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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K10-K/A
Amendment No. 1
[Mark One]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE[NO FEE REQUIRED]

For the fiscal year ended December 31, 19961999

[ ][_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE[FEE REQUIRED]

For the transition period from Commission File Number
to 01-19826

MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 52-1604305
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

Identification No.)

P. O.P.O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (706) 629-7721

Securities Registered Pursuant to Section 12(b) of the Act:

NoneTitle of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock,
$.01 par valueNone

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ][_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X][_]

The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant (13,255,593(26,856,924 shares) on February 26, 1997June 23, 2000 was
$352,930,164.$562,316,846. 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 February 26, 1997:
34,528,709June 28, 2000:
53,123,536 shares of Common Stock, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the 1997 Annual Meeting of
Stockholders Part III

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PART I

Item 1. Business

General

Mohawk Industries, Inc. ("Mohawk" or the "Company", a term which includes the
Company and its subsidiaries, including its primary operating subsidiaries,
Mohawk Carpet Corporation ("Mohawk Carpet") and Aladdin Manufacturing
Corporation ("Aladdin Manufacturing", formerly known as Mohawk Manufacturing
Corporation)) is a leading producer of woven and tufted broadloom carpet and
rugs for residential and commercial applications. The Company is the second
largest carpet and rug manufacturer in the United States, with 1996 net sales of
approximately $1.8 billion. The Company designs, manufactures and markets carpet
and rugs in a broad range of colors, textures and patterns. The Company is
widely recognized through its premier brand names, some of which are "Mohawk,"
"Alexander Smith," "Horizon," "Mohawk Commercial," "Harbinger," "Helios,"
"American Rug Craftsmen," "Karastan," "Bigelow," "Aladdin" and "Galaxy," and
markets its products primarily through retailers and commercial dealers.
Mohawk's operations are vertically integrated from the extrusion of olefin resin
into fibers to the shipment of finished products.

History

The Company was organized in Delaware in 1988 to acquire Aladdin Manufacturing
from its predecessor owner, Mohasco Corporation, in a leveraged buy-out
transaction. The Company completed its initial public offering of common stock
in April 1992, raising approximately $42.5 million in proceeds, which were used
to retire indebtedness and redeem preferred stock outstanding at that time.
Mohawk acquired Horizon Industries, Inc. ("Horizon") in October 1992 for cash of
approximately $63.9 million and 2,673,000 shares of Common Stock valued at
approximately $22.5 million. Mohawk purchased American Rug Craftsmen, Inc.
("American Rug Craftsmen") in April 1993 for approximately $32.0 million in cash
and Karastan Bigelow in July 1993 for approximately $155.5 million, which was
substantially all cash. In May 1993, the Company completed an offering of
3,150,000 shares of Common Stock. Of the total number of shares, 2.4 million
were sold by the Company and 750,000 shares were sold by selling stockholders.
The net proceeds to the Company were approximately $46.0 million. On February
25, 1994, Mohawk acquired all of the common stock of Aladdin Mills, Inc.
("Aladdin") in exchange for approximately 13.6 million shares of Common Stock,
valued at $386.5 million, based upon the closing stock price at the date the
agreement was executed. On January 13, 1995, Mohawk acquired all of the capital
stock of Galaxy for $42.2 million in cash. On January 27, 1997, the Company
entered into an agreement to acquire certain assets of Diamond Rug & Carpet
Mills, Inc. through a pre-packaged plan of organization under the Bankruptcy
Code.

Industry

According to the most recent figures available from the United States
Department of Commerce, worldwide carpet and rug sales volume of American
manufacturers and their domestic divisions was 1.6 billion square yards in 1995.
This volume represents a market in excess of approximately $9.5 billion at the
"mill level", which management believes, basedExhibit Index starts on standard industry mark-ups,
translates into approximately $15 billion to $17 billion at the retail level.
Based upon data obtained from recent industry publications, the worldwide carpet
and rug sales volume of American manufacturers in 1996 was approximately 1.6
billion square yards and $9.7 billion. The overall level of sales in the carpet
industry is influenced by a number of factors, including consumer confidence in
spending for durable goods, interest rates, turnover in housing, the condition
of the residential and commercial construction industries and the overall
strength of the economy.

Broadloom carpet (defined as carpet over six feet by nine feet in size)
represented 84% of the volume shipped by the industry in 1995. Tufted broadloom
carpet (a category that refers to the manner of construction in addition to
size) represented 81% of the broadloom industry volume shipped in 1995. The
broadloom carpet industry has two primary markets, residential and commercial,
with the residential market making up approximately 75% of industry volume
shipped and the commercial market comprising approximately 25% in 1995. An
estimated 62% of industry shipments is made in response to replacement demand,
which usually involves exact yardage (or "cut order") shipments that typically

provide higher profit margins than sales of carpet sold in full rolls. Because
the replacement business generally involves higher quality carpet cut to order
by the manufacturer, rather than the dealer, this business tends to be more
profitable for manufacturers than the new construction business.

Products and Markets

The Company designs, manufactures and markets hundreds of styles of carpet,
rugs and mats in a broad range of colors, textures and patterns. Mohawk
positions its products in all price ranges and emphasizes quality, style,
performance and service. The Company is widely recognized through its premier
brand names, "Mohawk," "Alexander Smith," "Horizon," "Mohawk Commercial,"
"Karastan Contract," "Bigelow Commercial," "Harbinger," "Helios," "American Rug
Craftsmen," "Karastan," "Bigelow," "Aladdin," "Townhouse," "Ciboney," "Modesto,"
"Hamilton," "New Visions" and "Galaxy," and markets its products primarily
through retailers, mass merchandisers, home centers, department stores,
boutiques and commercial dealers. Some products are also marketed through
private labeling programs.

Mohawk markets certain of its products outside the United States, but does not
consider sales of such products to be material.

Residential Broadloom Market

The residential market is the largest segment of the industry and represents a
significant portion of the Company's sales. The Company currently markets
approximately 350 residential products to more than 25,000 customers which
include independent retailers, department stores, mass merchandisers, buying
groups, and building and tenant improvement contractors.

The Company has positioned its premier residential brand names across all
price ranges with the Company product retail prices ranging from below $3 to
above $80 per square yard. "Mohawk," "Alexander Smith," "Horizon," "Galaxy,"
"New Visions," "Karastan" and "Bigelow" are positioned to sell primarily in the
medium-to-high retail price range in the residential broadloom market and these
lines are also sold under private labels. These lines have substantial brand
name recognition among carpet dealers and retailers with the "Karastan,"
"Mohawk," and "Bigelow" brands having the highest consumer recognition in the
industry. "Karastan" is the leader in the exclusive high end market. The
"Aladdin," "Townhouse," "Ciboney," "Modesto" and "Hamilton" brand names compete
in the low-to-medium retail price range.

Based on a recent industry survey, the Company is considered a leader within
the industry of U.S. carpet manufacturers providing marketing support. Through
dealer programs like Karastan Gallery, Mohawk Brand Excellence, New Visions,
Hamilton, Ciboney and Mohawk Carpet Color Center, the Company offers intensive
marketing and advertising support. These programs offer varying degrees of
support to dealers in such areas of sales and management training, display
racks, exclusive promotions and assistance in certain administrative functions
such as computer systems, accounting and insurance.

During 1996, the Company completed its realignment of the Aladdin, Galaxy and
Mohawk sales forces. Although these sales forces have maintained their separate
identities, they now report to common management on a regional basis. All of the
regional vice presidents report to one senior vice president of sales. Each
region has responsibility for sales, distribution and inventory management in
its region, all of which is coordinated by the senior vice president of sales at
a national level. The inventory management on a regional level is accomplished
by a hub-and-spoke warehouse network. In this system, Company trucks generally
deliver carpet from mill sites to regional warehouses. From there, it is shipped
to local distribution warehouses, then to retailers. The Company believes that
the current structure of the residential sales group has contributed to a more
efficient and profitable organization.

Commercial Market

The commercial market is divided into several segments: educational
institutions, corporate office space, hospitality facilities, retail space and
health care facilities. In addition, Mohawk produces and sells carpet for the

export market, the federal government and other niche businesses. Different
purchase decision makers and decision-making processes exist for each segment.
For example, in the corporate office segment, decisions are usually made by
architects or specifiers, whose responsibility is to manage the project budget
and coordinate interior design. In the institutional segment, by comparison,
decisions are often made by purchasing agents employed by the end user who have
longstanding relationships with carpet manufacturers. The commercial market is
generally a more complex market in which to sell than the residential market.
The Company's participation in the commercial market allows it to offset
partially the cyclical nature of its residential business.

In the commercial market, the Company markets its products under the brand
names "Mohawk Commercial," "Harbinger," "Aladdin," "Karastan Contract" and
"Bigelow Commercial." The marketing strategy of the Mohawk Commercial, Karastan
Contract and Bigelow Commercial brands is to leverage the brands' traditional
sales strength in the educational institution segment of the market to the
office, hospitality, retail and health care segments. These brands are comprised
of specialized products for these segments that emphasize product quality and
specification rather than just price.

The Harbinger brand is a specialized line of commercial carpet generally
specified by architects and designers for end users in the hospitality,
corporate, health care and institutional market sectors. Harbinger products are
largely custom designed and colored and are marketed through its sales
organization of commercial carpet sales specialists. The Harbinger brand is
considered to be an industry leader in product quality, styling and innovation
for the high-end commercial market. Harbinger products were the first to
introduce "graphics" tufting technology to the industry and have maintained
their product development leadership by employing tufting and dyeing
technologies that produce intricate multicolored patterns.

The Aladdin brand is marketed primarily to the "mainstreet" segment of the
commercial market. The "mainstreet" segment is generally comprised of the
low-to-medium price range styles and is distributed primarily through retail
dealers for smaller installations.

Woven commercial products accounted for a significant portion of the Company's
net sales of commercial product in 1996, including the Mohawk Commercial brand's
exclusive woven interlock products, which are manufactured by a unique weaving
process that increases performance, wear and durability. The Company's ability
to make woven carpet under the Mohawk Commercial, Karastan Contract and Bigelow
Commercial brand names in large volume for commercial applications
differentiates it from other manufacturers, most of which produce tufted carpet
almost exclusively. Woven carpet and specifically the Company's woven interlock
products sell at higher prices than tufted carpet and generally produce higher
profit margins. Management believes that the Company is the largest producer of
woven carpet in the United States and that the Company has several carpet
weaving machines and processes that no other manufacturer has, thereby allowing
the Company to create carpet to meet specifications that its competitors cannot
duplicate.

Residential Rug Market

The machine-made rug market is currently the fastest growing segment of the U.
S. carpet and rug industry with an annual growth rate estimated to be
approximately 11% in 1996. Much of this growth has occurred at the low-to-
medium retail price ranges. The distribution channels for the rug market
primarily include department stores, mass merchants, floorcovering stores,
catalog stores, home centers and furniture stores.

The Company's product lines include a broad array of rugs. The Karastan brand
name rugs represent the higher retail price ranges with one of the most valued
brand names in the industry and are distributed through specialty stores, along
with department and furniture stores. These are higher quality woven wool rugs
manufactured primarily on Axminster looms.

The Company emphasizes the fast growing lower retail price ranges through its
American Rug Craftsmen brand name. The rugs sold under this brand are primarily
woven polypropylene area rugs, tufted border rugs and decorative mats, which are
made from purchased matting material that is cut, serged and screen printed by
the Company. These products are distributed primarily through mass merchants and
home centers.

The Company also sells to the bath mat and washable bath rug segments of the
rug market through its Aladdin brand name. These are tufted nylon products which
are distributed through department stores and mass merchants.

Advertising and Promotion

The Company promotes its products in the form of co-operative advertising,
point-of-sale displays and marketing literature provided to assist in marketing
various carpet styles. Mohawk also continues to rely on the substantial brand
name identification of its "Mohawk," "Alexander Smith," "Horizon," "Mohawk
Commercial," "Harbinger," "Helios," "Karastan," "Bigelow," "Aladdin," "American
Rug Craftsmen" and "Galaxy" 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 1997, the Carpet and Rug Institute approved a four-year national industry
advertising campaign with a $25 million annual budget. Funding for the program
will be raised from contributions from individual manufacturers in the carpet
industry, including suppliers of fiber, backing, latex and finished carpet and
rugs. Mohawk will be a participant in the campaign. The purpose of the program
is to advance consumer confidence, satisfaction and preference of carpet as the
floorcovering of choice.

