tile business and realize synergies. The Company will continue to review
operations, systems and procedures to establish the most efficient operation
possible.

The Dal-Tile Acquisitioncommercial carpet market.

On March 20, 2002, the Company completed its acquisitionacquired all of the outstanding capital stock of Dal-Tile, a leading manufacturer and Dal-Tile merged with and into Maverick Merger Sub, Inc.,distributor of ceramic tile in the Company's wholly
owned subsidiary. Maverick Merger Sub was the surviving corporationUnited States for approximately $1,469 million, consisting of the
merger and was renamed Dal-Tile International Inc. The aggregate consideration
paid to Dal-Tile stockholders at closing, including holders of options to
purchase Dal-Tile common stock, consisted of approximately $692 million in cash, approximately 12.9 million shares of the Company's common stock, and options to purchase approximately 2.1 million shares of the Company's common stock. In
connection withstock and $718 million in cash. The Company's common stock and options were valued at $751 million based on the merger,measurement date stock price of $55.04 per share ($710.4 million) and the Company also paid costsestimated fair value of options using the Black-Scholes option-pricing model ($40.3 million). The transaction has been accounted for using the purchase method of accounting and, accordingly, the results of operations of Dal-Tile have been included in the Company's consolidated financial statements from March 20, 2002. The purchase price was allocated to the assets acquired and liabilities assumed based upon estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net identifiable assets acquired of approximately $21$1,168.3 million and repaid or assumed approximately $198 million of Dal-Tile's
outstanding debt.

was recorded as goodwill. The Company believes thatprimary reason for the acquisition of Dal-Tile will give itwas to expand the opportunity to:

. combine Mohawk's current effortsCompany's presence in the hard-flooring business with
Dal-Tile's larger, more established ceramic tile and natural stone business;

. use Mohawk and Dal-Tile's existing distribution channels to increase
sales of both carpets and hard floorcoverings;

. further develop Mohawk's various brands and increase sales by
distributing its products through Dal-Tile's distribution network;

. reduce overhead and other costs by adding Dal-Tile's distribution
network to Mohawk's logistical and distribution system;

. reduce manufacturing costs and increase quality by identifying
manufacturing best practices; and

. reduce general, administrative, overhead and other miscellaneous costs
by spreading fixed costs over a larger business.

The Company financed the Dal-Tile acquisition with $600 million of
borrowings under a bridge credit facility, borrowings of approximately $126
million under its existing revolving credit facility and $110 million under its
on-balance sheet asset financing securitization facility and the assumption of
Dal-Tile's existing $75 million on-balance sheet receivables securitization
facility.

markets.
Industry
The floorcovering industry has grown from $12.4 billion in sales in 1992 to $20.1$20.3 billion in 2000.2002. In 2000,2002, the primary categories of the United States floorcovering industry were carpet and rugs (63%(65%), ceramic tile (11%(12%), vinyl and rubber (14%(10%), hardwood (8%(9%) and laminate (4%). Each of these categories has been positively impacted by:

.
U.S. population growth, requiring new and renovated housing and commercial space;

.
increasing average house size (up approximately 30% since 1980);size; and

.
growth in vacation homes.housing starts and housing resales.
Compound average growth rates for units sold (measured by square yards) for each of the floorcovering categories above for the period from 1992 through 20002002, with the exception of the vinyl and rubber category, have met or exceeded the growth rate offor both the gross domestic product of the United States and housing starts over the same period. During this period, the compound average growth rate was 4.4%3.6% for carpet and rugs, 10.6%10.3% for ceramic tile, 5.0%1.3% for vinyl and rubber and 9.1%8.0% for hardwood. Laminate, which is a relatively new product, experienced a compound average growth rate of 39.9%41.5% from 1996 through 2000.2002.
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 2.01.9 billion square yards in 2000.2002. This volume represents a market in excess of approximately $12 billion. The overall level of sales in the carpet industry is influenced by a number of factors, including consumer confidence, 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 80%73% of the amounts shipped by the industry in 2000.2002. Tufted broadloom carpet, a category that refers to the manner of construction in 3

addition to size, represented 83.5%86.0% of the broadloom industry volume shipped in 2000.2002. The broadloom carpet industry has two primary markets, residential and commercial, with the residential market making up approximately 69%75% of industry amounts shipped in 20002002 and the commercial market comprising approximately 31%25%. An estimated 47%50% of industry shipments are 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.
The United States ceramic tile industry shipped 2.32.6 billion square feet, or $2.1$2.3 billion, in 2000, which represents an 8.1% and 5.9% growth rate over 1999,
respectively.2002. The compound average growth rate of dollar shipments was 9.5%8.0% from 19961992 through 20002002 for ceramic tile. Sales in the ceramic tile industry are influenced by the same factors that influence the carpet industry, including consumer confidence, 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.

Glazed floor and wall tile represented 86% of the total industry dollars
shipped in 2000. The balance of the industry 2000 dollar shipments are
represented by unglazed mosaic and porcelain, 11.0% of total, and quarry tile,
3.0% of total.
The ceramic tile industry's two primary markets, residential applications and commercial applications, represent 67.6%62.0% and 32.0%36.0% of the industry total, respectively. Of the total residential market, 62%67% of the dollar shipments are for new construction.

Competitive Strengths

Sales and Business Strategies

Competitive Strengths

The Company's competitive strengths include:

Strong Brand Equity. The Company's collection of national brands represents
one of the strongest portfolios in the floorcovering industry. The Company has
built strong brand equity by being a leader in service, quality and product
innovation in its industry. The Company's established brands also provide it
with a powerful platform for growth through new products and product line
extensions.

Position as Market Leader. The Company is the second largest carpet and rug
manufacturer in the United States and, as a result of its recent acquisition of
Dal-Tile, it is now a leading manufacturer, marketer and distributor of ceramic
tile and natural stone in the United States.

Superior Distribution System. The Company believes it provides superior
product availability and faster delivery for customers of its carpet and rug
business through its hub-and-spoke distribution network consisting of nine
regional warehouses and over 40 smaller satellite distribution centers. The
Company's distribution centers are supplied and serviced by its transportation
fleet, which operates over 750 trucks and trailers. The Company's use of
advanced management information systems allows it to monitor a transaction from
the customer order through manufacturing to shipment of the finished product and
to operate its separate facilities in a more integrated fashion, resulting in
faster delivery times, lower costs and increased operational efficiencies. The
Company's acquisition of Dal-Tile added over 200 customer service centers, as
well as three regional distribution centers, located strategically throughout
the United States, which provides it with opportunities to expand its
distribution capabilities.

Strong Customer Service. The Company is focused on building and maintaining
long-term relationships with its customers. The Company assists its customers in
selling its products and expanding their businesses by providing differentiated
products and presentations. The Company also provides additional services that
enhance its relationships with its customers, such as merchandising, training
and administrative support programs. As a result of the Company's efforts, it
was honored to be voted "Best Overall Carpet Manufacturer" and "Best Overall
Tile Manufacturer" by floorcovering retailers in the Floor Covering News Award
of Excellence as part of Surfaces 2001, a floorcovering industry tradeshow. In
addition, in 2001, commercial designers gave
Mohawk Segment.
Through the Company's Mohawk commercial
brands a strong rating by placing them in one ofsegment, the top three places for

service, quality, design, value and performance. No other commercial carpet
manufacturer achieved as high a rating in all categories.

Total Floorcovering Supplier. The Company's product selections include
hundreds of styles of carpets and rugs and ceramic tile in a broad range of
colors, textures and patterns in all price ranges. Combining Dal-Tile's
extensive ceramic and stone product offerings with Mohawk's products will
provide the Company's customers with one of the broadest product offerings in
the industry. This broad range of product offerings provides a foundation for
the Company's goal of becoming the one-stop supplier of floorcovering products
for residential and commercial applications.

Experienced Management. The Company's experienced management team has
driven its successful performance by emphasizing customer satisfaction,
operating efficiency, cost control, acquisition integration and product design.
In 2002, the Company was named Fortune magazine's Most Admired Company in the
Textiles category.

Business Strategies

The Company's business strategies are designed to take advantage of its
competitive strengths while maintaining its focus on meeting or exceeding its
customers' requirements. As a part of the Company's overall strategy, it has
implemented the following marketing, operations and acquisition strategies
designed to increase market share and achieve profitable growth through a focus
on high-quality, low-cost production offered with superior service at
competitive prices.

Marketing Strategy. The Company's marketing strategy includes initiatives
designed to more fully develop and support its independent dealer base in order
to increase the demand for its products. Key elements of the Company's marketing
strategy include:

. continuing to offer high-value, quality products;

. using advertising and marketing programs to leverage the substantial
brand equity of the Company's products, with a particular focus on
high-growth product categories;

. seeking to develop marketing programs with the Company's customers;

. dedicating separate sales forces to each of the Company's major
distribution channels; and

. offering merchandising, training and administrative support programs
to the Company's customers on a national level to support product
sales and assist in expanding their businesses.

Operations Strategy. The Company's operating strategy is to capitalize on
its competitive strengths to be both highly efficient and cost effective in its
manufacturing, marketing, distribution and administrative services. To this end,
the Company has structured its manufacturing operations to include the vertical
integration of production facilities using low-cost manufacturing techniques
with a superior distribution network. The Company's carpet and rug operations
are vertically integrated from the extrusion of resin into fiber, to the
conversion of fiber into yarn and to the manufacture and distribution of
finished carpet and rugs. The Company's ceramic tile operations are vertically
integrated from the production of frit and manufacturing supplies to the
manufacture of ceramic tile at modern facilities in both the United States and
Mexico to the distribution of finished ceramic tile through its three separate
distribution channels. The Company continues to evaluate enhancements in
manufacturing technology, operational procedures and management information
systems and to its hub-and-spoke distribution system where the Company believes
the investments will allow it to improve operating efficiencies or otherwise
reduce costs or improve customer service.

Acquisition Strategy. The Company's acquisition strategy is to continue to
explore growth through acquisition opportunities in an effort to expand its
product offerings, reduce its costs of production through vertical integration,
and maintain its position as a leading producer of floorcovering products for
residential and commercial applications. The Company regularly evaluates
acquisition opportunities that would help it meet these goals.

The Company's management team has considerable experience in completing
acquisitions. Since the Company's initial public offering in 1992 (the "Initial
Public Offering"), and prior to its merger with Dal-Tile, the Company completed
and integrated twelve acquisitions that collectively have (i) broadened price
points; (ii) increased the Company's vertical integration; (iii) expanded
distribution capabilities; (iv) facilitated entry into niche or complementary
businesses, such as rugs, decorative throws, bedspreads, coverlets and ceramic
tile and (v) added to the depth of the Company's management team.

Sales and Distribution

Carpet and Rug Business.

The Company designs, manufactures and markets hundreds of styles of carpet and rugs in a broad range of colors, textures and patterns. In addition, the Mohawk segment markets and distributes ceramic tile, laminate, hardwood and vinyl floor covering. The carpet and rug
divisionMohawk segment positions its products in all price ranges and emphasizes quality, style, performance and service. The Company is widely recognized through its
premier brand names, including "Mohawk," "Aladdin," " Mohawk Home," "Bigelow,"
"Bigelow Commercial," "Custom Weave," "Durkan Commercial," "Durkan Patterned
Carpets," "Goodwin Weavers," "Helios," "Horizon," "Karastan," "Karastan
Contract," "Mohawk ColorCenter," "Mohawk Commercial," "Mohawk Floorscapes,"
"Newmark Rug," "Townhouse," "World" and "WundaWeve." The Company markets and distributes carpet and rugs through over 30,00034,000 customers, which include independent carpetfloor covering retailers, home centers, mass merchandisers, department stores, commercial dealers, 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 Company's carpet and rug sales. The Company
currently markets approximately 650 residential products to its customers, which
include independent retailers, department stores, mass merchandisers, buying
groups and building and tenant improvement contractors.
The Company has positioned its premier residential carpet and rug brand names across all price ranges. "Mohawk," "Custom Weave," "WundaWeve," "Bigelow," "Galaxy," "Horizon," "Helios" and "Karastan" 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""Mohawk" brands having the highest consumer recognition in the industry. "Karastan" is the leader in the exclusive high-end market. The "Aladdin" and "World" brand names compete primarily in the low-to-medium retail price range.
The Company offers intensive marketing and advertising support through dealer programs like Karastan Gallery, Mohawk ColorCenter and Mohawk Floorscapes. These programs offer varying degrees of support to dealers in the form of sales and management training, merchandising systems, exclusive promotions and assistance in certain administrative functions such as consumer credit, advertising and insurance.
The Company's carpet and rug business generally markets its residential
products through its residential sales forces that reportare generally organized based on product type and sales channels in order to common managementbest serve each type of customer. A hub-and-spoke distribution network accomplishes the product distribution 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, the Company's trucks generally deliver carpetproduct from millmanufacturing and central distribution sites to regional warehouses. From there, it is shipped to retailers or to local distribution warehouses, then to retailers.
The commercial customer base is divided into several groups:channels: educational institutions, corporate office space, hospitality facilities, retail space and health care facilities. In addition, the Company 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.channel.
The sales distribution channels for theCompany's "Aladdin" commercial products have been
divided into five groups based upon traditional marketing paths: main street,
dealer negotiated, performance specified, fashion specified and hospitality and
lodging.

The main street channel traditionally offers lower price point carpetsbrand is sold primarily through retail dealers underto customers in the "Aladdin" brandretail space, corporate office and is distributed through the
residentialother channels. This sales force. Products sold into this channel are service driven and
price sensitive.

The dealer-negotiated channel is serviced through thealso commonly referred to as "Main Street." These customers are more price conscious in their purchase decisions. The "Bigelow Commercial" brand. In this channel, large commercial flooring contractors play the most
important role in product selection on negotiated project work such as leasedbrand is sold primarily to 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.channels through commercial flooring contractors. The performance specified channel is serviced through the "Mohawk Commercial" brand is marketed to customers in the educational institutional and "Mohawk Modular" brands, where long-term appearance retention
and durability are key buyer criteria for more demanding project environments
such as auditoriums, 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 characteristicshealth care facility channels that are more highly valued in high traffic installations.performance oriented. The "Lees" brand is positioned at the higher price points within each sales channel. The "Dura-Color" stain resistant technology and "Unibond" performance backing system enables the "Lees" brand to provide a differentiated product within each sales channel. Additionally, the Company markets its modular (carpet tile) product lines under the "Lees" brand. The "Karastan Contract" and "Durkan Commercial" brands are sold intopositioned primarily to service the medium to high-end fashion specified channel where distinctive styling and custom product
variations are more commonly required for project work. This market channel,
almost entirely specified through architects and designers, includes end use
installations such as higher end corporate offices, law firms, boutiqueconscious customer in both the 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.corporate office channels. 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. This channel is generally specified through a
designer but ultimatelycarpet sold through independent purchasing agents that
consolidate interior furnishings purchase decisions for hotel property owners.
Durkan Hospitality has historically offered a premium print product duethe hospitality channel to an
extensive pattern offering distinguished by visually sharperhotels, resorts and cleaner color
separation in the final product.casinos.
The Company believes its ability to make woven carpet under the Mohawk
Commercial"Mohawk Commercial" and Karastan Contract"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 carpetprovides unique characteristics that delivers a better value to the customer and generally
produce higher profit margins.the Company. The Company believes that it is one of the largest producers of woven carpet in the United States and that it has several carpet weaving machines and processes that no other manufacturer has, thereby allowing it to create carpet to meet specifications that its competitors cannot duplicate.

The machine-made rug marketMohawk Home Division, markets its product lines under two major brand names, "Mohawk Home" and "Karastan." Mohawk Home's affordable price points strategy for the mainstream retailers and home centers 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 occurreddirected 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 centersmid 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, throughwhile the Mohawk Home Division. The"Karastan" brand is directed at upscale retail and flooring stores. Product categories are diverse, including woven wool rugs, sold are primarilypolypropylene woven and tufted polypropylene area rugs, tufted borderprinted and woven nylon rugs, and decorative mats. These products
are distributed primarily through mass merchants and home centers under the
brands Mohawk Home and American Weavers. Mohawk Home also distributes blankets,
pillows, bedspreads and throws to mass merchants and home centers.

The Company also sells bath mats,doormats, washable scatter rugs and other woven
textile products to the rug market through its Townhouse, Newmark, Goodwin
Weavers 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,decorative throws and catalog businesses.pillows, woven bedspreads, textile wall hangings and blankets.
Dal-Tile Segment.
The Goodwin Weavers products include
blankets, pillows, bedspreads and throws, which are distributed through catalogs
and trade shows.

Ceramic Tile Business.

The Company'sDal-Tile segment's ceramic tile and natural stone products are distributed through three separate distribution channels consisting of company-operated sales service centers, independent distributors and home center retailers.centers. The business is organized into three strategic business units to address the specific customer needs of each distribution channel. Each strategic business unit is
supported by aA dedicated sales force.force supports each channel.
The Company has threefour regional distribution centers strategically located in California, Maryland, Texas and Texas.Florida. These centers help the Company maintaincreate high-quality customer service in each distribution channel by focusing on shorter lead times, increased order fill rates and improved on-time deliveries to its customers. In addition, these regionalThese distribution centers also enhance the Company's ability to plan and schedule production and to manage inventory requirements.

The Company has state-of-the-art showrooms and design centers in Atlanta,
Georgia and Dallas, Texas. These showrooms are dedicated primarily to the
residential business and provide a place for customers of local builders,
remodelers, architects, designers and contractors to view and select ceramic
tile for their building projects. The showroom is staffed with design
professionals knowledgeable in wall and floor tile applications, as well as
current design and decorating trends.

Company-Operated Sales Centers.
The Company's network of over 200
company-operated240 sales service centers located in the United States, Canada and Puerto Rico distributes primarily the daltileDaltile brand product, serving customers in all 50 states and portions of Canada and Puerto Rico. In 2001, a majority of the
Company's ceramic tile and natural stone sales were made through
company-operated sales centers.

In addition to sales center staff, this distribution channel is supported
by approximately 131 sales associates servicing both commercial and residential
markets. The daltile brand also has a group of 44 sales representatives
dedicated exclusively to the architectural community. The architectural
community exercises significant influence over the specification of products
utilized in commercial applications.
The Company has designed each sales center to serveserves as a "one-stop" source that provides customers with one of the ceramic tile industry's broadest product lines--alines-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 allied products. In addition to products manufactured by the Company's ceramic tile business, the sales centers carryCompany carries a selection of products purchased from other manufacturers to provide customers with a broader product line. The
sales centers generally range in size from 6,000 to 30,000 square feet, with a
typical center occupying approximately 12,000 square feet. The sales centers
consist of a showroom dedicated to displaying the product offerings together
with office space and a warehouse in which inventory is stocked. Sales center
displays and inventories are designed to reflect local consumer preferences. The
sales centers generally are located in light industrial areas rather than retail
areas and generally occupy moderately priced lease space under 3 to 10 year
leases.

As of March 1, 2002, the sales center distribution system included 217
Dal-Tile sales centers and five American Olean sales centers, four stone slab
operations and two residential showrooms, which provide sales and merchandising
support to the sales centers. In the future, the Company may open additional
sales centers in areas where factors such as population, construction activity,
local economic conditions and usage of tile create an attractive environment for
a sales center. From time to time, sales centers are closed in locations where
economic and competitive conditions have changed.

Independent Distributors.
The independent distributor channel is serviced
throughoffers a dedicated business unit that includes 10 regional sales managers to
serveunique product line under the particular requirements of its customers."American Olean" brand. Currently, the American
Olean"American Olean" brand is distributed through approximately 200 independent distributor locations and five company-owned sales centers that service a variety of residential and commercial customers. The Company is focused on increasing its presence in the independent distributor channel, particularly in tile products that are most commonly used in flooring applications.

Home-Center Retailers.
The Company believes its Dal-Tile divisionsegment is one of the U.S. ceramic tile industry's largest suppliers to the do-it-yourself and buy-it-yourself markets through home center retailers, such as The Home Depot and Lowe's, serving more than 2,000 home center retail outlets nationwide.Lowe's. The home center retailer channel has provided this segment with new sources of sales
over the past five years and is expected to continue presenting important growth opportunities.

Brands and Marketing Programs.
The Company believes that it has two of the leading brand names in the U.S. ceramic tile industry--daltileindustry-"Daltile" and American"American Olean." The roots of the daltile"Daltile" and American Olean"American Olean" brand names date back approximately fifty and seventy-five years, respectively.
The company-operatedCompany's sales service centers primarily distribute primarily the daltile"Daltile" brand, which includeswith a fully integrated marketing program, emphasizing a focus on quality and fashion. The broad product offering is based on the Company's assessment ofsatisfies the needs of professional installers, designers, architectsits residential, commercial and builders, as well as a
review of competitive products.builder customers. The marketing program includes public relations
support, merchandising (displays/sample boards, chip chests),
literature/catalogs and an Internet website.

The American Olean"American Olean" brand consists of a full product offering and is distributed primarily through independent distributors. The brand isBoth these brands are supported by a fully integrated marketing program, including public relations efforts, displays, merchandising (sample boards, chip chests), literature/catalogs and an Internet website.
Advertising and Promotion
The Company promotes its productsbrands through national advertising in both television and print media as well as in the form of co-operativecooperative advertising, point-of-sale displays and marketing literature provided to assist in marketing various carpet and ceramic tile styles. The Company also continues to rely on the substantial brand name identificationrecognition of its product lines. The cost of producing display samples, a significant promotional expense, is partially offset by sales of samples and support from raw materials suppliers in the carpet and rug business.

Manufacturing and Operations
Carpet and Rugs Business. 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. Over the past three years, the Company has incurred significant capital expenditures that have helped increase manufacturing efficiency and capacity, and improve overall cost competitiveness.
Ceramic Tile Business. The Company operates nine tile manufacturing
facilities with an aggregate annual manufacturing capacity of 527 million square
feet. Over the past three years, the CompanyDal-Tile segment has invested significantly in capital expenditures, principally for new plants and state-of-the-art fast-fire equipment to increase manufacturing capacity, improve efficiency and develop new capabilities. OperatingIn addition, the Company has added a porcelain tile manufacturing plant, which will significantly expand its production capacity has expanded from 378 million square feet to
527 million square feet during the same period.in 2004.
The ceramic tile business commenced operations in Mexico at the Company's Monterrey facility in 1955 and since then has been manufacturingcurrently manufactures products at this facility primarily for U.S. and Mexican consumption. The Monterrey location contains
five distinct manufacturing facilities, three of which produceproduces ceramic tile, one
of which produces frit (ground glass) and one of which produces refractories.

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, as well as the industry's largest offering of trim and angle pieces and its ability to utilize the industry's newest technology. The
Company seeks to maximize production at its lowest cost manufacturing
facilities, continue ongoing improvements by implementing demonstrated best
practices and continue to invest in manufacturing technology to lower its costs
and develop new capabilities.

Raw Materials and Suppliers
Carpet and Rugs Business. The principal raw materials the carpet and rug business uses are nylon, staple fibers, nylon filament fibers, rawpolypropylene, polyester and wool,
polypropylene filament fibers, polyester staple fibers, polypropylene, nylon and
polyester resins and post-consumer plastics,fibers, synthetic backing materials, polyurethane and latex and various dyes and chemicals. The Company obtains all of its major raw materials from independent sources and all of its externally purchased nylon fibers from fourthree major suppliers: E.I. du Pont de Nemours and
Company,Koch Industries, Inc., Solutia, Inc., BASF Corporation and Honeywell, Inc. Most of the fibers
the Company uses in carpet production are treated with stain-resistant
chemicals. The carpet and rug business has not experienced significant shortages of raw materials in recent years. The Company believes that the lossthere is an adequate supply of any one
supplier to its carpetall grades of resin and rug business would not have a material effect on its
businessfiber and that an alternative supply arrangement could be made inall are readily available from a relatively short periodnumber of time.

independent sources.
Ceramic Tile Business. In the Company's ceramic tile business, the Company manufactures wall tile primarily from talc, clay and clay; floor tile and glazed
mosaic tile primarily from impure nepheline syenite and clay; unglazed ceramic
tile primarily from pure nepheline syenite and clay; and unglazed quarry tile
from clay. During the fourth quarter of 1999, Dal-Tile sold its talc mining
operation, along with the related mineral rights, to Wold Talcsyenite. The Company Inc. In
conjunction with the sale, Dal-Tilehas entered into a long-term supply agreement for most of its talc requirements with Wold Talc.one supplier.
The Company owns long-term clay mining rights in Alabama, Kentucky and Mississippi that satisfy nearly all of its clay requirements for producing unglazed quarry tile. The Company purchases a number of different grades of clay for the manufacture of its non-quarry tile. The Company believes that there is an adequate supply of all grades of clay and that all are readily available from a number of independent sources.
The Company purchases all ofhas a single source supplier for its impure nepheline syenite requirements. If this supplier were unable to satisfy the Company's requirements, from
Minnesota Mining and Manufacturing Company. Thethe Company believes however, that there is an adequatealternative supply of impure nepheline syenite, which canarrangements would be obtained
from other sources. Pure nepheline syenite is purchased from Unimin Corporation,
which is the only major supplier of this raw material in North America. If there
were a supply interruption of pure nepheline syenite, feldspar could be used in
the production of mosaic tile. Feldspar can be purchased from a number of
sources at comparable cost to pure nepheline syenite.available.
Glazes are used on a significant percentage of the Company's manufactured tile. Glazes consist of frit (ground glass), zircon, stains and other materials, with frit being the largest ingredient. The Company manufactures approximately 56%57% of its frit requirements.
Competition
Carpet and Rugs Business. The carpet and rugs industry is highly competitive. Based on industry publications, the top 20 North American carpet and rug manufacturers (including their American and foreign divisions) in 20002002 had worldwide sales in excess of $16.8$13.0 billion, and the top 20 manufacturers in 1990 had sales in excess of $6 billion. In 2000,2002, the top five manufacturers had worldwide sales in excess of $11.8$10.2 billion. With 2001 net sales of approximately
$3.5 billion, theThe Company believes it is the second largest producer of carpet and rugs (in terms of sales volume).

in the world.

Ceramic Tile Business. The Company estimates that over 100 tile manufacturers, more than half of which are based outside the United States, compete for sales of ceramic tile to customers located in the United States. Although the U.S. ceramic tile industry is highly fragmented at both the manufacturing and distribution levels, the Company believes it is the largest manufacturer, distributor and marketer of ceramic tile in the United States and one of the largest in the world.

The principal methods of competition within the carpet and rugs and ceramic tile industries 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 perceivedlimited differentiation among competing product lines. The Company's recent investments in modernized, advanced manufacturing and data processing equipment, the extensive diversity of equipment in which the Company has invested, and its marketing strategy and its distribution system contribute to its ability to compete primarily on the basis of performance, quality, style and service, rather than just price.
In each of the Company's carpet and rug and ceramic tile businesses, the Company faces competition from a large number of domestic and foreign manufacturers and independent distributors of floorcovering products. Some of the Company's existing and potential competitors may be larger and have greater resources and access to capital than the Company does. Maintaining the Company's competitive position may require it to make substantial investments in its product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Competitive pressures may also result in decreased demand for the Company's products and in the loss of market share. In addition, the Company faces, and will continue to face, pressure on sales prices of its products from competitors, as well as from large customers. As a result of any of these factors, there could be a material adverse effect on the Company's sales and profitability.
Trademarks
The Company uses several trademarks that it considers important in the marketing of its products, including "Aladdin," "American Olean(R)," "Alexander
Smith(R)," "Bigelow(R)Olean^®," "Bigelow, Commercial," "Custom Weave" "daltile(R)"Dal-Tile^®," "Dal-Monte,"Durkan," "Durkan Commercial," "Durkan Patterned Carpets,"Galaxy," "Goodwin Weavers," "Helios(R)"Helios^®," "Home Source," "Horizon(R)," "Karastan(R)"Horizon^®," "Karastan Contract,^®," "Mohawk(R)"Lees^®," "Mohawk ColorCenter(R)^®," "Mohawk Commercial," "Mohawk Floorscape," "Mohawk Home," "Tommy Mohawk(R),"Portico," "Townhouse(R)," "World(R)"World^®" and "WundaWeve(R)"WundaWeve^®."
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 and ceramic tile purchased from it within 30 days from the date of sale, if the customer is not satisfied with the quality of the product. 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 its operating results or financial position.
During 2001,2003, no single customer accounted for more than 10% 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 its business.
Employees
As of March 1, 2002, after the merger with Dal-Tile,2, 2004, the Company employed approximately 31,35033,300 persons, of which approximately 700635 of its employees in the United States and approximately 3,0003,100 of its employees in Mexico are members of unions. 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 for over 20 years. The Company believes that its relations with its employees are good.

