================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[Mark One]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Commission File Number
to 01-19826
MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1604305
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P. O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 629-7721
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
The aggregate market value of the Common Stock of the Registrant held by non-
affiliates of the Registrant (31,035,979 shares) on March 6, 2001 was
$937,286,566. The aggregate market value was computed by reference to the
closing price of the Common Stock on such date.
Number of shares of Common Stock outstanding as of March 6, 2001: 52,393,392
shares of Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the 2001 Annual Meeting of
Stockholders--Part III
================================================================================
PART I
Item 1. Business
General
Mohawk Industries, Inc. ("Mohawk" or the "Company," a term which includes
the Company and its subsidiaries, including its primary operating subsidiaries,
Mohawk Carpet Corporation ("Mohawk Carpet") and Aladdin Manufacturing
Corporation ("Aladdin Manufacturing", formerly known as Mohawk Manufacturing
Corporation) is a leading producer of woven and tufted broadloom carpet and rugs
for principally residential applications. The Company is the second largest
carpet and rug manufacturer in the United States, with 2000 net sales of
approximately $3.3 billion. The Company designs, manufactures and markets carpet
and rugs in a broad range of colors, textures and patterns. The Company is
widely recognized through its premier brand names, some of which are "Mohawk,"
"Aladdin," "Mohawk Home," "American Weavers," "Bigelow," "Custom Weave,"
"Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image," "Karastan,"
"Mohawk Commercial," "Newmark Rug," "World" and "WundaWeve," and markets its
products primarily through carpet retailers, home centers, mass merchandisers,
department stores, commercial dealers and commercial end users. Mohawk's
operations are vertically integrated from the extrusion of resin and post-
consumer plastics into fiber, to the conversion of fiber into yarn and to the
manufacture and shipment of finished carpet and rugs.
History
The Company was organized in Delaware in 1988 to acquire Mohawk Carpet
Corporation from its predecessor owner, Mohasco Corporation, in a leveraged
buyout transaction. The Company completed its initial public offering of Common
Stock in April 1992, raising approximately $42.5 million in proceeds, which were
used to retire indebtedness and redeem preferred stock outstanding at that time.
Mohawk acquired Horizon Industries, Inc. in October 1992 for approximately $63.9
million in cash and 4,009,500 shares of Common Stock valued at approximately
$22.5 million. Mohawk purchased American Rug Craftsmen, Inc. in April 1993 for
approximately $32.0 million in cash and Karastan Bigelow in July 1993 for
approximately $155.5 million, which was substantially all cash. In May 1993, the
Company completed an offering of 4,725,000 shares of Common Stock. Of the total
number of shares, 3,600,000 shares were sold by the Company and 1,125,000 shares
were sold by selling stockholders. The net proceeds to the Company were
approximately $46.0 million. On February 25, 1994, Mohawk acquired all of the
common stock of Aladdin Mills, Inc. ("Aladdin") in exchange for approximately
20,343,000 shares of Common Stock, valued at $386.5 million, based upon the
closing stock price at the date the agreement was executed. On January 13, 1995,
Mohawk acquired all of the capital stock of Galaxy Carpet Mills, Inc. for $42.2
million in cash.
On July 23, 1997, the Company acquired certain assets of Diamond Rug &
Carpet Mills, Inc. ("Diamond") and other assets owned by Diamond's principal
shareholders for approximately $36.0 million, which consisted of $19.6 million
in cash at closing, $7.0 million in cash over the six-month period following
closing and a $9.4 million note payable in seven annual installments of
principal plus interest at 6%. The acquisition was accomplished through a plan
of reorganization filed by Diamond under Chapter 11 of the United States
Bankruptcy Code.
The Company completed its acquisitions of Newmark & James, Inc. ("Newmark")
and American Weavers, LLC ("American Weavers"), on June 30, 1998 and August 10,
1998, respectively. On November 12, 1998, the Company acquired all of the
outstanding capital stock of World Carpets, Inc. ("World") in exchange for
approximately 4.9 million shares of the Company's common stock valued at $149.5
million, based on the closing stock price on the day the agreement was executed.
On January 29, 1999, the Company acquired certain assets of Image
Industries, Inc. ("Image") for approximately $192 million, including the
assumption of $30 million of tax exempt bonds, and on March 9, 1999, the Company
acquired all of the outstanding capital stock of Durkan Patterned Carpets, Inc.
("Durkan"), for approximately 3.1 million shares valued at $116.5 million based
on the closing stock price the day the letter of intent was executed.
2
On November 14, 2000, the Company acquired certain fixed assets and
inventory of Crown Crafts, Inc. ("Crown Crafts") for approximately $37 million.
Industry
According to the most recent figures available from the United States
Department of Commerce, worldwide carpet and rug sales volume of American
manufacturers and their domestic divisions was 1.9 billion square yards in 1999.
This volume represents a market in excess of approximately $12 billion at the
"mill level," which management believes, based on standard industry mark-ups,
translates into approximately $19.0 billion to $21.5 billion at the retail
level. Based upon data obtained from recent industry publications, the worldwide
carpet and rug sales volume of American manufacturers in 2000 was approximately
1.8 billion square yards and $11.0 billion. The overall level of sales in the
carpet industry is influenced by a number of factors, including consumer
confidence in spending for durable goods, interest rates, turnover in housing,
the condition of the residential and commercial construction industries and the
overall strength of the economy.
Broadloom carpet (defined as carpet over six feet by nine feet in size)
represented 81% of the volume shipped by the industry in 1999. Tufted broadloom
carpet (a category that refers to the manner of construction in addition to
size) represented 95% of the broadloom industry volume shipped in 1999. The
broadloom carpet industry has two primary markets, residential and commercial,
with the residential market making up approximately 74% of industry volume
shipped and the commercial market comprising approximately 26% in 1999. An
estimated 54% of industry shipments is made in response to replacement demand,
which usually involves exact yardage (or "cut order") shipments that typically
provide higher profit margins than sales of carpet sold in full rolls. Because
the replacement business generally involves higher quality carpet cut to order
by the manufacturer, rather than the dealer, this business tends to be more
profitable for manufacturers than the new construction business.
Products and Markets
The Company designs, manufactures and markets hundreds of styles of carpet,
rugs and mats in a broad range of colors, textures and patterns. In addition,
Mohawk sells hard surface floorcovering products, which include tile, laminate,
vinyl and wood products. Mohawk positions its products in all price ranges and
emphasizes quality, style, performance and service. The Company is widely
recognized through its premier brand names, "Mohawk," "Aladdin," "American Rug
Craftsmen," "American Weavers," " Mohawk Home," "Bigelow," "Bigelow Commercial,"
"Custom Weave," "Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image,"
"Karastan," "Karastan Contract," "Mohawk Commercial," "Newmark Rug," "World" and
"WundaWeve," and markets its products primarily through carpet retailers, home
centers, mass merchandisers, department stores, commercial dealers, and
commercial end users. Some products are also marketed through private labeling
programs.
Mohawk markets certain of its products outside the United States, but does
not consider sales of such products to be material.
Sales to residential customers represent a significant portion of the total
industry and the majority of the Company's sales. The Company currently markets
approximately 750 residential products to more than 30,000 customers, which
include independent retailers, department stores, mass merchandisers, buying
groups, and building and tenant improvement contractors.
The Company has positioned its premier residential brand names across all
price ranges. "Mohawk," "Custom Weave," "WundaWeve," "Bigelow," "Galaxy,"
"Horizon," "Helios," "Karastan" and "World," are positioned to sell primarily in
the medium-to-high retail price range in the residential broadloom market and
these lines are also sold under private labels. These lines have substantial
brand name recognition among carpet dealers and retailers with the "Karastan,"
"Mohawk" and "Bigelow" brands having the highest consumer recognition in the
industry. "Karastan" is the leader in the exclusive high-end market. The
"Aladdin" brand name competes primarily in the low-to-medium retail price range.
The Company believes it is considered a leader within the industry of U.S.
carpet manufacturers providing marketing support. Through dealer programs like
Karastan Gallery, Mohawk Color Center and Mohawk
3
FloorScapes, the Company offers intensive marketing and advertising support.