Manufacturing and Operations

The Company's manufacturing operations are vertically integrated and include
the extrusion of resin into polypropylene and nylon fiber, yarn processing,
tufting, weaving, dyeing, coating and finishing. Capital expenditures are
primarily focused on increasing capacity, improving productivity and reducing
costs. Mohawk incurred $180.3 million in capital expenditures over the past
three years, including the $21.2 million purchase of polypropylene extrusion
equipment from Fiber One, primarily to modernize and expand manufacturing
equipment and facilities. These expenditures increased manufacturing efficiency
and capacity, while improving overall cost competitiveness.

Raw Materials and Suppliers

The principal raw materials the Company uses are nylon staple fibers; nylon
filament fibers; raw wool; polypropylene filament fibers; polyester staple
fibers; olefin resins; synthetic backing materials, polyurethane and latex; and
various dyes and chemicals. Mohawk obtains all of its major raw materials from
independent sources and all of its externally purchased nylon fibers from four
major suppliers: E.I. du Pont de Nemours and Company, Monsanto Company, BASF
Corporation and AlliedSignal, Inc. Most of the fibers the Company uses in carpet
production are treated with stain-resistant chemicals. The Company has not
experienced significant shortages of raw materials in recent years.

Competition

All of the markets in which the Company does business are highly competitive,
with approximately 100 companies engaged in the manufacture and sale of carpet
in the United States. Carpet manufacturers also face competition from the hard
surface floorcovering industry. Based on industry publications, the top twenty
North American carpet and rug manufacturers (including their American and
foreign divisions) in 1995 had worldwide sales in excess of $10 billion, and the
top twenty manufacturers in 1990 had sales in excess of $6 billion. Mohawk, with
1996 net sales of approximately $1.8 billion, is the second largest domestic
producer of carpet and rugs (in terms of sales volume).

Certain of the Company's competitors have greater financial and other
resources than the Company. In particular, the industry has one large
competitor, Shaw Industries, Inc. ("Shaw"), whose fiscal 1996 domestic wholesale
net sales were $2.4 billion representing approximately one fourth of the
estimated total industry sales for calendar 1996. Shaw's size could permit
significant raw material purchasing power and certain other manufacturing cost
advantages compared with the rest of the industry.

The principal methods of competition within the industry are price, style,
quality and service. In both the residential and commercial markets, price
competition and market coverage are particularly important because there is
relatively little perceived differentiation among competing product lines.
Mohawk's recent investments in modernized, state-of-the-art manufacturing and
data processing equipment, the extensive diversity of equipment in which it has
invested and its marketing strategy contribute to its ability to compete
primarily on the basis of performance, quality, style and service, rather than
just price.

Trademarks

Mohawk uses several trademarks that it considers important in the marketing of
its products, including "Mohawk(R)," "Tommy Mohawk(R)," "Mohawk Color
Center(R)," "Alexander Smith(R)," "Horizon(R)," "Mohawk Commercial,"
"Harbinger(R)," "Helios(R)," "Commercial Horizons(R)," "Karastan(R),"
"Bigelow(R)," "Aladdin," "American Rug Craftsmen," "Townhouse," "Ciboney(R),"
"Hamilton(R)" and "Galaxy(R)."

Sales Terms and Major Customers

The Company's sales terms are the same as those generally available throughout
the industry. The Company generally permits its customers to return broadloom
carpet purchased from it within 30 days from the date of sale if the customer is
not satisfied with the quality of the carpet. This return policy is consistent
with the Company's emphasis on quality, style and performance and promotes
customer satisfaction without generating enough returns to affect materially the
Company's operating results or financial position.

During 1996, no single customer accounted for more than 4% of Mohawk's total
net sales. The Company believes the loss of one or a few major customers would
not have a material adverse effect on the Company's business.

Backlog

Backlog of orders is generally insignificant in the carpet manufacturing
business because most residential orders are filled within several days and
commercial backlogs reflect the terms of the relevant contracts, which generally
require delivery within four to six weeks.

Employees

As of December 31, 1996, the Company employed approximately 12,000 persons.
Approximately 290 Mohawk employees are members of the Union of Needletrades,
Industrial and Textile Employees, AFL-CIO, CLC with which the Company is party
to a collective bargaining agreement. Other than with respect to these
employees, the Company is not a party to any collective bargaining agreements.
Additionally, the Company has not experienced any strikes or work stoppages. The
Company believes that its relations with its employees are good.

Environmental Matters

The Company's operations must meet federal, state and local regulations
governing the discharge of materials into the environment. All of the plants
operated by the Company were built or have been upgraded to meet current
environmental standards. The Company believes it is in material compliance with
all applicable regulations. The Company estimates that any expenses incurred in
maintaining compliance with these regulations will not materially affect
earnings.

Cyclical Nature of Industry; Current Economic Conditions

The carpet industry is a cyclical business, influenced by a number of general
economic factors, including consumer confidence and spending for durable goods,
disposable income, interest rates, turnover in housing and the condition of the
residential and commercial construction industries (including the number of new
housing starts and the level of commercial construction). During economic
downturns, the carpet industry can be expected to experience a general decline
in sales and profitability.

Item 2. Properties

The Company owns a 47,500 square foot headquarters office in Calhoun, Georgia
on an eight acre site. The following table lists the principal manufacturing and
distribution facilities owned by the Company:

Approx.
Enclosed
Area In
Square
Location Primary Products or Purposes Footage
-------- ---------------------------- -------

Dalton, GA ........... Carpet and rug manufacturing and warehousing ......... 1,762,000
Chatsworth, GA........ Carpet manufacturing, warehousing and offices......... 887,000
Dublin, GA............ Carpet manufacturing, warehousing and offices......... 831,000
Lyerly, GA............ Carpet manufacturing and warehousing.................. 635,000
Eden, NC.............. Carpet and rug manufacturing.......................... 784,200
Calhoun, GA........... Carpet manufacturing and distribution center.......... 792,000
Landrum, SC........... Weaving and finishing of carpet....................... 350,000
Dalton, GA............ Carpet dyeing......................................... 259,000
Dalton, GA............ Sample storage and distribution....................... 123,000
Eden, NC.............. Carpet and rug distribution........................... 194,000
Summerville, GA....... Sample manufacturing and distribution................. 235,000
Calhoun, GA (1)....... Sample manufacturing and distribution................. 150,000
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............ Yard manufacturing.................................... 105,400
Laurel Hill, NC....... Yarn manufacturing.................................... 203,000
Fort Oglethorpe, GA... Yarn manufacturing.................................... 194,000
Dalton, GA............ Yarn manufacturing.................................... 231,000
Calhoun, GA........... Yard manufacturing.................................... 121,000
Calhoun, GA........... Yarn manufacturing.................................... 113,800
Belton, SC (2)........ Yarn manufacturing.................................... 106,000
Tifton, GA (2)........ Yarn manufacturing.................................... 134,500
South Pittsburg, TN... Yarn manufacturing.................................... 102,000
Dalton, GA............ Warehouse............................................. 81,000
Greenville, NC........ Wool processing....................................... 103,000
Greenville, NC........ Wool processing....................................... 59,000
Philadelphia, PA...... Wool processing....................................... 50,000

___________
(1) Owned by a consolidated 50% joint venture which leases the property to the
Company.
(2) Operations have been discontinued and these facilities are held for sale.

The following table lists the Company's material leased office, manufacturing
and warehouse facilities:

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

Calhoun, GA............... Carpet manufacturing (2)........................... 241,000 Dec. 2003
Calhoun, GA............... Carpet manufacturing (2)........................... 195,000 Aug. 2004
Calhoun, GA............... Carpet manufacturing............................... 65,000 Mar. 2003
Calhoun, GA............... Carpet manufacturing and administrative offices.... 62,000 Jul. 2000
Calhoun, GA............... Warehouse.......................................... 75,000 Oct. 1997
Calhoun, GA............... Mat manufacturing and warehouse.................... 164,400 Jun. 2004
Calhoun, GA............... Warehouse (2)...................................... 97,250 Dec. 1996
Calhoun, GA............... Rug manufacturing and warehouse.................... 78,000 May 2002
Philadelphia, PA.......... Warehouse.......................................... 53,100 Dec. 2000
Columbus, OH.............. Distribution warehouse............................. 90,000 Aug. 2004
Miami, FL................. Distribution warehouse............................. 109,000 Aug. 2001
Elmwood Park, NJ.......... Distribution warehouse............................. 72,000 Apr. 1999
Jessup, MD................ Distribution warehouse............................. 98,000 Dec. 2003
Grand Prairie, TX......... Distribution warehouse............................. 91,000 Dec. 1998
Fullerton, CA............. Distribution warehouse............................. 57,000 Jul. 2001
Romeoville, IL............ Distribution warehouse............................. 108,000 Oct. 2000
Kent, WA.................. Distribution warehouse............................. 53,000 Jan. 2003
San Diego, CA............. Distribution warehouse............................. 63,000 Apr. 2010
La Mirada, CA............. Distribution warehouse............................. 220,000 Aug. 2011

- ------------
(1) Include renewal options exercisable by the Company.

(2) Includes a number of separately leased adjoining or adjacent buildings
with varying lease terms. The expiration date shown in the table is the
earliest expiration date of the respective group of leases.

The Company's properties are in good condition and adequate for its
requirements. The Company also believes its principal plants are generally
adequate to meet its production plans pursuant to its long-term sales goals. In
the ordinary course of its business, the Company monitors the condition of its
facilities to ensure that they remain adequate to meet long-term sales goals and
production plans.

Item 3. Legal Proceedings

The Company is involved in routine litigation from time to time in the regular
course of its business. Except as noted below, there are no material legal
proceedings pending or known to be contemplated to which the Company is a party
or to which any of its property is subject.

In June 1994, the Company and several other carpet manufacturers received
subpoenas to produce documents from a grand jury of the United States District
Court in Atlanta. The subpoenas were requested by the Antitrust Division of the
U. S. Department of Justice in connection with an investigation of the industry.
The Company believes that the results of this investigation will not have a
material adverse impact on the financial condition of the Company.

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.
The Company is a party to two consolidation 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 early 1996. Both
complaints were brought on behalf of a purported class of indirect purchasers of

carpet in the State of California and seek damages for alleged violations of
California antitrust and unfair competition laws. The Company believes both of
these lawsuits are without merit and intends to vigorously defend against them.

Itemsequentially numbered page 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, 1996.

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 ("Common Stock") is
quoted on the Nasdaq National Market. As of February 26, 1997, there were 485
holders of record of Common Stock. Mohawk has not paid or declared any dividends
on shares of its Common Stock since completing its initial public offering. The
Company's policy is to retain all net earnings for the development of its
business, and it does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. The payment of future cash dividends will be at the
sole discretion of the Board of Directors and will depend upon the Company's
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by the Board of Directors. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources" for a discussion of restrictions
limiting Mohawk's ability to pay dividends.

The table below sets forth the high and low sales prices per share of the
Common Stock as reported on the Nasdaq National Market for each fiscal period
indicated.