Available Information
The Company's Internet address is http://mohawkind.com. The Company makes the following reports filed by it available, free of charge, on its website under the heading "Investor Information:"
annual reports on Form 10-K;
quarterly reports on Form 10-Q;
current reports on Form 8-K; and
amendments to the foregoing reports.

The foregoing reports are made available on the Company's website as soon as practicable after they are filed with, or furnished to, the Securities and Exchange Commission ("SEC").
Item 2. Properties
The Company owns a 47,500 square foot headquarters office in Calhoun, Georgia on an eight acreeight-acre site. The Company also owns a 2,089,000 square foot manufacturing facility located in Dalton, Georgia and a 1,464,597 square foot manufacturing facility located in Monterey, Mexico. 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
Monterrey, Mexico......... Tile manufacturing, distribution and office ........... 1,464,597
Dalton, GA ............... Carpet manufacturing, distribution and offices ........ 1,103,200
Dalton, GA ............... Carpet and yarn manufacturing ......................... 1,101,600
Dublin, GA ............... Carpet manufacturing, warehousing and offices ......... 831,000
Lyerly, GA ............... Carpet manufacturing and warehousing .................. 820,000
Chatsworth, GA ........... Distribution center ................................... 812,075
Calhoun, GA .............. Carpet manufacturing and distribution center .......... 792,000
Chatsworth, GA ........... Carpet manufacturing, warehousing and offices ......... 787,800
Eden, NC ................. Carpet and rug manufacturing .......................... 784,200
Dallas, TX ............... Tile manufacturing, distribution and office ........... 733,846
Jackson, TN .............. Tile manufacturing .................................... 655,211
Summerville, GA .......... Yarn extrusion ........................................ 579,000
Eton, GA ................. Carpet manufacturing .................................. 577,205
Shannon, GA .............. Distribution center ................................... 567,000
Sugar Valley, GA ......... Rug manufacturing, warehousing and offices ............ 472,500
Calhoun Falls, SC......... Yarn manufacturing .................................... 425,000
Bennettsville, SC ........ Yarn manufacturing .................................... 412,000
Dalton, GA ............... Carpet manufacturing, distribution and offices ........ 396,900
Dahlonega, GA ............ Yarn manufacturing .................................... 380,000
Landrum, SC .............. Weaving and finishing of carpet ....................... 350,000
Dalton, GA ............... Carpet manufacturing .................................. 342,000
Calhoun, GA .............. Distribution center ................................... 300,248
Chatsworth, GA ........... Sample manufacturing .................................. 291,800
Calhoun, GA .............. Textile and Rug Manufacturing ........................ 287,688
Olean, NY ................ Tile manufacturing .................................... 278,417
Fayette, AL .............. Tile manufacturing .................................... 276,467
Lewisport, KY ............ Tile manufacturing .................................... 270,836
Dalton, GA ............... Carpet dyeing ......................................... 259,000
Chatsworth, GA ........... Yarn extrusion ........................................ 257,800
Calhoun, GA .............. Rug manufacturing and warehousing ..................... 250,000
Summerville, GA .......... Sample manufacturing and distribution ................. 235,000
Gettysburg, PA ........... Tile manufacturing .................................... 218,609
Dalton, GA ............... Carpet dyeing ......................................... 216,000
Conroe, TX ............... Tile manufacturing .................................... 208,059
Calhoun, GA .............. Textile manufacturing, distribution and offices ....... 207,432
Eden, NC ................. Carpet and rug distribution ........................... 194,000
Calhoun, GA .............. Mat manufacturing and warehouse........................ 164,400
Dalton, GA ............... Rug manufacturing and offices ......................... 135,000
Dalton, GA ............... Sample storage and distribution ....................... 123,000
Chatsworth, GA ........... Warping, warehousing .................................. 112,121
Greenville, NC ........... Wool processing ....................................... 103,000

The following table listssummarizes the Company's materialfacilities both owned and leased office, manufacturing
and warehouse facilities:

Approx.
Enclosed
Area in
Square Lease Term
Location Primary Products or Purposes footage Through (1)
- ----------------------------- ------------------------------------------- ----------- ------------

Dallas, TX ................. Distribution warehouse.................... 472,500 Jan-2003
Los Angeles, CA ............ Distribution warehouse.................... 410,515 Mar-2007
El Paso, TX ................ Tile manufacturing........................ 366,876 Mar-2006
Baltimore, MD .............. Distribution warehouse.................... 315,000 Feb-2007
Kensington, GA ............. Warehouse................................. 277,484 May-2002
Calhoun, GA ................ Carpet manufacturing, Rug Distribution.... 263,162 Mar-2006
Pembroke Park, FL .......... Distribution warehouse.................... 258,270 Jul-2020
La Mirada, CA .............. Distribution warehouse.................... 220,000 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 Mar-2012
Pompton Plains, NJ ......... Distribution warehouse.................... 164,437 Jul-2011
Calhoun, GA ................ Rug warehouse............................. 140,000 Dec-2003
Columbus, OH ............... Distribution warehouse.................... 135,000 Sep-2004
Kent, WA ................... Distribution warehouse.................... 120,950 Nov-2020
Romeoville, IL ............. Distribution warehouse.................... 108,000 Sep-2004
Lathrop, CA ................ Distribution warehouse.................... 101,112 Jan-2007
La Mirada, CA .............. Distribution warehouse.................... 100,000 Jan-2011

_______________
(1) Include renewal options exercisable by the Company.for each segment in square feet:
Mohawk Segment Dal-Tile Segment
Primary Purpose Owned Leased Owned Leased
class="edi" bgcolor="#97DDFF" Manufacturing 8,573,139 1,363,092 4,510,601 22,000
Selling and Distribution 3,399,339 4,406,423 97,511 5,036,151
Other 948,855 216,016 147,930 36,000
Total 22,921,333 5,985,531 4,756,042 5,094,151
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.
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.

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 has reached an agreement to settle the lawsuits and is in the
process of finalizing documentation to be presented to the court for approval.
The settlement amount has been recorded in accrued expenses.

Environmental Matters
The Company is subject to various federal, state, local and foreign environmental health and safety laws and regulations, including those governing air emissions, wastewater discharges, the use, storage, treatment and disposal of solid and hazardous materials, and the cleanup of contamination associated therewith. Because of the nature of the Company's business, the Company has incurred, and will continue to incur, costs relating to compliance with such laws and regulations. The Company is involved in various proceedings relating to environmental matters and is currently engaged in environmental investigation, remediation and post-closure care programs at certain sites. The Company has provided reserves for such activities that it has determined to be both probable and reasonably estimable. The Company does not expect that the ultimate liability with respect to such activities will have a material adverse effect on it.

Two
Three sites near Mohawk's Dallas facility in its Dal-Tile divisionsegment are involved in Resource Conservation and Recovery Act ("RCRA") Part B post-closure
careenvironmental cleanup projects proceeding under the oversight of the Texas Natural
Resource Conservation Commission ("TNRCC"). In 1991, Dal-Tile and the
predecessor to the TNRCC agreed to an administrative order (the "1991 Order") relating principally to the disposal or alleged disposal by Dal-Tile of waste materials containing lead compounds in a gravel pit ("Elam") near the City of Mesquite's landfill in
Dallas County and at a Dal-Tile-operated landfill located on Pleasant Run Road
("Pleasant Run") in Dallas County.compounds. Dal-Tile's approved closure plans for Elamhave been implemented and Pleasant Run were approved by the TNRCC, and remediation and other activities
associated with the closures implemented. The TNRCC issued post-closure care
permits for Elam and Pleasant Run in 2000. The Company expects to incur future
costs in connection with post-closure at Elam and Pleasant Run. The Company
believes that any such amounts will not have a material adverse effect on it.

In October 1994, Dal-Tile, Master-Halco, Inc. ("Master-Halco") (a
manufacturing company not affiliated with Dal-Tile), certain third party
individuals and the TNRCC agreed to an administrative order (the "1994 Order")
relating to, among other things, investigation and remediation in connection
with the alleged disposal of waste materials containing lead compounds at a
gravel pit on Kleburg Road ("Walton") in Dallas. Pursuant to the 1994 Order,
among other things, an administrative penalty of $213,200 was deferred pending
timely and satisfactory completion of the requirements in the 1994 Order.
Dal-Tile has completed certain required remediation and closure activities and
in 2000 submitted a Closure Certification Report to the TNRCC for approval.
Approval of the Closure Certification Report was received in June 2001. The
TNRCC has informed the Company that a formal Post Closure Care Permit is not
required. The Companyeach site is now performing Post Closure activities of the Walton
site and expects to incur future costs in connection with this activity. The
Company believes that any such amounts will not have a material adverse effect
on it.

Dal-Tile has reported that the Texas environmental proceedings described
above followed a related criminal investigation which led to the indictments
and, in 1993, the convictions of a former owner and a former officer of Dal-Tile
on federal charges of violating environmental laws, and that the U.S. Attorney's
Office for the Northern District of Texas, which obtained the indictments,
informed Dal-Tile on April 22, 1992 that, based on information in their
possession, it had decided not to prosecute Dal-Tile for violations of
environmental criminal statutes.undergoing post-closure care. Dal-Tile has been named as a potentially responsible party under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state statutes with respect tofor the disposal of certain hazardous substances at various other sites in the United States including,
without limitation, the Salford Quarry Superfund Site and the North Penn 6
Superfund Site. Based on currently available information, theStates. The Company believesdoes not believe that the ultimate allocation ofany future costs associated with the investigation and
remediation offor these pending sites will not, in the aggregate, have a material adverse effect on it.

Numerous aspects of the Company's manufacturing operations require
expenditures for environmental compliance. For example, the manufacture of
carpet and tile require expenditures for compliance with laws and regulations
governing air emissions, wastewater discharges, and the generation of solid and
hazardous waste. Many of these manufacturing processes also require expenditures
in order to comply with Occupational Safety and Health Administration ("OSHA")
regulations with respect to potential employee exposure including operations
that result in the accumulation of dust that contains silica. Expenditures
required for compliance activities associated with environmental and OSHA
compliance have not had, and are not expected to have, a material adverse effect
on the Company.

In addition, in light of the lengthy manufacturing history of the Company's
facilities, it is possible that additional environmental issues and related
matters may arise relating to past activities which the Company cannot now
reliably predict, including tort liability and liability under environmental
laws. For example, a number of the Company's facilities in the Dal-Tile division
located in the United States used lead compounds in glaze materials. The
Company's Mexican facilities continue to use lead compounds in their glaze
materials on certain specially ordered tiles. Significant exposure to lead
compounds may have adverse health effects. Although it is impossible to quantify
the Company's liability, if any, in respect of these matters, including
liability to individuals exposed to lead compounds, no claims relating to use of
lead compounds or waste disposal matters are pending against it except as set
forth above. In addition, the Company cannot now reliably predict the effect
which future environmental regulation in the United States, Mexico and Canada
could have on it.

As a result of a voluntary audit, the air operating permits for three of
Mohawk's facilities in its Dal-Tile division located in Texas are in the process
of being modified and voluntary Compliance Agreements with the TNRCC have been
entered into. In conjunction with this activity, it was determined that air
pollution control equipment will be required for certain emission sources at the
Dallas and El Paso facilities. Further, in November 2001 the TNRCC issued a
Notice of Violation ("NOV") to the El Paso facility alleging failure to install
air pollution control equipment during a recent expansion. The NOV will be
addressed as part of the permit modification process for the El Paso facility.
The Company believes the expenditures associated with obtaining the permit
modifications in Texas, including installation of the air pollution control
equipment, will not have a material adverse effect on it.

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, 2001.

2003.

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, $.01 par value per share (the "common stock""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
---------- -------
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 .......................................... $ 32.60 25.50
Second quarter ......................................... 35.85 27.91
Third quarter .......................................... 47.13 29.85
Fourth quarter ......................................... 55.55 35.90

2002
- ----
First quarter (through March 15, 2002) ................. $ 68.10 50.50
Mohawk
Common Stock
High Low
2002
First quarter $ 68.10 50.50
Second quarter 70.60 57.25
Third quarter 62.24 40.25
Fourth quarter 63.40 43.75
2003
First quarter $ 59.38 41.00
Second quarter 63.04 47.65
Third quarter 75.75 55.25
Fourth quarter 75.48 67.07
2004
First quarter (through March 2, 2004) 84.16 68.77
As of March 15, 2002,2, 2004, there were approximately 360411 holders of record of Common Stock. The Company has not paid or declared any cash dividends on shares of its Common Stock since completing its Initial Public Offering.initial public offering. The Company's policy is to retain all net earnings for the development of its business, and presently, 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.

Item 6. Selected Financial Data
The following table sets forth the selected financial data of the Company for the periods indicated, which information is derived from the consolidated financial statements of the Company. 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 using the purchase method of
accounting. 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 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 Industries, Inc. ("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 Patterned Carpets, Inc. ("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, Inc. ("Crown Crafts"). The acquisition was accounted for using the purchase method of accounting. On March 20, 2002, the Company acquired all the outstanding capital stock of Dal-Tile International Inc. ("Dal-Tile") in exchange for approximately of $1,469 million, consisting of approximately 12.9 million shares of the Company's common stock, options to purchase approximately 2.1 million shares of the Company's common stock and $718 million in cash. The acquisition was accounted for using the purchase method of accounting. On November 10, 2003, the Company acquired certain assets and assumed certain liabilities of the Lees Carpet division of Burlington Industries, Inc. ("Lees Carpet") for approximately $350 million in cash. The acquisition was recorded 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,
--------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(In thousands, except per share data)

Statement of earnings data:
Net sales ..................................................... $3,445,945 3,404,034 3,211,575 2,848,810 2,521,297
Cost of sales ................................................. 2,613,043 2,581,185 2,434,716 2,167,523 1,961,433
---------- ---------- ---------- ---------- ----------
Gross profit ................................................ 832,902 822,849 776,859 681,287 559,864
Selling, general and administrative
expenses .................................................... 505,745 505,734 482,062 432,191 383,523
Carrying value reduction of property,
plant and equipment and other
assets

At or for the Years Ended December 31,
2003 2002 (c) 2001 2000 1999
(In thousands, except per share data)
Statement of earnings data:
Net sales $ 5,005,053 4,522,336 3,445,945 3,404,034 3,211,575
Cost of sales 3,645,677 3,282,269 2,613,043 2,581,185 2,434,716
Gross profit 1,359,376 1,240,067 832,902 822,849 776,859
Selling, general and administrative
expenses 817,347 718,002 505,745 505,734 482,062
Class action legal settlement (a) - - - 7,000 -
Operating income 542,029 522,065 327,157 310,115 294,797
Interest expense (b) 55,575 68,972 29,787 38,044 32,632
Other (income) expense, net (1,980) 9,464 5,954 4,442 2,266
53,595 78,436 35,741 42,486 34,898
Earnings before income taxes 488,434 443,629 291,416 267,629 259,899
Income taxes 178,285 159,140 102,824 105,030 102,660
Net earnings $ 310,149 284,489 188,592 162,599 157,239
Basic earnings per share $ 4.68 4.46 3.60 3.02 2.63
Weighted-average common shares
outstanding 66,251 63,723 52,418 53,769 59,730
Diluted earnings per share $ 4.62 4.39 3.55 3.00 2.61
Weighted-average common and
dilutive potential common shares
outstanding 67,121 64,861 53,141 54,255 60,349
Balance sheet data:
Working capital $ 646,483 640,846 449,361 427,192 560,057
Total assets 4,163,575 3,596,743 1,768,485 1,795,378 1,682,873
Long-term debt (including
current portion) 1,012,413 820,427 308,433 589,828 596,065
Stockholders' equity 2,297,801 1,982,879 948,551 754,360 692,546
(a) .................................................. - - - 2,900 5,500
Class action legal settlement (b) ............................. - 7,000 - - -
Compensation expense for stock
option exercises (c) ........................................ - - - - 2,600
---------- ---------- ---------- ---------- ----------
Operating income ............................................ 327,157 310,115 294,797 246,196 168,241
---------- ---------- ---------- ---------- ----------
Interest expense .............................................. 29,787 38,044 32,632 31,023 36,474
Acquisition costs - World Merger (d) .......................... - - - 17,700 -
Other expense, net ............................................ 5,954 4,442 2,266 2,667 338
---------- ---------- ---------- ---------- ----------
35,741 42,486 34,898 51,390 36,812
---------- ---------- ---------- ---------- ----------
Earnings before income taxes ................................ 291,416 267,629 259,899 194,806 131,429
Income taxes .................................................. 102,824 105,030 102,660 79,552 51,866
---------- ---------- ---------- ---------- ----------
Net earnings ................................................ $ 188,592 162,599 157,239 115,254 79,563
========== ========== ========== ========== ==========

Basic earnings per share (e) .................................. $ 3.60 3.02 2.63 1.91 1.33
========== ========== ========== ========== ==========
Weighted-average common shares
outstanding (e) ............................................. 52,418 53,769 59,730 60,393 59,962
========== ========== ========== ========== ==========
Diluted earnings per share (e) ................................ $ 3.55 3.00 2.61 1.89 1.32
========== ========== ========== ========== ==========
Weighted-average common and
dilutive potential common shares
outstanding (e) ............................................ 53,141 54,255 60,349 61,134 60,453
========== ========== ========== ========== ==========

At or for the Years ended December 31,
--------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(In thousands)

Balance sheet data:
Working capital ........................... $ 449,361 427,192 560,057 438,474 389,378
Total assets .............................. 1,768,485 1,795,378 1,682,873 1,405,486 1,233,361
Long-term debt (including current
portion) ............................. 308,433 589,828 596,065 377,089 402,854
Stockholders' equity ...................... 948,551 754,360 692,546 611,059 493,841

(a) 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.

(b) The Company recorded a one-time charge of $7.0 million in 2000, reflecting the settlement of two class action lawsuits.
(b) In December 2002, the Company discontinued hedge accounting for its interest rate swap. The impact of discontinuing the hedge was to increase interest expense by approximately $10.7 million.
(c) A chargeIn 2002, the Company adopted the provisions of $2.6 million was recorded in 1997,Financial Accounting Standards Board SFAS No. 142 "Goodwill and Other Intangible Assets" which required the Company to cease amortizing goodwill and evaluate such goodwill and indefinite intangibles 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.

(d) The Company recorded a one-time charge of $17.7 million in 1998 for
transaction expenses related to the World merger.

(e) 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.

impairment.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

During
Overview
The Company is the three-year period ended December 31, 2001,leading producer of floorcovering products for residential and commercial applications in the United States. The Company continued
to experience growth both internallyis the second largest carpet and through acquisitions.

On January 29, 1999, the Company acquired certain assets of Image for
approximately $192 million, including acquisition costsrug manufacturer, and the assumption of
$30 million of tax-exempt debt,a leading manufacturer, marketer 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.

On March 20, 2002, the Company acquired all of the outstanding capital
stock of Dal-Tile International Inc. ("Dal-Tile") for a purchase price of
approximately $1,545 million, consisting of approximately 12.9 million shares of
the Company's common stock, options to purchase approximately 2.1 million shares
of the Company's common stock and $720 million in cash. The Company's common
stock and options were valued at $825 million based on the measurement date
stock price. The transaction will be accounted for using the purchase method of
accounting

These acquisitions have created opportunities to enhance the Company'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, coverlets
and ceramic tile.

Effective November 1, 2000, the Company entered into an agreement with
Congoleum Corporation, Inc., to become a national distributor of their vinyl
products. This agreement gave the Company access to a complete line of softceramic tile and hard floorcovering products to supply to customers throughoutnatural stone, in the United States. Annual floorcovering sales within the United States in 2002 were approximately $20.3 billion. The Company had annual net sales in 2003 in excess of $5.0 billion.
The primary categories of the floorcovering industry include carpet and rugs (63%(65%), ceramic tile (11%(12%), vinyl and rubber (14%(10%), hardwood (8%(9%) and laminate (4%). Compound average growth rates in units sold (measured in square yards) for each of theseall categories, except the vinyl and rubber category, for the period from 1992 through 20002002 have met or exceeded Gross Domestic Productthe growth rate for both the gross domestic product of the United States and housing starts over the same period. During this period, the compound average growth rate was 4.4%3.6% for carpet and rugs, 10.6%10.3% for ceramic tile, 5.0%1.3% for vinyl and rubber and 9.1%8.0% for hardwood. Laminate, which is a relatively new product, experienced a compound average growth rate of 39.9%41.5% from 1996 through 2000.2002. Although beginning from a smaller base, the growth rates for hard floorcoverings may indicate increasing consumer preference for these products for certain applications. In response to this increasing demand, the Company has increased its distribution of hard surface products, including ceramic tile, vinyl, hardwood and laminate. The acquisition of Dal-Tile providesprovided a unique opportunity to help the Company achieve its strategic goal of becoming one of the world's leading floorcovering manufacturers and distributors.
The Company considerscontinues to experience growth both internally and through acquisitions.
On March 20, 2002, the Company acquired all of the outstanding capital stock of Dal-Tile, a leading manufacturer and distributor of ceramic tile in the United States, for approximately $1,469 million in stock and cash. The transaction was accounted for using the purchase method of accounting and, accordingly, the results of operations of Dal-Tile have been included in the Company's consolidated financial statements from March 20, 2002. The primary reason for the acquisition was to expand the Company's presence in the ceramic tile and stone markets.
On November 10, 2003, the Company acquired the assets and assumed certain liabilities of the commercial carpet division of Burlington Industries, Inc., known as Lees Carpet, from W.L. Ross & Company for approximately $350 million in cash. The results of operations for Lees Carpet have been included with the Mohawk segment results and in the Company's consolidated financial statements since that date. The primary reason for the acquisition was to expand the Company's presence in the commercial carpet market.
The Company has two operating segments, the Mohawk segment and the Dal-Tile segment. The Mohawk segment sells and distributes its most critical accounting policies toproduct lines, which include its
accounts receivablebroadloom carpet, rugs, pad, ceramic tile, hardwood, vinyl and revenue recognition, inventorieslaminate through independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and income tax policies
because they are most important to thecommercial end users. The Dal-Tile segment product lines include ceramic tile, porcelain tile and stone products sold through company-operated sales service centers, independent distributors and home centers.
Critical Accounting Policies
The Company's discussion and analysis of financial condition and results of operations are based on its consolidated financial statements that were prepared in accordance with accounting principles generally accepted in the United States of America.
The Company makes estimates and assumptions when preparing financial statements. These estimates and assumptions affect various matters, including:
reported amounts of assets and liabilities in the Company's Consolidated Balance Sheets at the dates of the financial statements,
disclosure of contingent assets and liabilities at the dates of the financial statements, and

reported amounts of revenues and expenses in the Company's Consolidated Statements of Earnings during the reporting periods. These estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict and are beyond management's control. As a result, actual amounts could differ from these estimates.
The SEC issued disclosure guidance for accounting policies that management believes are most "critical." The SEC defines these critical accounting policies as those that are both most important to the portrayal of a company's financial condition and results and require management's most difficult, subjective, or complex judgments.judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The Company believes the following accounting policies require it to use judgments and estimates in preparing its consolidated financial statements and could represent critical accounting policies as defined by the SEC. The Company discusses its significant accounting policies, including those that do not require management to make difficult, subjective, or complex judgments or estimates, in Note 1 to the Consolidated Financial Statements.
Accounts receivable and revenue recognition. Revenues are recognized when goods are shipped which is when theand 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 evaluation of specific customer accounts and the aging of accounts receivable. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Inventories are stated at the lower of cost or market (net realizable value). Cost is determined using the last-in, first-out ("LIFO") method (LIFO) predominantly within the Mohawk segment, which matches current costs with current revenues, for substantially all inventories and the first-in, first-out ("FIFO") method for(FIFO), which is used to value inventory within the remaining inventories. Income taxesDal-Tile segment. Inventories on hand are accounted for undercompared against anticipated future usage, which is a function of historical usage and anticipated future selling price, in order to evaluate obsolescence, excessive quantities, and expected sales below cost. Actual results could differ from assumptions used to value obsolete, excessive inventory or inventory expected to be sold below cost and additional reserves may be required.
Goodwill and indefinite life intangible assets are subject to annual impairment testing. The impairment tests are based on determining the assetfair value of the specified reporting units and liability method. indefinite life intangible assets based on management judgments and assumptions using estimated future cash flows. These judgments and assumptions could materially change the value of the specified reporting units and indefinite life intangible assets and, therefore, could materially impact the Company's consolidated financial statements.
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 19

years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in earnings in the period that includes the enactment date. Additionally, taxing jurisdictions could retroactively disagree with the Company's tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner.

Results of Operations
Following are the results of operations for the last three years:
At or for the Years Ended December 31,
2003 2002 2001
(In thousands)
Statement of earnings data:
Net sales $ 5,005,053 100.0% 4,522,336 100.0% 3,445,945 100.0%
Cost of sales 3,645,677 72.8% 3,282,269 72.6% 2,613,043 75.8%
Gross profit 1,359,376 27.2% 1,240,067 27.4% 832,902 24.2%
Selling, general and administrative
expenses 817,347 16.3% 718,002 15.9% 505,745 14.7%
Operating income 542,029 10.9% 522,065 11.5% 327,157 9.5%
Interest expense 55,575 1.1% 68,972 1.5% 29,787 0.9%
Other (income) expense, net (1,980) 0.0% 9,464 0.2% 5,954 0.2%
53,595 1.1% 78,436 1.7% 35,741 1.1%
Earnings before income taxes 488,434 9.8% 443,629 9.8% 291,416 8.4%
Income taxes 178,285 3.6% 159,140 3.5% 102,824 3.0%
Net earnings $ 310,149 6.2% 284,489 6.3% 188,592 5.4%
During 2003, specifically the first half of 2003, the Company and industry performance as a whole was impacted negatively by the overall weak conditions in the U.S. economy and cautious consumer and commercial spending. The Company believes that the residential replacement business is recovering in response to improved economic conditions. The Company believes that the commercial business is also beginning to show signs of improvement at certain price points and anticipates the higher end business will improve later in 2004. The Company is implementing a price increase in both the Mohawk and Dal-Tile segment during the first quarter of 2004 to compensate for increased raw material prices resulting from higher oil and natural gas prices and higher import prices.
Year Ended December 31, 20012003, as Compared with Year Ended December 31, 2000
- --------------------------------------------------------------------------2002
Net sales for the year ended December 31, 20012003, were $3,445.9$5,005.1 million, reflecting an increase of $41.9$482.7 million, or approximately 1.2%10.7%, over the $3,404.0$4,522.3 million reported in the year ended December 31, 2000.2002. The increased net sales were attributable to the acquisition of Dal-Tile and Lees Carpet and internal growth. The Mohawk segment recorded net sales of $3,736.5 million in 2003 compared to $3,624.2 million in 2002, representing an increase of $112.4 million or approximately 3.1%. The growth was attributable to the Lees Carpet acquisition and internal growth of product lines. The Dal-Tile segment recorded net sales of $1,268.5 million in 2003, reflecting an increase of $370.4 million or 41.2%, over the $898.2 million reported in the year ended December 31, 2002. The Dal-Tile results are not included in the Company's consolidated financial statements prior to the March 20, 2002, acquisition. However, when the Dal-Tile net sales for the year ended December 31, 2003, are compared to the Dal-Tile pro forma net sales of $1,134.2 million for the year ended December 31, 2002 (derived by combining Dal-Tile net sales of $236.0 million prior to the March 20, 2002, acquisition date, after reclassifications to conform to Mohawk's presentation, with reported Dal-Tile net sales of $898.2 million for the period ending December 31, 2002), an increase of approximately 11.8% for the period was realized. The growth was primarily attributable to growth within residential products. The Company believes that the 2001this pro forma net sales increase was attributable primarilyinformation will be useful to internal
growth in carpet, rugs, padding and hard surface products.investors because it allows investors to compare the results of the two periods.