These programs offer varying degrees of support to dealers in sales and
management training, display racks, exclusive promotions and assistance in
certain administrative functions such as consumer credit, advertising and
insurance.
The Company generally markets its residential products through its
residential sales forces that report to common management on a regional basis.
All of the regional vice presidents report to one senior vice president of
sales. Each region has responsibility for sales, distribution and inventory
management in its region, all of which is coordinated by the senior vice
president of sales at a national level. The inventory management on a regional
level is accomplished by a hub-and-spoke distribution network. In this system,
Company trucks generally deliver carpet from mill sites to regional warehouses.
From there, it is shipped to local distribution warehouses, then to retailers.
The Company believes that the current structure of the residential sales group
has contributed to a more efficient and profitable organization.
The commercial customer base is divided into several groups: educational
institutions, corporate office space, hospitality facilities, retail space and
health care facilities. In addition, Mohawk produces and sells carpet for the
export market, the federal government and other niche businesses. Different
purchase decision makers and decision-making processes exist for each group.
The sales distribution channels for the commercial products have been
divided into five groups based upon traditional marketing paths: Main Street,
Dealer Negotiated, Performance Specified, Fashion Specified and Hospitality.
The main street channel traditionally offers lower price point carpets sold
through retail dealers under the "Aladdin" brand and is distributed through the
residential sales force. Products sold into this channel are service driven and
price sensitive.
The dealer-negotiated channel is serviced through the "Bigelow Commercial"
and "World Contract" brands. In this channel large commercial flooring
contractors play the most important role in product selection on negotiated
project work such as leased commercial office and retail space. This channel is
relationship driven and service oriented where top performers are rewarded with
a higher percentage of a contractor's discretionary business.
The performance specified channel is serviced through the "Mohawk
Commercial" and "Mohawk Modular" brands, where long term appearance retention
and durability are key buyer criteria for more demanding project environments
such as auditorium, airports, schools, institutional buildings and high traffic
retail outlets. Woven products are strategically advantaged over tufted products
in this market channel due to differentiated performance characteristics that
are more highly valued in high traffic installations.
The "Karastan Contract" and "Durkan Commercial" brands are sold into the
fashion specified channel where distinctive styling and custom product
variations are more commonly required for project work. This market channel,
almost entirely specified through the architect and specifier channel, includes
end use installations such as higher end corporate offices, law firms, boutique
retail, and high profile institutional projects. Because of the distinctive
styling and tailored pattern detail that can be achieved through the weaving
process, woven styling is highly valued among the design community.
Both the performance and fashion specified sales groups also solicit
business from large end user accounts that typically make product selections
centrally for their company through internal facilities managers and purchasing
agents.
The hospitality and lodging channel markets the "Durkan Hospitality" brand
that specializes in complex printed carpets commonly seen in higher end hotels,
resort facilities and casinos. The hospitality channel is generally specified
through a designer but ultimately sold through independent purchasing agents
that consolidate interior furnishings purchase decisions for hotel property
owners. Durkan Hospitality has historically offered a premium print product due
to an extensive pattern offering distinguished by visually sharper and cleaner
color separation in the final product.
4
The Company's ability to make woven carpet under the Mohawk Commercial and
Karastan Contract brand names in large volume for commercial applications
differentiates it from other manufacturers, most of which produce tufted carpet
almost exclusively. Woven carpet and specifically the Company's woven interlock
products sell at higher prices than tufted carpet and generally produce higher
profit margins. Management believes that the Company is the largest producer of
woven carpet in the United States and that the Company has several carpet
weaving machines and processes that no other manufacturer has, thereby allowing
the Company to create carpet to meet specifications that its competitors cannot
duplicate.
The machine-made rug market is currently the fastest growing product line
of the U. S. carpet and rug industry with an annual growth rate estimated to be
approximately 5% in 2000. Much of this growth has occurred at the low-to-medium
retail price ranges. The distribution channels for the rug market primarily
include department stores, mass merchants, floorcovering stores, catalog stores,
home centers and furniture stores.
The Company's product lines include a broad array of rugs. The Karastan
brand name rugs represent the higher retail price ranges with one of the most
valued brand names in the industry and are distributed through specialty stores,
along with department and furniture stores. These are higher quality woven wool
rugs manufactured primarily on Axminster looms.
The Company emphasizes the fast growing lower retail price ranges through
the Mohawk Home Division. The rugs sold are primarily woven and tufted
polypropylene area rugs, tufted border rugs and decorative mats. These products
are distributed primarily through mass merchants and home centers under the
brands American Rug Craftsmen and American Weavers.
The Company also sells to the bath mat and washable scatter rug components
of the rug market through its Townhouse, Newmark and Aladdin brand names. The
Aladdin products are tufted nylon and polyester products, which are distributed
through department stores and mass merchants. Both the Townhouse and Newmark
products are high-end washable cotton bath rugs that are distributed to the
luxury market of department stores, specialty stores, and catalogue businesses.
Advertising and Promotion
The Company promotes its products in the form of co-operative advertising,
point-of-sale displays and marketing literature provided to assist in marketing
various carpet styles. Mohawk also continues to rely on the substantial brand
name identification of its "Aladdin," "Alexander Smith," "American Rug
Craftsmen," "American Weavers," "Mohawk Home", "Bigelow," "Bigelow Commercial,"
"Custom Weave," "Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image,"
"Karastan," "Karastan Contract," "Mohawk," "Mohawk Commercial," "Newmark Rug,"
"World" and "WundaWeve" lines. The cost of producing display samples, a
significant promotional expense, is partially offset by sales of samples and
support from raw materials suppliers.
Manufacturing and Operations
The Company's manufacturing operations are vertically integrated and
include the extrusion of resin and post-consumer plastics into polypropylene,
polyester and nylon fiber, yarn processing, tufting, weaving, dyeing, coating
and finishing. Capital expenditures are primarily focused on increasing
capacity, improving productivity and reducing costs. Mohawk incurred $538
million in capital expenditures over the past three years, including
acquisitions. These expenditures increased manufacturing efficiency and
capacity, while improving overall cost competitiveness.
Raw Materials and Suppliers
The principal raw materials the Company uses are nylon staple fibers; nylon
filament fibers; raw wool; polypropylene filament fibers; polyester staple
fibers; polypropylene, nylon and polyester resins and post-consumer plastics;
synthetic backing materials, polyurethane and latex; and various dyes and
chemicals. Mohawk obtains all of its major raw materials from independent
sources and all of its externally purchased nylon fibers from four major
suppliers: E.I. du Pont de Nemours and Company, Solutia, Inc., BASF Corporation
and Honeywell, Inc. Most of the fibers the Company uses in carpet production are
treated with stain-resistant
5
chemicals. The Company has not experienced significant shortages of raw
materials in recent years. The Company believes that the loss of any one
supplier would not have a material effect on the Company and that an alternative
supply arrangement could be made in a relatively short period of time.
Competition
All of the markets in which the Company does business are highly
competitive, with less than 100 companies engaged in the manufacture and sale of
carpet in the United States. Certain of the Company's competitors may have
greater financial resources than the Company. Carpet manufacturers also face
competition from the hard surface floorcovering industry. Based on industry
publications, the top twenty North American carpet and rug manufacturers
(including their American and foreign divisions) in 1999 had worldwide sales in
excess of $17 billion, and the top twenty manufacturers in 1990 had sales in
excess of $6 billion. In 1999, the top five manufacturers had worldwide sales in
excess of $12 billion. Mohawk, with 2000 net sales of approximately $3.3
billion, is the second largest producer of carpet and rugs (in terms of sales
volume).
The principal methods of competition within the industry are price, style,
quality and service. In each of the Company's markets, price competition and
market coverage are particularly important because there is relatively little
perceived differentiation among competing product lines. Mohawk's recent
investments in modernized, advanced manufacturing and data processing equipment,
the extensive diversity of equipment in which it has invested and its marketing
strategy contribute to its ability to compete primarily on the basis of
performance, quality, style and service, rather than just price.