Mohawk
Common Stock
----------------
High Low
------ ------

1995
First Quarter.................................... $ 14.250 11.500
Second Quarter................................... 16.500 10.875
Third Quarter.................................... 19.250 14.500
Fourth Quarter................................... 18.000 13.500

1996
First Quarter.................................... 16.500 12.500
Second Quarter................................... 18.375 13.250
Third Quarter.................................... 26.125 16.375
Fourth Quarter................................... 27.875 20.625

1997
First Quarter (through February 26, 1997)........ 28.000 21.750

Item 6. Selected Financial Data

The following table sets forth the selected financial data of the Company
for the periods indicated, derived from the consolidated financial statements of
the Company. On October 23, 1992, the Company acquired all of the outstanding
common stock of Horizon. The operating results of Horizon are included in the
1992 consolidated statement of earnings from the date of its acquisition. On
April 30, 1993, the Company acquired all of the common stock of American Rug
Craftsmen. On July 30, 1993, the Company purchased the net assets of Karastan
Bigelow. The operating results of American Rug Craftsmen and Karastan Bigelow
are included in the Company's 1993 consolidated statement of earnings from their
respective acquisition dates. Each of the acquisitions of Horizon, American Rug
Craftsmen and Karastan Bigelow was recorded using the purchase method of
accounting. On February 25, 1994, the Company exchanged 13,562,224 shares of
Common Stock for all of the outstanding shares of Aladdin common stock in a
transaction recorded using the pooling-of-interests basis of accounting. All
financial data were restated to include the accounts and results of operations
of Aladdin. On January 13, 1995, the Company acquired all of the outstanding
capital stock of Galaxy. The operating results of Galaxy are included in the
1995 consolidated statement of earnings from the date of its acquisition. The
acquisition of Galaxy was recorded using the purchase method of accounting. 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,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- --------- --------- --------- --------

(In thousands, except per share data)
Statement of earnings data:
Net sales.............................................. $ 1,795,056 1,648,517 1,437,540 1,188,186 760,954
Cost of sales(a)....................................... 1,368,379 1,281,887 1,107,890 917,824 585,698
----------- --------- --------- --------- --------
Gross profit........................................ 426,677 366,630 329,650 270,362 175,256
Selling, general and administrative expenses........... 303,258 282,451 231,184 185,135 114,102
Restructuring costs (b)................................ 700 8,439 - 2,363 -
Carrying value reduction of property, plant
and equipment (c)................................... 3,060 23,711 - - -
Compensation expense for stock option exercises (d).... - 4,000 - - -
----------- --------- --------- --------- --------
Operating income.................................... 119,659 48,029 98,466 82,864 61,154
----------- --------- --------- --------- --------
Interest expense....................................... 31,544 34,998 27,112 18,029 9,222
Acquisition costs - Aladdin pooling (e)................ - - 10,201 - -
Other expense, net..................................... 5,390 2,570 2,987 2,659 1,242
Gain on insurance claim(a)............................. - - - (4,746) -
----------- --------- --------- --------- --------
36,934 37,568 40,300 15,942 10,464
----------- --------- --------- --------- --------
Earnings before income taxes and
extraordinary charge............................... 82,725 10,461 58,166 66,922 50,690
Income taxes(f)........................................ 33,675 4,049 25,159 27,399 20,312
----------- --------- --------- --------- --------
Earnings before extraordinary charge................ 49,050 6,412 33,007 39,523 30,378
Extraordinary charge(g)................................ - - - - 3,568
----------- --------- --------- --------- --------
Net earnings........................................ 49,050 6,412 33,007 39,523 26,810
Preferred stock dividends.............................. - - - - 132
----------- --------- --------- --------- --------
Net earnings after preferred stock dividends........ $ 49,050 6,412 33,007 39,523 26,678
=========== ========= ========= ========= ========
Earnings per common and common equivalent
share before extraordinary charge................... $ 1.42 0.19 0.99 1.19 1.06
=========== ========= ========= ========= ========
Net earnings per common and common.....................
equivalent share.................................... $ 1.42 0.19 0.99 1.19 0.93
=========== ========= ========= ========= ========
Weighted average common and common
equivalent shares outstanding....................... 34,566 33,623 33,374 33,109 28,607
=========== ========= ========= ========= ========

At or for the Years ended December 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- --------- --------- --------- --------

(In thousands, except per share data)
Balance sheet data:
Working capital ...................................... 311,668 244,800 292,163 198,735 143,831
Total assets ......................................... 955,775 903,152 854,779 776,424 477,669
Short-term note payable .............................. 21,200 50,000 - - -
Long-term debt (including current portion) ........... 366,380 353,037 399,377 328,469 175,347
Stockholders' equity ................................. 333,199 274,903 264,018 229,992 147,938

- --------------
(a) Certain of the Company's facilities suffered damage during the March 1993
blizzard, and the Company finalized settlement of the insurance claim during
the first quarter of 1994. The Company recorded reductions of $6.0 million
in cost of sales in each of the years 1993 and 1994 for reimbursements of
business interruption costs and $4.7 million in other income in 1993 related
to gains on fixed asset replacements.
(b) During 1995 and 1996, the Company recorded pre-tax restructuring costs of
$8.4 million and $.7 million, respectively, related to certain mill closings
whose operations have been consolidated into other Mohawk facilities. During
1993, the Company recorded pre-tax restructuring costs of $2.4 million
related to the closing of a woven carpet manufacturing operation and the
relocation and consolidation of this operation with a facility acquired in
the purchase of Karastan Bigelow.
(c) During 1995, the Company adopted FAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of
January 1, 1995. A charge of $23.7 million was recorded for the reduction of
the carrying value of property, plant and equipment at certain mills. During
1996, the Company recorded a charge of $3.1 million arising from the write
down of property, plant and equipment to be disposed of related to the
closing of a manufacturing facility in 1996 and a revision in the estimate
of fair value of certain property, plant and equipment based on current
market conditions related to mill closings in 1995.
(d) A one-time charge of $4.0 million was recorded 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
buy-out.
(e) The Company recorded a one-time charge of $10.2 million in 1994 for
transaction expenses related to the acquisition of Aladdin that were
incurred during the first quarter of 1994.
(f) During 1994, the Company reduced income tax expense by $2.0 million to
reflect a reduction in its effective tax rate and certain other changes in
the Company's federal and state income tax status.
(g) The extraordinary charge in 1992 relates to (i) redemption premiums and
prepayment penalties on certain indebtedness that was redeemed or repaid
with the proceeds from the Company's initial public offering and (ii) the
write-off of deferred loan costs associated with the former credit
agreement, which was replaced with a new credit agreement after the initial
public offering.

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

General

During the three-year period ended December 31, 1996, the Company continued
to experience significant growth both internally and through acquisitions. In
February 1994, the Company exchanged approximately 13.6 million shares of Common
Stock, valued at $386.5 million (based upon the closing price of the Common
Stock at December 3, 1993, the date the agreement was entered into by Mohawk,
Aladdin and the shareholders of Aladdin), for all of the outstanding shares of
Aladdin common stock in a merger accounted for using the pooling-of-interests
basis of accounting. All financial data included in the Company's historical
consolidated financial statements were restated to include the accounts and
results of operations of Aladdin. In January 1995, the Company acquired all of
the issued and outstanding capital stock of Galaxy for $42.2 million in cash in
a business combination accounted for using the purchase method of accounting.

These acquisitions have created other opportunities to enhance Mohawk's
operations by (i) expanding the Company's product lines to include many of the
most recognized brand names in the industry, (ii) increasing the Company's
ability to obtain volume discounts from suppliers, (iii) increasing production
efficiencies due to economies of scale and (iv) reducing the fixed cost

structure of the combined entities by eliminating redundant costs.

On January 27, 1997, the Company entered into an asset purchase agreement to
acquire certain assets of Diamond Rug & Carpet Mills, Inc. The proposed purchase
price will be a maximum of $43.0 million in cash, subject to adjustment based on
the level of inventory at closing. Under the asset purchase agreement, Mohawk
has agreed to purchase selected facilities owned by Diamond's principal
shareholders. If completed, the acquisition will be accomplished through a
prepackaged or other plan of reorganization under Chapter 11 of the United
States Bankruptcy Code and will be primarily financed through existing credit
facilities.

Results of Operations
Year Ended December 31, 1996 As Compared With Year Ended December 31, 1995

Net sales for the year ended December 31, 1996 were $1,795.1 million,
reflecting an increase of $146.5 million, or 9%, over the $1,648.5 million
reported in the year ended December 31, 1995. This sales increase was
attributable to an improvement in the Company's market share which the Company
believes primarily resulted from competitive changes in the retail segment of
the industry, Mohawk's realignment of its residential sales forces under a
regional structure, and Mohawk's strong product lines. The Company experienced a
significant increase in unit shipments as a result of these factors with average
net selling prices remaining flat as compared to 1995.

Quarterly net sales and the percentage changes in net sales by quarter for
1996 versus 1995 were as follows (dollars in thousands):

1996 1995 Change
---- ---- ------
First Quarter......................... $ 383,667 378,761 1.3%
Second Quarter........................ 474,552 429,241 10.6
Third Quarter......................... 471,199 425,594 10.7
Fourth Quarter........................ 465,638 414,921 12.2
----------- --------- ----
Total Year.......................... $ 1,795,056 1,648,517 8.9%
=========== ========= ====

Gross profit for 1996 was $426.7 million (23.8% of net sales) and represented
an increase over the gross profit of $366.6 million (22.2% of net sales) for
1995. Gross profit dollars for the current year were impacted favorably by
manufacturing improvements from restructuring and consolidating the residential
operations, higher production levels resulting in better absorption of fixed
costs, a reduction in certain raw material prices and manufacturing improvements
in other divisions. The manufacturing consolidations include the closing of five
residential manufacturing facilities during 1995 as well as the realignment of
the remaining residential mills to better utilize the strengths of each mill.
The Company's integration of its manufacturing, distribution and information
systems areas is progressing as planned and continues to contribute to the
margin improvement.

Selling, general and administrative expenses for 1996 were $303.3 million
(16.9% of net sales) compared to $282.5 million (17.1% of net sales) for 1995.
Selling, general and administrative expenses as a percentage of net sales
decreased primarily due to better control of discretionary spending and better
leveraging of costs on strong sales growth.

During 1996, the Company recorded nonrecurring charges of (i) $3.1 million
which included $0.9 million, primarily to reduce the carrying value of certain
assets, related to the decision to close a spinning mill in Belton, South
Carolina and $2.2 million primarily arising from a revision in the estimate of
the fair value of certain land and buildings that were recently sold and (ii)
$0.7 million related to restructuring costs for the Belton spinning mill
closing.

The Company recorded restructuring costs of $8.4 million during 1995 related
to certain mill closings whose operations have been consolidated into other
Mohawk facilities. The after-tax effect of these costs was $5.2 million or $0.15
per share.

During 1995, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (FAS No. 121) as of January 1, 1995. An impairment
loss of $23.7 million was recorded for the write-down of property, plant and
equipment at certain mills. The after-tax effect of the impairment loss was
$14.5 million, or $0.43 per share.

A one-time charge of $4.0 million was recorded during 1995 for income tax
reimbursements to be made to certain executives for the exercise of stock
options. The income tax reimbursements were recorded in connection with stock
options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
The agreements allow the Company to receive an income tax benefit on its tax
return for the tax effect of the taxable compensation provided to the
individuals upon exercise of these options. Such income tax benefit resulted in
a direct increase in stockholders' equity.

Interest expense for the current year was $31.5 million compared to $35.0
million in 1995. The primary factors contributing to the decrease were a
reduction in debt levels and lower interest rates on the Company's revolving
credit agreement.

In the current year, income tax expense was $33.7 million, or 40.7% of
earnings before income taxes. In 1995, income tax expense was $4.0 million,
representing 38.7% of earnings before income taxes. The primary reason for the
lower effective tax rate in 1995 was certain nonrecurring deductions that were
treated as permanent differences in 1995.

Year Ended December 31, 1995 As Compared With Year Ended December 31, 1994

Net sales for the year ended December 31, 1995 were $1,648.5 million,
reflecting an increase of $211.0 million, or 14.7%, over the $1,437.5 million
reported in the year ended December 31, 1994. This sales increase was
attributable primarily to increased unit shipments of broadloom carpet and rugs
during 1995 as a result of the acquisition of Galaxy as well as internal growth
by Aladdin and American Rug Craftsmen. The sales volume increase was partially
offset by a decrease in average net selling prices resulting from soft market
conditions, related to slow housing starts and resales in 1995, all of which
increased competitive pressures in the industry.

Quarterly net sales and the percentage changes in net sales by quarter for
1995 versus 1994 were as follows (dollars in thousands):

1996 1995 Change
---- ---- ------
First Quarter.......................... $ 378,761 327,025 15.8%
Second Quarter......................... 429,241 370,749 15.8
Third Quarter.......................... 425,594 377,484 12.7
Fourth Quarter......................... 414,921 362,282 14.5
---------- --------- ----
Total Year......................... $1,648,517 1,437,540 14.7%

Gross profit for 1995 was $366.6 million (22.2% of net sales) and
represented an increase over the gross profit of $329.7 million (22.9% of net
sales) for 1994. Gross profit dollars for the current year were impacted
favorably by the acquisition of Galaxy and the internal growth of Aladdin and
American Rug Craftsmen. The Company's gross profit was negatively impacted
during 1995 as a result of industry-wide raw material price increases in
polypropylene-based materials. In addition to the cost pressures, soft market
conditions increased competitive pressures in the industry during 1995. The
Company recorded a pre-tax reduction of $6.0 million in cost of sales in 1994
for the final reimbursement of business interruption costs related to the
insurance claim for property damage suffered in the March 1993 blizzard.

Selling, general and administrative expenses for 1995 were $282.5 million
(17.1% of net sales) compared to $231.2 million (16.1% of net sales) for 1994.
Selling, general and administrative expenses in dollars and as a percentage of
net sales increased primarily due to higher bad debt expense resulting from the
write-off of some large customers that filed for protection under bankruptcy
laws in 1995, and increased sample costs.