Quarterly net sales and the percentage changes in net sales by quarter for 20012003 versus 20002002 were as follows (dollars in thousands):
2001 2000 Change
---------------- ---------------- ------------

First quarter.......................... $ 777,339 799,403 (2.8)%
Second quarter......................... 864,958 890,980 (2.9)
Third quarter.......................... 907,850 875,765 3.7
Fourth quarter......................... 895,798 837,886 6.9
---------------- ---------------- ------------
Total year...................... $ 3,445,945 3,404,034 1.2 %
================ ================ ============
2003 2002 Change
First quarter $ 1,084,715 866,710 25.2 %
Second quarter 1,247,181 1,227,747 1.6
Third quarter 1,303,166 1,224,403 6.4
Fourth quarter 1,369,991 1,203,476 13.8
Total year $ 5,005,053 4,522,336 10.7 %
Gross profit was $832.9$1,359.4 million (24.2%(27.2% of net sales) for 20012003 and $822.8$1,240.1 million (24.2%(27.4% of net sales) for 2000. Gross profit dollars for 2001 were
impacted by favorable2002. The reduction in percentage was primarily attributable to a change in the selling mix, increased raw material prices resulting from higher oil and fuelnatural gas prices, higher import prices and start up costs and an improved product mix.related to the new Dal-Tile manufacturing facility.
Selling, general and administrative expenses for 20012003 were $505.7$817.3 million (14.7%(16.3% of net sales) compared to $505.7$718.0 million (14.9%(15.9% of net sales) for 2000.2002. The increased percentage was primarily attributable to the acquisition of Dal-Tile, which has higher selling, general and administrative expenses.
Operating income for 2003 was $542.0 million (10.9% of net sales) compared to $522.1 million (11.5% of net sales) in 2002. Operating income attributable to the Mohawk segment was $364.0 million (9.7% of segment net sales) in 2003 compared to $390.9 million (10.8% of segment net sales) in 2002. The percentage decrease in operating income was attributable to the higher costs associated with oil and natural gas prices and a change in the selling mix. Operating income attributable to the Dal-Tile segment was $187.2 million (14.8% of segment net sales) in 2003, compared to $139.9 million (15.6% of segment net sales) in 2002. The decrease in operating income as a percentage of net sales is primarily attributable to a change in product mix, higher import prices and start up costs of a new manufacturing facility. On a pro forma combined basis, the Dal-Tile segment operating income was $171.7 million (15.1% of pro forma segment net sales) for 2002 (derived by combining Dal-Tile operating income of $31.8 million prior to the March 20, 2002 acquisition, after reclassifications to conform to Mohawk's presentation, with reported Dal-Tile operating income of $139.9 million for the period ended December 31, 2002). The Company believes that presentation of this pro forma combined operating income information will be useful to investors because it allows investors to compare the results between the two periods.
Interest expense for 20012003 was $29.8$55.6 million compared to $38.0$69.0 million in 2000.2002. The primary factors contributingdecrease in interest expense was attributable to lower average debt levels during 2003 when compared to 2002, offset by an increase in the average borrowing rate due to a change in the mix of fixed and variable rate debt in 2003 when compared to 2002. Additionally, interest expense for 2002 included $10.7 million related to the decrease were lower debt levels
compared to 2000.write-off of an interest rate swap previously accounted for as a cash flow hedge.
Income tax expense for 2001 was $102.8$178.3 million, or 35.3%36.5% of earnings before income taxes. In 2000, income tax expense was $105.0taxes for 2003 compared to $159.1 million, representing 39.2%or 35.9% of earnings before income taxes.taxes for 2002. The reductionchange in the effective income tax rate was primarily due toresulted from the use of fewer available tax credits and other tax strategies.

in 2003 when compared to 2002.
Year Ended December 31, 20002002, as Compared with Year Ended December 31, 1999
- --------------------------------------------------------------------------2001
Net sales for the year ended December 31, 20002002, were $3,404.0$4,522.3 million, reflecting an increase of $192.4$1,076.4 million, or approximately 6%31.2%, over the $3,211.6$3,445.9 million reported in the year ended December 31, 1999.2001. The increased net sales were attributable to the Dal-Tile acquisition and internal growth of the Mohawk segment product lines. The Mohawk segment recorded net sales of $3,624.2 million in 2002 compared to $3,445.9 million in 2001, representing an increase of $178.2 million or approximately 5.2%. The growth was attributable to all segment product lines. Since the completion of the Dal-Tile acquisition, the Dal-Tile segment recorded net sales of $898.2 million in 2002. On a pro forma combined basis, the Dal-Tile segment net sales were $1,134.2 million (derived by combining Dal-Tile net sales of $236.0 million prior to the March 20, 2002 acquisition date, after reclassifications to conform to Mohawk's presentation, with reported Dal-Tile net sales of $898.2 million for the period ending December 31, 2002) for 2002. This compares to Dal-Tile net sales of $1,036.8 million

(derived from net sales prior to the March 20, 2002 acquisition) for 2001, resulting in an increase of approximately 9.4% for the period. The growth was primarily attributable to growth within residential products. The Company believes that
the 2000this pro forma net sales increase was attributable primarilyinformation will be useful to internal growth.investors because it allows investors to compare the results of the two periods.
Quarterly net sales and the percentage changes in net sales by quarter for 20002002 versus 19992001 were as follows (dollars in thousands):
2000 1999 Change
---------------- ---------------- ------------

First quarter.......................... $ 799,403 732,536 9.1 %
Second quarter......................... 890,980 825,623 7.9
Third quarter.......................... 875,765 842,870 3.9
Fourth quarter......................... 837,886 810,546 3.4
---------------- ---------------- ------------
Total year...................... $ 3,404,034 3,211,575 6.0 %
================ ================ ============

2002 2001 Change
First quarter $ 866,710 777,339 11.5 %
Second quarter 1,227,747 864,958 41.9
Third quarter 1,224,403 907,850 34.9
Fourth quarter 1,203,476 895,798 34.3
Total year $ 4,522,336 3,445,945 31.2 %
Gross profit was $822.8$1,240.1 million (27.4% of net sales) for 2002 and $832.9 million (24.2% of net sales) for 2000 and $776.9
million (24.2%2001. Gross profit as a percentage of net sales) for 1999. Grosssales in 2002 was favorably impacted when compared to 2001 by Dal-Tile's higher gross profit dollars for 2000 were
impacted by favorable product mixpercentage and improved manufacturing efficiencies within the change in depreciable lives of fixed
assets as of the beginning of the year and offset by higher material and fuel
costs.Mohawk segment.
Selling, general and administrative expenses for 20002002 were $505.7$718.0 million (14.9%(15.9% of net sales) compared to $482.1$505.7 million (15%(14.7% of net sales) for 1999.

In2001. The increased percentage was attributable to the third quarterDal-Tile segment which has higher selling, general and administrative expenses but also has higher gross profit as a percentage of 2000,net sales. The Mohawk and Dal-Tile (including selling, general and administrative costs prior to the Company reached an agreementacquisition of Dal-Tile) segments selling, general and administrative expenses reflected improvements over 2001, when compared to 2002. The improvements were due to better control of operating costs as net sales increased.
Operating income for 2002 was $522.1 million (11.5% of net sales) compared to $327.2 million (9.5% of net sales) in principle2001. Operating income attributable to settle two antitrust class actions.the Mohawk segment was $390.9 million (10.8% of segment net sales) in 2002 compared to $336.7 million (9.8% of segment net sales) in 2001. Operating income attributable to the Dal-Tile segment was $139.9 million (15.6% of segment net sales) in 2002. On a pro forma combined basis, the Dal-Tile segment operating income was $171.7 million (15.1% of pro forma segment net sales) for 2002 (derived by combining Dal-Tile operating income of $31.8 million prior to the March 20, 2002 acquisition, after reclassifications to conform to Mohawk's presentation, with reported Dal-Tile operating income of $139.9 million for the period ended December 31, 2002). This compares to Dal-Tile operating income of $154.6 million (14.9% of Dal-Tile net sales) for 2001. The Company contributed $13.5 millionbelieves that presentation of this pro forma combined operating income information will be useful to a settlement fundinvestors because it allows investors to resolve these claims. The court approvedcompare the settlement on
February 5, 2001. Duringresults between the third quarter of 2000, the Company recorded a
charge of $7 million in connection with the settlement. This amount was in
addition to $6.5 million accrued in earliertwo periods.
Interest expense for 20002002 was $38.0$69.0 million compared to $32.6$29.8 million in 1999.2001. The primary factors contributing to the increase were higher debt levels,in interest expense was attributable to additional debt incurred in March 2002 to finance the stock repurchase program and capital expenditures,acquisition of Dal-Tile, the write-off of approximately $10.7 million relating to an interest rate swap previously accounted for as a cash flow hedge and an increase in the weighted average borrowing rate due to a change in the mix of fixed rate and variable rate debt, when compared to 1999.

In 2000, income2001.
Income tax expense was $105.0$159.1 million, or 39.2%35.9% of earnings before income taxes. In 1999, income tax expense was $102.7taxes for 2002 compared to $102.8 million, representing 39.5%or 35.3% of earnings before income taxes.

taxes for 2001.
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 primarily through a combination of internally generated funds, bank credit lines, term and senior notes, the sale of receivables and credit terms from suppliers.
The level of accounts receivable increased from $358.8$501.1 million at the beginning of 20012003 to $404.9$573.5 million at December 31, 2001.2003. The $46.1$72.4 million increase was primarily attributable to strongthe acquisition of Lees Carpet and internal sales growth. Inventories decreasedincreased from $574.6$678.0 million at the beginning of 20012003 to $531.4$832.4 million at December 31, 2001,2003, due primarily to improvedbuilding inventory management.for hard surface product categories within the Mohawk and Dal-Tile segments and the acquisition of Lees Carpet.

The outstanding checks in excess of cash represent trade payables checks that have not yet cleared the bank. When the checks clear the bank, they are funded by the revolving credit facility. This policy does not impact any liquid assets on the consolidated balance sheet.

Capitalsheets.
Excluding acquisitions, capital expenditures totaled $52.9$114.6 million during 2001.2003. The capital expenditures made during 20012003 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, including $199.3$1,101.8 million for acquisitions, have totaled $471.3$1,381.2 million over the past three years. CapitalThe Company's capital spending during 2002
for both Mohawk and Dal-Tile combined,2004, excluding acquisitions, is expected to range from $125$140 million to $145$160 million, and will be used primarily to purchase equipment to increase production capacity and productivity.

The Company's
On September 30, 2003, the Company entered into a new revolving line of credit agreement provides for anproviding up to $300 million with interest raterates of either (i) LIBOR plus 0.2%0.4% to 0.5%1.5%, depending upon the Company's performance measured against certain financial ratios, or (ii) the primebase rate less 1.0%, and
hasplus 0-0.6% depending upon the Company's performance measured against certain financial ratios. The new facility replaces a termination date of January 28, 2004. At December 31, 2001, the Company
had credit facilities of $450 million under its revolving credit linefacility that was due to expire in January 2004. The facility is comprised of two tranches, a $200 million tranche expiring in September 2008 and $70a $100 million under various short-term uncommitted credit lines. Alltranche expiring in September 2004. The $100 million tranche of these lines
are unsecured. At December 31, 2001, a total of approximately $449 million was
unused under these lines.the facility is renewable annually. The credit agreement contains customary financial and other covenants. The Company must pay an annual facility fee ranging from .0015.15% to .0025.50% 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,Additionally, at December 31, 2003, the Company had credit facilities of $300 million under its revolving credit facility and $50 million under various short-term uncommitted credit lines. At December 31, 2003, a total of $237.3 million was unused under the combined revolving credit facility and uncommitted credit lines. The revolving credit facility and uncommitted lines of credit are unsecured.
In connection with the Dal-Tile acquisition during 2002, the Company entered into a 364-day revolving asset
financing securitization agreement enablingterm loan facility (the "Bridge Facility") to finance a portion of the acquisition. On April 2, 2002, the Company to sell up to $205sold $300 million of an undivided interest in a defined poolits 6.50% senior notes due 2007, Series A and $400 million of trade accounts receivable.
The agreement, which has been recorded as an on-balance sheet financing
transaction, may be extended in one-year termsits 7.20% senior notes due 2012, Series B through institutional private placements and has been extendedused the proceeds to October
24, 2002. The Company believes the securitization program provides a low costrepay outstanding indebtedness of financing and is an additional source of debt capital with diversification from
other alternatives. The Company sold an initial ownership interest in a defined
pool of trade

accounts receivable. As collections reduce the pool, the Company sells
participating interests in new receivables to bring the amount in the pool up to
the maximum permittedapproximately $601 million under the agreement. The receivables are sold at a
discount, which approximates the purchasers' financing cost of the program.
Receivables securedBridge Facility and approximately $90 million under the agreement were $461.1 million and $381.7 million
at December 31, 2001 and 2000, respectively. The net proceeds were used to
reduce borrowings under theCompany's revolving credit facility. Interest rates underOn June 13, 2002, the facility vary with the commercial paper ratesCompany exchanged $295 million of its registered 6.50% senior notes due 2007, Series C for the Blue Ridge Asset Funding
Corporation plus an applicable margin.

The Company's debt structure also includes a combinationequal amount of variable rate
industrial revenue bonds and fixed rate termits Series A senior notes and $397.8 million of its registered 7.20% senior notes with
interest rates ranging from 2.87% up to 8.48%. The industrial revenue bonds
mature beginning in 2004 through 2019 and the term and senior notes mature
through 2005. The industrial revenue bonds are backed by unsecured letters of
credit. The term and senior notes are also unsecured. The aggregate principaldue 2012, Series D for an equal amount of industrial revenue bonds, term andits Series B senior notes was $149.5 million at
December 31, 2001.notes. Interest on each series is payable semiannually.
On January 3, 2001,August 4, 2003, the Company entered into an on-balance sheet trade accounts receivable securitization agreement ("Securitization Facility") replacing two previous facilities that were due to expire in October 2003. The Securitization Facility allows the Company to borrow up to $350 million based on available accounts receivable. The Company sells, on a five-year interest rate
swap,non-recourse revolving basis, its accounts receivable to a special purpose entity, which convertedin turn obtains loan advances that are secured by the receivable pool from a notional amount ofthird-party commercial paper conduit sponsored by financial institutions. The Securitization Facility is subject to annual renewal. At December 31, 2003, the Company had approximately $100$182 million outstanding secured by approximately $649.0 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.trade receivables.
The Company's Board of Directors previouslyhas authorized the repurchase of up to 15 million shares of its outstanding common stock. Management believes that
there are times whenFor the repurchaseyear ended December 31, 2003, a total of approximately 593,000 shares of the Company's common stock provides a
more attractive return on investmentwere purchased at an aggregate cost of the Company's resources than other
investment alternatives. The Company may repurchase stock from time to time when
conditions and circumstances warrant.approximately $27.8 million. Since the inception of the program, a total of approximately 9.011 million shares have been repurchased at an aggregate cost of approximately $200.8$293.1 million. All of these repurchases have been financed through the Company's operations and revolving line of credit.banking arrangements.
The total amount of cash and borrowings required to completeCompany believes that the Mohawk and
Dal-Tile merger, including the cash merger consideration, payment in respectcombined total of the maximum cash-out of one-half of the Dal-Tile options, refinancing or
assuming the existing indebtedness of Dal-Tile and transaction fees and
expenses, was approximately $911 million. The Company has entered into a 364-day
term loan facility permitting the Company to borrow up to $700 million (the
"bridge credit facility") under which the Company has borrowed $600 million to
finance a portion of the merger costs. The bridge credit facility provides for
an interest rate of either (i) LIBOR plus 1.375% to 2.0% or (ii) the prime rate
plus 0% to 2% based upon certain conditions. The bridge credit facility is
unsecured and contains customary financial and other covenants. The remaining
$311 million of financing needs associated with the merger were met using
approximately (i) $126 million under the Company's revolving credit facility,
(ii) $110 million under the Company's on-balance sheet asset financing
securitization facility and (iii) the assumption of Dal-Tile's existing $75
million on-balance sheet receivables securitization facility.

The Company's total financing needs at the closing of the Dal-Tile merger
were approximately $1,224 million. The Company has currently addressed these
financing needs using a combination of approximately (i) $600 million of the
bridge credit facility, (ii) $194 million of its revolving credit facility,
(iii) $205 million of its on-balance sheet asset financing securitization, (iv)
$75 million of an on-balance sheet receivables securitization facility of
Dal-Tile, and (v) $150 million of the Company's existing industrial revenue
bonds, term notes and senior notes. Approximately $223 million of the Company's
revolving credit facility and $44 million of various short-term uncommitted credit lines remain unused immediately after closingand the merger.Securitization Facility of $700 million is adequate to support its capital and working capital requirements.

The Company
intends to replace Dal-Tile's existing $75 million receivables securitization
facility withfollowing is a new $100 million receivables securitization facility through a
multi-selling conduit. In addition, the Company intends to refinance the bridge
credit facility prior to the twelfth business day following the closingsummary of the merger. A failure to repay the bridge credit facility within such 12 business
day period will subject the Company to an additional feeCompany's future minimum payments under contractual obligations as of $3.5 million under
the bridge credit facility.

December 31, 2003 (in thousands):
Payments due by period
2004 2005 2006 2007 2008 Thereafter Total
Long-term debt $ 248,795 9,445 6,500 300,000 - 447,673 1,012,413
Operating leases 72,857 57,202 44,517 31,183 22,602 45,363 273,724
Purchase commitments (1) 66,481 48,968 48,000 48,000 48,000 - 259,449
$ 388,133 115,615 99,017 379,183 70,602 493,036 1,545,586

(1) Includes commitments for natural gas and foreign currency and fiber purchases.
Recent Accounting Pronouncements
In June 2001,January 2003, the Financial Accounting Standards Board ("FASB") issued SFASFASB Interpretation No. 141,
Business Combinations, and SFAS46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 142, Goodwill and Other Intangible Assets.
SFAS No. 141 requires51," which addresses consolidation by business enterprises of variable interest entities ("VIEs") either: (1) that do not have sufficient equity investment at risk to permit the purchase methodentity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of 22

accounting be used for all business combinations initiateda controlling financial interest. In December 2003, the FASB issued modifications to FIN 46 ("Revised Interpretations") resulting in multiple effective dates based on the nature as well as the creation date of the VIE. VIEs created after June 30, 2001.
SFAS No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized,January 31, 2003, but instead tested for impairment at least
annually in accordance with the provisions of SFAS No. 142.

The Company was requiredprior to adopt the provisions of SFAS No. 141 effective
June 30, 2001, and SFAS No. 142 effective January 1, 2002. Furthermore, any
goodwill that was acquired in a purchase business combination completed2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the first quarter of 2004. VIEs created after June 30, 2001 will notJanuary 1, 2004 must be amortized. Goodwill acquired in business combinations
completed before Julyaccounted for under the Revised Interpretations. Non-Special Purpose Entities created prior to February 1, 2001 is2003, should be accounted for under the revised interpretation's provisions no longer being amortized after December 31,
2001.later than the first quarter of fiscal 2004. The Company has evaluated its existing goodwill that was acquired in prior
purchase business combinations for impairmentadopted FIN 46, which did not have, and has concluded that no
adjustment to the Company's consolidated financial statements is required.

In April 2001, the EITF reached consensus on Issue No. 00-25 "Vendor Income
Statement Characterization of Consideration to a Purchaser of the Vendors
Products or Services." This issuance provides guidance primarily on income
statement classification of consideration from a vendor to a purchaser of the
vendor's products. Generally, cash consideration is to be classified as a
reduction of revenue, unless specific criteria are met regarding goods or
services that the vendor may receive in return for this consideration. The
Company believes that its current accounting policies are in conformity with
EITF 00-25, and does not believe that EITF 00-25 willexpect the Revised Interpretations to have, a material effectimpact on the Company's consolidated financial statements.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 provides new guidance
on the recognition and measurement of an asset retirement obligation and its
associated asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets. SFAS
No. 143 is effective for the Company's fiscal year beginning in 2003 and is not
expected to materially impact the Company's consolidated financial statements.

In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.
144 provides new guidance on the recognition of impairment losses on long-lived
assets to be held and used or to be disposed of and also broadens the definition
of what constitutes discontinued operations and how the results of discontinued
operations are to be measured and presented. SFAS No. 144 is effective for the
Company's fiscal year beginning in 2002 and is not expected to materially change
the methods used by the Company to measure impairment losses on long-lived
assets, but may result in more matters being reported as discontinued operations
than was permitted under the previous accounting principles.

Impact of Inflation
Inflation affects the Company's manufacturing costs and operating expenses. The carpet and tile industry has experienced inflation in the prices of raw materials and fuel-related costs. In the past, the Company has generally passed along these price increases to its customers and has been able to enhance productivity to offset increases in costs resulting from inflation in both the United States and Mexico.
Seasonality
The Company is a calendar year-end company and its results of operations for the first quarter tend to be the weakest. The second, third and fourth quarters typically produce higher net sales and operating income. These results are primarily due to consumer residential spending patterns for floorcovering, which historically have decreased during the first two months of each year following the holiday season.
Certain factorsFactors affecting the Company's performancePerformance
In addition to the other information provided in this Annual Report on Form 10-K, the following risk factors should be considered when evaluating an investment in shares of Mohawk common stock.

Common Stock.
If any of the events described in these risks were to occur, it could have a material adverse effect on the Company's business, financial condition and results of operations.

The failure to integrate Mohawk and Dal-Tile successfully by managing the
- -------------------------------------------------------------------------
challenges of that integration may result in the Company not achieving the
- --------------------------------------------------------------------------
anticipated potential benefits of the merger.
- --------------------------------------------

The Company will face challenges in consolidating functions, integrating
its organizations, procedures, operations and product lines in a timely and
efficient manner and retaining key personnel.

These challenges will result principally because the two companies
currently:

. maintain executive offices in different locations;
. manufacture and sell different types of products through
different distribution channels;
. conduct their businesses from various locations;
. maintain different operating systems and software on different
computer hardware; and
. have different employment and compensation arrangements for their
employees.

In addition, Dal-Tile has a significant manufacturing operation in Mexico,
and the Company has not previously operated a manufacturing facility outside of
the United States. As a result, the integration will be complex and will require
additional attention from members of management. The diversion of management
attention and any difficulties encountered in the transition and integration
process could have a material adverse effect on the Company's revenues, level of
expenses and operating results.

The floorcovering industry is cyclical and prolonged declines in residential or - -------------------------------------------------------------------------------
commercial construction activity could have a material adverse effect on the - ----------------------------------------------------------------------------
Company's business.
- ------------------
The U.S. floorcovering industry is highly dependent on residential and commercial construction activity, including new construction as well as remodeling. New construction activity and remodeling to a lesser degree,which are cyclical in nature and anature. A prolonged decline in residential or commercial construction activity could have a material adverse effect on the Company's business, financial condition and results of operations. Construction activity
is significantly affected by numerous factors, all of which are beyond the
Company's control, including:

. national and local economic conditions;
. interest rates;
. housing demand;
. employment levels;
. changes in disposable income;
. financing availability;
. commercial rental vacancy rates;
. federal and state income tax policies; and
. consumer confidence.business.
The U.S. construction industry has experienced significant downturns in the past, which have adversely affected suppliers to the industry, including
suppliers of floorcoverings.industry. The industry could experience similar downturns in the future, which could have a negative impact on the Company's business,
financial condition and results of operations.

business.
The Company faces intense competition in its industry, which could decrease
- --------------------------------------------------------------------------- demand for its products and could have a material adverse effect on its - -----------------------------------------------------------------------
profitability.
- -------------
The industry is highly competitive. The Company faces competition from a large number of domestic and foreign manufacturers and independent distributors
of floorcovering products.distributors. Some of its existing and potential competitors may be larger and have greater resources and access to capital than it does.capital. Maintaining the Company's competitive position may require it to makerequire: substantial investments in its product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Competitive pressures may also result in decreased demand for its products and in the loss
of market share. In addition, the Company faces, and will continue to face,
pressure on sales prices of its products from competitors, as well as from large

customers. As a result of anyproducts. Any of these factors there could behave a material adverse effect on the Company's sales and profitability.

Company.
A failure to identify suitable acquisition candidates, to complete acquisitions
- ------------------------------------------------------------------------------- and to integrate successfully the acquired operations could have a material - ---------------------------------------------------------------------------
adverse effect on the Company's business.
- ----------------------------------------
As part of its business strategy, the Company intends to pursue acquisitions of complementary businesses. Although it regularly evaluates acquisition opportunities, it may not be able to:

.to successfully identify suitable acquisition candidates;
. obtain sufficient financing on acceptable terms to fund acquisitions; . complete acquisitions; or
. profitably manage acquired businesses.
Acquired operations may not achieve expected performance levels of sales, operating income or
productivity comparable to those of its existing operations, or otherwise
perform as expected. Acquisitionsand may also involve a number of special risks, some or all of which could have a material and adverse effect on the Company's
business, results ofincluding among others an inability to successfully integrate acquired operations and financial condition, including, among
others:

. the Company's inability to integrate operations, systems and
procedures and to eliminate redundancies and excess costs
effectively;
. diversion of management's attention and resources; and
. difficulty retaining and training acquired key personnel.

management resources.
The Company may be unable to obtain raw materials on a timely basis, which could - --------------------------------------------------------------------------------
have a material adverse effect on its business.
- ----------------------------------------------

The Company's business is dependent upon a continuous supply of raw
materials from third party suppliers.
The principal raw materials used in itsthe Company's manufacturing operations include: nylon fiber and polypropylene resin, which are used exclusively in its carpet and rug business; talc, clay, impure nepheline
syenite, pure nepheline syenite and various glazes, including frit (ground glass), zircon and stains, which are used exclusively in its ceramic tile business;business and other materials. The Company purchaseshas a single source supplier for all of its impure nepheline syenite requirements from Minnesota Mining and Manufacturing Company and all of
its pure nepheline syenite requirements from Unimin Corporation. Unimin is the
only major supplier of pure nepheline syenite in North America.requirements. An extended interruption in the supply of these or other raw materials used in the Company's business or in the supply of suitable substitute materials would disrupt the Company's operations, which could have a material adverse effect on its business, financial condition and results of operations.

business.
The Company may be unable to pass on to its customers increases in the costs of - -------------------------------------------------------------------------------
raw materials and energy, which could have a material adverse effect on its - ---------------------------------------------------------------------------
profitability.
- -------------

Significant increases in the costs
The prices of raw materials and natural gas used in
the manufacture of the Company's products could have a material adverse effect
on its operating margins and its business, financial condition and results of
operations. The Company purchases nylon fiber, polypropylene resin, talc, clay,
impure nepheline syenite, pure nepheline syenite, frit, zircon, stains and other
materials from third party suppliers. The cost of some of these materials, like
nylon and polypropylene resin, is related to oil prices. The Company also
purchases significant amounts of natural gas to supply the energy required in
some of its production processes. The prices of these raw materials and of natural gas vary with market conditions. Although the Company generally attempts to pass on increases in the costs of raw materials and natural gas to its customers, the Company's ability to do so is, to a large extent, dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for its products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be recovered. During such periods of time, there could be a material adverse effect on the Company's profitability.

The Company has been, and in the future may be subject to claims and liabilities - --------------------------------------------------------------------------------
under environmental, health and safety laws and regulations, which could be - ---------------------------------------------------------------------------
significant.
- -----------
The Company's operations are subject to various federal, state, local and
foreign environmental, health and safety laws and regulations, including those governing air emissions, wastewater discharges, and the use, storage, treatment and disposal of hazardous materials. 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. New or
additional requirements could be imposed, and theThe Company could incur material expenditures to comply with new or existing regulations.regulations, including fines and penalties.
The nature of the Company's operations, and previous operations by others at
real property currently or formerly owned or operated byincluding the Company and the
disposalpotential discovery of waste at third party sitespresently unknown environmental conditions, exposes the Company to the risk of claims under environmental, health and safety laws and regulations. The Company could incur material costs or liabilities in connection with such claims. The Company
has been, and will continue to be, subject to these claims.

The discovery of presently unknown environmental conditions, changes
Changes in environmental, health, and safetyinternational trade laws and regulations, enforcement of existing
or new requirements or other unanticipated events could give rise to
expendituresin the business, political and liabilities, including fines or penalties, thatregulatory environment in Mexico could have a material adverse effect on the Company's business, operating results or
financial condition.

The Company relies on its Monterrey, Mexico plant for a significant portion of
- ------------------------------------------------------------------------------
its ceramic tile manufacturing capacity and any disruption in the plant's
- -------------------------------------------------------------------------
operations could negatively affect the Company's business.
- ---------------------------------------------------------
The Company's Monterrey, Mexico manufacturing facility represents a significant portion of the Company's total manufacturing capacity for ceramic tile. This facility contains five distinct manufacturing plants, three of which
produce ceramic tile, one of which produces frit used in the production of
manufactured tile and one of which produces refractories. Any disruption in the
operations of this facility could result in a material adverse effect on the
Company's ceramic tile business and the Company's operations as a whole.