Trademarks
Mohawk uses several trademarks that it considers important in the marketing
of its products, including "Aladdin," "Alexander Smith (R)," "Mohawk Home,"
"Bigelow (R)," "Ciboney (R)," "Commercial Horizons (R)," "Custom Weave" "Galaxy
(R)" "Hamilton (R)" "Harbinger (R)," "Helios (R)," "Horizon (R)," "Image,"
"Karastan (R)," "Mohawk (R)," "Mohawk Color Center (R)," "Mohawk Commercial,"
"Tommy Mohawk (R)," "Townhouse (R)," "World (R)" and "WundaWeve (R)."
Sales Terms and Major Customers
The Company's sales terms are the same as those generally available
throughout the industry. The Company generally permits its customers to return
broadloom carpet purchased from it within 30 days from the date of sale if the
customer is not satisfied with the quality of the carpet. This return policy is
consistent with the Company's emphasis on quality, style and performance and
promotes customer satisfaction without generating enough returns to affect
materially the Company's operating results or financial position.
During 2000, no single customer accounted for more than 10.0% of Mohawk's
total net sales. The Company believes the loss of one or a few major customers
would not have a material adverse effect on the Company's business.
Backlog
Backlog of orders is generally insignificant in the carpet manufacturing
business because most residential orders are filled within several days and
commercial backlogs reflect the terms of the relevant contracts, which generally
require delivery within four to six weeks.
Employees
As of December 31, 2000, the Company employed 24,005 persons. Approximately
261 Mohawk employees are members of the Union of Needletrades, Industrial and
Textile Employees, AFL-CIO, CLC with which the Company is party to a collective
bargaining agreement. Other than with respect to these employees, the Company is
not a party to any collective bargaining agreements. Additionally, the Company
has not experienced any strikes or work stoppages. The Company believes that its
relations with its employees are good.
6
Environmental Matters
The Company's operations must meet federal, state and local regulations
governing the discharge of materials into the environment. All of the plants
operated by the Company were built or have been upgraded to meet current
environmental standards. The Company believes it is in material compliance with
all applicable regulations. The Company estimates that any expenses incurred in
maintaining compliance with these regulations will not materially affect
earnings.
Cyclical Nature of Industry; Current Economic Conditions
The carpet industry is a cyclical business, influenced by a number of
general economic factors, including consumer confidence, spending for durable
goods, disposable income, interest rates, turnover in housing and the condition
of the residential and commercial construction industries (including the number
of new housing starts and the level of commercial construction). During economic
downturns, the carpet industry can be expected to experience a general decline
in sales and profitability.
Item 2. Properties
The Company owns a 47,500 square foot headquarters office in Calhoun,
Georgia on an eight acre site. The following table lists the principal
manufacturing and distribution facilities owned by the Company:
Approx.
Enclosed
Area in
Square
Location Primary Products or Purposes Footage
- ---------------------- ----------------------------------------------------------- ---------------
Dalton, GA............ Carpet and rug manufacturing and warehousing............. 2,089,000
Dalton, GA............ Carpet manufacturing, distribution and offices........... 1,103,200
Dalton, GA............ Carpet manufacturing, distribution and offices........... 396,900
Dalton, GA............ Carpet and yarn manufacturing............................ 1,101,600
Chatsworth, GA........ Carpet manufacturing, warehousing and offices............ 787,800
Dublin, GA............ Carpet manufacturing, warehousing and offices............ 831,000
Lyerly, GA............ Carpet manufacturing and warehousing..................... 820,000
Eden, NC.............. Carpet and rug manufacturing............................. 784,200
Calhoun, GA........... Carpet manufacturing and distribution center............. 792,000
Dalton, GA............ Carpet manufacturing..................................... 342,000
Eton, GA.............. Carpet manufacturing..................................... 577,205
Armuchee, GA.......... Carpet manufacturing..................................... 232,000
Chatsworth, GA........ Distribution center...................................... 812,075
Shannon, GA........... Distribution center...................................... 567,000
Landrum, SC........... Weaving and finishing of carpet.......................... 350,000
Dalton, GA............ Carpet dyeing............................................ 259,000
Dalton, GA............ Carpet dyeing............................................ 216,000
Dalton, GA............ Sample storage and distribution.......................... 123,000
Eden, NC.............. Carpet and rug distribution.............................. 194,000
Summerville, GA....... Sample manufacturing and distribution.................... 235,000
Chatsworth, GA........ Sample manufacturing..................................... 291,800
Sugar Valley, GA...... Rug manufacturing, warehousing and offices............... 472,500
Dalton, GA............ Rug manufacturing and offices............................ 135,000
Calhoun, GA........... Rug manufacturing and warehousing........................ 250,000
Chatsworth, GA........ Yarn extrusion........................................... 257,800
Summerville, GA....... Yarn extrusion........................................... 579,000
Dahlonega, GA......... Yarn manufacturing....................................... 380,000
Calhoun Falls, SC..... Yarn manufacturing....................................... 425,000
Bennettsville, SC..... Yarn manufacturing....................................... 412,000
Dalton, GA............ Yarn manufacturing....................................... 105,400
Laurel Hill, NC....... Yarn manufacturing....................................... 203,000
7
Fort Oglethorpe, GA... Yarn manufacturing....................................... 194,000
Dalton, GA............ Yarn manufacturing....................................... 231,000
Dalton, GA............ Yarn manufacturing....................................... 180,000
Calhoun, GA........... Yarn manufacturing....................................... 121,000
Calhoun, GA........... Yarn manufacturing....................................... 113,800
Dillon, SC............ Yarn manufacturing....................................... 102,000
South Pittsburg, TN... Yarn manufacturing....................................... 102,000
Chatsworth, GA........ Yarn manufacturing....................................... 138,100
Rome, GA.............. Yarn manufacturing....................................... 240,400
Rome, GA.............. Yarn manufacturing....................................... 224,000
Cartersville, GA...... Yarn manufacturing....................................... 178,100
Milledgeille, GA...... Yarn manufacturing....................................... 255,000
Ulmer, SC............. Yarn manufacturing....................................... 238,666
Chatsworth, GA........ Yarnset plant............................................ 121,200
Chatsworth, GA........ Commercial warehouse..................................... 128,000
Eton, GA.............. Storage warehouse........................................ 121,300
Greenville, NC........ Wool processing.......................................... 103,000
Calhoun, GA........... Textile and rug manufacturing............................ 287,688
Chatsworth, GA........ Warping, warehousing..................................... 112,121
Calhoun, GA........... Textile manufacturing, distribution and offices.......... 207,432
Calhoun, GA........... Distribution center...................................... 300,248
_________
The following table lists the Company's material leased office, manufacturing
and warehouse facilities:
Approx.
Enclosed
Area in
Square Lease Term
Location Primary Products or Purposes Footage Through (1)
- ---------------------- -------------------------------------------------- ------------- --------------
Calhoun, GA........... Mat manufacturing and warehouse (2)............. 164,400 Jun-2004
Calhoun, GA........... Rug manufacturing, warehouse and offices........ 131,865 Mar-2008
Calhoun, GA........... Yarn manufacturing.............................. 110,700 Mar-2008
La Mirada, CA......... Distribution warehouse.......................... 360,200 Jan-2011
La Mirada, CA......... Distribution warehouse.......................... 100,000 Jan-2011
Grand Prairie, TX..... Distribution warehouse.......................... 202,890 Jun-2012
Bowlingbrook, IL...... Distribution warehouse.......................... 201,959 Nov-2019
Glen Burnie, MD....... Distribution warehouse.......................... 187,200 Apr-2007
Pembroke Park, FL..... Distribution warehouse.......................... 258,270 Jul-2020
Pompton Plains, NJ.... Distribution warehouse.......................... 164,437 Jul-2011
Columbus, OH.......... Distribution warehouse.......................... 135,000 Sep-2004
Romeoville, IL........ Distribution warehouse.......................... 108,000 Oct-2004
Lathrop, CA Distribution warehouse.......................... 101,112 Feb 2012
Calhoun, GA........... Carpet manufacturing............................ 263,162 Mar-2006
Bentonville, AR....... Textile manufacturing........................... 134,067 Nov-2004
Kensington, GA........ Warehouse....................................... 277,484 May-2001
Kent, WA.............. Distribution warehouse.......................... 120,950 Nov-2020
____________
(1) Include renewal options exercisable by the Company.