During 1995, the Company adopted FAS No. 121 as of January 1, 1995. An
impairment loss of $23.7 million was recorded for the write-down of property,
plant and equipment at certain mills. The after-tax effect of the impairment
loss was $14.5 million, or $0.43 per share.

options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
The agreements allow the Company to receive an income tax benefit on its tax
return for the tax effect of the taxable compensation provided to the
individuals upon exercise of these options. Such income tax benefit resulted in
a direct increase in stockholders' equity.

Interest expense for the current year was $35.0 million compared to $27.1
million in 1994. Factors causing the increased interest expense were additional
debt required to finance capital expenditures in 1995 to expand production
capacity, and additional debt that was incurred in January 1995 to finance the
acquisition of Galaxy.

During 1994, the Company recorded a one-time non-operating charge of $10.2
million for transaction expenses related to the acquisition of Aladdin.

In 1995, income tax expense was $4.0 million, or 38.7% of earnings before
income taxes. In 1994, income tax expense was $25.2 million, representing 43.3%
of earnings before income taxes. The Company did not record an income tax
benefit for a significant portion of the $10.2 million one-time charge resulting
in a higher effective tax rate during 1994. During 1994, the Company reduced
income tax expense by $2.0 million to reflect a reduction in its effective tax
rate and certain other changes in the Company's federal and state income tax
status.

Liquidity and Capital Resources

The Company's primary capital requirements are for working capital, capital
expenditures and acquisitions. The Company's working capital needs are met
through a combination of internally-generated funds, bank credit lines and
credit terms from suppliers.

The level of accounts receivable increased from $177.8 million at the
beginning of 1996 to $215.1 million at December 31, 1996. The $37.3 million
increase is attributable to strong sales growth. Inventories rose from $299.2
million at the beginning of 1996 to $302.7 million at December 31, 1996, due
primarily to the increased sales.

Capital expenditures totaled $63.3 million during 1996, which includes $21.2
million of equipment used primarily for the extrusion of polypropylene yarn that
was acquired in a noncash transaction in exchange for a promissory note due in
April 1997. The promissory note pays interest at a variable rate that ranges
from 0.25% to 0.875% above LIBOR and was paid in full in January 1997. The
capital expenditures made during 1996 were incurred primarily to modernize and
expand manufacturing facilities and equipment. The Company's capital projects
are primarily focused on increasing capacity, improving productivity and
reducing costs. Capital expenditures for Mohawk including the $21.2 million of
polypropylene extrusion equipment from Fiber One, have totaled $180.3 million
over the past three years. Capital spending during 1997 is expected to range
from $65 million to $70 million, the majority of which will be used to purchase
equipment to increase production capacity and productivity.

On June 6, 1996, the Company amended and restated its revolving credit
agreement to decrease its credit availability from $300 million to $250 million
due to decreasing external financing needs. At December 31, 1996, the Company
had $127.2 million of unused credit availability under its revolving credit
line. The credit agreement's interest rate either (i) ranges from 0.25% to
0.875% above LIBOR, depending upon the Company's performance measured against
specific coverage ratios, or (ii) is the prime rate. The credit agreement
contains customary financial and other covenants and restricts cumulative
dividend payments to $10.0 million as adjusted based on the Company's
performance and dividend payments. 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.

Impact of Inflation

Inflation affects the Company's manufacturing costs and operating expenses.
The carpet industry has experienced moderate inflation in the prices of raw
materials and outside processing for the last three years. The Company has
generally passed along nylon fiber increases to its customers.

Seasonality

The carpet business is seasonal, with the Company's second, third and fourth
quarters typically producing higher net sales and operating income. By
comparison, results for the first quarter tend to be the weakest. This

seasonality is primarily attributable to consumer residential spending patterns
and higher installation levels during the spring and summer months.

Forward-Looking Information

Certain of the matters discussed in the preceding pages, particularly
regarding anticipating financial performance, business prospects, proposed
acquisitions, new products and similar matters, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended. Forward-looking statements involve a number of risks and uncertainties.
Factors that would cause actual results to differ materially include, but are
not limited to, the following: marketing conditions in the carpet industry, raw
material prices, timing of capital expenditures, the successful integration of
acquisitions, the successful introduction of new products, the successful
rationalization of existing operations, and other risks identified from time to
time in the Company's SEC reports and public announcements.

Item 8. Consolidated Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report............................................ 15
Consolidated Balance Sheets as of December 31, 1996 and 1995............ 16
Consolidated Statements of Earnings for the Years ended
December 31, 1996, 1995 and 1994 .................................. 17
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1996, 1995 and 1994................................... 18
Consolidated Statements of Cash Flows for the Years ended
December 31, 1996, 1995 and 1994................................... 19
Notes to Consolidated Financial Statements...............................20

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Mohawk Industries, Inc.:

We have audited the consolidated financial statements of Mohawk
Industries, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in Item 14(a)2. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

As discussed in note 1, the Company changed its method of accounting
for impairment of long-lived assets and for long-lived assets to be disposed of
in 1995.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 7, 1997

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 1996 and 1995

(In thousands, except per share data)

ASSETS 1996 1995
--------- ---------

Current assets:
Receivables................................................................... $ 215,111 177,778
Inventories................................................................... 302,723 299,191
Prepaid expenses.............................................................. 20,221 17,607
Deferred income taxes......................................................... 18,186 12,858
--------- ---------
Total current assets........................................... 556,241 507,434
Property, plant and equipment, net................................................... 324,698 317,966
Other assets......................................................................... 74,836 77,752
--------- ---------
$ 955,775 903,152
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and notes payable........................... $ 41,832 61,262
Accounts payable and accrued expenses......................................... 202,741 201,372
--------- ---------
Total current liabilities...................................... 244,573 262,634
Deferred income taxes................................................................ 27,530 21,742
Long-term debt, less current portion................................................. 345,748 341,775
Other long-term liabilities.......................................................... 4,725 2,098
--------- ---------
Total liabilities.............................................. 622,576 628,249
--------- ---------

Stockholders' equity:
Preferred stock, $.01 par value; 60,000 shares authorized; no shares issued... - -
Common stock, $.01 par value; 75,000 shares authorized; 34,471 and 34,394
shares issued in 1996 and 1995, respectively................................ 345 344
Additional paid-in capital.................................................... 131,560 122,747
Retained earnings............................................................. 201,294 152,244
--------- ---------
333,199 275,335
Less:
Treasury stock, at cost; 1,302 shares in 1995......................... - 115
Deferred compensation from stock options.............................. - 317
--------- ---------
Total stockholders' equity.................................... 333,199 274,903
Commitments and contingencies (Notes 10 and 14)
--------- ---------
$ 955,775 903,152
========= =========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings
Years Ended December 31, 1996, 1995 and 1994

(In thousands, except per share data)

1996 1995 1994
---------- ----------- -----------

Net sales................................................................. $1,795,056 1,648,517 1,437,540
Cost of sales............................................................. 1,368,379 1,281,887 1,107,890
---------- ----------- -----------
Gross profit....................................................... 426,677 366,630 329,650
Selling, general and administrative expenses.............................. 303,258 282,451 231,184
Restructuring costs....................................................... 700 8,439 -
Carrying value reduction of property, plant and equipment................. 3,060 23,711 -
Compensation expense for stock option exercises........................... - 4,000 -
---------- ----------- -----------
Operating income................................................... 119,659 48,029 98,466
---------- ----------- -----------
Other expense:
Interest expense....................................................... 31,544 34,998 27,112
Acquisition costs - Aladdin pooling.................................... - - 10,201
Other expense, net..................................................... 5,390 2,570 2,987
---------- ----------- -----------
36,934 37,568 40,300
---------- ----------- -----------
Earnings before income taxes....................................... 82,725 10,461 58,166
Income taxes.............................................................. 33,675 4,049 25,159
---------- ----------- -----------
Net earnings....................................................... $ 49,050 6,412 33,007
========== =========== ===========

Earnings per common and common equivalent share........................... $ 1.42 0.19 0.99
========== =========== ===========
Weighted average common and common equivalent shares outstanding.......... 34,566 33,623 33,374
========== =========== ===========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994

(In thousands)

Common stock Additional Total
------------------ paid-in Retained Treasury Stock stockholders'
Shares Amount capital earnings stock options equity
-------- ------ --------- -------- ------ ------- -----------

Balances at December 31, 1993...................... 34,289 $343 117,962 112,825 (168) (970) 229,992
Stock options exercised............................ 15 - 109 - 4 - 113
Tax benefit from exercise of stock
options....................................... - - 579 - - - 579
Amortization of deferred
compensation.................................. - - - - - 327 327
Net earnings....................................... - - - 33,007 - - 33,007
-------- ---- --------- -------- ------ ------ --------
Balances at December 31, 1994...................... 34,304 343 118,650 145,832 (164) (643) 264,018
Stock options exercised............................ 90 1 742 - 49 - 792
Tax benefit from exercise of stock
options....................................... - - 3,355 - - - 3,355
Amortization of deferred
compensation.................................. - - - - - 326 326
Net earnings....................................... - - - 6,412 - - 6,412
-------- ---- --------- -------- ------ ------ --------
Balances at December 31, 1995...................... 34,394 344 122,747 152,244 (115) (317) 274,903
Stock options exercised............................ 77 1 1,207 - 115 - 1,323
Tax benefit from exercise of stock
options....................................... - - 7,606 - - - 7,606
Amortization of deferred
compensation.................................. - - - - - 317 317
Net earnings....................................... - - - 49,050 - - 49,050
-------- ---- --------- -------- ------ ------ --------
Balances at December 31, 1996...................... 34,471 $345 131,560 201,294 - - 333,199
======== ==== ========= ======== ====== ====== ========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994

(In thousands)

1996 1995 1994
----------- --------- ---------

Cash flows from operating activities:
Net earnings.......................................................... $ 49,050 6,412 33,007
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization.................................... 55,156 52,560 49,485
Deferred income taxes............................................ 460 (10,335) 5,324
Provision for doubtful accounts.................................. 13,213 9,649 6,047
Loss on sale of property, plant and equipment.................... 1,254 105 400
Carrying value reduction of property, plant and equipment........ 3,060 23,711 -
Compensation expense for stock option exercises.................. - 4,000 -
Changes in assets and liabilities, net of effects of acquisitions:
Receivables................................................... (56,576) 21,091 (28,456)
Insurance claim receivable.................................... - - 3,884
Inventories................................................... (3,532) (5,512) (21,912)
Accounts payable and accrued expenses......................... 6,753 13,097 (35,391)
Other assets and prepaid expenses............................. (8,376) (2,183) 9,862
Other liabilities............................................. 4,868 (1,678) 291
----------- --------- ---------
Net cash provided by operating activities................... 65,330 110,917 22,541
----------- --------- ---------
Cash flows from investing activities:
Proceeds from insurance recoveries for and sale of property, plant
equipment and other assets......................................... 3,247 6,460 -
Additions to property, plant and equipment........................... (42,085) (38,961) (78,018)
Acquisitions, net of cash acquired................................... - (42,232) (13,946)
----------- --------- ---------
Net cash used in investing activities....................... (38,838) (74,733) (91,964)
----------- --------- ---------
Cash flows from financing activities:
Net change in revolving line of credit................................ (22,903) 2,241 63,038
Payments on term loans................................................ (13,754) (5,081) (4,513)
Change in outstanding checks in excess of cash........................ 919 6,671 (4,748)
Redemption of Aladdin indebtedness.................................... - - (87,617)
Redemption of Galaxy indebtedness..................................... - (44,487) -
Proceeds from new loan................................................ - - 100,000
Common stock transactions............................................. 9,246 4,472 692
----------- --------- ---------
Net cash provided by (used in) financing activities........ (26,492) (36,184) 66,852
----------- --------- ---------
Net decrease in cash....................................... - - (2,571)
Cash, beginning of year.................................................... - - 2,571
----------- --------- ---------
Cash, end of year.......................................................... $ - - -
=========== ========= =========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994

(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.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(b) Accounts Receivable and Revenue Recognition

The Company is a broadloom carpet and rug manufacturer and sells
carpet and rugs throughout the United States for residential and commercial use.
The Company grants credit to customers, most of whom are retail carpet dealers,
under credit terms that are customary in the industry.

Revenues are recognized when goods are shipped. The Company provides
allowances for expected cash discounts, returns, claims and doubtful accounts
based upon historical bad debt and claims experience and periodic evaluations of
the aging of the accounts receivable.

Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the last-in, first-out (LIFO) method, which
matches current costs with current revenues, for substantially all inventories
and the first-in, first-out (FIFO) method for the remaining inventories.

(d) Property, Plant and Equipment

Property, plant and equipment is stated at cost, including interest
on funds borrowed to finance the acquisition or construction of major capital
additions. Depreciation is calculated on a straight-line basis over the
estimated remaining useful lives of the respective assets.

(e) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(f) Earnings Per Common and Common Equivalent Share

The Company's earnings per share are computed by dividing net earnings
by the weighted average common and common equivalent shares outstanding.
Dilutive common stock options are included in the earnings per share calculation
using the treasury stock method. Common equivalent shares outstanding for the
fourth quarter of 1995 (912 equivalent shares) and the first quarter of 1994
(1,358 equivalent shares) are excluded from the earnings per share computation
for 1995 and 1994 as the effect on loss per share for such quarters would have
been anti-dilutive.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"), which establishes a new method of accounting for
stock-based compensation arrangements with an entity's employees. The new method
is a fair value based method rather than the intrinsic value based method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("Opinion No. 25"). FAS No. 123 allows entities to retain the current approach
set forth in Opinion No. 25 for recognizing stock-based compensation expense in
the basic financial statements. Entities electing to apply the provisions of
Opinion No. 25 are required to make pro forma disclosures of net earnings and
earnings per share as if the fair value based method had been used. The Company
continues to apply the provisions of Opinion No. 25 for purposes of measuring
compensation cost in adopting FAS No. 123. The disclosure requirements of FAS
No. 123 are effective for 1996, but the effect of the pro forma disclosures on
the Company's comparative results of operations for 1995 and 1996 was
immaterial.

(g) Financial Instruments

The Company's financial instruments consist primarily of cash,
accounts receivable, accounts payable, notes payable and long-term debt. The
carrying amount of cash, accounts receivable, accounts payable and notes payable
approximates their fair value because of the short-term maturity of such
instruments. Interest rates that are currently available to the Company for
issuance of long-term debt with similar terms and remaining maturities are used
to estimate the fair value of the Company's long-term debt. The estimated fair
value of the Company's long-term debt at December 31, 1996 was $371,736,
compared to a carrying amount of $366,380.

(h) Fiscal Year

The Company ends its fiscal year on December 31. Each of the first
three quarters in the fiscal year ends on the Saturday nearest the calendar
quarter end.

(i) Goodwill

Goodwill arises in connection with business combinations accounted for
as purchases. Goodwill is amortized on a straight-line basis over 40 years.
Amortization charged to earnings was $1,481 in 1996 and 1995 and $1,506 in 1994.

(j) Impairment of Long-Lived Assets

In 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of "("FAS No. 121"), as of January 1, 1995.
Under FAS No. 121, the Company evaluates impairment of long-lived assets on a
business unit basis, rather than on an aggregate entity basis, whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. If the sum of the expected future undiscounted cash flows is
less than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets is based on the fair
value of the asset.

(k) Reclassifications

Certain prior years' financial statement balances have been
reclassified to conform with the current year's presentation.

(2) Acquisitions

On February 25, 1994, the Company acquired all of the common stock of
Aladdin in exchange for 13,562 shares of the Company's common stock. Aladdin
designs, manufactures and sells broadloom carpet and rugs. The acquisition of
Aladdin was accounted for under the pooling-of-interests basis of accounting
and, accordingly, the Company's historical consolidated financial statements
were restated to include the accounts and results of operations of Aladdin. The
Company incurred a one-time charge of $10,201 during the first quarter of 1994
for transaction expenses related to the acquisition of Aladdin, and such charge
is included as a non-operating expense for the year ended December 31, 1994.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

On January 13, 1995, the Company acquired all of the issued and
outstanding capital stock of Galaxy Carpet Mills, Inc. ("Galaxy") for $42,232 in
cash, including acquisition costs. Galaxy is a manufacturer and distributor of
broadloom carpet, primarily for the residential market. 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 fair values
allocated were $112,583 for the assets acquired and $70,351 for the liabilities
assumed. Galaxy's results of operations are included in the Company's 1995
consolidated statement of earnings from the date of acquisition.

On January 27, 1997, the Company entered into an asset purchase
agreement to acquire certain assets of Diamond Rug & Carpet Mills, Inc.
("Diamond"). The proposed purchase price will be a maximum of $43,000 in cash,
subject to adjustment based on the level of inventory at closing. Under the
asset purchase agreement, Mohawk has agreed to purchase selected facilities
owned by Diamond's principal shareholders. If completed, the acquisition will be
accomplished through a prepackaged or other plan of reorganization under Chapter
11 of the United States Bankruptcy Code.

(3) Receivables

Receivables are as follows:

1996 1995
-------- --------

Customers, trade ..................................................... $247,485 206,015
Income tax receivable ................................................ - 1,298
Other ................................................................ 2,470 2,610
-------- --------
249,955 209,923
Less allowance for discounts, returns, claims and doubtful accounts .. 34,844 32,145
-------- --------
Net receivables ....................................... $215,111 177,778
======== ========
(4) Inventories

The components of inventories are as follows:
1996 1,995
-------- --------
Finished goods ............................................... $151,068 165,137
Work in process .............................................. 45,428 47,125
Raw materials ................................................ 106,227 86,929
-------- --------
Total inventories .................................... $302,723 299,191
======== ========

(5) Property, Plant and Equipment

Following is a summary of property, plant and equipment:
1996 1995
-------- --------
Land ................................................................. $ 7,678 7,325
Buildings and improvements ........................................... 118,224 106,819
Machinery and equipment .............................................. 370,938 318,176
Furniture and fixtures ............................................... 20,236 16,969
Leasehold improvements ............................................... 2,573 3,323
Construction in progress ............................................. 10,312 18,436
-------- --------
529,961 471,048
Less accumulated depreciation and amortization ....................... 205,263 153,082
-------- --------
Net property, plant and equipment ............................ $324,698 317,966
======== ========

Property, plant and equipment includes capitalized interest of $1,180,
$2,169 and $1,382 in 1996, 1995 and 1994, respectively.

During 1996, the Company recorded a charge of $3,060 arising from (a) the
write-down of property, plant and equipment to be disposed of related to the
closing of a manufacturing facility in 1996 and (b) a revision in the estimate
of fair value of certain property, plant and equipment based on current market
conditions related to mill closings in 1995 (see Note 12). The after-tax effect
of the charge for the year was $1,815, or $0.05 per share.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

In connection with the adoption of FAS No. 121 in 1995, the Company
recorded impairment losses of $21,000 for the write-down of property, plant and
equipment to be held and used at certain mills and $2,711 for the write-down of
property, plant and equipment to be disposed of related to these mill closings.
The after-tax effect of these impairment losses for the year was $14,535, or
$0.43 per share. The Company primarily used a discounted cash flow analysis to
estimate the fair value of these assets.

(6) Other Assets

The components of other assets are summarized below:

1996 1995
-------- ---------

Goodwill, net of accumulated amortization of $5,589 and $4,108, respectively .... $ 53,679 55,160
Other assets .................................................................... 21,157 22,592
-------- ---------
Total other assets ..................................................... $ 74,836 77,752
======== ========

(7) Note Payable and Long-Term Debt

In June 1996, the Company acquired certain equipment, primarily used for
the extrusion of polypropylene yarn, valued at $21,200 in exchange for a
promissory note due in April 1997. The promissory note pays interest at a
variable rate that ranges from 0.25% to 0.875% above LIBOR. The note was paid in
full in January 1997.

On June 6, 1996, the Company amended and restated its revolving credit
agreement to decrease its credit availability from $300,000 to $250,000 due to
decreasing external financing needs. At December 31, 1996, the Company had
$127,200 of unused credit availability under its revolving credit line. The
credit agreement's interest rate either (i) ranges from 0.25% to 0.875% above
LIBOR, depending upon the Company's performance measured against specific
coverage ratios, or (ii) is the prime rate. The credit agreement contains
customary financial and other covenants and restricts cumulative dividend
payments to $10,000 as adjusted based on the Company's performance and dividend
payments. 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 capital stock of each of the Company's subsidiaries has been pledged
as collateral under the credit agreement, the term loans and the senior notes.

Long-term debt consists of the following:

1996 1995
-------- ---------

Revolving line of credit, due May 15, 1999 ............................. $122,800 95,190
8.46% senior notes, payable in annual principal installments
beginning in 1998, due September 16, 2004, interest
payable quarterly .................................................... 100,000 100,000
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually ........................................ 85,000 85,000
8.48% term loans, payable in annual principal installments
beginning in 1996, due October 26, 2002, interest payable
quarterly ............................................................ 34,286 40,000
9.5% senior notes, payable in annual principal installments,
due April 1, 1998, interest payable semiannually ..................... 7,500 11,250
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually ......................................................... 10,000 10,000
7% term note, payable in annual principal and interest
installments, due July 31, 1999 (paid in full in April 1996) ......... - 3,879
Other .................................................................. 6,794 7,718
-------- ---------
Total long-term debt ................................................. 366,380 353,037
Less current portion ................................................... 20,632 11,262
-------- ---------
Long-term debt, excluding current portion ............................ $345,748 341,775
======== ========

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

The aggregate maturities of long-term debt as of December 31, 1996 are as
follows:

1997....................... $ 20,632
1998....................... 34,623
1999....................... 153,673
2000....................... 30,873
2001....................... 30,873
Thereafter................. 95,706
--------
$366,380
========

(8) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are as follows:

1996 1995
-------- ---------

Outstanding checks in excess of cash.......................................... $ 31,800 30,881
Accounts payable, trade....................................................... 86,369 98,122
Accrued expenses.............................................................. 68,635 53,574
Accrued compensation.......................................................... 15,937 18,795
-------- --------
Total accounts payable and accrued expenses..................................... $202,741 201,372
======== ========

(9) Stock Options

Under the Company's employee stock option plans, options may be granted
to directors and key employees through 2002 and 2003 to purchase a maximum of
1,500 and 450 shares of common stock, respectively. During 1996, options to
purchase 266 and 148 shares, respectively, were granted under these plans.
Options granted under each of these plans expire ten years from the date of
grant and become exercisable at such dates and at prices as determined by the
Compensation Committee of the Company's Board of Directors.

During 1996, the Company adopted the 1997 Non-Employee Director Stock
Compensation Plan. The plan provides for grants of up to 25 shares of common
stock of the Company for non-employee directors to receive in lieu of cash for
their annual retainers.

Additional information relating to the Company's stock option plans
follows:

1996 1995 1994
------------- ---------- ---------

Options outstanding at beginning of year......................... 2,559 3,225 2,780
Options granted.................................................. 414 103 620
Options exercised................................................ (1,410) (634) (55)
Options canceled................................................. (166) (135) (120)
------------ ----------- -----------
Options outstanding at end of year............................... 1,397 2,559 3,225
============ =========== ===========
Options exercisable at end of year................................ 406 1,578 2,034
============ =========== ===========

Option prices per share:
Options granted during the year.................................. $14.91-17.00 14.00-18.25 14.38-27.50
============ =========== ===========
Options exercised during the year................................ $ .02-21.75 .02-10.00 .01-10.00
============ =========== ===========
Options canceled during the year.................................. $ 8.50-28.75 8.50-28.75 8.50-28.75
============ =========== ===========
Options outstanding at end of year................................ $ .04-28.75 .02-28.75 .02-28.75
============ =========== ===========

A one-time charge of $4,000 was recorded in the fourth quarter of 1995
for income tax reimbursements to be made to certain executives for the exercise
of stock options. The income tax reimbursements were recorded in accordance with
the stock option agreements in 1988 and 1989 in connection with the Company's
1988 leveraged buyout. The agreements allow the Company to receive an income tax
benefit on its tax return for the tax effect of the taxable compensation
provided to the individuals upon the exercise of these options. Such income tax
benefit resulted in a direct increase in stockholders' equity of $7,606 in 1996
primarily from the exercise of these options.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

(10) Employee Benefit Plans

The Company has a 401(k) retirement savings plan (the "Plan") open to
in excess of 55% of its employees who have completed one year of eligible
service. The Company contributes $0.50 for every $1.00 of employee contributions
up to a maximum of 4% of the employee's salary. Employee and employer
contributions to the Plan were $6,308 and $2,061 in 1996, $6,970 and $2,225 in
1995 and $7,073 and $2,214 in 1994, respectively.

Substantially all of the remaining employees are eligible to
participate in a defined contribution profit sharing plan. Contributions are
discretionary and the Company expensed $2,130, $1,875 and $2,441 for the years
ended December 31, 1996, 1995 and 1994, respectively.