Changes in international trade laws and in the business, political and
- ----------------------------------------------------------------------
regulatory environment in Mexico could have a material adverse effect on the
- ----------------------------------------------------------------------------
Company's business.
- ------------------

The Company's operations in Mexico include its Monterrey facility. Accordingly, an event that has a material adverse impact on the Company's Mexican operations could have a material adverse effect on itsthe tile operations as a whole. The business, regulatory and political environments in Mexico differ from those in the United States, and the Company's Mexican operations are exposed to a number of inherentlegal, currency, tax, political, and economic risks, including:

. changes in international trade laws, such as the North American
Free Trade Agreement, or NAFTA, affecting the Company's import
and export activities in Mexico;
. changes in Mexican labor laws and regulations affecting the
Company's abilityspecific to hire and retain employees in Mexico;
. currency exchange restrictions and fluctuations in the value of
foreign currency;
. potentially adverse tax consequences;
. local laws concerning repatriation of profits;
. political conditions in Mexico;
. unexpected changes in the regulatory environment in Mexico; and
. changes in general economic conditions in Mexico.

Future exchange rate fluctuations or inflation could have a material adverse
- ----------------------------------------------------------------------------
effect on the Company's results of operations.
- ---------------------------------------------

The Company's Mexican facility, which is considered an extension of its
U.S. operations, primarily provides ceramic tile to the Company's U.S.
distribution network, and to a more limited extent, sells ceramic tile in
Mexico. The facility has more peso-denominated expenses than revenues. This
means that the Company realizes a benefit when the peso devalues against the
U.S. dollar, although this benefit may be offset by Mexican

inflation. Any future increases in the Mexican inflation rate, which are not
offset by devaluation of the peso, may negatively impact the Company's results
of operations. The Mexican peso has been and may in the future be, subject to
significant fluctuations. To the extent that the peso appreciates against the
U.S. dollar, there could be a material adverse effect on the Company's business,
financial condition and results of operations.

The Company could face increased competition as a result of the General - -----------------------------------------------------------------------
Agreement on Tariffs and Trade ("GATT") and the North American Free Trade Agreement.
- --------------------------------------------------------------------------Agreement ("NAFTA").
The United StatesCompany is party to the General Agreement on Tariffs and Trade
("GATT"). Under GATT, the United States currently imposesuncertain what effect reduced import duties on
ceramic tile imported from countries outside North America at no more than 13%,
to be reduced ratably to no less than 8.5% by 2004. Accordingly, as these duties
decrease,under GATT may have on its operations, although these reduced rates may stimulate additional competition from manufacturers in these countries,
which now export, or may seek tothat export ceramic tile to the United States. The
Company is uncertain what effect GATT may have on its operations.

The North American Free Trade Agreement ("NAFTA") was entered into by
Canada, Mexico and the United States and over a transition period will remove
most customs duties imposed on goods traded among the three countries. In
addition, NAFTA will remove or limit many investment restrictions, liberalize
trade in services, provide a specialized means for settlement of, and remedies
for, trade disputes arising under its laws and will result in new laws and
regulations to further these goals.
Although NAFTA lowers the tariffs imposed on the Company's ceramic tile manufactured in Mexico and sold in the United States and will eliminate such tariffs entirely on January 1, 2008, it may also stimulate competition in the United States and Canada from manufacturers located in Mexico, which could negatively affect the Company's
business.

Mexico.
Forward-Looking Information
Certain of the matters discussedstatements in the preceding pages,this Annual Report on Form 10-K, particularly regarding anticipationanticipating of 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,"forecast," "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 and 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. Those
statements are based on assumptions regarding the Company's ability to maintain
its sales growth and gross margins and to control costs. These or other
assumptions could prove inaccurate and therefore, thereThere can be no assurance that the "forward-looking statements"forward-looking statements will prove to be accurate. Forward-looking
statementsaccurate because they are based on many assumptions, which involve a number of risks and uncertainties. The following important factors in addition to those discussed elsewhere in this document, affect thecould cause future results of Mohawk and could cause those results to differ materially from
those expressed in the forward-looking statements: materially adversediffer: changes in economic conditions generally in the carpet, rug, ceramic tile and other
floorcovering markets served by Mohawk; the successful integration of Dal-Tile
into Mohawk's business; competition from other carpet, rug, ceramic tile and
floorcovering manufacturers;industry conditions; competition; raw material prices; declines in residential or
commercial construction activity; 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
successfulacquisitions; introduction of new products; the successful rationalization of
existing operations; and other risks identified from time to time in the
Company'sMohawk'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 as 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

To
Financial exposures are managed as an integral part of the Company's risk management program, which seeks to reduce the riskpotentially adverse effect that the volatility of the interest rate, fluctuations,exchange rate and natural gas markets may have on its operating results. The Company does not regularly engage in speculative transactions, nor does it regularly hold or issue financial instruments for trading purposes.

Natural Gas Risk Management
The Company uses a combination of natural gas futures contracts and long-term supply agreements to manage unanticipated changes in natural gas prices. The contracts are based on forecasted usage of natural gas measured in Million British Thermal Units ("MMBTU").
The Company has designated the Company engagesnatural gas futures contracts as cash flow hedges. The outstanding contracts are valued at market with the offset going to other comprehensive income, net of applicable income taxes and any hedge ineffectiveness. Any gain or loss is recognized in cost of goods sold in the use of interest rate swap agreements.same period or periods during which the hedged transaction affects earnings. At December 31, 2001,2003, the Company held
one interest rate swap agreement under which the Company pays a fixed percent of
interest times thehad natural gas contracts that mature from January 2004 to December 2004 with an aggregate notional principal amount of $100approximately 3.9 million and receives in
return an amount equal to a specified variable rate of interest times the same
notional principal amount.MMBTU's. The

fixed interest rate per the agreement is 5.82%, which expires January 2, 2006.
The average rate as of December 31, 2001 was 4.0%. This agreement is considered
highly effective as of December 31, 2001. The cumulative fair value of the
agreement asthese contracts was an asset of $3.6 million. At December 31, 20012002, the Company had natural gas contracts outstanding with a notional amount of approximately 1.4 million MMBTU's. The fair value of these contracts was a liabilityan asset of $2.8 million,$1.9 million. The offset to these assets is recorded in other comprehensive income, net of taxes,applicable income taxes.
The Company's natural gas long-term supply agreements are accounted for under the normal purchases provision within SFAS No. 133 and its amendments. At December 31, 2003, the Company has normal purchase commitments of approximately 3.1 million MMBTU's for periods maturing from January 2004 through September 2005. The contracted value of these commitments was approximately $13.8 million and the fair value of these commitments was approximately $17.0 million, at December 31, 2003. At December 31, 2002, the Company had normal purchase commitments of approximately 4.6 million MMBTU's. The contracted value of these commitments was approximately $17.4 million and the fair value of these commitments was approximately $19.7 million.
Foreign Currency Rate Management
The Company enters into foreign exchange forward contracts to hedge costs associated with its operations in Mexico. The objective of these transactions is to reduce volatility of exchange rates where these operations are located by fixing a portion of their costs in U.S. currency. Gains and losses are recognized in cost of goods sold in the same period or periods during which the hedged transaction affects earnings. Accordingly, these contracts have been designated as cash flow hedges. The Company had forward contracts to purchase approximately 145.3 million and 357.5 million Mexican pesos at December 31, 2003 and 2002, respectively. The aggregate U.S. Dollar value of these contracts at December 31, 2003 and 2002 was recordedapproximately $12.7 million and $34,581, respectively. The contracts are marked to market in long-termother current liabilities with the offset to other comprehensive loss,income, net of applicable income taxes. 28

Unrealized losses at December 31, 2003 and 2002 respectively, were not significant.
Interest Rate Management
In 2002, the Company determined that its $100 million interest rate swap was ineffective. Consequently, the $10.7 million unrealized loss associated with the swap was recorded as a realized loss in interest expense during the fourth quarter of 2002. The Company continues to carry the liability on its consolidated balance sheets and the interest rate swap is marked to market at the end of each reporting period. The change in fair value for the year ended December 31, 2003 was not significant.
Item 8. Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report. ......................................................................... 30
Report 23
Consolidated Balance Sheets as of December 31, 20012003 and 2000 .......................................... 31
2002 24
Consolidated Statements of Earnings for the Years ended December 31, 2001, 20002003, 2002 and 1999 .............. 32
2001 25
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the Years ended
December 31, 2001, 20002003, 2002 and 1999 ................................................................... 33
2001 26
Consolidated Statements of Cash Flows for the Years ended December 31, 2001, 20002003, 2002 and 1999 ............ 34
2001 27
Notes to Consolidated Financial Statements ............................................................ 35
28
29

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 schedulesschedule as listed in Item 14(a)15(a)2. These consolidated financial statements and financial statement schedulesschedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedulesschedule 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, 20012003 and 2000,2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001,2003, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules,schedule, 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.
As discussed in notes 1 and 5 to the consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets in 2002.
/s/: KPMG LLP
KPMG LLP
Atlanta, Georgia
February 1, 2002, except
for the fourth paragraph of
note 2 as to which the date is
March 20, 2002

5, 2004

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 20012003 and 2000

(In2002
(In thousands, except per share data)

ASSETS 2001 2000
------------- ------------

Current assets:
Receivables .......................................................................... $ 404,875 358,809
Inventories .......................................................................... 531,405 574,595
Prepaid expenses ..................................................................... 24,884 26,973
Deferred income taxes ................................................................ 70,058 66,474
------------- ------------
Total current assets .................................................. 1,031,222 1,026,851
Property, plant and equipment, net .......................................................... 619,703 650,053
Goodwill, net ............................................................................... 109,167 112,376
Other assets ................................................................................ 8,393 6,098
------------- -----------
$ 1,768,485 1,795,378
============= ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt .................................................... $ 158,366 224,391
Accounts payable and accrued expenses ................................................ 423,495 375,268
------------- -----------
Total current liabilities ............................................. 581,861 599,659
Deferred income taxes ....................................................................... 84,955 75,808
Long-term debt, less current portion ........................................................ 150,067 365,437
Other long-term liabilities ................................................................. 3,051 114
------------- -----------
Total liabilities ..................................................... 819,934 1,041,018
------------- -----------

Stockholders' equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued .............. - -
Common stock, $.01 par value; 150,000 shares authorized; 61,408 and 60,838
shares issued in 2001 and 2000, respectively ....................................... 614 608
Additional paid-in capital ........................................................... 197,247 183,303
Retained earnings .................................................................... 947,123 758,531
Accumulated other comprehensive loss ................................................. (2,837) -
------------- -----------
Less treasury stock at cost; 8,715 and 8,538 shares in 2001 and 2000, respectively ... 1,142,147 942,442
Total stockholders' equity ........................................... 193,596 188,082
------------- -----------
Commitments and contingencies (Note 11) .................................................... 948,551 754,360
------------ -----------
$ 1,768,485 1,795,378
============= ===========
ASSETS 2003 2002
Current assets:
Receivables $ 573,500 501,129
Inventories 832,415 678,008
Prepaid expenses 43,043 37,368
Deferred income taxes 84,260 82,074
Total current assets 1,533,218 1,298,579
Property, plant and equipment, net . 919,085 855,324
Goodwill 1,368,700 1,277,453
Other intangible assets 325,339 146,700
Other assets 17,233 18,687
$ 4,163,575 3,596,743
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 248,795 27,427
Accounts payable and accrued expenses 637,940 630,306
Total current liabilities 886,735 657,733
Deferred income taxes 183,669 145,973
Long-term debt, less current portion 763,618 793,000
Other long-term liabilities 31,752 17,158
Total liabilities 1,865,774 1,613,864
Stockholders' equity:
Preferred stock, $.01 par value; 60 shares authorized;
no shares issued - -
Common stock, $.01 par value; 150,000 shares authorized; 77,050
and 76,371 shares issued in 2003 and 2002, respectively 770 763
Additional paid-in capital 1,035,733 1,006,550
Retained earnings 1,541,761 1,231,612
Accumulated other comprehensive income 2,313 1,126
2,580,577 2,240,051
Less treasury stock at cost; 10,515 and 10,006 shares in 2003
and 2002, respectively 282,776 257,172
Total stockholders' equity 2,297,801 1,982,879
Commitments and contingencies (Note 14)
$ 4,163,575 3,596,743
See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years Ended December 31, 2001, 20002003, 2002 and 1999

(In2001
(In thousands, except per share data)
2001 2000 1999
----------- ----------- -----------

Net sales ........................................................... $ 3,445,945 3,404,034 3,211,575
Cost of sales ....................................................... 2,613,043 2,581,185 2,434,716
----------- ----------- -----------
Gross profit ................................................. 832,902 822,849 776,859
Selling, general and administrative expenses ........................ 505,745 505,734 482,062
Class action legal settlement ....................................... - 7,000 -
----------- ----------- -----------
Operating income ............................................. 327,157 310,115 294,797
----------- ----------- -----------
Other expense (income):
Interest expense ................................................. 29,787 38,044 32,632
Other expense .................................................... 7,780 5,660 5,665
Other income ..................................................... (1,826) (1,218) (3,399)
----------- ----------- -----------
35,741 42,486 34,898
----------- ----------- -----------
Earnings before income taxes ................................. 291,416 267,629 259,899
Income taxes ........................................................ 102,824 105,030 102,660
----------- ----------- -----------
Net earnings ................................................. $ 188,592 162,599 157,239
=========== =========== ===========

Basic earnings per share ............................................ $ 3.60 3.02 2.63
=========== =========== ===========

Weighted-average common shares outstanding .......................... 52,418 53,769 59,730
=========== =========== ===========

Diluted earnings per share .......................................... $ 3.55 3.00 2.61
=========== =========== ===========

Weighted-average common and dilutive potential common
shares outstanding .............................................. 53,141 54,255 60,349
=========== =========== ===========
2003 2002 2001
Net sales $ 5,005,053 4,522,336 3,445,945
Cost of sales 3,645,677 3,282,269 2,613,043
Gross profit 1,359,376 1,240,067 832,902
Selling, general and administrative expenses 817,347 718,002 505,745
Operating income 542,029 522,065 327,157
Other expense (income):
Interest expense 55,575 68,972 29,787
Other expense 6,252 13,455 7,780
Other income (8,232) (3,991) (1,826)
53,595 78,436 35,741
Earnings before income taxes 488,434 443,629 291,416
Income taxes 178,285 159,140 102,824
Net earnings $ 310,149 284,489 188,592
Basic earnings per share $ 4.68 4.46 3.60
Weighted-average common shares outstanding 66,251 63,723 52,418
Diluted earnings per share $ 4.62 4.39 3.55
Weighted-average common and dilutive potential
common shares outstanding 67,121 64,861 53,141
See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Years Ended December 31, 2001, 20002003, 2002 and 1999

(In2001
(In

Balances at December 31, 1998 ...................... Stock options exercised ............................ Purchase of treasury stock ......................... Grant to employee profit sharing plan .............. Tax benefit from exercise of stock options ....................................... Durkan pooling adjustment .......................... Adjustments to conform fiscal year end of Durkan ..................................... Net earnings .......................................

Balances at December 31, 1999 ...................... Stock options exercised ............................ Purchase of treasury stock ......................... Grant to employee profit sharing plan .............. Tax benefit from exercise of stock options ....................................... Net earnings .......................................

Balances at December 31, 2000 ...................... Stock options exercised ............................ Purchase of treasury stock ......................... Grant to employee profit sharing plan .............. Grant for executive incentive program .............. Tax benefit from exercise of stock options ....................................... Comprehensive Inome: Unrealized loss on hedge instruments ............... Net earnings .......................................

Total comprehensive income .........................

Balances at December 31, 2001 ......................

thousands) Accumulated Additional other Total Common stock paid-in Retained comprehensive Treasury stockholders' -------------------- Shares Amount capital earnings loss stock equity --------- --------- --------- ---------- -------- ---------- ---------- 60,533 $ 606 172,045 438,408 - - 611,059 124 1 1,390 - - - 1,391 - - - - - (85,936) (85,936) - - - - - 1,950 1,950 - - 836 - - - 836 - - 5,722 - - - 5,722 - - - 285 - - 285 - - - 157,239 - - 157,239 -------- -------- -------- -------- -------- -------- -------- 60,657 607 179,993 595,932 - (83,986) 692,546 181 1 2,396 - - - 2,397 - - - - - (106,689) (106,689) - - - - - 2,593 2,593 - - 914 - - - 914 - - - 162,599 - - 162,599 -------- -------- -------- -------- -------- -------- -------- 60,838 608 183,303 758,531 - (188,082) 754,360 570 6 9,097 - - - 9,103 - - - - - (8,159) (8,159) - - - - - 2,500 2,500 - - - - - 145 145 - - 4,847 - - - 4,847 - - - - (2,837) - (2,837) - - - 188,592 - - 188,592 -------- 185,755 -------- -------- -------- -------- -------- -------- -------- 61,408 $ 614 197,247 947,123 (2,837) (193,596) 948,551 ======== ======== ======== ======== ======== ======== ========
Accumulated
Additional other Total
Common stock paid-in Retained comprehensive Treasury stockholders'
Shares Amount capital earnings income (loss) stock equity
Balances at December 31, 2000 60,838 $ 608 183,303 758,531 - (188,082) 754,360
Stock options exercised 570 6 9,097 - - - 9,103
Purchase of treasury stock - - - - - (8,159) (8,159)
Grant to employee profit sharing plan - - - - - 2,500 2,500
Grant to executive incentive plan - - - - - 145 145
Tax benefit from exercise of stock
options - - 4,847 - - - 4,847
Comprehensive Income:
Unrealized loss on hedge instruments
net of taxes - - - - (2,837) - (2,837)
Net earnings - - - 188,592 - - 188,592
Total Comprehensive Income 185,755
Balances at December 31, 2001 61,408 614 197,247 947,123 (2,837) (193,596) 948,551
Stock options exercised 2,056 20 50,165 - - - 50,185
Purchase of Dal-Tile 12,907 129 750,558 - - - 750,687
Purchase of treasury stock - - - - - (64,034) (64,034)
Grant to employee profit sharing plan - - 3,040 - - 282 3,322
Grant to executive incentive plan - - 77 - - 176 253
Tax benefit from exercise of stock
options - - 5,463 - - - 5,463
Comprehensive Income:
Discontinued hedge on
interest rate swap - - - - 6,768 - 6,768
Unrealized loss on hedge instruments
net of taxes - - - - (2,805) - (2,805)
Net earnings - - - 284,489 - - 284,489
Total Comprehensive Income 288,452
Balances at December 31, 2002 76,371 763 1,006,550 1,231,612 1,126 (257,172) 1,982,879
Stock options exercised 679 7 18,283 - - - 18,290
Purchase of treasury stock - - - - - (27,839) (27,839)
Grant to employee profit sharing plan - - 2,080 - - 1,929 4,009
Grant to executive incentive plan. - - 63 - - 306 369
Tax benefit from exercise of stock
options - - 8,757 - - - 8,757
Comprehensive Income:
Currency translation adjustment - - - - 47 - 47
Unrealized gain on hedge instruments
net of taxes - - - - 1,140 - 1,140
Net earnings - - - 310,149 - - 310,149
Total Comprehensive Income 311,336
Balances at December 31, 2003 77,050 $ 770 1,035,733 1,541,761 2,313 (282,776) 2,297,801
See accompanying notes to consolidated financial statements.

26
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2001, 20002003, 2002 and 1999

(In2001
(In thousands)
2001 2000 1999
------------- ------------ ------------

Cash flows from operating activities:
Net earnings ........................................................... $ 188,592 162,599 157,239
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization ..................................... 84,167 82,346 105,297
Deferred income taxes ............................................. 5,563 32,179 (1,302)
Tax benefit on stock options exercised ............................ 4,847 914 836
Loss on sale of property, plant and equipment ..................... 2,910 205 2,516
Changes in assets and liabilities, net of effects of acquisitions:
Receivables .................................................... (46,066) (18,248) 18,708
Inventories .................................................... 43,190 (70,209) (32,437)
Accounts payable and accrued expenses .......................... 48,754 33,770 (55,324)
Other assets and prepaid expenses .............................. (811) (3,257) (16,086)
Other liabilities .............................................. 101 27 (5,293)
--------------- ------------ -------------
Net cash provided by operating activities .................... 331,247 220,326 174,154
--------------- ------------ -------------
Cash flows from investing activities:

Additions to property, plant and equipment ............................ (52,913) (73,475) (145,621)
Acquisitions .......................................................... - (36,844) (162,463)
--------------- ------------ -------------
Net cash used in investing activities (52,913) (110,319) (308,084)
--------------- ------------ -------------
Cash flows from financing activities:
Net change in revolving line of credit ................................. (181,964) (168,595) 255,530
Net change in asset securitization ..................................... (66,104) 191,104 -
Payments on term loans ................................................. (32,212) (32,226) (32,229)
Redemption of acquisition indebtedness ................................. - - (20,917)
Proceeds (redemption) from Industrial Revenue Bonds and other,
net of payments ................................................. (1,115) 3,480 (7,779)
Change in outstanding checks in excess of cash ......................... 2,117 522 15,479
Acquisition of treasury stock .......................................... (8,159) (106,689) (85,936)
Common stock transactions .............................................. 9,103 2,397 7,398
--------------- ------------ -------------
Net cash (used in) provided by financing activities ......... (278,334) (110,007) 131,546
--------------- ------------ -------------
Net change in cash .......................................... - - (2,384)
Cash, beginning of year ..................................................... - - 2,384
=============== ============ =============
Cash, end of year ........................................................... $ - - -
=============== ============ =============
2003 2002 2001
Cash flows from operating activities:
Net earnings $ 310,149 284,489 188,592
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 106,615 101,942 84,167
Deferred income taxes 34,775 33,712 5,563
Tax benefit on stock options exercised 8,757 5,463 4,847
Loss on sale of property, plant and equipment 3,267 2,762 2,910
Changes in assets and liabilities, net of
effects of acquisitions:
Receivables (47,443) 34,657 (46,066)
Inventories (104,964) (15,215) 43,190
Accounts payable and accrued expenses (2,769) 105,464 48,754
Other assets and prepaid expenses (5,592) (13,111) (811)
Other liabilities 6,595 9,347 101
Net cash provided by operating activities 309,390 549,510 331,247
Cash flows from investing activities:
Additions to property, plant and equipment (114,631) (111,934) (52,913)
Acquisitions (384,121) (717,638) -
Net cash used in investing activities (498,752) (829,572) (52,913)
Cash flows from financing activities:
Net change in revolving line of credit 37,299 (29,491) (181,964)
Proceeds from issuance of senior notes - 700,000 -
Proceeds from bridge credit facility - 600,000 -
Repayment of bridge credit facility - (600,000) -
Net change in asset securitizations 182,000 (125,000) (66,104)
Payments on term loans (26,492) (32,208) (32,212)
Redemption of acquisition indebtedness - (202,564) -
Industrial revenue bonds and other,
net of payments (821) (1,307) (1,115)
Change in outstanding checks in excess of cash 6,925 (15,519) 2,117
Acquisition of treasury stock (27,839) (64,034) (8,159)
Common stock transactions 18,290 50,185 9,103
Net cash provided by (used in) financing activities 189,362 280,062 (278,334)
Net change in cash - - -
Cash, beginning of year - - -
Cash, end of year $ - - -
See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2001, 20002003, 2002 and 1999
(In2001
(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 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"). The historical consolidated financial statements
have been restated to give retroactive effect to the Durkan Merger. The Durkan
Merger was accounted for as a pooling-of-interests in the accompanying
consolidated financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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, rug and rugceramic tile manufacturer and sells carpet, rugs, ceramic tile and other floorcovering materials throughout the United States principally for residential and commercial use. The Company grants credit to customers, most of whom are retail carpetretail-flooring dealers and commercial end users, under credit terms that are customary in the industry.
Revenues are recognized when goods are shipped, which is 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 specific customer accounts and 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 within the Mohawk segment and the first-in, first-out (FIFO) method for the remainingDal-Tile segment inventories.
(d) Property, Plant and Equipment
Property, plant and equipment isare stated at cost, including interest on
funds borrowed to finance the acquisition or construction of major capital
additions.capitalized interest. 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, the shorter of the estimated useful life or life of the lease for leasehold improvements, five years for vehicles and seven years for other equipment and furniture and fixtures.
(e) Goodwill and Other Intangible Assets
In accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" the Company tests goodwill and other intangible assets with indefinite lives for impairment on an annual basis (or on an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value). The Company conducts testing for impairment during the fourth quarter of its fiscal year. Intangible assets that do not have indefinite lives are amortized based on weighted average lives.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(f) 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.bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued) 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)
(g) Financial Instruments
The Company's financial instruments consist primarily of accounts
receivable,receivables, accounts payable, accrued expenses and long-term debt. The carrying amount of accounts receivable,receivables, accounts payable and accrued expenses 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, 20012003 and 20002002 was $311,617$1,095,590 and $590,786,$894,462, compared to a carrying amount of $308,433$1,012,413 and $589,828,$820,427, respectively.

(g)
(h) Derivative Instruments
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting StandardsSFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities,"Activities" ("SFAS No.133"No. 133") and its amendments which require the Company to recognize all derivatives on the consolidated balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income.earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in its fair value are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The Company engages in activities that expose it to market risks, including the effects of changes in interest rates.rates, exchange rates and changes in natural gas prices. Financial exposures are managed as an integral part of the Company's risk management program, which seeks to reduce the potentially adverse effect that the volatility of the interest rate, marketexchange rate and natural gas markets may have on operating results. The Company does not regularly engage in speculative transactions, nor does it regularly hold or issue financial instruments for trading purposes. There was no impact on the consolidated financial statements upon adoption of SFAS No.133.

The Company maintains an interest rate risk management strategy that uses
interest rate swaps to minimize significant, unanticipated earnings fluctuations
caused by volatility in interest rates.No. 133.
The Company formally documents all hedging instruments and hedging items, as well as its risk management objective and strategy for undertaking hedged items. This process includes linking all derivatives that are designated as fair value and cash flow hedges to specific assets or liabilities on the consolidated balance sheet or to forecasted transactions. The Company also formally assesses, both at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items. When it is determined that a derivative is not highly effective, the derivative expires, or is sold, terminated, or exercised, or the derivative is discontinued because it is unlikely that a forecasted transaction will occur, the Company discontinues hedge accounting for that specific hedge instrument.

(h) Fiscal Year

The Company ends its fiscal year on December 31. Each
(i) Shipping and Handling
Costs related to shipping and handling are included in cost 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 accountedsales for as
purchases. Goodwill is amortized primarily on a straight-line basis over 40
years. Amortization charged to earnings was $3,209 in 2001, $3,184 in 2000 and
$2,808 in 1999. Accumulated amortization was $19,564 and $16,355 at December 31,
2001 and 2000, respectively. Goodwill increased in 2000 by $2,000 as a result of
an earnout payment made to the former owners of Newmark & James, a company
acquired in 1998, after certain earnings thresholds were reached by Newmark &
James.

all periods presented.

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

(j)
(j) Advertising Costs and Vendor Consideration
Advertising and promotion expenses are charged to earnings during the period in which they are incurred. Advertising and promotion expenses included in selling, administrative and general expenses were $26,990 in 2003, $31,829 in 2002 and $28,845 in 2001.
In 2001, $25,526the EITF reached consensus on Issue No. 01-09 "Accounting for Consideration Given by a Vendor to a Customer" ("EITF 01-09"). This issuance provides guidance primarily on income statement classification of consideration from a vendor to a purchaser of the vendor's products. Generally, cash consideration is to be classified as a reduction of net sales, unless specific criteria are met regarding goods or services that the vendor may receive in 2000return for this consideration. The Company makes various payments to customers, including slotting fees, advertising allowances, buy-downs and $25,152co-op advertising. All of these payments reduce gross sales with the exception of co-op advertising. Co-op advertising is classified as a selling, general and administrative expense. Co-op advertising expenses, a component of advertising and promotion expenses, were $9,355 in 1999.