(2) Includes a number of separately leased adjoining or adjacent buildings with
varying lease terms. The expiration date shown in the table is the earliest
expiration date of the respective group of leases.
The Company's properties are in good condition and adequate for its
requirements. The Company also believes its principal plants are generally
adequate to meet its production plans pursuant to its long-term sales goals. In
the ordinary course of its business, the Company monitors the condition of its
facilities to ensure that they remain adequate to meet long-term sales goals and
production plans.
8
Item 3. Legal Proceedings
The Company is involved in routine litigation from time to time in the
regular course of its business. Except as noted below, there are no material
legal proceedings pending or known to be contemplated to which the Company is a
party or to which any of its property is subject.
In December 1995, the Company and four other carpet manufacturers were
added as defendants in a purported class action lawsuit, In re Carpet Antitrust
Litigation, pending in the United States District Court for the Northern
District of Georgia, Rome Division. The amended complaint alleges price-fixing
regarding polypropylene products in violation of Section One of the Sherman Act.
In September 1997, the Court granted the plaintiffs' motion to certify the
class. In October 1998, two plaintiffs, on behalf of an alleged class of
purchasers of nylon carpet products, filed a complaint in the United States
District Court for the Northern District of Georgia against the Company and two
of its subsidiaries, as well as certain competitors. The complaint alleges that
the Company acted in concert with other carpet manufacturers to restrain
competition in the sale of certain nylon carpet products. The Company filed an
answer, denied the allegations in the complaint and set forth its defenses.
On August 11, 2000, the Company presented to the Court the terms of an
agreement in principle to settle these two cases. Under the terms of the
settlement agreement, the Company will contribute $13.5 million to a settlement
fund to resolve price-fixing claims brought by a class of purchasers of
polypropylene carpet and a proposed settlement class of purchasers of nylon
carpet. The Company recorded a charge of $7 million in the third quarter of
2000, in connection with the lawsuit. The Company denies all liability and
wrongdoing and has agreed to settle these claims in order to avoid the costs of
further litigation. The court dismissed all claims against the Company and
granted final approval to the settlement on February 5, 2001.
The Company is a party to two consolidated lawsuits captioned Gaehwiler v.
Sunrise Carpet Industries, Inc. et al. and Patco Enterprises, Inc. v. Sunrise
Carpet Industries, Inc. et al., both of which were filed in the Superior Court
of the State of California, City and County of San Francisco, in 1996. Both
complaints were brought on behalf of a purported class of indirect purchasers of
polypropylene carpet in the State of California and seek damages for alleged
violations of California antitrust and unfair competition laws. In February
1999, a similar complaint was filed in the Superior Court of the State of
California, City and County of San Francisco, on behalf of a purported class
based on indirect purchasers of nylon carpet in the State of California and
alleges violations of California antitrust and unfair competition laws. The
complaints described above do not specify any specific amount of damages but do
request injunctive relief and treble damages plus reimbursement for fees and
costs. The Company believes it has meritorious defenses and intends to
vigorously defend against these actions.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of the Company
during the fourth quarter ended December 31, 2000.
9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market for the Common Stock
The Company's common stock is quoted on the New York Stock Exchange
("NYSE") under the symbol "MHK." The table below shows the high and low sales
prices per share of the Common Stock as reported on the NYSE Composite Tape, for
each fiscal period indicated.
Mohawk
Common Stock
-------------------------
High Low
----------- ----------
1999
----
First quarter.......................................... $ 42.00 25.94
Second quarter......................................... 38.56 28.19
Third quarter.......................................... 30.44 18.38
Fourth quarter......................................... 26.81 19.69
2000
----
First quarter.......................................... $ 26.00 18.94
Second quarter......................................... 26.25 20.50
Third quarter.......................................... 27.81 21.13
Fourth quarter......................................... 29.13 19.06
2001
----
First quarter (through March 6, 2001).................. $ 32.60 26.69
As of March 6, 2001, there were 396 holders of record of Common Stock.
Mohawk has not paid or declared any cash dividends on shares of its Common Stock
since completing its initial public offering. The Company's policy is to retain
all net earnings for the development of its business, and it does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. The payment
of future cash dividends will be at the sole discretion of the Board of
Directors and will depend upon the Company's profitability, financial condition,
cash requirements, future prospects and other factors deemed relevant by the
Board of Directors. The payment of cash dividends is limited by certain
covenants within various Company loan agreements.
10
Item 6. Selected Financial Data
The following table sets forth the selected financial data of the Company for
the periods indicated, derived from the consolidated financial statements of the
Company. On July 23, 1997, the Company acquired certain assets of Diamond and
other assets owned by Diamond's principal shareholders using the purchase method
of accounting. On November 12, 1998, the Company acquired all of the
outstanding capital stock of World in exchange for approximately 4.9 million
shares of the Company's common stock in a transaction recorded using the
pooling-of-interests method of accounting. On January 29, 1999, the Company
acquired certain assets and assumed certain liabilities of Image. The
acquisition was recorded using the purchase method of accounting. On March 9,
1999, the Company acquired all of the outstanding capital stock of Durkan in
exchange for approximately 3.1 million shares of the Company's common stock in a
transaction recorded using the pooling-of-interests method of accounting. On
November 14, 2000, the Company acquired certain fixed assets and inventory of
Crown Crafts. The acquisition was accounted for using the purchase method of
accounting. All financial data have been restated to include the accounts and
results of operations of World and Durkan. The selected financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and notes thereto included elsewhere herein.
At or for the Years ended December 31,
----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
(In thousands, except per share data)
Statement of earnings data:
Net sales............................. $ 3,255,846 3,083,264 2,744,620 2,429,085 2,239,471
Cost of sales......................... 2,432,997 2,306,405 2,063,333 1,869,221 1,726,765
-------------- -------------- -------------- -------------- --------------
Gross profit........................ 822,849 776,859 681,287 559,864 512,706
Selling, general and administrative
expenses............................ 505,734 482,062 432,191 383,523 367,251
Restructuring costs (a)............... - - - - 700
Carrying value reduction of property,
plant and equipment and other
assets (b).......................... - - 2,900 5,500 3,060
Class action legal settlement (c)..... 7,000 - - - -
Compensation expense for stock
option exercises (d)................ - - - 2,600 -
-------------- -------------- -------------- -------------- --------------
Operating income.................... 310,115 294,797 246,196 168,241 141,695
-------------- -------------- -------------- -------------- --------------
Interest expense...................... 38,044 32,632 31,023 36,474 39,772
Acquisition costs - World Merger (e) - - 17,700 - -
Other expense, net.................... 4,442 2,266 2,667 338 4,586
-------------- -------------- -------------- -------------- --------------
42,486 34,898 51,390 36,812 44,358
-------------- -------------- -------------- -------------- --------------
Earnings before income taxes........ 267,629 259,899 194,806 131,429 97,337
Income taxes.......................... 105,030 102,660 79,552 51,866 40,395
-------------- -------------- -------------- -------------- --------------
Net earnings........................ $ 162,599 157,239 115,254 79,563 56,942
============== ============== ============== ============== ==============
Basic earnings per share (f).......... $ 3.02 2.63 1.91 1.33 0.96
============== ============== ============== ============== ==============
Weighted-average common shares
outstanding (f)..................... 53,769 59,730 60,393 59,962 59,310
============== ============== ============== ============== ==============
Diluted earnings per share (f)........ $ 3.00 2.61 1.89 1.32 0.95
============== ============== ============== ============== ==============
Weighted-average common and
dilutive potential common shares
outstanding (f).................... 54,255 60,349 61,134 60,453 59,899
============== ============== ============== ============== ==============
11
At or for the Years ended December 31,
----------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
(In thousands, except per share data)
Balance sheet data:
Working capital....................... $ 427,192 560,057 438,474 389,378 390,889
Total assets.......................... 1,792,641 1,682,873 1,405,486 1,233,361 1,226,959
Short-term note payable............... - - - - 21,200
Long-term debt (including current
portion)......................... 589,828 596,065 377,089 402,854 486,952
Stockholders' equity.................. 754,360 692,546 611,059 493,841 409,616
(a) During 1996, the Company recorded pre-tax restructuring costs of $0.7
million, related to certain mill closings whose operations have been
consolidated into other Mohawk facilities.