(11) Insurance Claim

Certain of the Company's facilities located in Calhoun, Georgia
suffered damage during the blizzard that hit the Eastern United States on March
13, 1993, resulting in temporary interruptions to the operations of these
facilities. All of the damage was fully insured against (both on a business
interruption and property basis), and the Company finalized settlement of the
insurance claim during the first quarter of 1994. The Company recorded a
reduction of $6,005 in cost of sales for reimbursements of business interruption
costs for the year ended December 31, 1994.

(12) Restructuring Costs

During the fourth quarter of 1996, the Company decided to close a
spinning mill in Belton, South Carolina, the operations of which are being
consolidated into other Mohawk facilities. For the year ended December 31, 1996,
the Company recorded restructuring costs of $700 related to employee termination
benefits, environmental clean-up and other costs associated with the mill
closing. The after-tax effect of the restructuring costs for the year was $415,
or $0.01 per share.

During 1995, the Company closed five residential manufacturing
facilities, the operations of which are being consolidated into other Mohawk
facilities. During the year ended December 31, 1995, the Company recorded
restructuring costs of $8,439 related to employee termination benefits,
relocating inventories and equipment and other costs associated with the mill
closings. The amount of termination benefits accrued and charged to expense was
$2,250 for the year ended December 31, 1995. The benefits accrued were for 945
employees, who were principally involved in manufacturing operations. The amount
of actual termination benefits paid and charged against the liability as of
December 31, 1995 was $2,186, covering approximately 930 employees. The after-
tax effect of the restructuring costs for the year was $5,173, or $0.15 per
share. All of these costs have been paid as of December 31, 1996.

(13) Income Taxes

Income tax expense attributable to earnings before income taxes for
the years ended December 31, 1996, 1995 and 1994 consists of the following:

Current Deferred Total
------- -------- -----

1996:
U.S. federal........................................ $31,113 (1,142) 29,971
State and local..................................... 2,102 1,602 3,704
------- ------- ------
$33,215 460 33,675
======= ======= ======
1995:
U.S. federal........................................ $11,422 (8,311) 3,111
State and local..................................... 2,962 (2,024) 938
------- ------- ------
$14,384 (10,335) 4,049
======= ======= ======
1994:
U.S. federal........................................ $16,939 4,451 21,390
State and local..................................... 2,896 873 3,769
------- ------- ------
$19,835 5,324 25,159
======= ======= ======

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

Income tax expense attributable to earnings before income taxes differs
from the amounts computed by applying the U.S. federal income tax rate of 35
percent to earnings before income taxes as follows:

1996 1995 1994
------ ----- ------

Computed "expected" tax expense ............................ $28,954 3,661 20,358
State and local income taxes, net of federal................
income tax benefit........................................ 1,868 610 2,450
Acquisition costs - Aladdin pooling......................... - - 3,472
Stock offering.............................................. - (987) -
Amortization of goodwill.................................... 519 524 527
Adjustment to deferred tax assets and liabilities
for changes in tax rates and tax status................... - - (1,950)
Other, net.................................................. 2,334 241 302
------- ----- ------
$33,675 4,049 25,159
======= ===== ======

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below:

1996 1995
------- ------

Deferred tax assets:
Accounts receivable.................................... $ 11,789 10,252
Accrued expenses....................................... 7,885 5,508
Purchased net operating loss carryforwards............. 5,712 7,096
Other.................................................. 1,315 1,411
------- -------
Gross deferred tax assets...................... 26,701 24,267
------- -------
Deferred tax liabilities:
Plant and equipment.................................... (28,963) (28,147)
Inventories............................................ (2,224) (3,762)
Other.................................................. (4,858) (1,242)
------- -------
Gross deferred tax liabilities................. (36,045) (33,151)
------- -------
Net deferred tax liability..................... $ (9,344) (8,884)
======== =======

At December 31, 1996, as a result of the Galaxy acquisition, the
Company had net operating loss carryforwards for income tax purposes of $14,647.
These net operating loss carryforwards are available to offset future taxable
income, if any, and expire in 2009. Utilization of the net operating loss
carryforwards is subject to certain limitations under the Internal Revenue Code.

(14) Commitments and Contingencies

The Company is obligated under various operating leases for office
space, machinery and equipment.

Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) at December 31, 1996
are:

Years Ending
December 31,
------------
1997............................ $14,609
1998............................ 11,930
1999............................ 8,485
2000............................ 6,450
2001............................ 3,785
Thereafter...................... 3,092
-------
Total minimum lease payments.. $48,351
=======

Rental expense under operating leases was $17,240, $18,249 and $16,096
in 1996, 1995 and 1994, respectively.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - (Continued)

In June 1994, the Company and several other carpet manufacturers
received subpoenas to produce documents from a grand jury of the United States
District Court in Atlanta. The subpoenas were requested by the Antitrust
Division of the U.S. Department of Justice in connection with an investigation
of the industry. The Company believes that the results of this investigation
will not have a material adverse impact on the financial condition of the
Company.

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.
The Company is a party to two consolidation 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 early 1996. Both
complaints were brought on behalf of a purported class of indirect purchasers of
carpet in the State of California and seek damages for alleged violations of
California antitrust and unfair competition laws. The Company believes both of
these lawsuits are without merit and intends to vigorously defend against them.

(15) Consolidated Statements of Cash Flows Information

Supplemental disclosures of cash flow information are as follows:

1996 1995 1994
-------- -------- --------

Net cash paid during the year for:
Interest................................................ $32,268 36,309 28,257
======= ====== ======
Income taxes............................................ $23,049 3,058 25,565
======= ====== ======

(16) Quarterly Financial Data (Unaudited)

The supplemental quarterly financial data are as follows:

Quarters Ended
----------------------------------------------------------------------------
March 30, June 29, Sept. 28, Dec. 31,
1996 1996 1996 1996
-------- -------- --------- ---------

Net sales.............................. $383,667 474,552 471,199 465,638
Gross profit........................... 87,184 117,114 109,329 113,050
Net earnings........................... 5,338 16,395 14,800 12,517
Earnings per share..................... 0.16 0.48 0.43 0.36

Quarters Ended
----------------------------------------------------------------------------
April 1, July 1, Sept.308, Dec. 31,
1995 1995 1995 1995
-------- -------- --------- ---------
Net sales.............................. $378,761 429,241 425,594 414,921
Gross profit........................... 81,918 94,097 94,911 95,704
Net earnings (loss).................... 4,307 5,619 6,629 (10,143)
Earnings (loss) per share................ 0.13 0.17 0.20 (0.31)

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders under the following headings: "Election of Directors--
Director, Director Nominee and Executive Officer Information"; "--Nominees for
Director"; "--Continuing Directors"; and "--Executive Officers."

Item 11. Executive Compensation

The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders under the following headings: "Executive Compensation
and Other Information--Summary of Cash and Certain Other Compensation"; "--
Option Grants"; "--Option Exercises and Holdings"; "--Pension Plans"; "--
Employment and Consulting Contracts"; and "Election of Directors--Meetings and
Committees of the Board of Directors."

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1. Consolidated Financial Statements

The Consolidated Financial Statements of Mohawk Industries, Inc. and
subsidiaries listed in Item 8 of Part II are incorporated by reference into this
item.

2. Consolidated Financial Statement Schedules

Schedule I-Condensed Financial Information of Registrant........... 40
Schedule II-Consolidated Valuation and Qualifying Accounts......... 43

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 Amended and Restated Agreement and Plan of Merger,
including exhibits thereto, by and among Mohawk, Horizon
Acquisition Corp. and Horizon dated as of July 29, 1992 and
amended as of September 29, 1992. (Incorporated herein by
reference to Exhibit 2 in Mohawk's Registration Statement on
Form S-4, Registration No. 33-52542.)

*2.2 Stock Purchase Agreement dated as of March 8, 1993 among
Mohawk, John C. Thornton, William Robert Fowler, Dave M.
Reynolds and American Rug Craftsmen, Inc. (Incorporated herein
by reference to Exhibit 5 in Mohawk's Current Report on Form 8-
K dated March 8, 1993.)

*2.3 Asset Purchase Agreement dated as of June 3, 1993
between Fieldcrest Cannon, Inc. and Mohawk (Incorporated
herein by reference to Exhibit 5 in Mohawk's Current
Report on Form 8-K dated June 3, 1993.)

*2.4 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.)

*2.5 Stock Purchase Agreement by and among Mohawk, Galaxy and
the Stockholder of Galaxy dated December 1, 1994.
(Incorporated herein by reference to Exhibit 2 in
Mohawk's Current Report on Form 8-K dated January 13, 1995.)

3.1 Restated Certificate of Incorporation of Mohawk.

3.2 Amended and Restated Bylaws of Mohawk.

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, 1996.)

4.2 See Articles 2, 6, and 9 of the Amended and Restated
Bylaws of Mohawk. (Incorporated herein by reference to
Exhibit 3.2 in Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.)

*10.1 Leases dated February 25, 1993 between Mohawk and
Forsyth/Airport Partners & Petula Associates, Ltd.
concerning Greensboro, North Carolina offices.
(Incorporated herein by reference to Exhibit 10.9 of
Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.2 Lease dated April 18, 1984 between Horizon and William
Norris Little, James D. Miller, Jr., and Dean Cassidy
d/b/a Cassidy & Associates concerning Dyenamics Plant at
South Industrial Boulevard in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.3 of
Horizon's Annual Report on Form 10-K for the fiscal year
ended September 28, 1985 (SEC File No. 0-11492).)

*10.3 Lease dated August 1, 1985 between Horizon and Kay D.
Owens concerning Coater I and General Administration
Offices and Plant at South Industrial Boulevard in
Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.3 of Horizon's Annual Report on Form 10-K for
the fiscal year ended September 28, 1985 (SEC File No.
0-11492).)

*10.4 Lease dated April 1, 1988 between Horizon and Kay D.
Owens concerning the addition between the Tufting and
Coater Buildings on South Industrial Boulevard in
Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.24 in Mohawk's Registration Statement on Form
S-1, Registration No. 33-53932.)

*10.5 Lease dated March 22, 1978 between Horizon and John
Wayne Hall and James S. Owens concerning the Printing
Plant at South Industrial Boulevard in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.9 of
Registration Statement No. 2-84128 and to Exhibit 10.13
of Registration Statement No. 2-87625.)

*10.6 Lease dated December 12, 1983 between Horizon and James
S. Owens concerning the expanded Tufting Plant at South
Industrial Boulevard in Calhoun, Georgia. (Incorporated
herein by reference to Exhibit 10.12.1 of Horizon's
Annual Report on Form 10-K for the fiscal year ended
October 1, 1983 (SEC File No. 0-11492).)

*10.7 Lease dated June 1, 1991 between Horizon and Don R. Owens
concerning the Maintenance Plant at South Industrial Boulevard
in Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.27 in the Registrant's Form S-1 Registration No. 33-
53932.)

*10.8 Lease dated September 1, 1991 between Horizon and Don R. Owens
concerning the Roll Storage Plant at South Industrial Boulevard
in Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.28 in Mohawk's Registration Statement on Form S-1,
Registration No. 33-53932.)

*10.9 Lease dated June 1, 1992 between Horizon and Don R. Owens
concerning the Roll Storage Plant at South Industrial Boulevard
in Calhoun, Georgia. (Incorporated herein by reference to
Exhibit 10.29 in Mohawk's Registration Statement on Form S-1,
Registration No. 33-53932.)

*10.10 Lease dated October 1, 1992 between Horizon and Don R. Owens
concerning two additions to the Maintenance Plant at South
Industrial Boulevard in Calhoun, Georgia. (Incorporated herein
by reference to Exhibit 10.30 in Mohawk's Registration
Statement on Form S-1, Registration No. 33-53932.)

*10.11 Lease dated August 15, 1989 between Joan Jones Webb and
assigns and Aladdin related to a finished goods distribution
warehouse in Miami, Florida. (Incorporated herein by reference
to Exhibit 10.27 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)

*10.12 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.)

*10.13 Lease dated June 21, 1994 between Ventura County
Employees' Retirement Association and Aladdin related to
a finished goods distribution warehouse in Fullerton,
California. (Incorporated herein by reference to Exhibit
10.28 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.14 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.)

*10.15 Lease dated March 31, 1994 between Alfred Sanzari and
Aladdin related to a finished goods distribution warehouse in
Elmwood Park, New Jersey. (Incorporated herein by reference to
Exhibit 10.30 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.16 Lease dated May 1, 1994 between Columbware Associates
and Aladdin related to a finished goods distribution
warehouse in Jessup, Maryland. (Incorporated herein by
reference to Exhibit 10.31 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.)