2003, $14,090 in 2002 and $11,803 in 2001.
(k) Impairment of Long-Lived Assets
In 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Company accounts for long-lived assets in accordance withadoption of SFAS No. 144 did not affect the provisions of FASCompany's financial statements. SFAS No. 144 replaced SFAS No. 121, Accounting"Accounting for the Impairment of Long-Lived Assets
and for Long-LivedLong Lived Assets to Be Disposed Of. Under FASbe disposed of." SFAS No. 121,144 establishes a single accounting model for the Company
evaluates impairment or disposal of long-lived assets on a business unit basis, rather than
on an aggregate entity basis, whenever events orincluding discontinued operations. In accordance with SFAS No. 144, long-lived assets and intangibles subject to amortization are reviewed for impairment when changes in circumstances indicate that the carrying amount of such assetsthe asset may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment losscharge is recognized. Measurementrecognized equal to the amount by which the carrying amount exceeds the expected undiscounted cash flows. Assets to be disposed of an
impairment loss for long-lived assets is based onare reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.
(l) Foreign Currency Translation
The Company's subsidiaries that operate outside the United States use their local currency as the functional currency, with the exception of operations carried out in Mexico, in which case the functional currency is the U.S. dollar. Other than Mexico, the functional currency is translated into U.S. dollars for balance sheet accounts using the month end rates in effect as of the asset.

(l)balance sheet date and average exchange rate for revenue and expense accounts for each respective period. The translation adjustments are deferred as a separate component of shareholders' equity, within other comprehensive income. Gains or losses resulting from transactions denominated in foreign currencies are included in other income or expense, within the consolidated statements of earnings. The assets and liabilities of the Company's Mexico operations are re-measured using a month end rate, except for non-monetary assets and liabilities, which are re-measured using the historical exchange rate. Income and expense accounts are re-measured using an average monthly rate for the period, except for expenses related to those balance sheet accounts that are re-measured using historical exchange rates. The resulting re-measurement adjustment is reported in the consolidated statements of operations when incurred.
(m) Earnings per Share ("EPS")
The Company applies the provisions of Financial Accounting Standards Board ("FASB") FASSFAS 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.

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

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)not significant.
Computations of basic and diluted earnings per share are presented in the following table:
Years Ended December 31,
2001 2000 1999
------------------ -------------- --------------
(In thousands, except per share data)

Net earnings ............................... $ 188,592 162,599 157,239
================== ============== ==============

Weighted-average common and
dilutive potential common
shares outstanding:

Weighted-average common shares
outstanding ......................... 52,418 53,769 59,730

Add weighted-average dilutive
potential common shares - options
to purchase common shares ........... 723 486 619

Weighted-average common and
dilutive potential common
------------------ -------------- --------------
shares outstanding .................. 53,141 54,255 60,349
================== ============== ==============

Basic earnings per share ................... $ 3.60 3.02 2.63
================== ============== ==============

Diluted earnings per share ................. $ 3.55 3.00 2.61
================== ============== ==============

(m) Effect of New Accounting Pronouncements

In April 2001,
Years Ended December 31,
2003 2002 2001
(In thousands, except per share data)
Net earnings $ 310,149 284,489 188,592
Weighted-average common and dilutive potential
common shares outstanding:
Weighted-average common shares outstanding 66,251 63,723 52,418
Add weighted-average dilutive potential common
shares - options to purchase common shares, net 870 1,138 723
Weighted-average common and dilutive potential
common shares outstanding 67,121 64,861 53,141
Basic earnings per share $ 4.68 4.46 3.60
Diluted earnings per share $ 4.62 4.39 3.55
(n) Stock Based Compensation
Effective January 1, 2003, the EITF reached consensus on Issue No. 00-25 "Vendor Income
Statement Characterization of Consideration to a Purchaser ofCompany adopted the Vendors
Products or Services." This issuance provides guidance primarily on income
statement classification of consideration from a vendor to a purchaser of the
vendor's products. Generally, cash consideration is to be classified as a
reduction of net sales, unless specific criteria are met regarding goods or
services that the vendor may receive in return for this consideration. The
Company believes that its current accounting policies are in conformity with
EITF 00-25, and does not believe that EITF 00-25 will have a material effect on
its consolidated financial statements. The Company makes various payments to
customers, including slotting fees, advertising allowances, buydowns and co-op
advertising. All of these payments reduce gross sales with the exception of
co-op advertising. Co-op advertising is classified as a selling, general and
administrative expense. Co-op advertising expenses were $11,803 in 2001, $11,570
in 2000 and $9,603 in 1999.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS No. 142 will require
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with thedisclosure provisions of SFAS No. 142.

The Company was required to adopt the provisions of148, "Accounting for Stock-Based Compensation-Transition and Disclosure." This statement amends SFAS No. 141 effective
June 30, 2001,123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and requires prominent disclosure in both the annual and interim financial statements of the method of accounting used and the financial impact of stock-based compensation. As permitted by SFAS No. 142 effective January 1, 2002. Furthermore, any
goodwill that was acquired in a purchase business combination completed after
June 30, 2001 will not be amortized. Goodwill acquired in business combinations
completed before July 1, 2001 is no longer being amortized after December 31,
2001.

123, the Company accounts for stock options granted as prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," which recognizes compensation cost based upon the intrinsic value of the award.
If the Company had elected to recognize compensation expense based upon the fair value at the grant dates for awards under its plans, the Company's net earnings per share would have been reduced as follows:

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
2003 2002 2001
Net earnings as reported $ 310,149 284,489 188,592
Deduct: Stock-based employee compensation
expense determined under fair value based
method for all options, net of related tax effects (6,284) (4,972) (3,198)
Pro forma net earnings $ 303,865 279,517 185,394
Net earnings per common share (basic)
As reported $ 4.68 4.46 3.60
Pro forma $ 4.59 4.39 3.54
Net earnings per common share (diluted)
As reported $ 4.62 4.39 3.55
Pro forma $ 4.54 4.31 3.49
The average fair value of options granted during 2003, 2002 and 2001 was $24.73, $26.72 and $15.27, respectively. This fair value was estimated using the Black-Scholes option pricing model based on a weighted-average market price at grant date of $53.93 in 2003, $62.11 in 2002 and $31.91 in 2001 and the following weighted-average assumptions:
2003 2002 2001
Dividend yield - - -
Risk-free interest rate 2.3% 3.0% 4.1%
Volatility 31.3% 39.7% 43.3%
Expected life (years) 6 6 6
(o) Effect of New Accounting Pronouncements
In June 2001,January 2003, the Financial Accounting Standards BoardFASB issued SFASFASB Interpretation No. 143,
Accounting for Asset Retirement Obligations. SFAS46 ("FIN 46"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 143 provides new guidance51," which addresses consolidation by business enterprises of variable interest entities ("VIEs") either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB issued modifications to FIN 46 ("Revised Interpretations") resulting in multiple effective dates based on the recognitionnature as well as the creation date of the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the first quarter of 2004. VIEs created after January 1, 2004 must be accounted for under the Revised Interpretations. Non-Special Purpose Entities created prior to February 1, 2003, should be accounted for under the revised interpretation's provisions no later than the first quarter of fiscal 2004. The Company has adopted FIN 46, which did not have, and measurement of an asset retirement obligation and its
associated asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets. SFAS
No. 143 is effective forCompany does not expect the Company's fiscal year beginning in 2003 and is not
expectedRevised Interpretations to materiallyhave, a material impact on the Company's consolidated financial statements.
In August 2001,April 2003, the Financial Accounting Standards BoardFASB issued SFAS No. 144, Accounting149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This standard amends and clarifies financial accounting and reporting for the Impairment or Disposal of Long-Lived Assets.derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived
assets to be held and used or to be disposed of and also broadens the definition
of what constitutes discontinued operations and how the results of discontinued
operations are to be measured and presented. SFAS No. 144133. The standard is effective for the
Company's fiscal year beginning in 2002 and is not expected to materially change
the methods used by the Company to measure impairment losses on long-lived
assets, but may result in more matters being reported as discontinued operations
than is permitted under previous accounting principles.

(n) Shipping and Handling Costs

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."contracts entered into or modified after June 30, 2003. The Company has analyzedadopted SFAS No. 133 and it did not have a material impact on the implications EITF 00-10Company's consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and accordingly,
re-classified shippingEquity." SFAS 150 establishes standards for how an issuer classifies and handling costs from net sales to costmeasures certain financial instruments with characteristics of sales.both liabilities and equity, and imposes certain additional disclosure requirements. The provisions of SFAS No. 150 are generally effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company has adopted SFAS No. 150 and it did not have a material impact on the Company's consolidated financial statements.
(p) Fiscal Year
The Company ends its fiscal year on December 31. Each of this reclassification was to increase net sales and cost of sales by
$148,921, $148,188 and $128,311the first three quarters in 2001, 2000 and 1999, respectively.

(o)the fiscal year ends on the Saturday nearest the calendar quarter end.
(q) Reclassifications
Certain prior period financial statement balances have been reclassified to conform withto the current period's classification.

presentation.
(2) Acquisitions

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 3,150 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 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.
On March 20, 2002, the Company acquired all of the outstanding capital stock of Dal-Tile International Inc. ("Dal-Tile"), a leading manufacturer and distributor of ceramic tile in the United States, for approximately $1,545,000,$1,468,325, consisting of approximately 12,900 shares of the Company's common stock, options to purchase approximately 2,100 shares of the Company's common stock and $720,000approximately $717,638 in cash.cash, including direct acquisition costs. The Company's common stock and options were valued at $825,000approximately $750,687 based on the measurement date stock price.

price of $55.04 per share ($710,420) and the estimated fair value of the options using the Black-Scholes option-pricing model ($40,267). The acquisition was accounted for by the purchase method and, accordingly, the results of operations of Dal-Tile have been included in the Company's consolidated financial statements from March 20, 2002. The purchase price was allocated to the assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition. The trademark value was established based upon an independent appraisal. The excess of the purchase price over the fair value of the net identifiable assets acquired of approximately $1,168,286 was recorded as goodwill. None of the goodwill is expected to be deductible for income tax purposes. The primary reason for the acquisition was to expand the Company's presence in the ceramic tile and stone markets.
Mohawk considered whether identifiable intangible assets, such as customer relationships, patents, covenants not to compete, software, production backlog, marketing agreements, unpatented technology and trade secrets, might exist and none were identified other than trademarks, during the purchase price negotiations and during the subsequent purchase price allocation evaluation. Accordingly, the valuation resulted in the recognition of goodwill and trademarks.
In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), goodwill recorded in the Dal-Tile acquisition will not be amortized. Additionally, the Company determined that the trademark intangible assets have indefinite useful lives because they are expected to generate cash flows indefinitely. Goodwill and the trademark intangible assets are subject to annual impairment testing.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Current assets $ 322,042
Property, plant and equipment 223,267
Goodwill 1,168,286
Intangible assets-trademarks 146,700
Other assets 4,930
Total assets acquired 1,865,225
Current liabilities 132,124
Long-term debt 181,300
Other liabilities 83,476
Total liabilities assumed 396,900
Net assets acquired $ 1,468,325
The following unaudited pro forma financial information presents the combined results of operations of Mohawk and Dal-Tile as if the acquisition had occurred at the beginning of 2002, after giving effect to certain adjustments, including increased interest expense on debt related to the acquisition, the elimination of goodwill amortization and related income tax effects. The pro forma information does not necessarily reflect the results of operations that would have occurred had Mohawk and Dal-Tile constituted a single entity during such periods. The following table discloses the results for the fiscal years ended December 31:
2002 2001
Net sales $ 4,758,380 4,482,741
Net earnings 294,846 242,601
Basic earnings per share 4.39 3.63
Diluted earnings per share 4.32 3.58
On May 5, 2003, the Company acquired certain assets of International Marble and Granite of Colorado, Inc., a distributor of natural stone slabs and tile. The primary reason for the acquisition was to expand the Company's presence in the stone flooring and countertop slab market. The acquisition was accounted for by the purchase method and, accordingly, the results of operations are included within the Dal-Tile segment from May 5, 2003. The purchase price was not significant.
On June 30, 2003, the Company acquired certain assets of a manufacturer and distributor of washable bath rugs. The primary reason for the acquisition was to expand the Company's presence in the bath mat market. The acquisition was accounted for by the purchase method and, accordingly, the results of operations are included within the Mohawk segment from June 30, 2003. The purchase price was not significant.
On November 10, 2003, the Company acquired the assets and assumed certain liabilities of the carpet division of Burlington Industries, Inc. ("Lees Carpet") from W.L. Ross & Company for approximately $349,839 in cash. The results of Lees Carpet have been included with the Mohawk segment results in the Company's consolidated financial statements since that date. The primary reason for the acquisition was to expand the Company's presence in the commercial carpet market.
The following table summarizes the preliminary estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition for Lees Carpet.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Current assets $ 62,942
Property, plant and equipment 53,469
Goodwill 78,035
Intangible assets 178,340
Other assets 52
Total assets acquired 372,838
Current liabilities 14,999
Other liabilities 8,000
Total liabilities assumed 22,999
Net assets acquired $ 349,839
Of the approximately $178,340 of acquired intangible assets, approximately $125,580 was assigned to trade names and not subject to amortization. The remaining $52,760 was assigned to customer relationships with a weighted-average useful life of approximately 15 years. Goodwill of approximately $78,035 was assigned to the Mohawk segment. The goodwill is expected to be deductible for tax purposes.
The following unaudited pro forma financial information presents the combined results of operations of Mohawk and Lees Carpet as if the acquisition had occurred at the beginning of 2002, after giving effect to certain adjustments, including increased interest expense on debt related to the acquisition, the amortization of customer relationships, depreciation and related income tax effects. The pro forma information does not necessarily reflect the results of operations that would have occurred had Mohawk and Lees Carpet constituted a single entity during such periods. The following table discloses the results for the fiscal years ended December 31:
2003 2002
Net sales $ 5,222,159 4,782,905
Net earnings 316,386 290,996
Basic earnings per share 4.78 4.57
Diluted earnings per share 4.71 4.49

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(3) Receivables

Receivables
Receivables are as follows:
2003 2002
Customers, trade $ 663,269 578,429
Other 4,648 7,373
667,917 585,802
Less allowance for discounts, returns, claims and
doubtful accounts 94,417 84,673
Net receivables $ 573,500 501,129
(4) Inventories
The components of inventories are as follows:
2003 2002
Finished goods $ 535,645 436,080
Work in process 72,981 67,907
Raw materials 223,789 174,021
Total inventories $ 832,415 678,008
(5) Goodwill and Other Intangible Assets
Effective January 1, 2002, the Company adopted SFAS No. 142,which requires the Company to evaluate its goodwill and indefinite life intangibles on an annual basis for impairment. Furthermore, any goodwill and indefinite life intangibles that was acquired in a purchase business combination completed after June 30, 2001 will not be amortized. Goodwill and indefinite life intangibles that was acquired in business combinations completed before July 1, 2001 is no longer being amortized. The Company has two operating segments, the Mohawk unit and the Dal-Tile unit and, accordingly, has assigned the acquired goodwill and indefinite life intangibles to the respective operating segments. During the fourth quarter of 2003, the Company evaluated the goodwill and indefinite life intangibles using the discounted cash flow approach and determined that there was no impairment.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The following table summarizes the components of intangible assets:
2003 2002
Carrying amount of amortized intangible assets:
Customer relationships $ 53,010 -
Patents 600 -
$ 53,610 -
Accumulated amortization of amortized intangible assets:
Customer relationships $ 541 -
Patents 10 -
$ 551 -
Unamortized intangible assets:
Trade names $ 272,280 146,700
Aggregate amortization expense
For the year ended December 31 $ 551 -
Estimated amortization expense for years ended
December 31, are as follows:
2004 $ 3,619
2005 3,619
2006 3,619
2007 3,619
2008 3,619
The changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2002 are as follows:
Mohawk Dal-Tile
Segment Segment Total
Balance as of January 1, 2002 $ 109,167 - 109,167
Goodwill acquired during the year - 1,168,286 1,168,286
Balances as of December 31, 2002 109,167 1,168,286 1,277,453
Goodwill acquired during the year 85,916 5,331 91,247
Balances as of December 31, 2003 $ 195,083 1,173,617 1,368,700

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The following table discloses the Company's earnings, assuming the exclusion of goodwill amortization for the fiscal year ended December 31:
2001 2000
---------------- ----------------

Customers, trade ............................................
Net earnings $ 479,219 433,042
Other ....................................................... 5,037 4,125
---------------- ----------------
484,256 437,167
Less allowance for discounts, returns, claims and
doubtful accounts ........................................ 79,381 78,358
---------------- ----------------
Net receivables ..............................188,592
Add back: Goodwill amortization, net of income taxes 2,022
Adjusted net earnings. $ 404,875 358,809
================ ================

(4) Inventories

The components190,614
Basic earnings per share $ 3.60
Add back: Goodwill amortization, net of inventories are as follows:

2001 2000
---------------- ----------------
Finished goods ..............................................income taxes 0.04
Adjusted net earnings $ 287,525 295,447
Work in process ............................................. 68,088 73,658
Raw materials ............................................... 175,792 205,490
---------------- ----------------
Total inventories ............................3.64
Diluted earnings per share $ 531,405 574,595
================ ================

(5) Property, Plant and Equipment

Following is a summary3.55
Add back: Goodwill amortization, net of property, plant and equipment:

2001 2000
---------------- ----------------
Land ........................................................income taxes 0.04
Adjusted net earnings $ 24,355 23,870
Buildings and improvements .................................. 275,174 266,094
Machinery and equipment ..................................... 910,454 876,417
Furniture and fixtures ...................................... 34,677 33,657
Leasehold improvements ...................................... 6,405 5,727
Construction in progress .................................... 26,654 32,435
---------------- ----------------
1,277,719 1,238,200
Less accumulated depreciation and amortization .............. 658,016 588,147
---------------- ----------------
Net property, plant and equipment ............ $ 619,703 650,053
================ ================
3.59
(6) Property, Plant and Equipment
Following is a summary of property, plant and equipment:
2003 2002
Land $ 59,621 56,671
Buildings and improvements 367,007 339,630
Machinery and equipment 1,154,387 1,052,567
Furniture and fixtures 45,680 42,421
Leasehold improvements 19,912 16,354
Construction in progress 88,883 77,468
1,735,490 1,585,111
Less accumulated depreciation and amortization 816,405 729,787
Net property, plant and equipment $ 919,085 855,324
Property, plant and equipment includes capitalized interest of $5,634, $2,126 and $1,855 $3,097in 2003, 2002 and $3,213 in 2001, 2000 and 1999, respectively.

Effective January 1, 2000,
(7) Long-Term Debt
On September 30, 2003, the Company extended the estimated useful lives
on certain property, plant and equipment. The impact of the change was to
increase net earnings for fiscal 2000 by approximately $14,600, or $0.27 per
share.

(6) Long-Term Debt

The Company'sentered into a new revolving line of credit agreement provides for anproviding up to $300,000 with interest raterates of either (i) LIBOR plus 0.2%0.4% to 0.5%1.5%, depending upon the Company's performance measured against certain financial ratios, or (ii) the primebase rate less 1.0%plus 0-0.6% depending upon the Company's performance measured against certain financial ratios. The new facility replaces a $450,000 facility that was due to expire in January 2004. The facility is comprised of two tranches, a $200,000 tranche expiring in September 2008 and has a termination date$100,000 tranche expiring in September 2004. The $100,000 tranche of January 28, 2004. At December 31, 2001,
the Company had credit facilities of $450,000 under its revolving credit line
and $70,000 under various short-term uncommitted credit lines. At December 31,
2001, a total of $448,933 was unused under these lines. All of these lines are
unsecured.facility is renewable annually. The credit agreement contains customary financial and other covenants. The Company must pay an annual facility fee ranging from .0015.15% to .0025.50% of the total credit commitment, depending upon the Company's performance measured against specific coverage ratios, under the revolving credit line. 40

Additionally, at December 31, 2003, the Company had credit facilities of $300,000 under its revolving credit facility and $50,000 under various short-term uncommitted credit lines. At December 31, 2003, a total of $237,344 was unused under the combined revolving credit facility and uncommitted credit lines. The revolving credit facility and uncommitted lines of credit are unsecured.

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

On October 25, 2000,
In connection with the Dal-Tile acquisition during 2002, the Company entered into a 364 day364-day term loan facility (the "Bridge Facility") to finance a portion of the acquisition. On April 2, 2002, the Company sold $300,000 of its 6.50% senior notes due 2007, Series A and $400,000 of its 7.20% senior notes due 2012, Series B through institutional private placements and used the proceeds to repay outstanding indebtedness of approximately $601,000 under the Bridge Facility and approximately $90,000 under the Company's revolving asset
financingcredit facility. On June 13, 2002, the Company exchanged $294,965 of its registered 6.50% senior notes due 2007, Series C for an equal amount of its Series A senior notes and $397,800 of its registered 7.20% senior notes due 2012, Series D for an equal amount of its Series B senior notes. Interest on each series is payable semiannually.
On August 4, 2003, the Company entered into an on-balance sheet trade accounts receivable securitization agreement enabling("Securitization Facility") replacing two previous facilities were due to expire in October 2003. The Securitization Facility allows the Company to sellborrow up to $205,000
of an undivided interest in a defined pool of trade$350,000 based on available accounts receivable. The agreement, which has been recorded as an on-balance sheet financing transaction,
may be extended in one-year terms and has been extended to October 24, 2002. The
Company believes the securitization program provides low cost of financing and
is an additional source of debt capital with diversification from other
alternatives. The Company sold an initial ownership interest insells, on a defined pool
of tradenon-recourse revolving basis, its accounts receivable limitedto a special purpose entity, which in turn obtains loan advances that are secured by eligible accounts receivable. As
collections reduce the receivable pool the Company sells participating interests in new
receivables to bring the amount in the pool up to the maximum permitted under
the agreement. The receivables are sold atfrom a discount, which approximates the
purchasers' financing cost of the program. Receivables secured under the
agreement were $461,072 and $381,700 at December 31, 2001 and 2000,
respectively.

The net proceeds were used to reduce borrowings under the revolving credit
facility. Interest rates under the facility vary with thethird-party commercial paper rates
for the Blue Ridge Asset Funding Corporation plus an applicable margin.conduit sponsored by financial institutions. The Company uses an interest rate swap contract to adjust the proportion of
total debt thatSecuritization Facility is subject to variable interest rates as compared to fixed
interest rates. Under an interest rate swap contract, the Company agrees to pay
an amount equal to a fixed-rate of interest times a notional principal amount,
and to receive in return an amount equal to a specified variable-rate of
interest times the same notional principal amount of $100,000. The notional
amounts of the contracts are not exchanged, and no other cash payments are made.
The contract fair value is reflected on the balance sheet and related gains or
losses are deferred in other comprehensive income. These deferred gains and
losses are recognized in income as an adjustment to interest expense over the
same period in which the related interest payments being hedged are recognized
in income. However, to the extent that any of these contracts are not considered
to be 100% effective in offsetting the change in the value of the interest
payments being hedged, any changes in fair value relating to the ineffective
portion of these contracts is immediately recognized in income. As ofannual renewal. At December 31, 2001,2003, the Company had an interest rate swap agreementapproximately $182,000 outstanding for a
notional amountsecured by approximately $649,018 of $100,000, which will be in effect until January 3, 2006.
Under the terms of the swap agreement, the Company pays a fixed interest rate of
5.82 %. As of December 31, 2001, the cumulative loss and fair value of the swap
agreement was $4,503 or $2,837, net of applicable income taxes.trade receivables.
The Company guarantees the Industrial Revenue Bondsits industrial revenue bonds with various standby letters of credit, which were in aggregate $55,600$55,599 at December 31, 20012003 and 2000.

2002.

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

Long-term debt consists of the following:

2001 2000
---------- ----------

Revolving line of credit, due January 28, 2004 ................. $ 33,893 215,857
Asset securitization, due October 24, 2002 ..................... 125,000 191,104
8.46% senior notes, payable in annual principal
installments beginning in 1998, due September 16, 2004,
interest payable quarterly ................................... 42,857 57,143
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually ................................ 37,778 47,222
8.48% term loans, payable in annual principal
installments, due October 26, 2002, interest payable
quarterly .................................................... 5,714 11,429
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually ................................................. 2,857 4,286
6% term note, payable in annual principal and interest
installments beginning in 1998, due July 23, 2004 ............ 4,007 5,343

Industrial Revenue Bonds and other ............................. 56,327 57,444
--------- ---------
Total long-term debt .......................... 308,433 589,828
Less current portion .......................................... 158,366 224,391
--------- ---------
Long-term debt, excluding current portion ..................... $ 150,067 365,437
========= =========

The aggregate maturities of long-term debt as of December 31, 2001 are
as follows:

2002 ......................................................... $ 158,366
2003 ......................................................... 27,424
2004 ......................................................... 59,023
2005 ......................................................... 9,447
2006 ......................................................... 6,500
Thereafter ..................................................... 47,673
---------
$ 308,433
=========

(7) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are as follows:

2001 2000
---------- ----------
Outstanding checks in excess of cash ........... $ 45,012 42,895
Accounts payable, trade ........................ 171,620 165,108
Accrued expenses ............................... 132,944 104,313
Accrued compensation ........................... 73,919 62,952
--------- ---------
Total accounts payable and accrued expenses ... $ 423,495 375,268
========= =========

Long-term debt consists of the following:
2003 2002
364-Day Credit Agreement, due September 29, 2004 $ 41,701 -
Revolving line of credit, due January 28, 2004 - 4,402
Securitization Facility, due August 4, 2004 182,000 -
6.50% senior notes, payable April 15, 2007
interest payable semiannually 300,000 300,000
7.20% senior notes, payable April 15, 2012
interest payable semiannually 400,000 400,000
8.46% senior notes, payable in annual principal
installments beginning in 1998, due September 16, 2004,
interest payable quarterly 14,286 28,571
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually 18,889 28,333
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually - 1,428
6% term note, payable in annual principal and interest
installments beginning in 1998, due July 23, 2004 1,336 2,671
Industrial revenue bonds and other 54,201 55,022
Total long-term debt 1,012,413 820,427
Less current portion 248,795 27,427
Long-term debt, excluding current portion $ 763,618 793,000
The aggregate maturities of long-term debt as of:
December 31, 2003 are as follows:
2004 $ 248,795
2005 9,445
2006 6,500
2007 300,000
2008 -
Thereafter 447,673
$ 1,012,413

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(8) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are as follows:
2003 2002
Outstanding checks in excess of cash $ 30,429 23,504
Accounts payable, trade 245,746 236,272
Accrued expenses 262,012 263,891
Accrued compensation 99,753 106,639
Total accounts payable and accrued expenses $ 637,940 630,306
(9) Derivative Financial Instruments
Natural Gas Risk Management
The Company uses a combination of natural gas futures contracts and long-term supply agreements to manage unanticipated changes in natural gas prices. The contracts are based on forecasted usage of natural gas measured in Million British Thermal Units ("MMBTU").
The Company has designated the natural gas futures contracts as cash flow hedges. The outstanding contracts are valued at market with the offset going to other comprehensive income, net of applicable income taxes and any hedge ineffectiveness. Any gain or loss is recognized in cost of goods sold in the same period or periods during which the hedged transaction affects earnings. At December 31, 2003, the Company had natural gas contracts that mature from January 2004 to December 2004 with an aggregate notional amount of approximately 3,950 MMBTU's. The fair value of these contracts was an asset of $3,565. At December 31, 2002, the Company had natural gas contracts outstanding with an aggregate notional amount of approximately 1,450 MMBTU's. The fair value of these contracts was an asset of $1,911. The offset to these assets is recorded in other comprehensive income, net of applicable income taxes, respectively.
The Company's long-term natural gas supply agreements are accounted for under the normal purchases provision within SFAS No. 133 and its amendments. At December 31, 2003, the Company has normal purchase commitments of approximately 3,095 MMBTU's for periods maturing from January 2004 through September 2005. The contracted value of these commitments was approximately $13,774 and the fair value of these commitments was approximately $17,018, at December 31, 2003. At December 31, 2002, the Company had normal purchase commitments of approximately 4,560 MMBTU's. The contracted value of these commitments was approximately $17,441 and the fair value of these commitments was approximately $19,694.
Foreign Currency Rate Management
The Company enters into foreign exchange forward contracts to hedge costs associated with its operations in Mexico. The objective of these transactions is to reduce volatility of exchange rates where these operations are located by fixing a portion of their costs in U.S. currency. Gains and losses are recognized in cost of goods sold in the same period or periods during which the hedged transaction affects earnings. Accordingly, these contracts have been designated as cash flow hedges. The Company had forward contracts to purchase approximately 145,284 and 357,522 Mexican pesos at December 31, 2003 and 2002, respectively. The aggregate U.S. Dollar value of these contracts at December 31, 2003 and 2002 was approximately $12,665 and $34,581, respectively. The contracts are marked to market in other current liabilities with the offset to other comprehensive income, net of applicable income taxes. Unrealized losses at December 31, 2003 and 2002, respectively, were not significant.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Interest Rate Management
In 2002, the Company determined that its $100,000 interest rate swap was ineffective. Consequently, the $10,700 unrealized loss associated with the swap was recorded as a realized loss in interest expense during the fourth quarter of 2002. The Company continues to carry the liability on its consolidated balance sheets and the interest rate swap is marked to market at the end of each reporting period. The change in fair value for the year ended December 31, 2003 was not significant.
(10) Product warranties
The Company warrants certain qualitative attributes of its products for up to 20 years. The Company records a provision for estimated warranty and related costs, based on historical experience and periodically adjusts these provisions to reflect actual experience.
Product warranties are as follows:
2003 2002 2001
Balance at beginning of year $ 7,184 7,021 6,506
Warranty claims (52,237) (61,718) (52,125)
Warranty expense 50,243 61,881 52,640
Balance at end of year $ 5,190 7,184 7,021
(11) Stock Options, Stock Compensation and Treasury Stock
Under the Company's 1992, 1993 and 1997 stock option plans,2002 Long-Term Incentive Plan, options may be granted to directors and key employees through 2002, 2003 and 20072012 to purchase a maximum of 2,250, 675 and 2,5503,200 shares of common stock, respectively.stock. Under the 2002 plan, options that were not issued from the 1992, 1993 and 1997 plans were cancelled. During 2001, 2000,2003, 2002, and 19992001 options to purchase 704, 187565, 731, and 809704 shares, respectively, were granted under thesethe 1992, 1993, 1997 and 2002 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. In connection with the acquisition of Dal-Tile in 2002, the Company issued 2,096 options to employees of Dal-Tile in exchange for their respective options.
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 non-employee directors to receive in lieu of cash for their annual retainers. During 2001, 2000,2003, 2002, and 19992001 a total of one, two, four, and threetwo shares, respectively, were awarded to the non-employee directors under the plan.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Additional information relating to the Company's stock option plans follows:

2001 2000 1999
--------------- -------------- ---------------

Options outstanding at beginning of year .... 1,868 2,043 1,387
Options granted ............................. 704 184 809
Options exercised ........................... (570) (181) (124)
Options canceled ............................ (86) (178) (29)
--------------- -------------- ---------------
Options outstanding at end of year .......... 1,916 1,868 2,043
=============== ============== ===============
Options exercisable at end of year .......... 599 931 873
=============== ============== ===============

Option prices per share:
Options granted during the year ............. $ 23.33-53.01 20.13-26.26 19.69 - 35.13
=============== ============== ===============
Options exercised during the year ........... $ 5.67-35.13 5.67-19.70 5.67 - 19.17
=============== ============== ===============
Options canceled during the year ............ $ 5.67-42.86 6.67-35.14 9.33 - 35.13
=============== ============== ===============
Options outstanding at end of year .......... $ 5.61-53.01 5.61-35.13 5.61 - 35.13
=============== ============== ===============

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 2001, 2000 and 1999. 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.