(b) During 1996, the Company recorded a charge of $3.1 million arising from the
write-down of property, plant and equipment to be disposed of related to the
closing of a manufacturing facility in 1996 and a revision in the estimate of
fair value of certain property, plant and equipment based on current market
conditions related to mill closings in 1995. During 1997, the Company recorded a
charge of $5.5 million arising from a revision in the estimated fair value of
certain property, plant and equipment held for sale based on current appraisals
and other market information related to a mill closing in 1995. During 1998, the
Company recorded a charge of $2.9 million for the write-down of assets to be
disposed of relating to the acquisition of World.
(c) The Company recorded a one-time charge of $7.0 million in 2000, reflecting
the settlement of two antitrust class action price-fixing lawsuits.
(d) A charge of $2.6 million was recorded in 1997, for income tax
reimbursements to be made to certain executives related to the exercise of stock
options granted in 1988 and 1989 in connection with the Company's 1988 leveraged
buyout.
(e) The Company recorded a one-time charge of $17.7 million in 1998 for
transaction expenses related to the World Merger.
(f) The Board of Directors declared a 3-for-2 stock split on October 23, 1997,
which was paid on December 4, 1997 to holders of record on November 4, 1997.
Earnings per share and weighted-average common share data have been restated to
reflect the split.
12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
During the three-year period ended December 31, 2000, the Company continued to
experience significant growth both internally and through acquisitions.
The Company completed its acquisitions of Newmark and American Weavers on June
30, 1998 and August 10, 1998, respectively. Both of these acquisitions were
accounted for using the purchase method of accounting. On November 12, 1998,
the Company acquired all of the outstanding capital stock of World in exchange
for approximately 4.9 million shares of the Company's common stock valued at
$149.5 million, based on the closing stock price on the day the agreement was
executed. The acquisition of World was accounted for using the pooling-of-
interests method of accounting.
On January 29, 1999, the Company acquired certain assets of Image for
approximately $192 million, including acquisition costs and the assumption of
$30 million of tax-exempt debt, and on March 9, 1999, the Company acquired all
of the outstanding capital stock of Durkan for approximately 3.1 million shares
of the Company's common stock valued at $116.5 million based on the closing
stock price the day the letter of intent was executed. The Image acquisition
was accounted for using the purchase method of accounting, and the Durkan
acquisition was accounted for using the pooling-of-interests method of
accounting.
On November 14, 2000, the Company acquired certain assets of Crown Crafts.
Under the agreement, the Company paid approximately $37 million in cash for
substantially all of the fixed assets and inventory of the division. The
acquisition was accounted for using the purchase method of accounting.
These acquisitions have created opportunities to enhance Mohawk's operations
by (i) broadening price points, (ii) increasing vertical integration efforts,
(iii) expanding distribution capabilities and (iv) facilitating entry into niche
businesses, such as rugs, decorative throws, bedspreads and coverlets.
Effective November 1, 2000, the Company entered into an agreement with
Congoleum Corporation, Inc. to become a national distributor of their vinyl
products. This gave the Company access to a complete line of soft and hard floor
covering products to supply to customers throughout the United States. In
conjunction with this program and the other hard surface floor covering
initiatives being undertaken by the Company, the Company anticipates significant
start up costs with the roll out of these product lines into all sales regions
during 2001.
In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue Recognition" was
issued requiring that revenue be recognized when certain criteria are met. In
addition, the Emerging Issues Task Force ("EITF") reached a consensus on issue
EITF 00-10 in September 2000, "Accounting for Shipping and Handling Fees and
Costs". The Company has analyzed the implications of both SAB 101 and EITF 00-10
and believes that these pronouncements did not have a material impact on the
Company's consolidated financial statements.
As the Company looks forward at this time, it sees the impact of a slowing
economy. In May 2000, industry unit shipments turned negative when compared to
the prior year and have remained negative for each subsequent month through
December 2000. Raw material prices rose over the last twelve months but appear
to have peaked while natural gas and utility costs continue to increase. On the
positive side the Company has announced a price increase for selected
residential carpet, effective March 2001.The hard surface product expansion is
progressing very favorably with customers but significant sampling and personnel
costs will be incurred during the first half of 2001 without the offsetting
growth in margins. The Company is encouraged by its customer acceptance of its
programs and brand recognition efforts. In addition, the Company is pleased by
the Federal Reserve's recent move to lower interest rates and congressional
consideration of potential tax reductions. These impacts are expected to have a
long-term favorable impact on the economy.
13
Results of Operations
Year Ended December 31, 2000 as Compared with Year Ended December 31, 1999
- --------------------------------------------------------------------------
Net sales for the year ended December 31, 2000 were $3,255.8 million,
reflecting an increase of $172.6 million, or approximately 5.6%, over the
$3,083.3 million reported in the year ended December 31, 1999. The Company
believes that the 2000 net sales increase was attributable primarily to internal
growth.
Quarterly net sales and the percentage changes in net sales by quarter for
2000 versus 1999 were as follows (dollars in thousands):
2000 1999 Change
------------------ --------------- ---------------
First quarter...................... $ 765,083 707,167 8.2%
Second quarter..................... 852,808 790,617 7.9
Third quarter...................... 838,514 809,933 3.5
Fourth quarter..................... 799,441 775,547 3.1
------------------ --------------- ---------------
Total year.................. $ 3,255,846 3,083,264 5.6%
================== =============== ===============
Gross profit for 2000 was $822.9 million (25.3% of net sales) and represented
an increase over the gross profit of $776.9 million (25.2% of net sales) for
1999. Gross profit dollars for the current year were impacted by favorable
product mix and the change in depreciable lives of fixed assets as of the
beginning of the year and offset by higher material and fuel costs.
Selling, general and administrative expenses for 2000 were $505.7 million
(15.5% of net sales) compared to $482.1 million (15.6% of net sales) for 1999.
In the third quarter of 2000, the Company reached an agreement in principle to
settle two antitrust class actions. The Company will contribute $13.5 million to
a settlement fund to resolve these claims. The court approved the settlement on
February 5, 2001. During the third quarter, the Company recorded a charge of $7
million in connection with the settlement.
Interest expense for the current year was $38.0 million compared to $32.6
million in 1999. The primary factors contributing to the increase were higher
debt levels, attributable to the stock repurchase program and capital
expenditures, and an increase in the weighted average borrowing rate compared to
1999.
In the current year, income tax expense was $105.0 million or 39.2% of
earnings before income taxes. In 1999, income tax expense was $102.7 million,
representing 39.5% of earnings before income taxes.
Year Ended December 31, 1999 as Compared with Year Ended December 31, 1998
- --------------------------------------------------------------------------
Net sales for the year ended December 31, 1999 were $3,083.3 million,
reflecting an increase of $338.6 million, or approximately 12.3%, over the
$2,744.6 million reported in the year ended December 31, 1998. All major
product categories achieved sales increases in 1999 as compared to 1998. The
Company believes that the 1999 net sales increase was attributable to internal
growth and the acquisition of Image.