*10.17 Lease dated January 7, 1994, as amended January 18, 1994,
between Principal Mutual Life Insurance Company and Aladdin
related to a finished goods distribution warehouse in Grand
Prairie, Texas. (Incorporated herein by reference to Exhibit
10.32 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.)

*10.18 Lease dated November 21, 1994 between Roundup Co. and
Aladdin related to a finished goods distribution
warehouse in Kent, Washington. (Incorporated herein by
reference to Exhibit 10.33 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.)

*10.19 Lease dated October 17, 1994 between Ventura County
Employees' Retirement Association and Aladdin related to
a finished goods distribution warehouse in Kent,
Washington. (Incorporated herein by reference to Exhibit
10.34 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.20 Lease dated March 1, 1994 between Design Leasing and Holding
Company, Inc. and American Rug Craftsmen, Inc. related to a
manufacturing facility and warehouse in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.35 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994.)

*10.21 Consolidated Amended and Restated Note Agreement dated
as of September 3, 1993 for $70 million of senior notes,
including $20 million uncommitted shelf facility, among
Mohawk, Mohawk Carpet and The Prudential Insurance
Company of America. (Incorporated herein by reference to
Exhibit 10.2 in Mohawk's quarterly report on Form 10-Q
for the quarter ended October 2, 1993.)

*10.22 Letter dated February 24, 1994 amending the Consolidated,
Amended and Restated Note Agreement dated September 3, 1993
among Mohawk, Mohawk Carpet and The Prudential Insurance
Company of America. (Incorporated herein by reference to
Exhibit 10.2 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)

*10.23 Letter dated as of September 16, 1994 of the Second
Modification to the Consolidated, Amended and Restated Note
Agreement dated September 3, 1993 among Mohawk, Mohawk Carpet
Corporation 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 1,
1994.)

*10.24 Letter dated as of July 19, 1995 of the Third
Modification to the Consolidated, Amended and Restated
Note Agreement dated as of September 3, 1993 among
Mohawk, Mohawk Carpet Corporation and The Prudential
Insurance Company of America. (Incorporated herein by
reference to Exhibit 10.6 of Mohawk's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.)

*10.25 Letter dated as of September 29, 1995 of the Fourth
Modification to the Consolidated, Amended and Restated
Note Agreement dated as of September 3, 1993 among
Mohawk, Mohawk Manufacturing Corporation (f/k/a Mohawk
Carpet Corporation) and The Prudential Insurance Company
of America. (Incorporated herein by reference to Exhibit
10.10 of Mohawk's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.)

*10.26 Letter dated as of March 12, 1996 of the Fifth
Modification to the Consolidated, Amended and Restated
Note Agreement dated September 3, 1993 among Mohawk,
Mohawk Manufacturing Corporation (f/k/a Mohawk Carpet
Corporation) and The Prudential Insurance Company of
America. (Incorporated herein by reference to Exhibit
10.26 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)

*10.27 Second Amended and Restated Credit Agreement dated as of
January 13, 1995 among Mohawk Carpet, Mohawk, Wachovia
Bank of Georgia, N.A. and First Union National Bank of
Georgia. (Incorporated herein by reference to Exhibit
10.3 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)

*10.28 First Amendatory Agreement dated as of June 23, 1995 to
the Second Amended and Restated Credit Agreement dated
as of January 13, 1995 among Mohawk Carpet Corporation,
Mohawk, Wachovia Bank of Georgia, N.A. and First Union
National Bank of Georgia. (Incorporated herein by
reference to Exhibit 10.1 of Mohawk's Quarterly Report
on Form 10-Q for the quarter ended July 1, 1995.)

*10.29 Second Amendatory Agreement and Waiver dated as of July
19, 1995 to the Second Amended and Restated Credit
Agreement dated as of January 13, 1995 among Mohawk
Carpet Corporation, Mohawk, Wachovia Bank of Georgia,
N.A. and First Union National Bank of Georgia.
(Incorporated herein by reference to Exhibit 10.1 of
Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)

*10.30 Third Amendatory Agreement dated as of September 28,
1995 to the Second Amended and Restated Credit Agreement
dated as of January 13, 1995 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk,
Wachovia Bank of Georgia, N.A. and First Union National
Bank of Georgia. (Incorporated herein by reference to
Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.)

*10.31 Fourth Amendatory Agreement dated as of December 22,
1995 to the Second Amended and Restated Credit Agreement
dated as of January 13, 1995 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk,
Wachovia Bank of Georgia, N.A. and First Union National
Bank of Georgia. (Incorporated herein by reference to
Exhibit 10.31 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.)

*10.32 Fifth Amendatory Agreement dated as of December 31, 1995
to the Second Amended and Restated Credit Agreement
dated as of January 13, 1995 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk,
Wachovia Bank of Georgia, N.A. and First Union National
Bank of Georgia. (Incorporated herein by reference to
Exhibit 10.32 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.)

10.33 Sixth Amendatory Agreement dated as of December 31, 1996 to the
Second Amended and Restated Credit Agreement dated as of
January 13, 1995 among Aladdin Manufacturing Corporation (f/k/a
Mohawk Manufacturing Corporation and prior to that known as
Mohawk Carpet Corporation), Mohawk, Wachovia Bank of Georgia,
N.A. and First Union National Bank of Georgia.

*10.34 Note Purchase Agreement dated as of August 15, 1993 for 9.5%
Senior Notes due April 1, 1998 among Mohawk Carpet, Mohawk,
Horizon, American Rug Craftsmen, Burton Carpets & Rugs, Inc.
and The Harbinger Company, Inc., and Alexander Hamilton Life
Insurance Company of America, Connecticut Mutual Life Insurance
Company, The Franklin Life Insurance Company and Principal
Mutual Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.5 of Mohawk's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.)

*10.35 First Amendment and Waiver Agreement dated as of February 25,
1994 of the Note Purchase Agreement dated as of August 15, 1993
for 9.5% Senior Notes due April 1, 1998 among Mohawk Carpet,
Mohawk, American Rug Craftsmen, Inc., Burton Carpets & Rugs,
Inc., Aladdin, Mohawk Marketing, Inc., Alexander Hamilton Life
Insurance Company of America, Connecticut Mutual Life Insurance
Company, Principal Mutual Life Insurance Company and The
Franklin Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.6 of Mohawk's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.)

*10.36 Second and Third Amendment Agreements dated as of
September 16, 1994 of the Note Purchase Agreement dated as of
August 15, 1993 for 9.5% Senior Notes due April 1, 1998 among
the Company, Mohawk Carpet Corporation, American Rug Craftsmen,
Aladdin, Mohawk Marketing, Inc., Alexander Hamilton Life
Insurance Company of America, Connecticut Mutual Life Insurance
Company, The Franklin Life Insurance Company and Principal
Mutual Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended October 1, 1994.)

*10.37 Fourth Amendment and Waiver Agreement dated as of July 19, 1995
of the Note Purchase Agreement dated as of August 15, 1993 for
9.5% Senior Notes due April 1, 1998 among Mohawk Carpet
Corporation, Mohawk, Aladdin Mills, Inc., Mohawk Marketing,
Inc., Galaxy Carpet Mills, Inc., Mohawk Mills, Inc., Mohawk
Manufacturing Corporation, Alexander Hamilton Life Insurance
Company of America, Connecticut Mutual Life Insurance Company,
The Franklin Life Insurance Company and Principal Mutual Life
Insurance Company. (Incorporated herein by reference to Exhibit
10.3 of Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)

*10.38 Fifth Amendment Agreement dated as of September 29, 1995 of the
Note Purchase Agreement dated as of August 15, 1993 for 9.5%
Senior Notes due April 1, 1998 among Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Mohawk, Aladdin
Mills, Inc., Mohawk Marketing, Inc., Galaxy Carpet Mills, Inc.,
Mohawk Mills, Inc., Mohawk Carpet Corporation, Alexander
Hamilton Life Insurance Company of America, Connecticut Mutual
Life Insurance Company, American General Life Insurance Company
and Principal Mutual Life Insurance Company. (Incorporated
herein by reference to Exhibit 10.7 of Mohawk's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.)

*10.39 Sixth Amendment Agreements dated as of March 12, 1996 of the
Note Purchase Agreement dated as of August 15, 1993 for 9.5%
Senior Notes due April 1, 1998 among the Company, Mohawk
Manufacturing Corporation (f/k/a Mohawk Carpet Corporation),
Aladdin, Mohawk Marketing, Inc., Galaxy Carpet Mills, Inc.,
Mohawk Mills, Inc., Mohawk Carpet Corporation, Alexander
Hamilton Life Insurance Company of America, Connecticut Mutual
Life Insurance Company, The Franklin Life Insurance Company and
Principal Mutual Life Insurance Company. (Incorporated herein
by reference to Exhibit 10.38 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.)

*10.40 Note Purchase Agreement dated as of August 15, 1993 for $85
million of Senior Notes due September 1, 2005 among Mohawk
Carpet, Mohawk, Horizon, American Rug Craftsmen, Burton Carpets
& Rugs, Inc. and The Harbinger Company, Inc., and John Hancock
Mutual Life Insurance Company, John Hancock Variable Life
Insurance Company, John Hancock Life Insurance Company of
America, Principal Mutual Life Insurance Company, Principal
National Life Insurance Company, UNUM Life Insurance Company of
America and The Franklin Life Insurance Company. (Incorporated
herein by reference to Exhibit 10.7 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.)

*10.41 First Amendment and Waiver Agreement dated as of February 25,
1994 of the Note Purchase Agreement dated as of August 15, 1993
for $85 million Senior Notes due September 1, 2005 among Mohawk
Carpet, Mohawk, American Rug Craftsmen, Inc., Burton Carpets &
Rugs, Inc., Aladdin, Mohawk Marketing, Inc., John Hancock
Mutual Life Insurance Company, John Hancock Variable Life
Insurance Company, John Hancock Life Insurance Company of
America, Principal Mutual Life Insurance Company, Principal
National Life Insurance Company, UNUM Life Insurance Company
and The Franklin Life Insurance Company. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.)

*10.42 Second and Third Amendment Agreements dated as of September 16,
1994 of the Note Purchase Agreement dated as of August 15, 1993
for $85 million Senior Notes due September 1, 2005 among the
Company, Mohawk Carpet Corporation, American Rug Craftsmen,
Aladdin, Mohawk Marketing, Inc., John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance
Company, John Hancock Life Insurance Company of America,
Principal Mutual Life Insurance Company, Principal National
Life Insurance Company, UNUM Life Insurance Company and The
Franklin Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.4 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended October 1, 1994.)

*10.43 Fourth Amendment and Waiver Agreement dated as of July 19, 1995
of the Note Purchase Agreement dated as of August 15, 1993 for
$85 million of Senior Notes due September 1, 2005 among Mohawk
Carpet Corporation, Mohawk, Aladdin Mills, Inc., Mohawk
Marketing, Inc., Galaxy Carpet Mills, Inc., Mohawk Mills, Inc.,
Mohawk Manufacturing Corporation, John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance
Company, John Hancock Life Insurance Company of America,
Principal Mutual Life Insurance Company, UNUM Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.4 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.)

*10.44 Fifth Amendment Agreement dated as of September 29, 1995 of the
Note Purchase Agreement dated as of August 15, 1993 for $85
million of Senior Notes due September 1, 2005 among Mohawk
Manufacturing Corporation (f/k/a Mohawk Carpet Corporation),
Mohawk, Aladdin Mills, Inc., Mohawk Marketing, Inc., Galaxy
Carpet Mills, Inc., Mohawk Mills, Inc., Mohawk Carpet
Corporation, John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, John Hancock Life
Insurance Company of America, Principal Mutual Life Insurance
Company, UNUM Life Insurance Company of America and American

General Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.8 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.)

*10.45 Sixth Amendment Agreement dated as of March 12, 1996 of the
Note Purchase Agreement dated as of August 15, 1993 for $85
million Senior Notes due September 1, 2005 among the Company,
Mohawk Manufacturing Corporation (f/k/a Mohawk Carpet
Corporation), Aladdin, Mohawk Marketing, Inc.,Galaxy Carpet
Mills, Inc., Mohawk Mills, Inc., Mohawk Carpet Corporation,
John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, John Hancock Life Insurance
Company of America, Principal Mutual Life Insurance Company,
Principal National Life Insurance Company, UNUM Life Insurance
Company and The Franklin Life Insurance Company. (Incorporated
herein by reference to Exhibit 10.44 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.)