2001 2000 1999
-------- --------- -------
Net earnings
As reported ......................... $188,592 162,599 157,239
Pro forma ........................... 185,394 160,313 155,282
Net earnings per common share (basic)
As reported ......................... $ 3.60 3.02 2.63
Pro forma ........................... 3.54 2.98 2.60
Net earnings per common share (diluted)
As reported ......................... $ 3.55 3.00 2.61
Pro forma ........................... 3.49 2.95 2.57

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

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

average fair value of options granted during 2001, 2000 and 1999 was $15.27,
$13.00 and $15.28, respectively. This fair value was estimated using the
Black-Scholes option pricing model based on a weighted-average market price at
grant date of $31.91 in 2001, $22.69 in 2000 and $26.48 in 1999 and the
following weighted-average assumptions:

2001 2000 1999
-------- -------- --------
Dividend yield ................ - - -
Risk-free interest rate ....... 4.1% 5.1% 6.4%
Volatility .................... 43.3% 48.1% 46.7%
Expected life (years) ......... 6 7 7
2003 2002 2001
Options outstanding at beginning of year 2,624 1,916 1,868
Options granted for Dal-Tile acquisition - 2,096 -
Options granted 565 731 704
Options exercised (679) (2,056) (570)
Options canceled (97) (63) (86)
Options outstanding at end of year 2,413 2,624 1,916
Options exercisable at end of year 765 1,017 599
Option prices per share:
Options granted during the year $ 48.50-74.93 38.73-65.02 23.33-53.01
Options exercised during the year $ 6.67-63.14 5.67-49.09 5.67-35.13
Options canceled during the year $ 9.33-63.90 9.58-63.14 5.67-42.86
Options outstanding at end of year $ 9.33-74.93 6.67-65.02 5.61-53.01
Options exercisable at end of year $ 9.33-65.02 6.67-53.01 5.61-35.13
Summarized information about stock options outstanding and exercisable at December 31, 2001,2003, is as follows:
Outstanding Exercisable
Exercise price Number of Average Average Number of Average
range Shares Life (1) Price (2) Shares Price (2)
- -------------------- ----------- ----------- ----------- -------------- -----------

Under $19.17 ....... 386 3.39 $ 12.05 380 $ 12.00
$19.38-22.63 ....... 422 7.84 20.16 91 19.85
$23.33-30.50 ....... 116 7.89 26.40 35 29.30
$30.53 ............. 568 9.16 30.53 - -
$30.69-53.01 ....... 424 7.73 35.39 93 33.90
----------- --------------
1,916 599
=========== ==============

___________

(1)
Outstanding Exercisable
Exercise price range Number of Shares Average Life (1) Average Price (2) Number of Shares Average Price (2)
Under $20.16 411 3.80 $ 15.49 348 $ 14.72
$20.20-30.50 111 5.87 22.95 69 22.59
$30.53-30.53 407 7.16 30.53 91 30.53
$30.69-48.50 651 7.89 42.95 142 34.05
$49.09-58.00 151 8.83 55.24 18 53.55
$63.14-74.93 682 8.49 64.56 97 63.41
Total 2,413 765

1) Weighted average contractual life remaining in years.
(2)
2) Weighted average exercise price.
The Company's Board of Directors has authorized the repurchase of up to 15,000 shares of its outstanding common stock. For the year ended December 31, 2003, a total of approximately 593 shares of the Company's common stock were purchased at an aggregate cost of approximately $27,839. Since the inception of the program, a total of approximately 8,99310,957 shares have been repurchased at an aggregate cost of approximately $200,784.$293,129. All of these repurchases have been financed through the Company's operations and banking arrangements.

(9)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(12) Employee Benefit Plans
The Company has a 401(k) retirement savings plan (the "Plan""Mohawk Plan") open to substantially all of its employees who have completed one year90 days of eligible service. TheEffective January 1, 2003, the Dal-Tile International Inc. Employees' Retirement Savings Plan was merged into the Mohawk Plan. For the Mohawk segment, 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 matchsalary and 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 $18,322 and $6,521
in 2001, $16,926 and $6,055 in 2000, and $14,873 and $5,080 in 1999,
respectively. The Company also made a discretionary contribution to the Plan of
approximately $2,500, $2,500 and $2,100 in 2001, 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,Dal-Tile segment, the Company contributed
approximately $142 to the World Plan.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Durkan maintained a 401(k) retirement savings plan (the "Durkan Plan") open
to substantially all Durkan employees. Durkan contributed $0.50contributes $.50 for every $1.00 of employee contributions up to a maximum of 6% of eligible wages. For the years
ended December 31, 2000employee's salary. Employee and 1999, Durkan contributed approximately $262, and
$343, respectively,employer contributions to the Durkan Plan.Mohawk Plan were $28,807 and $10,995 in 2003, $20,237 and $7,359 in 2002, and $18,322 and $6,521 in 2001, respectively. The DurkanCompany also made a discretionary contribution to the Mohawk Plan was merged into the Plan
effective January 1, 2001.

(10)of approximately $4,595, $3,797 and $2,500 in 2003, 2002 and 2001, respectively.
(13) Income Taxes
Income tax expense attributable to earnings before income taxes for the years ended December 31, 2001, 20002003, 2002 and 19992001, consists of the following:
Current Deferred Total
----------------- -------------- ---------------

2001:
U.S. federal ............... $ 82,246 5,728 87,974
State and local ............ 15,015 (165) 14,850
----------------- -------------- ---------------
$ 97,261 5,563 102,824
================= ============== ===============
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
================= ============== ===============
Current Deferred Total
2003:
U.S. federal $ 132,849 38,696 171,545
State, local and other 10,661 (3,921) 6,740
$ 143,510 34,775 178,285
2002:
U.S. federal $ 133,914 9,859 143,773
State, local and other 3,089 12,278 15,367
$ 137,003 22,137 159,140
2001:
U.S. federal $ 82,246 5,728 87,974
State, local and other 15,015 (165) 14,850
$ 97,261 5,563 102,824
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:
2001 2000 1999
----------------- -------------- ---------------

Computed "expected" tax expense ............ $ 101,996 93,670 90,965
State and local income taxes, net of
federal income tax benefit ............... 9,652 7,878 7,704
Amortization of goodwill ................... 709 700 684
Tax credits ................................ (5,000) - -
Other, net ................................. (4,533) 2,782 3,307
----------------- -------------- ---------------
$ 102,824 105,030 102,660
================= ============== ===============
2003 2002 2001
Computed "expected" tax expense $ 170,952 155,270 101,996
State and local income taxes, net of federal
income tax benefit 5,071 8,741 9,652
Foreign income taxes 2,495 1,248 -
Amortization of goodwill - - 709
Tax credits (2,312) (5,000) (5,000)
Other, net 2,079 (1,119) (4,533)
$ 178,285 159,140 102,824

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 20012003 and 20002002, are presented below:
2001 2000
------------------ ---------------

Deferred tax assets:
Accounts receivable ............................ $ 3,286 10,751
Inventories ................................... 19,089 11,533
Accrued expenses ............................... 49,030 46,372
------------------ ---------------
Gross deferred tax assets .............. 71,405 68,656
------------------ ---------------

Deferred tax liabilities:
Plant and equipment ............................ (72,934) (65,420)
Prepaid expenses ............................... (1,347) (2,182)
Other .......................................... (12,021) (10,388)
------------------ ---------------
Gross deferred tax liabilities ......... (86,302) (77,990)
------------------ ---------------

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Net deferred tax liability ........ $ (14,897) (9,334)
============ ===========
2003 2002
Deferred tax assets:
Accounts receivable $ 3,940 3,627
Inventories 25,312 18,138
Prepaid expenses - 655
Accrued expenses 61,003 67,706
Other 1,147 7,735
Gross deferred tax assets 91,402 97,861
Deferred tax liabilities:
Plant and equipment (117,857) (103,831)
Intangibles (72,954) (57,929)
Gross deferred tax liabilities (190,811) (161,760)
Net deferred tax liability $ (99,409) (63,899)
Based upon the expected reversal of deferred tax liabilities, 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, 2001.

(11)2003.
(14) 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 andnon-cancelable operating leases (with initial or remaining lease terms in excess of one year) atas of December 31, 2001 are:

Total
Capital Operating Future
Leases Leases Payments
----------------- -------------- ---------------

2002 ......................................... $ 1,214 34,802 36,016
2003 ......................................... 913 29,103 30,016
2004 ......................................... 63 22,206 22,269
2005 ......................................... - 15,932 15,932
2006 ......................................... - 10,503 10,503
Thereafter ................................... - 16,533 16,533
--------------- -------------- ---------------
Total payments ............................... $ 2,190 129,079 131,269
============== ===============
Less amount representing interest ............ 153
---------------
Present value of capitalized lease payments
with a weighted interest rate of 7.72 % .... $ 2,037
===============

The Company assumed several capitalized leases from recent acquisitions for
machinery and equipment, at a cost of $5,010, $7,480 and $8,899 for the periods
ended December 31, 2001, 2000 and 1999, respectively. The amortization of these
capital leases is included in depreciation expense. Accumulated amortization was
$2,038, $3,312 and $3,619 in 2001, 2000 and 1999, respectively.31:
2004 $ 72,857
2005 57,202
2006 44,517
2007 31,183
2008 22,602
Thereafter 45,363
Total payments $ 273,724
Rental expense under operating leases was $78,007, $62,066 and $39,072 $36,392in 2003, 2002 and $28,407 in
2001, 2000 and 1999, 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 allegationsapproximately $23,433 and $19,600 as of December 31, 2003 and 2002 in standby letters of credit for various insurance contracts and commitments to foreign vendors that expire within two years.
The Company is involved in routine litigation from time to time in the complaint and set forthregular course of its defenses.

On August 11, 2000,business. Except as noted below, there are no material legal proceedings pending or known to be contemplated to which the Company presentedis a party or to the Court the termswhich any of an
agreement in principle to settle these two cases. On February 5, 2001, the Court
dismissed all claims against the Company and granted final approval to the
settlement. Under the terms of the settlement agreement, the Company contributed
$13,500 to a settlement fund to resolve price-fixing claims brought by a class
of purchasers of polypropylene carpet and a

its property is subject.

MOHAWK INDUSRTIES,INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial statementsStatements (Continued)

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.
This was in addition to $6,500 accrued in earlier periods. The Company denies
all liability and wrongdoing and has agreed to settle these claims in order to
avoid the costs of further litigation.
The Company is a partysubject to two consolidated lawsuits captioned Gaehwiler v.
Sunrise Carpet Industries, Inc. et al.various federal, state, local and Patco Enterprises, Inc. v. Sunrise
Carpet Industries, Inc. et al., bothforeign environmental health and safety laws and regulations, including those governing air emissions, wastewater discharges, the use, storage, treatment and disposal of which were filed insolid and hazardous materials, and the Superior Courtcleanup of contamination associated therewith. Because 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 Courtnature of the State of
California, CityCompany's business, the Company has incurred, and County of San Francisco, on behalf of a purported class
based on indirect purchasers of nylon carpetwill continue to incur, costs relating to compliance with such laws and regulations. The Company is involved in the State of Californiavarious proceedings relating to environmental matters and alleges violations of California antitrustis currently engaged in environmental investigation, remediation 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.post-closure care programs at certain sites. The Company has reached an agreementprovided reserves for such activities that it has determined to settlebe both probable and reasonably estimable. The Company does not expect that the lawsuitsultimate liability with respect to such activities will have a material adverse effect on it.
Three sites near Mohawk's Dallas facility in its Dal-Tile segment are involved in environmental cleanup projects relating principally to the disposal or alleged disposal by Dal-Tile of waste materials containing lead compounds. Dal-Tile's approved closure plans have been implemented and each site is now undergoing post-closure care. Dal-Tile has been named as a potentially responsible party under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state statutes for the disposal of certain hazardous substances at various other sites in the process of finalizing documentation to be presented to the courtUnited States. The Company does not believe that any future costs for approval.
The settlement amount has been recorded in accrued expenses.

(12)these sites will have a material adverse effect on it.
(15) Consolidated Statements of Cash Flows Information
Supplemental disclosures of cash flow information are as follows:
2001 2000 1999
---------------- --------------- ---------------

Net cash paid during the year for:

Interest ........................ $ 31,789 39,866 37,740
================ =============== ===============
Income taxes .................... $ 73,498 74,592 120,371
================ =============== ===============

(13)
2003 2002 2001
Net cash paid during the year for:
Interest $ 61,424 43,866 31,789
Income taxes $ 139,914 59,931 73,498
Supplemental schedule of non-cash
investing and financing activities:
Fair value of assets acquired in acquisition $ 407,320 1,865,225 -
Liabilities assumed in acquisition (23,199) (396,900) -
Issuance of common stock and options in acquisition - (750,687) -
$ 384,121 717,638 -
(16) Other incomeIncome and expense

Other income and expense are as follows:

2001 2000 1999
----------------- -------------- ---------------

Miscellaneous income ............ $ 1,826 1,218 3,399
================= ============== ===============

Miscellaneous expense ........... 3,966 2,010 2,607
Amortization expense ............ 3,814 3,650 3,058
----------------- -------------- ---------------
$ 7,780 5,660 5,665
================= ============== ===============

Expense
Other income and expense are as follows:
2003 2002 2001
Miscellaneous income $ 8,232 3,991 1,826
Miscellaneous expense 6,252 13,455 3,966
Amortization expense - - 3,814
$ 6,252 13,455 7,780

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

(14)
(17) Segment Reporting
The Company has two operating segments, the Mohawk segment and the Dal-Tile segment. The Mohawk segment sells and distributes its product lines, which include broadloom carpet, rugs, pad, ceramic tile, hardwood, vinyl and laminate though independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. The Dal-Tile segment product lines include ceramic tile, porcelain tile and stone products sold through company-operated sales service centers, independent distributors and home centers. Amounts disclosed for each segment are prior to any elimination or consolidation entries. Corporate general and administrative expenses amounts attributable to each segment are estimated and allocated accordingly. Export sales are not significant and long-lived assets located outside the United States of America, principally Mexico, were $85,001 and $83,842 at December 31, 2003 and 2002, respectively.
Segment information is as follows:
2003 2002 2001
Net sales:
Mohawk $ 3,736,517 3,624,156 3,445,945
Dal-Tile 1,268,536 898,180 -
$ 5,005,053 4,522,336 3,445,945
Operating income:
Mohawk $ 364,040 390,936 336,672
Dal-Tile 187,245 139,888 -
Corporate and eliminations (9,256) (8,759) (9,515)
$ 542,029 522,065 327,157
Depreciation and amortization:
Mohawk $ 81,977 83,676 84,167
Dal-Tile 24,638 18,266 -
$ 106,615 101,942 84,167
Capital expenditures (excluding acquisitions):
Mohawk $ 56,775 80,623 52,913
Dal-Tile 57,856 31,311 -
$ 114,631 111,934 52,913
Assets:
Mohawk $ 2,086,716 1,638,336 1,656,813
Dal-Tile 1,967,206 1,832,701 �� -
Corporate and eliminations 109,653 125,706 111,672
$ 4,163,575 3,596,743 1,768,485

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(18) Quarterly Financial Data (Unaudited)
The supplemental quarterly financial data are as follows:
Quarters Ended
-----------------------------------------------------------------------
March 31, June 30, September 29, December 31,
2001 2001 2001 2001
----------------- -------------- ----------------- -------------

Net sales .................... $ 777,339 864,958 907,850 895,798
Gross profit ................. 177,322 216,154 219,424 220,002
Net earnings ................. 27,206 46,466 55,727 59,193
Basic earnings per share ..... 0.52 0.89 1.06 1.12
Diluted earnings per share ... 0.51 0.88 1.05 1.11

Quarters Ended
-----------------------------------------------------------------------
April 1, July 1, September 30, December 31,
2000 2000 2000 2000
----------------- -------------- ----------------- ---------------

Net sales .................... $ 799,403 890,980 875,765 837,886
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
March 29, June 28, September 27, December 31,
2003 2003 2003 2003
Net sales $ 1,084,715 1,247,181 1,303,166 1,369,991
Gross profit 274,796 340,103 364,886 379,591
Net earnings 41,640 74,985 91,382 102,142
Basic earnings per share 0.63 1.14 1.38 1.54
Diluted earnings per share 0.62 1.12 1.36 1.51
Quarters Ended
March 30, June 29, September 28, December 31,
2002 2002 2002 2002
Net sales. $ 866,710 1,227,747 1,224,403 1,203,476
Gross profit 215,377 339,906 341,403 343,381
Net earnings 43,210 75,518 81,560 84,201
Basic earnings per share 0.80 1.12 1.22 1.27
Diluted earnings per share 0.77 1.10 1.21 1.25

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Based on an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective for the period covered by this report. In connection with such evaluation, no change in the Company's internal control over financial reporting occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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 Certificate of Incorporation providesProxy Statement for the Board of Directors
of the Company to consist of three classes of directors serving staggered terms
of office. Upon the expiration of the term of office for a class of directors,
the nominees for that class will be elected for a term of three years to serve
until the election and qualification of their successors. The terms of Messrs.
John F. Fiedler, Jeffrey S. Lorberbaum and Robert N. Pokelwaldt will expire at
the2004 Annual Meeting of Shareholders in 2002. The termsStockholders under the following headings: "Election of Messrs. Bruce C.
Bruckmann, Larry W. McCurdyDirectors-Director, Director Nominee and Sylvester H. Sharpe will expire in 2003. The
terms of Messrs. Leo Benatar, David L. Kolb and W. Christopher Wellborn will
expire in 2004. The Board of Directors has appointed a compensation committee,
comprised of Messrs. McCurdy, Benatar and Pokelwaldt, and an audit committee
comprised of Messrs. McCurdy, Bruckmann and Pokelwaldt.

The following table sets forth information regarding the directors and
executive officers of the Company:

Name Age Position
- ---- --- --------

Jeffrey S. Lorberbaum ............. 47 President, Chief Executive Officer and Director (term expiring 2002)
William B. Kilbride ............... 51 President-Mohawk Home
David E. Polley ................... 67 President- Residential Division
Sylvester ("Jack") H. Sharpe ...... 70 Executive Vice President, Mohawk Residential Business, Director (term
expiring 2003)
John D. Swift ..................... 60 Vice President-Finance and Chief Financial Officer
Herbert M. Thornton ............... 61 President-Carpet Group
W. Christopher Wellborn ........... 46 President-Dal-Tile Division and Director (term expiring 2004)
Leo Benatar ....................... 72 Director (term expiring 2004)
Bruce C. Bruckmann ................ 48 Director (term expiring 2003)
John F. Fiedler ................... 63 Director (term expiring 2002)
David L. Kolb ..................... 63 Chairman of the Board of Directors (term expiring 2004)
Larry W. McCurdy .................. 66 Director (term expiring 2003)
Robert N. Pokelwaldt .............. 65 Director (term expiring 2002)

Jeffrey S. Lorberbaum--Mr. Lorberbaum has been a director of the Company
since March 28, 1994 and served as President and Chief Operating Officer of the
Company since January 24, 1995. Effective January 1, 2001, Mr. Lorberbaum
succeeded Mr. Kolb as Chief Executive Officer and currently holds the position
of President and Chief Executive Officer. Mr. Lorberbaum joined Aladdin Mills,
Inc. ("Aladdin"), a company acquired in 1994 by Mohawk, in 1976 and served as
Vice President--Operations from 1986 until February 25, 1994 when he became
President and Chief Executive Officer of Aladdin.

William B. Kilbride--Mr. Kilbride joined American Rug Craftsmen, formerly a
wholly owned subsidiary of the Company, as its President in June 1992. Mr.
Kilbride served in that position until he became President of the Mohawk Home
Division, upon its formation in 1999. Before joining American Rug Craftsmen, Mr.
Kilbride served as First Vice President--Planning of Dean Witter Discover, which
he joined in February 1983.

David E. Polley--Mr. Polley served as President and a Director of World
from 1991, until World was acquired by Mohawk in Novemebr 1998 and has served as
President of the Residential Division since the acquisition. Before joining
World, he workedInformation"; "-Nominees for Burlington Industries, Inc. and served as President of
Burlington's Residential Group and President of Burlington's Lees Residential
Carpets. He also served as Chairman of David Industries, Inc., and Executive
Vice-President of Stephen-Leedom Carpets.

Sylvester ("Jack") H. Sharpe--Mr. Sharpe has been a director of the Company
since October 1999. Mr. Sharpe has served as Executive Vice President of the
Residential Business of the Company since January 1995. From 1975 to 1995, Mr.
Sharpe served as the Executive Vice President of Aladdin.

John D. Swift--Mr. Swift served as Vice President-Finance of Mohawk Carpet
Corporation from September 1984 to December 1988 and since that time has served
as the Company's Vice President-Finance and Chief Financial Officer. Mr. Swift
served as the Company's Treasurer from December 1988 to February 1994 and served
as Secretary of the Company from December 1988 to May 23, 1996. Prior to joining
Mohawk Carpet Corporation, he worked for General Electric Company for 18 years
in various positions of accounting, auditing and financial management.

Herbert M. Thornton--Mr. Thornton joined Karastan Bigelow, a division of
Fieldcrest Cannon, Inc. in July 1990 and was named President of Karastan at the
time of that division's acquisition by Mohawk in July 1993. Mr. Thornton served
in that position until April of 2000 when he became President of the Fashion and
Performance Division (which serves the commercial and hospitality markets and
the Karastan customers). On December 1, 2001, Mr. Thornton was appointed
President-Carpet Group, assuming responsibility for sales and marketing of
carpet products. Before joining Karastan, Mr. Thornton served as President of
Hollytex, Inc., a carpet manufacturer, which he joined in December 1984.

W. Christopher Wellborn--Mr. Wellborn was Executive Vice President, Chief
Financial Officer and Assistant Secretary of Dal-Tile from August 1997 through
March 20, 2002 when he was named a director of Mohawk and the President of
Dal-Tile, at the time the Dal-Tile acquisition was completed. From June 1993 to
August 1997, Mr. Wellborn was Senior Vice President and Chief Financial Officer
of Lenox, Inc.

Leo Benatar--Mr. Benatar has been a director of the Company since the
consummation of the Company's Initial Public Offering. Mr. Benatar has been an
Associated Consultant with A. T. Kearney since May 1996. From June 1995 until
May 1996, Mr. Benatar was Chairman of the Board of Engraph, Inc., a manufacturer
of packaging and product identification materials. Before June 1995, Mr. Benatar
served as Chairman of the Board, President and Chief Executive Officer of
Engraph, Inc. for more than five years. Engraph, Inc. was acquired by Sonoco
Products Company, a manufacturer of packaging and product identification
materials, in October 1992, and Mr. Benatar served as Senior Vice President and
a director of Sonoco Products Company from October 1992 until May 1996. Mr.
Benatar is also a director of Interstate Bakeries Corporation, a manufacturer
and distributor of food products, Aaron Rents, Inc., a furniture and appliance
retailer and Paxar Corporation, a provider of identification and tracking
solutions to retailers and apparel manufacturers. From January 1, 1994 until
December 31, 1995, Mr. Benatar also served as Chairman of the Federal Reserve
Bank of Atlanta.

Bruce C. Bruckmann--Mr. Bruckmann has been a director of the Company since
October 1992. Mr. Bruckmann has been a Managing Director of Bruckmann, Rosser,
Sherrill & Co., Inc., a venture capital firm, since January 1995. From March
1994 to January 1995, Mr. Bruckmann served as Managing Director of Citicorp
Venture Capital, Ltd. ( "CVC, Ltd. ") and as an executive officer of 399 Venture
Partners, Inc. (formerly Citicorp Investments, Inc.). From 1983 until March
1994, Mr. Bruckmann served as Vice President of CVC, Ltd. Mr. Bruckmann is also
a director of AmeriSource Distribution Corporation, a distributor of
pharmaceuticals, Town Sports International, Inc., a fitness club operator, Anvil
Knitwear, Inc., an activewear manufacturer, Penhall International, Inc., a
renter of operator-assisted construction equipment, California Pizza Kitchen,
Inc., a casual restaurant chain serving pizza, pasta and salads, and Mediq,
Inc., a renter of movable critical care and life-support medical equipment.

John F. Fiedler--Mr. Fiedler has been a director of the Company since March
20, 2002, the time the Dal-Tile acquisition was completed. Mr. Fiedler is
Chairman and Chief Executive Officer of Borg Warner Inc. Prior to joining Borg
Warner in June of 1994, Mr. Fiedler was Executive Vice President of Goodyear
Tire & Rubber Company, where Mr. Fiedler was responsible for North American
Tires. Mr. Fiedler's 29-year career with Goodyear included numerous sales,
marketing and manufacturing positions in the United States and the Far East. Mr.
Fiedler is also a director of Roadway Express, Inc.

David L. Kolb--Mr. Kolb served as President of Mohawk Carpet Corporation
(now one of the Company's principal operating subsidiaries) until Mohawk Carpet
Corporation was acquired by the Company in December 1988, at which time he
became Chairman of the Board of Directors and Chief Executive Officer of the
Company. Effective January 1, 2001, Mr. Kolb retired from his position as Chief
Executive Officer. Prior to joining Mohawk Carpet Corporation, Mr. Kolb served
in various executive positions with Allied-Signal Corporation for 19 years, most
recently as Vice President and General Manager of Home Furnishings. Mr. Kolb is
also a director of Chromcraft Revington Corporation, a furniture manufacturer,
Oglethorpe University, The Georgia Board of

Industry, Trade and Tourism and Paxar Corporation, a provider of identification
and tracking solutions to retailers and apparel manufacturers.