Quarterly net sales and the percentage changes in net sales by quarter for
1999 versus 1998 were as follows (dollars in thousands):
1999 1998 Change
------------------ --------------- ---------------
First quarter...................... $ 707,167 589,473 20.0%
Second quarter..................... 790,617 689,488 14.7
Third quarter...................... 809,933 718,772 12.7
Fourth quarter..................... 775,547 746,887 3.8
------------------ --------------- ---------------
Total Year.................. $ 3,083,264 2,744,620 12.3%
================== =============== ===============
14
The Company's fiscal calendar reflected differences for the 1999 first
quarter, with four more shipping days, when compared to 1998 and four fewer
shipping days when the fourth quarter of 1999 is compared to 1998.
Gross profit for 1999 was $776.9 million (25.2% of net sales) and represented
an increase over the gross profit of $681.3 million (24.8% of net sales) for
1998. Gross profit dollars for 1999 were impacted favorably by better
absorption of fixed costs through higher production volume.
Selling, general and administrative expenses for 1999 were $482.1 million
(15.6% of net sales) compared to $432.2 million (15.7% of net sales) for 1998.
Interest expense for 1999 was $32.6 million compared to $31.0 million in 1998.
The primary factor contributing to the increase was an increase in debt levels,
which was attributable to acquisitions, the stock repurchase program and capital
expenditures, which was offset by a decrease in the Company's weighted average
interest rate in 1999.
In 1999, income tax expense was $102.7 million, or 39.5% of earnings before
income taxes. In 1998, income tax expense was $79.6 million, representing 40.8%
of earnings before income taxes. The primary reason for the decrease in the 1999
effective income tax rate was that certain costs included in the nonrecurring
pre-tax charge of $17.7 million related to the World acquisition recorded in
1998 were not deductible for income tax purposes.
Liquidity and Capital Resources
The Company's primary capital requirements are for working capital, capital
expenditures and acquisitions. The Company's capital needs are met through a
combination of internally generated funds, bank credit lines and credit terms
from suppliers.
The level of accounts receivable increased from $337.8 million at the
beginning of 2000 to $356.1 million at December 31, 2000. The $18.3 million
increase was attributable to strong sales growth. Inventories increased from
$494.8 million at the beginning of 2000 to $574.6 million at December 31, 2000,
due primarily to the need for a higher level of inventory to meet the increased
sales volume, the expansion of hard surface product lines to meet anticipated
sales requirements and the addition of Crown Crafts inventory.
Capital expenditures totaled $73.5 million during 2000, and the Company spent
an additional $37 million related to the purchase of certain assets of Crown
Crafts. The capital expenditures made during 2000 were incurred primarily to
modernize and expand manufacturing facilities and equipment. The Company's
capital projects are primarily focused on increasing capacity, improving
productivity and reducing costs. Capital expenditures for Mohawk, including
$235.9 million for acquisitions, have totaled $538 million over the past three
years. Capital spending during 2001 is expected to range from $96 million to
$111 million, the majority of which will be used to purchase equipment to
increase production capacity and productivity.
The Company's credit agreement provides for an interest rate of either (i)
LIBOR plus 0.2% to 0.5%, depending upon the Company's performance measured
against certain financial ratios, or (ii) the prime rate less 1.0% and has a
termination date of January 28, 2004. At December 31, 2000, the Company had
credit availability of $450 million under its revolving credit line and $70
million under various short-term uncommitted credit lines. At December 31, 2000,
a total of approximately $267 million was unused under these lines. The credit
agreement contains customary financial and other covenants. The Company must
pay an annual facility fee ranging from .0015 to .0025 of the total credit
commitment, depending upon the Company's performance measured against specific
coverage ratios, under the revolving credit line.
During 1999, the Company's Board of Directors authorized the repurchase of up
to 10 million shares of its outstanding common shares. During the quarter ended
July 1, 2000, the Board of Directors authorized an additional repurchase of 5
million outstanding shares bringing the total authorized repurchase to 15
million shares. For the year ended December 31, 2000, a total of approximately
4.7 million shares of the Company's common stock was purchased at an aggregate
cost of approximately $106.7 million. Since the inception of the program, a
total of approximately 8.7 million shares has been repurchased at an aggregate
cost of approximately
15
$192.6 million. All of this repurchase has been financed through the Company's
operations and revolving line of credit.
During October 2000, the Company entered into a one-year asset securitization
agreement enabling the Company to sell up to $205 million of an undivided
interest in a defined pool of trade accounts receivable. The agreement may be
extended in one-year terms. The net proceeds from this borrowing were used to
reduce borrowings under the revolving credit facility. At December 31, 2000, a
total of approximately $191 million was outstanding under the asset
securitization agreement.
On January 3, 2001, the Company entered into a five-year interest rate swap,
which converted approximately $100 million of its variable rate debt to a fixed
rate. Under the agreement payments are made based on a fixed rate of 5.82% and
received on a LIBOR based variable rate. Differentials received or paid under
the agreement will be recognized as interest expense.
Impact of Inflation
Inflation affects the Company's manufacturing costs and operating expenses.
The carpet industry has experienced significant inflation in the prices of raw
materials and fuel-related costs, beginning in the third quarter of 1999. For
the period from 1998, through the end of the second quarter of 1999, the carpet
industry has experienced moderate inflation in the prices of raw materials and
fuel-related costs. The Company has generally passed along nylon fiber price
increases to its customers although additional costs resulting from recent
significant inflationary pressures may not be fully recoverable through such
price increases in the near-term.
Seasonality
The carpet business is seasonal, with the Company's second, third and fourth
quarters typically producing higher net sales and operating income. By
comparison, results for the first quarter tend to be the weakest. This
seasonality is primarily attributable to consumer residential spending patterns
and higher installation levels during the spring and summer months.
Certain factors affecting the Company's performance
In addition to the other information provided in this Form 10-K, the following
risk factors should be considered when evaluating an investment in shares of
Mohawk common stock.
A failure by Mohawk to complete acquisitions and successfully integrate acquired
- --------------------------------------------------------------------------------
operations could materially and adversely affect its business.
- --------------------------------------------------------------
Management intends to pursue acquisitions of complementary businesses as part
of its business and growth strategies. Although management regularly evaluates
acquisition opportunities, it cannot offer assurance that it will be able to:
. successfully identify suitable acquisition candidates;
. obtain sufficient financing on acceptable terms to fund acquisitions;
. complete acquisitions;
. integrate acquired operations into Mohawk's existing operations; or
. profitably manage acquired businesses.
Acquired operations may not achieve levels of sales, operating income or
productivity comparable to those of Mohawk's existing operations, or otherwise
perform as expected. Acquisitions may also involve a number of special risks,
some or all of which could have a material adverse effect on Mohawk's business,
results of operations and financial condition, including, among others:
. possible adverse effects on Mohawk's operating results;
. diversion of Mohawk management's attention and its resources; and
. dependence on retaining and training acquired key personnel.
16
The carpet industry is cyclical and a downturn in the overall economy could
- ---------------------------------------------------------------------------
lessen the demand for Mohawk's products and impair growth and profitability.
- ----------------------------------------------------------------------------
The carpet industry is cyclical and is influenced by a number of general
economic factors. Prevailing interest rates, consumer confidence, spending for
durable goods, disposable income, turnover in housing and the condition of the
residential and commercial construction industries (including the number of new
housing starts and the level of new commercial construction) all have an impact
on Mohawk's growth and profitability. In addition, sales of Mohawk's principal
products are related to construction and renovation of commercial and
residential buildings. Any adverse cycle could lessen the overall demand for
Mohawk's products and could, in turn, impair Mohawk's growth and profitability.
The carpet business is seasonal and this seasonality causes Mohawk's results of
- -------------------------------------------------------------------------------
operations to fluctuate on a quarterly basis.
- ---------------------------------------------
Mohawk is a calendar year end company and its results of operations for the
first quarter tend to be the weakest. Mohawk's second, third and fourth quarters
typically produce higher net sales and operating income. These results are
primarily due to consumer residential spending patterns and more carpet being
installed in the spring and summer months.
Mohawk's business is competitive and a failure by Mohawk to compete effectively
- -------------------------------------------------------------------------------
could have a material and adverse impact on Mohawk's results of operations.