*10.46 Note Purchase Agreement dated as of September 16, 1994 for $100
million of Senior Notes due September 16, 2004 among the
Company, Mohawk Carpet Corporation, American Rug Craftsmen,
Aladdin, Mohawk Marketing, Inc., The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company,
John Hancock Mutual Life Insurance Company, Connecticut Mutual
Life Insurance Company, Alexander Hamilton Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 4.1 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended October 1,
1994.)

*10.47 Letter dated as of July 19, 1995 of the First Modification to
the Note Purchase Agreement dated as of September 16, 1994 for
$100 million of Senior Notes due September 16, 2004 among
Mohawk, Mohawk Carpet Corporation, The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company,
John Hancock Mutual Life Insurance Company, Connecticut Mutual
Life Insurance Company, Alexander Hamilton Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.5 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.)

*10.48 Letter dated as of September 29, 1995 of the Second
Modification to the Note Purchase Agreement dated as of
September 16, 1994 for $100 million of Senior Notes due
September 16, 2004 among Mohawk, Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), The Prudential
Insurance Company of America, Principal Mutual Life Insurance
Company, John Hancock Mutual Life Insurance Company,
Connecticut Mutual Life Insurance Company, Alexander Hamilton
Life Insurance Company of America and American General
Insurance Company. (Incorporated herein by reference to Exhibit
10.9 of Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)

*10.49 Letter dated as of March 12, 1996 of the Third Modification to
the Note Purchase Agreement dated as of September 16, 1994 for
$100 million of Senior Notes due September 16, 2004 among
Mohawk, Mohawk Manufacturing Corporation (f/k/a Mohawk Carpet
Corporation), The Prudential Insurance Company of America,
Principal Mutual Life Insurance Company, John Hancock Mutual
Life Insurance Company, Connecticut Mutual Life Insurance
Company, Alexander Hamilton Life Insurance Company of America
and American General Insurance Company. (Incorporated herein by
reference to Exhibit 10.48 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.)

*10.50 Second Amended and Restated Intercreditor Agreement among the
Collateral Agent, First Union National Bank of Georgia,
Wachovia Bank of Georgia, N.A., The Prudential Insurance
Company of America, John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company, John Hancock Life
Insurance Company of America, Principal Mutual Life Insurance
Company, Principal National Life Insurance Company, UNUM Life

Insurance Company, The Franklin Life Insurance Company,
Alexander Hamilton Life Insurance Company of America and
Connecticut Mutual Life Insurance Company, and the related
Amended and Restated Security Agreements dated as of September
16, 1994 between the Collateral Agent for the benefit of the
parties to that Intercreditor Agreement and the Company and
Mohawk Carpet Corporation. (Incorporated herein by reference to
Exhibit 10.5 of Mohawk's Quarterly Report on Form 10-Q for the
quarter ended October 1, 1994.)

*10.51 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.)

*10.52 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.)

*10.53 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.)

*10.54 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.)

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

*10.55 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.)

*10.56 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.)

*10.57 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.)

*10.58 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.)

*10.59 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.)

*10.60 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.)

*10.61 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.)

*10.62 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.)

*10.63 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.)

*10.64 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.)

*10.65 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.)

*10.66 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.)

*10.67 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.)

*10.68 Executive Employment Agreement by and between Mohawk and David
L. Kolb. (Incorporated herein by reference to Exhibit 10.46 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)

*10.69 Executive Employment Agreement by and between Mohawk and
William B. Kilbride. (Incorporated herein by reference to
Exhibit 10.68 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)

*10.70 Executive Employment Agreement by and between Mohawk and Frank
A. Procopio. (Incorporated herein by reference to Exhibit 10.48
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.71 Executive Employment Agreement by and between Mohawk and John
D. Swift. (Incorporated herein by reference to Exhibit 10.49 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)

*10.72 Executive Employment Agreement by and between Mohawk and Donald
G. Mercer. (Incorporated herein by reference to Exhibit 10.47
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.73 Employment Agreement among Mohawk, Aladdin and S. H. Sharpe.
(Incorporated herein by reference to Exhibit 10.50 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993.)

*10.74 Employment Agreement among Mohawk, Aladdin and Jeffrey
Lorberbaum. (Incorporated herein by reference to Exhibit 10.51
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.75 Consulting Agreement among Mohawk, Aladdin and Alan S.
Lorberbaum. (Incorporated herein by reference to Exhibit 10.51
of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)

*10.76 Form of Promissory Note between Mohawk and each of the
following; David L. Kolb, John D. Swift and Frank A. Procopio.
(Incorporated herein by reference to Exhibit 10.75 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995.)

*10.77 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.)

*10.78 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.

10.79 1997 Non-Employee Director Stock Compensation Plan.

10.80 1997 Long-Term Incentive Plan.

11 Statement re: Computation of Per Share Earnings.

21 Subsidiaries of the Registrant.

23.1 Independent Auditors' Consent - KPMG Peat Marwick LLP.

27 Financial Data Schedule.

- --------
* Indicates exhibit incorporated by reference.

(b) Reports on Form 8-K.

None.

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 4, 1997June 28, 2000
By: /s/ DavidDAVID L. Kolb
----------------------------------------KOLB
-------------------------------------------------
David L. Kolb,
Chairman of the Board 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 4, 1997June 28, 2000 /s/ David L. Kolb
----------------------------------------
David L. Kolb,

Chairman of the Board and Chief Executive
Officer (principal executive officer)

Dated: March 4, 1997 /s/ JohnJOHN D. Swift
----------------------------------------SWIFT
--------------------------------------------------
John D. Swift,
Chief Financial Officer, Vice President-Finance
and Assistant Secretary
(principal financial and accounting officer)

Dated: March 4, 1997 /s/ Leo Benatar
----------------------------------------
Leo Benatar,
Director

Dated: March 4, 1997 /s/ Bruce C. Bruckmann
----------------------------------------
Bruce C. Bruckmann,
Director

Dated: March 4, 1997 /s/ Alan S. Lorberbaum
----------------------------------------
Alan S. Lorberbaum,
Director

Dated: March 4, 1997 /s/ Jeffrey S. Lorberbaum
----------------------------------------
Jeffrey S. Lorberbaum,
Director

Dated: March 4, 1997 /s/ Larry W. McCurdy
----------------------------------------
Larry W. McCurdy,
Director

Dated: March 4, 1997 /s/ Robert N. Pokelwaldt
----------------------------------------
Robert N. Pokelwaldt,
Director

392

SCHEDULE I

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

MOHAWK INDUSTRIES, INC.

BALANCE SHEETS

DECEMBER 31, 1996 AND 1995

(IN THOUSANDS, EXCEPT PER SHARE DATA)

1996 1995
-------- -------

ASSETS
Current assets - intercompany receivable................... $ 34,079 24,833
Investment in subsidiaries................................. 299,120 250,070
-------- -------
$333,199 274,903
======== =======
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 60,000 shares authorized;
no shares issued......................................... $ - -
Common stock, $.01 par value; 75,000 shares authorized;
34,471 and 34,394 shares issued in 1996 and 1995,
respectively............................................. 345 344
Additional paid-in capital................................. 131,560 122,747
Retained earnings.......................................... 201,294 152,244
-------- -------
333,199 275,335

Less:
Treasury stock, at cost; 1,302 shares in 1995............ - 115
Deferred compensation from stock options................. - 317
-------- -------
$333,199 274,903
======== =======

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CondensedItem 14.Exhibits Financial Information Of RegistrantStatements Schedules and Reports on 8-K
----------------------------------------------------------

(a) 3. Exhibits

Exhibit 23.3 Independent Auditors' Consent
------------

Exhibit 99.1 Mohawk Industries, Inc.Carpet Corporation Retirement Savings Plan
------------
Independent Auditors' Report

Statements of Earnings

Years Ended December 31, 1996, 1995 and 1994

(In thousands)

1996 1995 1994
-------- ------- -------

Equity in earnings of subsidiaries...................... $ 49,050 6,412 33,007
-------- ------ ------
Net earnings .................................... $ 49,050 6,412 33,007
======== ====== ======

SCHEDULE I
(continued)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
MOHAWK INDUSTRIES, INC.
Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994

(In thousands)

1996 1995 1994
----------- --------- ---------

Cash flows from operating activities:
Net earnings............................................................... $ 49,050 6,412 33,007
Adjustments to reconcile net earnings to net cash used in
operating activities:
Equity in earnings of subsidiaries................................. (49,050) (6,412) (33,007)
Increase in intercompany receivable................................ (9,246) (4,473) (1,019)
----------- --------- ---------
Net cash used in operating activities............................ (9,246) (4,473) (1,019)
----------- --------- ---------
Cash flows from financing activities:
Stock options exercised................................................... 1,323 792 113
Tax benefit from exercise of stock options................................ 7,606 3,355 579
Other..................................................................... 317 326 327
----------- --------- ---------
Net cash provided by financing activities....................... 9,246 4,473 1,019
----------- --------- ---------
Net change in cash.............................................. - - -
Cash, beginning of year......................................................... - - -
----------- --------- ---------
Cash, end of year............................................................... $ - - -
=========== ========= =========

SCHEDULE II

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

(IN THOUSANDS)

Additions
-----------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of year expenses accounts Deductions of year
---------- ---------- --------- ---------- ---------- -------

Year ended December 31, 1994:
Allowance for doubtful accounts - trade....... $ 9,353 6,047 - 7,794(2) 7,606
Provision for cash discounts.................. 4,104 42,857 - 42,960(2) 4,001
Provision for claims and allowances........... 8,914 77,164 - 75,069(2) 11,009
------- ------- ----- ------- ------
Total.................................... $22,371 126,068 - 125,823 22,616
======= ======= ===== ======= ======
Year ended December 31, 1995:
Allowance for doubtful accounts - trade....... $ 7,606 9,649 3,196(1) 2,495(2) 17,956
Provision for cash discounts.................. 4,001 48,304 442(1) 48,250(2) 4,497
Provision for claims and allowances........... 11,009 95,498 1,953(1) 98,768(2) 9,692
------- ------- ----- ------- ------
Total.................................... $22,616 153,451 5,591 149,513 32,145
======= ======= ===== ======= ======
Year ended December 31, 1996:
Allowance for doubtful accounts - trade....... $17,956 13,213 - 11,634(2) 19,535
Provision for cash discounts.................. 4,497 48,577 - 48,146(2) 4,928
Provision for claims and allowances........... 9,692 89,845 - 89,156(2) 10,381
------- ------- ----- ------- ------
Total.................................... $32,145 151,635 - 148,936 34,844
======= ======= ===== ======= ======

_______________
(1) Purchase price allocated to valuation accounts in connection with
acquisitions.
(2) Represents charge offs, net of recoveries, to the reserves.

EXHIBIT INDEX

Mohawk
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation of Mohawk.

3.2 Amended and Restated Bylaws of Mohawk.

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-KNet Assets Available for the fiscal year ended December 31, 1996.)

4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk.
(Incorporated herein by reference to Exhibit 3.2 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)

10.33 Sixth Amendatory Agreement datedPlan Benefits as
of December 31, 19961999 and 1998

Statement of Changes in Net Assets Available for Plan
Benefits for the Year ended December 31, 1999

Notes to the Second
Amended and Restated Credit Agreement datedFinancial Statements

Schedule of Assets Held for Investment Purposes as of
January 13, 1995
among Aladdin Manufacturing Corporation (f/k/a Mohawk Manufacturing
Corporation and prior to that known as Mohawk Carpet Corporation),
Mohawk, Wachovia Bank of Georgia, N.A. and First Union National Bank
of Georgia

10.79 1997 Non-Employee Director Stock Compensation Plan.

10.80 1997 Long-Term Incentive Plan.

11 Statement re: Computation of Per Share Earnings.

21 Subsidiaries of the Registrant.

23.1December 31,1999

Exhibit Index
Exhibit
Number Description
------ -------------------------------------------------------

Exhibit 23.3 Independent Auditors' Consent
- KPMG Peat Marwick LLP.

27------------

Exhibit 99.1 Mohawk Carpet Corporation Retirement Savings Plan
------------
Independent Auditors' Report

Statements of Net Assets Available for Plan Benefits as
of December 31, 1999 and 1998

Statement of Changes in Net Assets Available for Plan
Benefits for the Year ended December 31, 1999

Notes to the Financial Data Schedule.

44Statements

Schedule of Assets Held for Investment Purposes as of
December 31,1999