Larry W. McCurdy--Mr. McCurdy has been a director of the Company since the
consummation of the Company's Initial Public Offering. Mr. McCurdy was President
and Chief Executive Officer of Moog Automotive, Inc., a privately held
manufacturer of automotive aftermarket products, from November 1985 until April
1994. Moog Automotive, Inc. was acquired by Cooper Industries, Inc., a
manufacturer of electrical and automotive products, tools and hardware, in
October 1992, and Mr. McCurdy became Executive Vice President-Operations of
Cooper Industries, Inc. in April 1994. Mr. McCurdy held that position until
March 7, 1997, when he became President, Chief Executive Officer and a director
of Echlin Inc., a worldwide manufacturer of motor vehicle parts. On December 17,
1997, Mr. McCurdy was elected Chairman of the board of directors of Echlin, Inc.
In July 1998 Echlin was merged with Dana Corporation, a global leader in the
engineering, manufacturing and distribution of components and systems for
worldwide vehicular and industrial manufacturers. Mr. McCurdy served as
President of the Dana Automotive Aftermarket Group from July 1998 until his
retirement in August 2000. Mr. McCurdy also serves on the boards of directors of
American Axle & Manufacturing Holdings, Inc., Lear Corporation, both
international manufacturers for original equipment vehicles, Breed Technologies,
Inc., an equipment supplier of air bag sensing devices and air bag components
and Genuine Parts, Inc., a North American automotive parts distributor.

Robert N. Pokelwaldt--Mr. Pokelwaldt has been a director of the Company
since the consummation of the Company's Initial Public Offering. Mr. Pokelwaldt
served as Chairman and Chief Executive Officer of York International
Corporation, a manufacturer of air conditioning and cooling systems, from
January 1993 until his retirement in October 1999. He also served York
International from June 1991 until January 1993 as President, Chief Executive
Officer and a director and, from January 1990 until June 1991, as President and
Chief Operating Officer. Mr. Pokelwaldt is also a director of Carpenter
Technologies Corporation, a manufacturer of specialty steel, Susquehanna
Pfaltzgraff Corp., a manufacturer of dinnerware products and an owner/operator
of radio and cable systems networks, Intersil Corp., a telecommunications chip
manufacturer, and First Energy Corporation, a generator and power distribution
company.

SectionDirector"; "-Continuing Directors"; "-Executive Officers"; "-Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directorsCompliance" and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Directors, executive officers and greater than ten percent
stockholders are required by SEC regulation to furnish the Company copies of all
Section 16(a) reports they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended December 31, 2001, all Section 16(a) filing requirements applicable to
directors, executive officers and greater than ten percent beneficial owners
were complied with by such persons except for the following inadvertent late
filings: (i) the initial statement of beneficial ownership on Form 3 required to
be filed (assuming that a report is required under such circumstances) by Mr.
Mark Lorberbaum within ten days after his becoming a member of the Lorberbaum
family reporting group of Mohawk which occurred on July 10, 2000 as a result of
various family estate planning transactions was filed on January 19, 2002 and
the sale of 5,100 shares of Common Stock on October 25, 2001 by Mr. Mark
Lorberbaum reportable on a Form 4 due by November 10, 2001, was reported on a
Form 4 filed on January 19, 2002; (ii) the initial statement of beneficial
ownership on Form 3 required to be filed (assuming that a report is required
under such circumstances) by Ms. Suzanne L. Helen within ten days after her
becoming a member of the Lorberbaum family reporting group of Mohawk which
occurred on July 10, 2000 as a result of various family estate planning
transactions was filed on January 19, 2002; and (iii) transactions reportable on
Form 5's required to be filed for the years 1999 and 2000 by Mr. Alan S.
Lorberbaum, a former director of Mohawk, to report estate planning transactions
resulting in a change in beneficial ownership were combined into a single Form 5
filed on January 19, 2002; and (iv) an exchange fund transaction on December 1,
2000 by Mr. David L. Kolb resulting in a change in beneficial ownership was
filed on Form 4 on March 8, 2002 .

Item 11. Executive Compensation

Report of the Compensation Committee of the Board of Directors of Mohawk
Industries, Inc.

Executive Compensation Philosophy. The Committee believes that a compensation
program that enables the Company to attract and retain outstanding executives
will assist the Company in meeting its long-range objectives, thereby serving
the interest of the Company's stockholders. The compensation program of the
Company is designed to achieve the following objectives:

1. Provide compensation opportunities that are competitive with those of
companies of a similar size.

2. Create a strong link between the executive's compensation and the
Company's annual and long-term financial performance.

3. Include above average elements of financial risk through
performance-based incentive compensation which offers an opportunity
for above average financial reward to the executives.

The Company's executive compensation program has three components: base
salaries, annual incentives and long-term incentives.

Base Salaries. The Company's executive officers receive base salaries as
compensation for the skills, knowledge and experience that they bring to their
positions. Base salaries paid to the Company's executive officers are intended
to be maintained at a competitive level with companies of a similar size. In
order to assess competitive rates, in 2001, the committee used compensation
surveys produced by a nationally recognized compensation consulting firm of
executives with similar job functions and responsibilities in public companies
engaged in nondurable goods manufacturing in the same net sales range. The group
of companies included in the surveys used was typically broader than the peer
group used in the Performance Graph following this report because the
competitive marketplace for executive talent has been viewed by the Committee as
national in scope and not restricted to the carpet and textile industries. With
respect to base salaries, the Committee has tried to achieve competitive rates
by targeting the approximate midpoint of the range of base salaries for
comparable positions. Within this overall policy, the Committee has preserved
the flexibility to make exceptions where performance over several years dictates
a higher base salary.

Annual Incentive Bonuses. Annual incentive bonuses under the executive
incentive program are provided in addition to base salaries to create total
annual compensation. Using the compensation surveys discussed above, the
Committee has targeted the upper quartile of total annual compensation for
similarly situated executives in companies of similar size. By placing a
significant portion of an executive's annual pay "at risk," the Committee
believes that compensation is more directly related to performance and will more
closely link the financial interests of the executives and those of the
stockholders. Given the Company's aggressive business objectives, the Committee
believes this policy to be appropriate and fair for both the executives and the
stockholders.

The 2001 Executive Incentive Program (the "Plan") was designed to provide
incentive bonus opportunities for 29 key executives of the Company, including
the executive officers named in the Summary Compensation Table. For those
executives who were classified as Corporate Participants, including the Chief
Executive Officer ("CEO") and the Chief Financial Officer, to be eligible for
any bonus the total corporation must have attained in 2001 a threshold level of
earnings per share ("EPS") established by the Committee. For those executives
who were classified as Residential Business Participants, Karastan Business
Participants, Commercial Business Participants, Home Products Participants or
Hospitality Business Participants to be eligible for any bonus their business
unit must have attained in 2001 a threshold level of EPS contribution
established by the Committee. The factors considered in establishing the
thresholds in the Plan were the previous year's EPS for the total corporation
and EPS contribution by each business unit. If the threshold is attained, then
the bonus calculation is based on the attainment of increasing levels of
improvement of (i) 2001 EPS over 2000 EPS and (ii) 2001 Earnings After Capital
Charge ("EAC") (after tax operating earnings less a cost of capital charge) over
EAC targets established by the Committee using 2000 results as a base. The bonus
calculation is weighted 75% to the EPS level attained and 25% to the EAC level
attained. The bonus attainable at various levels in the Plan is calculated as a
percentage of 2001 compensation payments excluding all bonus, deferred bonus and
other non-salary amounts ("Base Compensation")"-Audit Committee". The percentages of Base
Compensation for which individual participants become eligible at the various
levels vary and were set for the CEO by the Committee and for the other
executives by the CEO (subject to the approval of the Committee) in order to
relate performance goals to a targeted level of total annual compensation.

A portion of each award ranging from 20% to 26% is paid as follows:
one-half is paid in shares of the Common Stock purchased in the market and
issued to the participant as restricted shares underCompany has adopted the Mohawk Industries, Inc. 1997 Long-Term Incentive PlanStandards of Conduct and one-half is used to pay withholding tax on the
award. One-half of the shares granted will be restricted for one year and the
other half for two years. The number of restricted shares to be granted is
calculated using the average monthly closing stock price of the Common Stock
during 2001. The balance of the award is paid in cash to the participant in
2002.

The Committee has the authority to interpret the Plan, make changes therein
or grant special bonuses for exceptional performance as it determines
appropriate.

Long-Term Incentives. The Company provides long-term incentives to its
executives through stock option programs designed to encourage executives to
acquire and hold shares of Common Stock. The stock option plans are designed to
retain executives and motivate them to improve the market value of the Common
Stock over a number of years. The Committee believes that equity ownership by
executives furthers the Committee's compensation policy objective of aligning
long-term financial interests of executives with those of the stockholders. The
Committee considers the amount and terms of options previously awarded to and
held by executive officers in determining the size of option grants. In 2001,
options were grantedEthics, which applies to all of its directors, officers and employees. The standards of conduct and ethics are publicly available on our website at http://mohawkind.com. If the executive officers named inCompany makes any substantive amendments to the Summary
Compensation Table. These options all vest in 20% annual increments.

Other Compensation Plans. The Company maintains several broadly-based
employee benefit plans in which the executive officers are permitted to
participate on the same terms as other employees. These include the retirement
savings plan (designed to qualify under section 401(k)standards of conduct and ethics, or grants any waiver, including any implicit waiver, from a provision of the Internal Revenue
Code), a supplemental executive retirement plan which provides certain
supplemental retirement and other benefits to a certain executive who has
completed an aggregate of 60 months employment with the Company, and a
nonqualified deferred compensation plan for highly compensated employees which
permits deferral of income on a portion of the employee's compensation.

To the extent readily determinable and as one of the factors in its
consideration of the various components of executive compensation, the Committee
considers the anticipated tax treatment to the Company and to the executives of
various payments and benefits. Some types of compensation payments and their
deductibility (e.g., the spread on exercise of non-qualified options) depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations of and changes in the tax laws and other
factors beyond the Committee's control also affect the deductibility of
compensation. For these and other reasons, the Committee will not necessarily
and in all circumstances limit executive compensation tostandards, that deductible under
Section 162(m) of the Internal Revenue Code. The Committee will consider various
alternatives for preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.

Chief Executive Officer Compensation. In accordance with the compensation
philosophy and process described above, the Committee set Mr. Lorberbaum's base
salary for 2001 at $575,000, which was below the midpoint for CEO's of similar
sized companies in the surveys used by the Committee. Mr. Lorberbaum's total
annual cash compensation is linkedapplies to the Company's performance by his
participation inchief executive officer, chief financial officer or chief accounting officer, the 2001 Executive Incentive Program. UnderCompany will disclose the Plan, he would
earn no bonus unless 2001 EPS exceeded the threshold level established in the
Plan. In 2001, Mr. Lorberbaum earned a bonus equal to approximately 100% of his
Base Compensation based upon an improvement in EPS for the total corporation of
18 percent over 2000 EPS and an improvement in EAC for the total corporation of
16 percent over 2000 EAC. This bonus will be paid in cash and restricted shares
as described above. In 2001, Mr. Lorberbaum was awarded stock options to
purchase 50,000 shares of Common Stock at fair market value on the datesnature of the grants. These options vestamendment or waiver on its website. The Company may elect to also disclose the amendment or waiver in 20% annual increments.a report on Form 8-K filed with the SEC.
Item 11. Executive Compensation
The Committee's objectives in setting Mr. Lorberbaum `s compensation for
2001 wereinformation required by this item is incorporated by reference to be competitive with other companies in the carpet industry and with
other public companies of a similar size and to provide Mr. Lorberbaum with
appropriate incentives to achieve the Company's short-term and long-term
objectives.

Compensation Committee
Leo Benatar-Chairman
Robert N. Pokelwaldt
Larry McCurdy

Performance Graph

The following is a line graph comparing the yearly percentage changeinformation contained in the Company's cumulative total stockholder returns to thoseProxy Statement for the 2004 Annual Meeting of the Standard & Poor's
500 Index and a group of peer issuers beginning on December 31, 1996 and ending
on December 31, 2001.

Comparison of Total Cumulative Returns Among Mohawk Industries, Inc.,
the S&P 500 Index and a Peer Group

[GRAPH]

-----------------------------------------------------------------------------------
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- -------------------------------------------------------------------------------------------------------------

Mohawk $100.00 $149.57 $286.79 $179.83 $186.65 $374.18
- -------------------------------------------------------------------------------------------------------------
S&P 500 $100.00 $133.36 $171.47 $207.56 $188.66 $166.24
- -------------------------------------------------------------------------------------------------------------
Peer Group $100.00 $137.62 $149.48 $129.34 $125.73 $127.39
- -------------------------------------------------------------------------------------------------------------

The peer group includesStockholders under the following companies: Cone Mills Corporation,
Dixie Group, Inc., Guilford Mills, Inc., Interface, Inc., Leggett & Platt, Inc.,
Masco Corporationheadings: "Executive Compensation and West Point Stevens, Inc. Total return values were
calculated based on cumulative total return, assuming the value of the
investment in the Company's Common Stock and in each index on December 31, 1996
was $100 and that all dividends were reinvested. The Company is not included in
the peer group because management believes that, by excluding the Company,
investors will have a more accurate view of the Company's performance relative
to certain other carpet and textile companies.

SummaryOther Information-Summary of Cash and Certain Other Compensation

The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1999, 2000, and 2001 for
(i) the Chief Executive Officer of the Company and (ii) each of the four other
most highly compensated

executive officers of the Company (determined as of December 31, 2001)
(collectively, the "Named Executive Officers").

Summary Compensation Table

Annual Compensation Long-Term Compensation
------------------------------------- ------------------------
Other Annual Restricted Securities All Other
Salary Bonus Compensation Stock Underlying Compensation
Name and Position Year ($) ($) ($)(1) Awards($)(2) Options(#) ($)(3)
- ------------------------------- ---- ------ ----- ------------ ------------ ---------- ------------

Jeffrey S. Lorberbaum .......... 2001 $575,000 $503,125 $ -- $118,577 50,000 $3,450
President and 2000 495,000 363,176 -- 61,437 1,500 3,450
Chief Executive Officer 1999 480,000 417,375 -- 45,793 7,000 3,200

David E. Polley ................ 2001 $322,500 $241,875 $ -- $53,164 25,000 $3,450
President-Residential 2000 295,417 186,000 -- 30,315 -- 3,450
Division 1999 248,333 153,125 -- 18,281 -- 3,200

Herbert M. Thornton ............ 2001 $320,000 $240,000 $ -- $52,785 55,000 $3,450
President-Carpet Group 2000 295,417 186,000 -- 29,134 20,000 3,450
1999 248,333 153,125 -- 14,661 7,000 3,200

William B. Kilbride ............ 2001 $320,000 $240,000 $ -- $52,785 35,000 $3,450
President -Mohawk Home 2000 290,000 183,750 -- 28,824 -- 3,450
1999 275,000 206,250 -- 21,946 27,000 4,105

John D. Swift .................. 2001 $320,000 $240,000 $ -- $52,785 25,000 $3,450
Vice President-Finance and 2000 275,000 173,853 -- 27,333 -- 3,450
Chief Financial Officer 1999 267,000 199,082 6,097 20,363 7,000(4) 3,200

______________
(1) Amounts in 1999 include (i) imputed interest on the outstanding balance of
interest free loans made by the Company to Mr. Swift upon exercise of stock
options granted in connection with the Company's leveraged buyout ("LBO
Stock Options") in the amount of $3,317, and (ii) $2,780 paid by the
Company in 1999 to Mr. Swift, so that he could pay the 1999 tax liability
on imputed income arising from such interest free loans. All future
obligations in connection with the LBO Stock Options have been terminated.
(2) Amounts in 2001 include 1,878, 842, 836, 836 and 836 shares for Messrs.
Lorberbaum, Polley, Thornton, Kilbride and Swift, respectively. These
shares were granted on February 26, 2002, in connection with each
executive's annual incentive bonus for 2001 and have been valued at $63.14
per share. The restrictions will lapse on February 26, 2003 for 50% of the
shares and will lapse on February 26, 2004 for the remaining 50%. Amounts
in 2000 include 1,978, 976, 938, 928 and 880 shares for Messrs. Lorberbaum,
Polley, Thornton, Kilbride and Swift, respectively. These shares were
granted on February 26, 2001, in connection with each executive's annual
incentive bonus for 2000 and have been valued at $31.06 per share. The
restrictions lapsed on February 15, 2002 for 50% of the shares and will
lapse on February 15, 2003 for the remaining 50%. Amounts in 1999 include
2,024, 808, 648, 970 and 900 shares for Messrs. Lorberbaum, Polley,
Thornton, Kilbride and Swift, respectively. These shares were granted on
February 15, 2000, in connection with each executive's annual incentive
bonus for 1999 and have been valued at $22.625 per share. The restrictions
lapsed on February 15, 2001 for 50% of the shares and lapsed on February
15, 2002 for the remaining 50%. See "Executive Compensation-Report of the
Compensation Committee of the Board of Directors of Mohawk Industries,
Inc." As of December 31, 2001, Mr. Lorberbaum held 2,990 shares of
restricted stock valued at $164,091, Mr. Polley held 1,380 shares of
restricted stock valued at $75,734, Mr. Thornton held 1,262 shares of
restricted stock valued at $69,259, Mr. Kilbride held 1,413 shares of
restricted stock valued at $77,545 and Mr. Swift held 1,330 shares of
restricted stock valued at $72,990.
(3) Except with respect to Mr. Kilbride in 1999, represents matching
contributions pursuant to the Company's Retirement Savings Plan. In 1999,
amounts for Mr. Kilbride represent contributions pursuant to the American
Rug Craftsmen 401(k) Savings and Retirement Plan.
(4) Amount represents options granted in 1999 pursuant to the 1993 Stock Option
Plan (3,500 shares) and the 1997 Long Term Incentive Plan (3,500 shares).

Option Grants

The following table sets forth information on options granted to the Named
Executive Officers in fiscal 2001.

Option Grants In Fiscal Year
Ended December 31, 2001

Individual Grants
-----------------------------------------------------
% of Total Potential Realizable Value at Assumed
Number of Options Annual Rates of Stock Price
Securities Granted to Exercise Appreciation for
Name Underlying Employee or Base Option Term (2)
- ---- Options in the Price Expiration --------------------------------------
Granted Fiscal Year (1) ($/Sh) Date 5% 10%
---------- -------------- -------- --------- ------------ -----------

Jeffrey S.Lorberbaum ... 50,000 (3) 7.09% $30.53 02/27/11 $960,007 $2,432,847

Herbert M. Thornton .... 35,000 (3) 4.97% $30.53 02/27/11 $672,005 $1,702,993
20,000 (4) 2.84% $53.04 12/20/11 $666,754 $1,689,685

David E. Polley ........ 25,000 (3) 3.54% $30.53 02/27/11 $480,003 $1,216,423

William B. Kilbride .... 35,000 (3) 4.97% $30.53 02/27/11 $672,005 $1,702,993

John D. Swift .......... 25,000 (3) 3.54% $30.53 02/27/11 $480,003 $1,216,423

(1) The total number of shares of Common Stock covered by options granted to
employees in the 2001 fiscal year was 704,850.

(2) Potential realizable value is based on the assumption that the Common
Stock price appreciates at the annual rate shown (compounded annually) from
the date of grant until the end of the 10-year option term. The numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission (the "SEC") and are not intended to predict future
performance.

(3) These options were granted under the Company's 1997 Long-Term Incentive Plan
and vest in 20% annual increments beginning February 27, 2002.

(4) These options were granted under the Company's 1997 Long-Term Incentive Plan
and vest in 20% annual increments beginning December 20, 2002.

OptionCompensation"; "-Option Grants"; "-Option Exercises and Holdings

The following table sets forth certain information regarding the exerciseHoldings"; "-Pension Plans"; "-Certain Relationships and Related Transactions", and "Election of stock options by the Named Executive Officers during fiscal 2001 and the
number of shares covered by both exercisable and non-exercisable stock options
held by the Named Executive Officers as of December 31, 2001. Also reported are
the values for "in-the-money" options, which represent the positive spread
between the exercise price of any such existing stock options and the fiscal
year-end price of the Common Stock (which was $54.88).

Aggregated December 31, 2001
Year End Option Values

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End (#) at FY-End ($)
Acquired Value ---------------------------- ---------------------------
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------

Jeffrey S. Lorberbaum .... - - 78,100 55,400 $3,421,350 $1,371,596
Herbert M. Thornton ...... 12,850 $278,559 2,950 77,450 $104,520 $1,586,005
David E. Polley .......... - - 15,000 35,000 $367,575 $853,805
William B. Kilbride ...... 37,499 $963,754 10,800 51,200 $266,466 $1,251,950
John D. Swift ............ - - 2,800 29,200 $76,926 $724,140

- -----------
(1) Value realized is the difference between the fair market value of the
securities underlying the options and the exercise price on the date of
exercise.

Pension Plans

The following table shows estimated annual retirement benefits payable to
Mr. Swift at age 65 under the Supplemental Executive Retirement Plan (the
"SERP") as described below.

Pension Plan Table

Years of Service 15
Remuneration or more
------------ -------------------

$ 200,000 ........................ $ 80,000
300,000 ........................ 120,000
400,000 ........................ 160,000
500,000 ........................ 200,000
600,000 ........................ 240,000
700,000 ........................ 280,000
800,000 ........................ 320,000
900,000 ........................ 360,000
1,000,000 ........................ 400,000
1,100,000 ........................ 440,000
1,200,000 ........................ 480,000
1,300,000 ........................ 520,000

The Company has established a Retirement Savings Plan (the "Retirement
Savings Plan"), which is a combination 401(k)/profit-sharing plan that provides
for employee pre-tax contributions under Section 401(k) of the Internal Revenue
Code, Company matching contributions, and, if profits are sufficient, a Company
profit sharing contribution. The Company has also established the SERP, a
non-qualified plan designed to supplement the benefits payable under the
Retirement Savings Plan and certain other plans. The SERP provides such benefits
to Mr. Swift.

Benefits under the SERP generally vest after the participant has sixty
months of employment with the Company and generally can begin once the
participant attains age 60. The retirement benefit payable at age 65 to Mr.
Swift (and prior to reduction as described below) is 40% of Mr. Swift's average
annual compensation (as determined in accordance with the preceding sentence).
Benefits under the SERP are reduced if the participant begins to receive SERP
benefits prior to age 65.

Benefits payable under the SERP as shown in the foregoing table are reduced
by (i) one-half of the participant's Social Security benefits; (ii) certain
other Company benefit plans; and (iii) the annuity benefit to the participant
from a subsequent employer's pension plan. Upon retirement, the normal form of
SERP benefit is a life annuity for the life of the participant, but the Board
and the participant may approve payment in an alternate form. There are also
certain death benefits and medical benefits that are payable under the SERP.

Mr. Swift had an average five-year compensation of $458,728 and 17 years
of creditable service. Messrs. Lorberbaum, Thornton, Polley and Kilbride do not
participate in the SERP.

MeetingsDirectors-Meetings and Committees of the Board of Directors

General. During fiscal 2001, the Board of Directors held seven meetings.
All members of the Board of Directors attended at least 86% of the total number
of Board of Directors and Committee meetings that they were eligible to attend.

The Audit Committee consists of Mr. Bruckmann, Mr. McCurdy and Mr.
Pokelwaldt. The Audit Committee met three times during 2001. The Audit Committee
oversees management's conduct of the financial reporting process, the system of
internal, financial and administrative controls and the annual independent audit
of the Company's financial statements. In addition, the Audit Committee makes
recommendations to the Board of Directors regarding the Company's employment of
independent auditors, reviews the independence of such auditors, approves the
scope of the annual activities of the independent and internal auditors and
reviews audit results. The Board of Directors has adopted a written charter for
the Audit Committee.

The Compensation Committee consists of Mr. Benatar, Mr. Pokelwaldt and
Mr. McCurdy. The Compensation Committee met five times during 2001. The
Compensation Committee is responsible for deciding, recommending and reviewing
the compensation, including benefits, of the executive officers and directors of
the Company and for administering the Company's incentive compensation plans.
See also "Executive Compensation--Report of the Compensation Committee of the
Board of Directors of Mohawk Industries, Inc.Directors."

The Company has no nominating committee.

Director Compensation. Employees of the Company or its subsidiaries who are
also directors do not receive any fee or remuneration for services as members of
the Board of Directors or any Committee of the Board of Directors. The Company
pays non-employee directors an annual retainer of $20,000 and a fee of $2,000
for each Board meeting and $1,000 for each Committee meeting attended. In lieu
of this retainer and fees, Mr. Kolb receives an annual retainer of $30,000 for
his services as Chairman of the Board of Directors and a fee of $3,000 for each
Board meeting and $2,000 for each Committee meeting attended. Committee Chairmen
also receive an annual retainer of $2,500. Pursuant to the Company's 1993 Stock
Option Plan and the 1997 Long-Term Incentive Plan, directors who are not
employees of the Company are initially granted a non-qualified stock option to
purchase 11,250 shares of Common Stock as of the date they commence service as a
director. On January 1 of each year, eligible directors who are directors on
such date receive an option to purchase 2,250 shares of Common Stock. The
exercise prices for all such option grants are based on a formula that with
respect to initial grants relates to the closing sale price of the underlying
Common Stock on the business day immediately preceding the date of grant and
with respect to subsequent grants is the average of the closing sale prices of
the underlying Common Stock on the last business day of each of the Company's
four fiscal quarters during the preceding fiscal year. The Company reimburses
all directors for expenses the directors incur in connection with attendance at
meetings of the Board of Directors or Committees.

In December 1996, the Board of Directors adopted the Mohawk Industries,
Inc. 1997 Non-Employee Director Stock Compensation Plan (the "Director Stock
Compensation Plan") to promote the long-term growth of the Company by providing
a vehicle for its non-employee directors to increase their proprietary interest
in the Company and to attract and retain highly qualified and capable
non-employee directors. Under the Director Stock Compensation Plan, non-employee
directors may elect to receive their annual cash retainer fees (excluding any
meeting fees) in shares of Common Stock of the Company, based on the fair market
value of the Common Stock on the quarterly payment date. The maximum number of
shares of Common Stock which may be granted under the plan is 37,500 shares,
which shares may not be original issue shares. In 1997, the Director Stock
Compensation

Plan was amended by the Board of Directors to include an optional income
deferral feature using a book entry (phantom stock) account that would fluctuate
in value based on the performance of the Common Stock of the Company over the
deferral period. The Board of Directors may suspend or terminate the Director
Stock Compensation Plan at any time.

In connection with the merger of Dal-Tile International Inc., Mr. Wellborn
entered into an agreement with the Company whereby he agreed to serve as
President of Dal-Tile commencing on March 20, 2002 through March 20, 2004. If
during the term of the agreement Mr. Wellborn's employment is terminated without
cause he would receive his annual salary, currently $400,000, for the remainder
of the term plus annual bonuses based on the greater of his target bonus or the
average bonus received for the two prior fiscal years. Mr. Wellborn also
received 25,000 options to purchase the Company's Common Stock pursuant to this
agreement.

Pursuant to a change in control agreement Mr. Wellborn had with Dal-Tile,
Mr. Wellborn received a payment of $2,019,384 in connection with the merger with
Mohawk.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Principal
The information required by this item is incorporated by reference to information contained in the Company's Proxy Statement for the 2004 Annual Meeting of Stockholders under the following headings: "Executive Compensation and Other Information "-Equity Compensation Plan Information." and - -Principal Stockholders of the Company

The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 20, 2002, by (i) each
person who is known by the Company beneficially to own more than five percent of
the outstanding shares of the Common Stock, (ii) each of the Company's directors
and nominees, (iii) each of the Named Executive Officers, and (iv) all of the
Company's directors and executive officers as a group. Unless otherwise
indicated, the holders listed below have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.