- ---------------------------------------------------------------------------
Mohawk operates in a highly competitive industry. Mohawk and other
manufacturers in the carpet industry compete on the basis of price, style,
quality and service. Some of Mohawk's competitors may have greater financial
resources at their disposal. If competitors substantially increase production
and marketing of competing products, then Mohawk might be required to lower its
prices or spend more on product development, marketing and sales, which could
adversely affect Mohawk's profitability.
An increase in the cost of raw materials could negatively impact Mohawk's
- -------------------------------------------------------------------------
profitability.
- --------------
The cost of raw materials has a significant impact on the profitability of
Mohawk. In particular, Mohawk's business requires it to purchase large volumes
of nylon fiber and polypropylene resin, which is used to manufacture fiber. The
cost of these raw materials is related to oil prices. Mohawk does not have any
long-term supply contracts for any of these products. While Mohawk generally
attempts to match cost increases with price increases, large increases in the
cost of such raw materials could adversely affect its business, results of
operations and financial condition if it is unable to pass these costs through
to its customers.
Mohawk may be responsible for environmental cleanup, which could negatively
- ---------------------------------------------------------------------------
impact profitability.
- ---------------------
Various federal, state and local environmental laws govern the use of Mohawk's
facilities. Such laws govern:
. discharges to air and water;
. handling and disposal of solid and hazardous substances and waste; and
. remediation of contamination from releases of hazardous substances in
Mohawk's facilities and off-site disposal locations.
Mohawk's operations are also governed by the laws relating to workplace safety
and worker health, which, among other things, establish asbestos and noise
standards and regulate the use of hazardous chemicals in the workplace. Mohawk
has taken and will continue to take steps to comply with these laws. Based upon
current available information, Mohawk believes that complying with environmental
and safety and health requirements will not require material capital
expenditures in the foreseeable future. However, Mohawk cannot provide assurance
that complying with these environmental or health and safety laws and
requirements will not adversely affect its business, results of operations and
financial condition. Future laws, ordinances or regulations could give rise to
additional compliance or remediation costs, which could have a material adverse
effect on its business, results of operations and financial condition.
17
Forward-Looking Information
Certain of the matters discussed in the preceding pages, particularly
regarding anticipating future financial performance, business prospects, growth
and operating strategies, proposed acquisitions, new products and similar
matters, and those preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended. For those statements,
Mohawk claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Forward-
looking statements involve a number of risks and uncertainties. The following
important factors, in addition to those discussed elsewhere in this document,
affect the future results of Mohawk and could cause those results to differ
materially from those expressed in the forward-looking statements: materially
adverse changes in economic conditions generally in the carpet, rug and
floorcovering markets served by Mohawk; competition from other carpet, rug and
floorcovering manufacturers; raw material prices; timing and level of capital
expenditures; the successful integration of acquisitions, including the
challenges inherent in diverting Mohawk management's attention and resources
from other strategic matters and from operational matters for an extended period
of time; the successful introduction of new products; the successful
rationalization of existing operations; and other risks identified from time to
time in the Company's SEC reports and public announcements. Any forward-looking
statements represent Mohawk's estimates only as of the date of this report and
should not be relied upon as representing Mohawk's estimates of any subsequent
date. While Mohawk may elect to update forward-looking statements at some point
in the future, Mohawk specifically disclaims any obligation to do so, even if
Mohawk's estimates change.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk-sensitive instruments do not subject the Company to
material market risk exposures other than as described below. The Company
estimates that a 1% increase in the Company's cost of borrowed funds could have
yielded an approximate $4.8 million adverse effect on 2000 pre-tax earnings. The
Company manages exposure to interest rate risk using interest rate swaps to fix
portions of variable rate debt.
Item 8. Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report................................................................ 19
Consolidated Balance Sheets as of December 31, 2000 and 1999................................ 20
Consolidated Statements of Earnings for the Years ended December 31, 2000, 1999 and 1998.... 21
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 2000, 1999 and 1998....................................................... 22
Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and 1998.. 23
Notes to Consolidated Financial Statements.................................................. 24
18
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Mohawk Industries, Inc.:
We have audited the consolidated financial statements of Mohawk Industries, Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in Item 14(a)2. These consolidated
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mohawk Industries,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG LLP
Atlanta, Georgia
February 2, 2001
19
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2000 and 1999
(In thousands, except per share data)
ASSETS 2000 1999
------------- -------------
Current assets:
Receivables.............................................................................. $ 356,072 337,824
Inventories.............................................................................. 574,595 494,774
Prepaid expenses......................................................................... 26,973 25,184
Deferred income taxes.................................................................... 66,474 76,628
------------- -------------
Total current assets............................................................ 1,024,114 934,410
Property, plant and equipment, net.......................................................... 650,053 624,814
Other assets................................................................................ 118,474 123,649
------------- -------------
$ 1,792,641 1,682,873
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................................ $ 224,391 33,961
Accounts payable and accrued expenses.................................................... 372,531 340,392
------------- -------------
Total current liabilities....................................................... 596,922 374,353
Deferred income taxes....................................................................... 75,808 53,783
Long-term debt, less current portion........................................................ 365,437 562,104
Other long-term liabilities................................................................. 114 87
------------- -------------
Total liabilities............................................................... 1,038,281 990,327
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued.................. - -
Common stock, $.01 par value; 150,000 shares authorized; 60,838 and 60,657
shares issued in 2000 and 1999, respectively........................................... 608 607
Additional paid-in capital............................................................... 183,303 179,993
Retained earnings........................................................................ 758,531 595,932
------------- -------------
942,442 776,532
Less treasury stock at cost; 8,538 and 3,952 shares in 2000 and 1999, respectively..... 188,082 83,986
------------- -------------
Total stockholders' equity...................................................... 754,360 692,546
Commitments and contingencies (Note 12).....................................................
------------- -------------
$ 1,792,641 1,682,873
============= =============
See accompanying notes to consolidated financial statements.
20
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years Ended December 31, 2000, 1999 and 1998
(In thousands, except per share data)
2000 1999 1998
--------------- ------------- -------------
Net sales......................................................................... $ 3,255,846 3,083,264 2,744,620
Cost of sales..................................................................... 2,432,997 2,306,405 2,063,333
--------------- ------------- -------------
Gross profit............................................................... 822,849 776,859 681,287
Selling, general and administrative expenses...................................... 505,734 482,062 432,191
Carrying value reduction of property, plant and equipment and
other assets.................................................................. - - 2,900
Class action legal settlement..................................................... 7,000 - -
--------------- ------------- -------------
Operating income........................................................... 310,115 294,797 246,196
--------------- ------------- -------------
Other expense:
Interest expense............................................................... 38,044 32,632 31,023
Acquisition costs - World Merger............................................... - - 17,700
Other expense, net............................................................. 4,442 2,266 2,667
--------------- ------------- -------------
42,486 34,898 51,390
--------------- ------------- -------------
Earnings before income taxes............................................... 267,629 259,899 194,806
Income taxes...................................................................... 105,030 102,660 79,552
--------------- ------------- -------------
Net earnings............................................................... $ 162,599 157,239 115,254
=============== ============= =============
Basic earnings per share.......................................................... $ 3.02 2.63 1.91
=============== ============= =============
Weighted-average common shares outstanding........................................ 53,769 59,730 60,393
=============== ============= =============
Diluted earnings per share........................................................ $ 3.00 2.61 1.89
=============== ============= =============
Weighted-average common and dilutive potential common
shares outstanding............................................................ 54,255 60,349 61,134
=============== ============= =============
See accompanying notes to consolidated financial statements.