Number of Shares of Percent
Common Stock of
Name of Beneficial Owner Beneficially Owned Class
- ------------------------ -------------------- -------

Jeffrey S. Lorberbaum(1) ............................. 14,349,536 21.8%
Aladdin Partners, L.P.(2) ............................ 9,900,000 15.1
FMR Corporation(3) ................................... 8,755,372 13.3
JMS Group Limited Partnership(4) ..................... 3,985,604 6.1
David L. Kolb(5) ..................................... 562,342 *
Sylvester H. Sharpe(6) ............................... 499,114 *
Bruce C. Bruckmann(7) ................................ 281,593 *
W. Christopher Wellborn(8) ........................... 149,523 *
John D. Swift(9) ..................................... 70,586 *
William B. Kilbride(10) .............................. 23,551 *
Leo Benatar(11) ...................................... 24,014 *
Larry W. McCurdy(11) ................................. 20,547 *
Robert N. Pokelwaldt(11) ............................. 27,230 *
David E. Polley(12) .................................. 22,946 *
Herbert M. Thornton(13) .............................. 12,886 *
John F. Fiedler ...................................... 1,398 *
All directors and executive officers
as a group (13 persons) ........................... 16,045,266 24.4%

- --------
* Less than one percent.

(1) The address of Mr. Jeffrey Lorberbaum is 2001 Antioch Road, Dalton, Georgia
30721. Includes 9,900,000 shares held by Aladdin Partners, L.P., with
respect to which Mr. Lorberbaum may be deemed to share voting and
investment power. Mr. Lorberbaum is the owner of 100% of the outstanding
voting stock of ASL Management Corp., the majority general partner of
Aladdin Partners, L.P. Mr. Lorberbaum disclaims beneficial ownership of the
shares held by Aladdin Partners, L.P. Also includes 263,721 shares owned by
The Alan S. Lorberbaum Family Foundation, of which Mr. Jeffrey Lorberbaum
is a trustee and may be deemed to share voting and investment power. Mr.
Jeffrey Lorberbaum disclaims beneficial ownership of the shares held by The
Alan S. Lorberbaum Family Foundation. Includes 3,985,604 shares held by the
JMS Group Limited Partnership ("JMS"). The general partner of JMS is SJL
Management Company, LLC ("SJL"). Mr.

Lorberbaum is an equal member of SJL and may be deemed to share voting and
dipositive power with respect to all shares held by JMS. Mr. Lorberbaum
disclaims beneficial ownership of such shares. Includes 89,100 shares
issuable upon the exercise of currently vested options, and 10,928 shares
issued pursuant to the Company's Executive Incentive Program, of which
2,867 are restricted shares, and 1,548 shares owned pursuant to the
Company's 401(k) Plan.

(2) The address of Aladdin Partners, L.P. is 2001 Antioch Road, Dalton, Georgia
30721. ASL Management Corp. is the majority general partner of Aladdin
Partners, L.P. and shares voting and investment power with respect to these
shares. The address of ASL Management Corp. is 2001 Antioch Road, Dalton,
Georgia 30721. Mr. Jeffrey Lorberbaum is the owner of 100% of the
outstanding voting stock of ASL Management Corp. and, as a result, may be
deemed to share voting and investment power with respect to these shares.
Mr. Barry L. Hoffman is a director of ASL Management Corp. and, as a result
of such position, may be deemed to share voting and investment power with
respect to these shares. Excludes 3,500 shares owned of record by Mr.
Hoffman in his individual capacity. The business address of Mr. Hoffman is
Joseph Decosimo & Company, 1100 Tallan Building, Two Union Square,
Chattanooga, Tennessee 37402. Each of ASL Management Corp., Mr. Jeffrey
Lorberbaum and Mr. Hoffman, disclaim beneficial ownership of the shares
held by Aladdin Partners, L.P.

(3) Based upon Schedule 13G/A dated February 14, 2002 filed with the SEC by
FMR Corporation. The address of FMR Corporation is 82 Devonshire Street,
Boston, Massachusetts 02109.

(4) The address of JMS is Joseph Decosimo & Company, 1100 Tallan Building, Two
Union Square, Chattanooga, Tennessee 37402. The general partner of JMS is
SJL. Each of Ms. Suzanne L. Helen and Mr. Mark Lorberbaum is an equal
member of SJL and may be deemed to share voting and dispositive power with
respect to all shares held by JMS. Each of Ms. Helen and Mr. Mark
Lorberbaum disclaims beneficial ownership of such shares.

(5) Includes 450 shares issuable upon the exercise of currently vested options
and 12,444 shares issued pursuant to the Company's Executive Incentive
Program, of which 1,395 are restricted shares, and 703 shares owned
pursuant to the Company's 401(k) plan. Also includes 4,820 held by two
minor children.

(6) Includes 26,700 shares issuable upon the exercise of currently vested
options and 4,246 shares issued pursuant to the Company's Executive
Incentive Program, of which 872 are restricted shares and 145 shares owned
pursuant to the Company's 401(k) Plan.

(7) Includes 24,750 shares issuable upon the exercise of currently vested
options.

(8) Includes 141,632 shares issuable upon the exercise of currently vested
options.

(9) Includes 8,500 shares issuable upon the exercise of currently vested
options, 4,678 shares issued pursuant to the Company's Executive Incentive
Program, of which 1,276 are restricted shares, and 14,523 shares owned
pursuant to the Company's 401(k) plan.

(10) Includes 18,500 shares issuable upon the exercise of currently vested
options and 4,780 shares issued pursuant to the Company's Executive
Incentive Program, of which 1,300 are restricted shares and 46 shares
owned pursuant to the Company's 401(k) Plan.

(11) Includes 13,500 shares issuable upon the exercise of currently vested
options.

(12) Includes 20,000 shares issuable upon the exercise of currently vested
options, 2,626 shares issued pursuant to the Company's Executive Incentive
Program, of which 1,330 are restricted shares, and 320 shares owned
pursuant to the Company's 401(k) plan.

(13) Includes 10,650 shares issuable upon the exercise of currently vested
options, 22,236 shares issued pursuant to the Company's Executive
Incentive Program, of which 1,305 are restricted shares, and 138 shares
owned pursuant to the Company's 401(k) plan.

Company."
Item 13. Certain Relationships and Related Transactions

In connection with
The information required by this item is incorporated by reference to information contained in the merger of Dal-Tile International Inc., Mr. Wellborn
entered into an agreement with the Company whereby he agreed to serve as
President of Dal-Tile commencing on March 20, 2002 through March 20, 2004. If
during the term of the agreement Mr. Wellborn's employment is terminated without
cause he would receive his annual salary, currently $400,000,Company's Proxy Statement for the remainder2004 Annual Meeting of Stockholders under the term plus annual bonuses based onfollowing heading: "Executive Compensation and Other Information-Certain Relationships and Related Transactions."

Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to information contained in the greater of his target bonus or the
average bonus receivedCompany's Proxy Statement for the two prior fiscal years. Mr. Wellborn also
received 25,000 options to purchase2004 Annual Meeting of Stockholders under the Company's Common Stock pursuant to this
agreement.

Pursuant to a change in control agreement Mr. Wellborn had with Dal-Tile,
Mr. Wellborn received a payment of $2,019,384 in connection with the merger with
Mohawk.

following heading: "Principal Accountant Fees and Services."
PART IV
Item 14. 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

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 ......... 69
Schedule II-ConsolidatedII‑Consolidated Valuation and Qualifying Accounts ....... 7356
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.)

*2.5 Agreement and Plan of Merger by and between Mohawk, Maverick
Merger Sub, Inc. and Dal-Tile International Inc., dated as of
November 19, 2001. (Incorporated herein by reference to Exhibit
2.1 of the Mohawk Registration Statement on Form S-4,
Registration No. 333-74806, as filed December 7, 2001.)

*2.6 Amendment No. 1, to the Agreement and Plan of Merger by and
between Mohawk, Maverick Merger Sub, Inc. and Dal-Tile
International Inc., dated as of January 16, 2002. (Incorporated
herein by reference to Exhibit 2.2 of the Mohawk Registration
Statement on Form S-4, Registration No. 333-74806, as filed
January 17, 2002.)

*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 3.1 of the Mohawk registration Statement on
Form S-4, Registration No. 333-74806, as filed February 6, 2002.)

*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 3.1 of the
Mohawk registration Statement on Form S-4, Registration No.
333-74806, as filed February 6, 2002.)

*10.1 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.)

*10.2 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.)

*10.3 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.)

*10.4 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.)

*10.5 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.)

*10.6 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.)

*10.7 Lease dated October 15, 2000 between Majestic Realty Co. and
Principal Life Insurance Company and Aladdin concerning a
distribution warehouse in La Mirada, California. (Incorporated
herein by reference to Exhibit 10.9 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000.)

*10.8 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.)

*10.9 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.)

*10.10 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.)

*10.11 Lease dated November 28, 2000 between Aladdin Manufacturing
Corporation and Lathrop industrial development, LLC a warehouse
in Lathrop, California. (Incorporated herein by reference to
Exhibit 10.13 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.)

*10.12 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.)

*10.13 Lease dated April 1, 2000 between Aladdin Manufacturing
Corporation and DMK Holdings LLC, concerning a warehouse in
Calhoun, Georgia. (Incorporated herein by reference to Exhibit
10.17 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.)

*10.14 Lease dated December 29, 1999 between Aladdin Manufacturing
Corporation and Seattle-Tacoma Box Company concerning a
warehouse in Kent, Washington. (Incorporated herein by reference
to Exhibit 10.18 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.)

10.15 Lease dated November 16, 2001 between Aladdin Manufacturing
Corporation and Ostow Holdings, L.L.C. concerning a warehouse in
Calhoun, Georgia.

10.16 Lease dated June 27, 2001 between Dal Tile Corporation and
Merritt Eli, L.L.C. concerning a warehouse in Baltimore,
Maryland.

10.17 Sublease dated February 3, 1997 between Dal Tile Corporation
and KMART Corporation concerning a warehouse in Dallas, Texas.

10.18 Lease dated August 24, 1996 between Dal Tile Corporation _ and
Harry L. Hussmann Jr., Inc., a Texas Corporation concerning a
tile manufacturing facility in El Paso, Texas.

10.19 Lease dated September 30, 1996 between Dal Tile Corporation and
Ontario industrial Partners concerning a warehouse in Los
Angeles, California.

*10.20 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.)

*10.21 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.)

*10.22 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.)

*10.23 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.)

*10.24 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.)

*10.25 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.)

*10.26 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.)

*10.27 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. (Incorporated herein by reference to Exhibit 10.28 of
Mohawk's Annual Report on Form 10-K for the year ended December
31, 2000)

*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. (Incorporated
herein by reference to Exhibit 10.29 of Mohawk's Annual Report on
Form 10-K for the year ended December 31, 2000)

10.30 First Amendment to the 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.

*10.31 Interest Rate Swap Agreement dated August 31 2000 by Mohawk
Industries, Inc, and First Union National Bank. (Incorporated
herein by reference to Exhibit 10.30 of Mohawk's Annual Report on
Form 10-K for the year ended December 31, 2000)

10.32 Bridge Credit Facility among Mohawk Industries Inc., Goldman,
Sachs Credit Partners, LP, First Union Securities Inc., and
SunTrust Bank dated March 20, 2002.

Exhibits Related to Executive Compensation Plans, Contracts and other
Arrangements:

*10.33 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.)

*10.34 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.)

*10.35 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)

*10.36 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.)

*10.37 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.)

*10.38 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.)

*10.39 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.)

*10.40 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.)

*10.41 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.)

*10.42 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.)

*10.43 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.)

*10.44 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.)

*10.45 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.)

*10.46 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.)

*10.47 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.)

*10.48 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.)

*10.49 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.)

*10.50 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.)

*10.51 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.)

*10.52 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.)

*10.53 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.)

*10.54 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.)

*10.55 Amendment and Restated Consulting Agreement between Mohawk
Industries, Inc. and David L. Kolb dated January 17, 2001.
(Incorporated herein by reference to Exhibit 10.55 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
2000.)

10.56 Employment Agreement between Mohawk Industries, Inc., Dal-Tile
International Inc. and W. Christopher Wellborn dated March 11,
2002.

*10.57 Dal-Tile International Inc. 1990 Stock Option Plan, as amended
and restated (also known as the 2000 Amended and Restated Stock
Option Plan)(Incorporated herein by reference to Appendix B in
Dal-Tile International Inc.'s Definitive Proxy Statement for its
2001 Annual Meeting of Stockholders, as filed with the Securities
and Exchange Commission on March 27, 2001).

*10.58&nbs p;
*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 2.1(a) in Mohawk's Registration Statement on Form S-4, Registration No. 333-74220.)
*2.2 Agreement and Plan of Merger by and between Mohawk, Maverick Merger Sub, Inc. and Dal-Tile International Inc., dated as of November 19, 2001. (Incorporated herein by reference to Exhibit 2.1 of the Mohawk Registration Statement on Form S-4, Registration No. 333-74806, as filed December 7, 2001.)
*2.3 Amendment No. 1, to the Agreement and Plan of Merger by and between Mohawk, Maverick Merger Sub, Inc. and Dal-Tile International Inc., dated as of January 16, 2002. (Incorporated herein by reference to Exhibit 2.2 of the Mohawk Registration Statement on Form S-4, Registration No. 333-74806, as filed January 17, 2002.)
*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 Restated Bylaws of Mohawk, as amended. (Incorporated herein by reference to Exhibit 3.2 in Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.)
*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 Restated Bylaws of Mohawk, as amended. (Incorporated herein by reference to Exhibit 3.2 in Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.)
*4.3 Indenture, dated as of April 2, 2002 between Mohawk Industries, Inc. and Wachovia Bank, National Association, as Trustee (Incorporated herein by reference to Exhibit 4.1 in Mohawk's Registration Statement on Form S-4, Registration No. 333-86734, as filed April 22, 2002.)

*10.1 Five Year Credit Agreement, dated as of September 30, 2003, among Mohawk Industries, Inc., SunTrust Bank and Wachovia Bank, National Association. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the period ended September 27, 2003.)
*10.2 364-Day Credit Agreement, dated as of September 30, 2003, among Mohawk Industries, Inc., SunTrust Bank and Wachovia Bank, National Association. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the period ended September 27, 2003.)
*10.3 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.)
*10.4 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.)
*10.5 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.)
*10.6 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.)
*10.7 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.)
*10.8 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. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2000)
*10.9 Amendment No. 1 to the Receivables Purchase and Sale Agreement dated as of December 28, 2001, by and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc., as of October 25, 2000.
*10.10 Amendment No. 2 to the Receivables Purchase and Sale Agreement dated as of July 19, 2002, by and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc., as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)
*10.11 Amendment No. 3 and Joinder to the Receivables Purchase and Sale Agreement dated as of December 31, 2002, by and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc., as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)
*10.12 Amended and Restated Receivables Purchase and Sale Agreement, dated as of August 4, 2003, among Mohawk Carpet Distribution, L.P. and Dal-Tile Corporation, as originators, and Mohawk Factoring, Inc. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the period ended September 27, 2003.)
*10.13 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. (Incorporated herein by reference to Exhibit 10.29 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2000)
*10.14 Amendment No. 1 dated as of October 24, 2001, to the Credit and Security Agreement 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 dated as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)

*10.15 Amendment No. 2 dated as of July 19, 2002, to the Credit and Security Agreement 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 dated as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)
*10.16 Amendment No. 3 dated as of October 23, 2002, to the Credit and Security Agreement 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 dated as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)
*10.17 Amendment No. 4 dated as of December 31, 2002, to the Credit and Security Agreement 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 dated as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)
*10.18 Amended and Restated Credit and Security Agreement, dated as of August 4, 2003, Among Mohawk Factoring, Inc., Mohawk Servicing, Inc., Blue Ridge Asset Funding Corporation, Three Pillars Funding Corporation, SunTrust Capital Markets, Inc., as a co-agent, and Wachovia Bank, National Association, as a co-agent and administrative agent. (Incorporated herein by reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the period ended September 27, 2003.)
*10.19 Second Amendment to the Liquidity Asset Purchase Agreement dated as of October 23, 2002 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 dated as of October 25, 2000. (Incorporated herein by reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2002)
*10.20 Interest Rate Swap Agreement dated August 31 2000 by Mohawk Industries, Inc, and First Union National Bank. (Incorporated herein by reference to Exhibit 10.30 of Mohawk's Annual Report on Form 10‑K for the year ended December 31, 2000)
Exhibits Related to Executive Compensation Plans, Contracts and other Arrangements:
*10.21 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.)
*10.22 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.)
*10.23 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.)
*10.24 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.)
*10.25 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.)
*10.26 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.)
*10.27 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.)

*10.28 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.)
*10.29 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.)
*10.30 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.)
*10.31 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.)
*10.32 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.)
*10.33 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.)
*10.34 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.)
*10.35 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.)
*10.36 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.)
*10.37 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.)
10.38 Mohawk Industries, Inc., 1997 Non-Employee Stock Compensation Plan (Amended and Restated as of March 31, 2003).
*10.39 Amendment and Restated Consulting Agreement between Mohawk Industries, Inc. and David L. Kolb dated January 17, 2001. (Incorporated herein by reference to Exhibit 10.55 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.)
*10.40 Employment Agreement between Mohawk Industries, Inc., Dal-Tile International Inc., and W. Christopher Wellborn dated March 20, 2002. (Incorporated herein by reference to Exhibit 10.56 of Mohawk's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.)
*10.41 Dal-Tile International Inc. 1990 Stock Option Plan, as amended and restated (also known as the 2000 Amended and Restated Stock Option Plan) (Incorporated herein by reference to Appendix B in Dal-Tile International Inc.'s Definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, as filed with the Securities and Exchange Commission on March 27, 2001)
*10.42 Supply Agreement dated as of December 29, 1999, between Dal-Tile Corporation and Wold Talc Company. (Incorporated herein by reference to Exhibit 10.18 of the Dal-Tile International Inc., Form 10-K for fiscal year 1999.)
14.1 Code of ethics
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent - KPMG LLP.

- --------

31.1 Certification Pursuant to Rule 13a-14(a)
31.2 Certification Pursuant to Rule 13a-14(a)
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Indicates exhibit incorporated by reference.

(b) Reports on Form 8-K.

8‑K.
1. Current Report on Form 8-K: Third quarter earnings press release, dated October 15, 2001

16, 2003.
2. Current Report on Form 8-K: AnnouncementPress release announcing the acquisition of merger with Dal-Tile
International Inc.Lees Carpet, dated November 19, 2001.

11, 2003.
3. Current Report on Form 8-K: AnnouncementPress release announcing incremental depreciation and amortization related to the acquisition of increase in estimated
earnings for the fourth quarter of 2001,Lees Carpet, dated December 7, 2001.

November 24, 2003.

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 20, 2002
By: /s/ JEFFREY S. LORBERBAUM
------------------------------------
Jeffrey S. Lorberbaum,

Dated: March 3, 2004 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 20, 2002 /s/ JEFFREY S. LORBERBAUM
------------------------------------------
Jeffrey S. Lorberbaum,
President and Chief Executive Officer
(principal executive officer)

Dated: March 20, 2002 /s/ JOHN D. SWIFT
-----------------------------------------------
John D. Swift,
Chief Financial Officer, Vice President-Finance
and Assistant Secretary
(principal financial and accounting officer)

Dated: March 20, 2002 /s/ DAVID L. KOLB
-----------------------------------------------
David L. Kolb,

Dated: March 3, 2004 /s/: JEFFREY S. LORBERBAUM
Jeffrey S. Lorberbaum,
President and Chief Executive Officer
(principal executive officer)
Dated: March 3, 2004 /s/: JOHN D. SWIFT
John D. Swift,
Chief Financial Officer, Vice President‑Finance
and Assistant Secretary
(principal financial and accounting officer)
Dated: March 3, 2004 /s/: DAVID L. KOLB
David L. Kolb,
Chairman of the Board

Dated: March 20, 2002 /s/ LEO BENATAR
-----------------------------------------------
Leo Benatar,
Director

Dated: March 20, 2002 /s/ BRUCE C. BRUCKMANN
-----------------------------------------------
Bruce C. Bruckmann,
Director

Dated: March 20, 2002 /s/ JOHN F. FIEDLER
-----------------------------------------------
John F. Fiedler,
Director

Dated: March 20, 2002 /s/ S. H. SHARPE
-----------------------------------------------
S. H. Sharpe
Director

Dated: March 20, 2002 /s/ LARRY W. MCCURDY
-----------------------------------------------
Larry W. McCurdy,
Director

Dated: March 20, 2002 /s/ ROBERT N. POKELWALDT
-----------------------------------------------
Robert N. Pokelwaldt,
Director

Dated: March 20, 2002 /s/ W. CHRISTOPHER WELLBORN
-----------------------------------------------
W. Christopher Wellborn,
Director

SCHEDULE I
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.

Balance Sheets

December 31, 2001 and 2000

(In thousands, except per share data)

ASSETS 2001 2000
---------- ---------
Current assets - intercompany receivable............... $ -- 207,134
Investment in subsidiaries............................. 1,071,755 883,163
---------- ---------
$1,071,755 1,090,297

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Intercompay payable................................... $ 105 --
Current portion of long-term debt..................... 30,873 30,878
Long-term debt, less current portion................... 92,226 305,059
---------- ---------
Total liabilities................................. 123,204 335,937
========== =========

Stockholders' equity:
Preferred stock, $.01 per value; 60 shares authorized;
no shares issued...................................... -- --
Common stock, $.01 par value; 150,000 shares
authorized; 61,408 and 60,638 shares issued in 2001
and 2000, respectively................................ 614 608
Addition paid-in capital............................... 197,247 183,303
Retained earning....................................... 947,123 758,531
Accumulated other comprehensive loss.............. (2,837) --
---------- ---------
1,142,147 942,442
Less treasury stock at cost; 8,715 and 8,538 shares
in 2001 and 2000, respectively...................... 193,596 188,082
---------- ---------
Total stockholders' equity........................ 948,551 754,360
---------- ---------
$1,071,755 1,090,297
========== =========

See accompanying notes to condensed financial information of registrant.

SCHEDULE I
(continued)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.

Statements of Earnings

Years Ended December 31, 2001, 2000 and 1999

(In thousands)

2001 2000 1998
-------- ------- -------

Dividend income from subsidiaries.................................. $208,250 200,155 157,239
Interest expense................................................... 19,658 37,556 -
-------- ------- -------
Equity in earnings of subsidiaries................................. 188,592 162,599 157,239
-------- ------- -------
Net earnings................................................... $188,592 162,599 157,239
======== ======= =======
the Board
Dated: March 3, 2004 /s/: LEO BENATAR
Leo Benatar,
Director
Dated: March 3, 2004 /s/: PHYLLIS O. BONANNO
Phyllis O. Bonanno,
Director
Dated: March 3, 2004 /s/: BRUCE C. BRUCKMANN
Bruce C. Bruckmann,
Director
Dated: March 3, 2004 /s/: JOHN F. FIEDLER
John F. Fiedler,
Director
Dated: March 3, 2004 /s/: S. H. SHARPE
S. H. Sharpe,
Director
Dated: March 3, 2004 /s/: LARRY W. MCCURDY
Larry W. McCurdy,
Director
Dated: March 3, 2004 /s/: ROBERT N. POKELWALDT
Robert N. Pokelwaldt,
Director
Dated: March 3, 2004 /s/: W. CHRISTOPHER WELLBORN
W. Christopher Wellborn,
Director

See accompanying notes to condensed financial information of registrant.

SCHEDULE I
(continued)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.

Statements of Cash Flows

Years Ended December 31, 2001, 2000 and 1999

(In thousands)

2001 2000 1999
---------- ---------- ----------

Cash flows from operating activities:
Net earnings ..................................................... $ 188,592 162,599 157,239
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
Equity in earnings of subsidiaries ............................ (188,592) (162,599) (157,239)
Tax benefit from exercise of stock options .................... 4,847 914 216
Decrease (increase) in intercompany receivable ................ 207,047 302,845 (451,075)
---------- ---------- ----------
Net cash (used in) provided by operating activities ........... 211,894 303,759 (450,859)
---------- ---------- ----------
Cash flows from financing activities:
Net change in revolving line of credit ........................... (181,964) (168,595) 384,452
Net (payments) proceeds from term loans .......................... (30,874) (30,872) 150,952
Stock options exercised .......................................... 9,103 2,397 1,391
Purchase of treasury stock ....................................... (8,159) (106,689) (85,936)
---------- ---------- ----------
Net cash (used in) provided by financing activities............ (211,894) (303,759) 450,859
---------- ---------- ----------
Net change in cash .......................................... - - -
Cash, beginning of year .............................................. - - -
---------- ---------- ----------
Cash, end of year..................................................... $ - - -
========== ========== ==========

See accompanying notes to condensed financial information of registrant.

SCHEDULE I
(continued)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Information Of Registrant
Mohawk Industries, Inc.

December 31, 2001, 2000 and 1999

(In thousands, except per share data)

(1) Long-Term Debt

The Company's revolving 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, 2001, the Company had
credit facilities of $450,000 under its revolving credit line and $70,000 under
various short-term uncommitted credit lines. At December 31, 2001, a total of
$448,933 was unused under these lines. All of these lines are unsecured. 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.

The Company uses an interest rate swap contract to adjust the proportion of
total debt that is subject to variable interest rates as compared to fixed
interest rates. Under an interest rate swap contract, the Company agrees to pay
an amount equal to a fixed-rate of interest times a notional principal amount,
and to receive in return an amount equal to a specified variable-rate of
interest times the same notional principal amount of $100,000. The notional
amounts of the contracts are not exchanged, and no other cash payments are made.
The contract fair value is reflected on the balance sheet and related gains or
losses are deferred in other comprehensive income. These deferred gains and
losses are recognized in income as an adjustment to interest expense over the
same period in which the related interest payments being hedged are recognized
in income. However, to the extent that any of these contracts are not considered
to be 100% effective in offsetting the change in the value of the interest
payments being hedged, any changes in fair value relating to the ineffective
portion of these contracts is immediately recognized in income. As of December
31, 2001, the Company had an interest rate swap agreement outstanding for a
notional amount of $100,000, which will be in effect until January 3, 2006.
Under the terms of the swap agreement, the Company pays a fixed interest rate of
5.82 %. As of December 31, 2001, the cumulative loss and fair value of the swap
agreement was $4,503 or $2,837, net of applicable income taxes.

Long-term debt consists of the following:

2001 2000
---------- ----------

Revolving line of credit, due January 28, 2004 ..................... $ 33,893 215,857
8.46% senior notes, payable in annual principal installments
beginning in 1998, due September 16, 2004, interest payable
quarterly ......................................................... 42,857 57,143
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually ..................................... 37,778 47,222
8.48% term loans, payable in annual principal installments,
due October 26, 2002, interest payable quarterly .................. 5,714 11,429
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually ...................................................... 2,857 4,286
---------- ----------
Total long-term debt ....................................... 123,099 335,937
Less current portion ............................................... 30,873 30,878
---------- ----------
Long-term debt, excluding current portion .................. $ 92,226 305,059
========== ==========

The aggregate maturities of long-term debt as of December 31, 2001 are
as follows:

2002 ............................................................... $ 30,873
2003 ............................................................... 25,159
2004 ............................................................... 57,623
2005 ............................................................... 9,444
---------
$ 123,099
=========

(2) Dividends

The dividends paid to Mohawk by its consolidated subsidiaries were $208,250,
$200,155 and $157,239 for 2001, 2000 and 1999, respectively.

SCHEDULE II

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Valuation and Qualifying Accounts

Years Ended December 31, 2001, 2000 and 1999

(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, 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 ................. 27,413 138,815 138,916 27,312
---------- ---------- ------------- ---------
Total ............................................ $ 70,479 236,404 228,525 78,358
========== ========== ============= =========

Year ended December 31, 2001:
Allowance for doubtful accounts - trade ............. $ 38,853 12,048 9,608 41,293
Provision for cash discounts ........................ 12,193 80,145 80,264 12,074
Provision for claims and allowances ................. 27,312 153,634 154,932 26,014
---------- ---------- ------------- ---------
Total.............................................. $ 78,358 245,827 244,804 79,381
========== ========== ============= =========

- ---------------
(1) Represents charge offs, net of recoveries, to the reserves.

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.)

*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 3.1 of the Mohawk registration Statement on
Form S-4, Registration No. 333-74806, as filed February 6, 2002.)

*10.13 Lease dated April 1, 2000 between Aladdin Manufacturing
Corporation and DMK Holdings LLC, concerning a warehouse in
Calhoun, Georgia. (Incorporated herein by reference to

Exhibit 10.17 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000.)