21
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
Common stock Additional Total
----------------------- paid-in Retained Treasury stockholders'
Shares Amount capital earnings stock equity
--------- ---------- ---------- ----------- ------------- --------------
Balances at December 31, 1997.................. 60,217 $ 603 167,388 325,850 - 493,841
Stock options exercised........................ 316 3 4,414 - - 4,417
Dividends paid................................. - - - (24) - (24)
Tax benefit from exercise of stock
options................................... - - 243 - - 243
Adjustments to conform fiscal year end
of World.................................. - - - (2,672) - (2,672)
Net earnings................................... - - - 115,254 - 115,254
-------- --------- --------- ---------- ------------ -------------
Balances at December 31, 1998.................. 60,533 606 172,045 438,408 - 611,059
Stock options exercised........................ 124 1 1,390 - - 1,391
Purchase of treasury stock..................... - - - - (85,936) (85,936)
Grant to employee profit sharing plan.......... - - - - 1,950 1,950
Tax benefit from exercise of stock
options................................... - - 836 - - 836
Durkan pooling adjustment...................... - - 5,722 - - 5,722
Adjustments to conform fiscal year end
of Durkan................................. - - - 285 - 285
Net earnings................................... - - - 157,239 - 157,239
-------- --------- --------- ---------- ------------ -------------
Balances at December 31, 1999.................. 60,657 607 179,993 595,932 (83,986) 692,546
Stock options exercised........................ 181 1 2,396 - - 2,397
Purchase of treasury stock..................... - - - - (106,689) (106,689)
Grant to employee profit sharing plan.......... - - - - 2,593 2,593
Tax benefit from exercise of stock
options................................... - - 914 - - 914
Net earnings................................... - - - 162,599 - 162,599
-------- --------- --------- ---------- ------------ -------------
Balances at December 31, 2000.................. 60,838 $ 608 183,303 758,531 (188,082) 754,360
======== ========= ========= ========== ============ =============
See accompanying notes to consolidated financial statements.
22
MOHAWK INDUSTRIES, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
-------------- -------------- --------------
Cash flows from operating activities:
Net earnings............................................................. $ 162,599 157,239 115,254
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization....................................... 82,346 105,297 72,591
Deferred income taxes............................................... 32,179 (1,302) (14,194)
Provision for doubtful accounts..................................... 15,717 15,804 13,173
Loss on sale of property, plant and equipment....................... 205 2,516 2,121
Carrying value reduction of property, plant and equipment
and other assets................................................. - - 2,900
Changes in assets and liabilities, net of effects of acquisitions:
Receivables...................................................... (33,965) 2,904 (36,523)
Inventories...................................................... (70,209) (32,437) (31,083)
Accounts payable and accrued expenses............................ 31,177 (57,274) 57,295
Other assets and prepaid expenses................................ (3,257) (16,086) (7,653)
Other liabilities................................................ 27 (5,293) (1,673)
-------------- -------------- --------------
Net cash provided by operating activities..................... 216,819 171,368 172,208
-------------- ------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment.............................. (73,475) (145,621) (83,180)
Acquisitions............................................................ (36,844) (162,463) (36,574)
-------------- -------------- --------------
Net cash used in investing activities......................... (110,319) (308,084) (119,754)
-------------- -------------- --------------
Cash flows from financing activities:
Net change in revolving line of credit................................... (168,595) 255,530 83,658
Proceeds from asset securitization....................................... 191,104 - -
Payments on term loans................................................... (32,226) (32,229) (38,554)
Redemption of acquisition indebtedness................................... - (20,917) (102,201)
Proceeds (redemption) from Industrial Revenue Bonds and other,
net of payments................................................... 3,480 (7,779) 11,329
Change in outstanding checks in excess of cash........................... 522 15,479 (6,486)
Dividends paid........................................................... - - (24)
Acquisition of treasury stock............................................ (104,096) (83,986) -
Common stock transactions................................................ 3,311 8,234 1,988
-------------- -------------- --------------
Net cash (used in) provided by financing activities........... (106,500) 134,332 (50,290)
-------------- -------------- --------------
Net change in cash............................................ - (2,384) 2,164
Cash, beginning of year....................................................... - 2,384 220
-------------- -------------- --------------
Cash, end of year............................................................. $ - - 2,384
============== ============== ==============
See accompanying notes to consolidated financial statements.
23
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
DECEMBER 31, 2000, 1999 AND 1998
(In thousands, except per share data)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of Mohawk
Industries, Inc. and its subsidiaries (the "Company" or "Mohawk"). All
significant intercompany balances and transactions have been eliminated in
consolidation. On November 12, 1998, the Company acquired all of the
outstanding capital stock of World Carpets, Inc. ("World") in exchange for 4,900
shares of the Company's common stock ("World Merger"). On November 12, 1998,
the Securities and Exchange Commission declared effective a shelf registration
statement to register for resale 4,900 shares of Company common stock issued in
connection with the World Merger. The historical consolidated financial
statements have been restated to give retroactive effect to the World Merger.
The World Merger is being accounted for as a pooling-of-interests in the
accompanying consolidated financial statements.
On March 9, 1999, the Company acquired all of the outstanding capital stock
of Durkan Patterned Carpets, Inc. ("Durkan") for 3,150 shares of the Company's
common stock ("Durkan Merger"). On April 28, 1999, a shelf registration
statement was filed with the Securities and Exchange Commission to register for
resale 3,150 shares of the Company's common stock in connection with the Durkan
Merger. The historical consolidated financial statements have been restated to
give retroactive effect to the Durkan Merger. The Durkan Merger is being
accounted for as a pooling-of-interests in the accompanying consolidated
financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(b) Accounts Receivable and Revenue Recognition
The Company is principally a broadloom carpet and rug manufacturer and
sells carpet, rugs and other floorcovering materials throughout the United
States principally for residential use. The Company grants credit to customers,
most of whom are retail carpet dealers, under credit terms that are customary in
the industry.
Revenues are recognized when goods are shipped which is generally when the
legal title passes to the customer. The Company provides allowances for
expected cash discounts, returns, claims and doubtful accounts based upon
historical bad debt and claims experience and periodic evaluations of the aging
of the accounts receivable.
(c) Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the last-in, first-out (LIFO) method, which
matches current costs with current revenues, for substantially all inventories
and the first-in, first-out (FIFO) method for the remaining inventories.
(d) Property, Plant and Equipment
Property, plant and equipment is stated at cost, including interest on
funds borrowed to finance the acquisition or construction of major capital
additions. Depreciation is calculated on a straight-line basis over the
estimated remaining useful lives, which are 35 years for buildings and
improvements, 15 years for extrusion equipment, 10 years for tufting equipment
and 7 years for other equipment and furniture and fixtures.
24
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(f) Earnings per Share ("EPS")
The Company applies the provisions of Financial Accounting Standards Board
("FASB") FAS No. 128, Earnings per Share, which requires companies to present
basic EPS and diluted EPS. Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.
Dilutive common stock options are included in the diluted EPS calculation
using the treasury stock method. Common stock options that were not included in
the diluted EPS computation because the options' exercise price was greater than
the average market price of the common shares for the periods presented are
immaterial.
(g) Financial Instruments
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, notes payable and long-term debt. The carrying
amount of cash, accounts receivable, accounts payable and notes payable
approximates their fair value because of the short-term maturity of such
instruments. Interest rates that are currently available to the Company for
issuance of long-term debt with similar terms and remaining maturities are used
to estimate the fair value of the Company's long-term debt. The estimated fair
value of the Company's long-term debt at December 31, 2000 and 1999 was $590,786
and $605,332, compared to a carrying amount of $589,828 and $596,065,
respectively. The Company uses interest rate swaps to manage exposure that
arises in the normal course of business. The Company does not use derivatives
for speculative purposes.
(h) Fiscal Year
The Company ends its fiscal year on December 31. Each of the first three
quarters in the fiscal year ends on the Saturday nearest the calendar quarter
end.
(i) Goodwill
Goodwill arises in connection with business combinations accounted for as
purchases. Goodwill is amortized primarily on a straight-line basis over 40
years. Amortization charged to earnings was $3,184 in 2000, $2,808 in 1999 and
$2,437 in 1998.
(j) Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of FAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. Under FAS No. 121, the Company
evaluates impairment of long-lived assets on a business unit basis, rather than
on an aggregate entity basis, whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the
25
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
carrying amount of the asset, an impairment loss is recognized. Measurement of
an impairment loss for long-lived assets is based on the fair value of the
asset.
(k) Effect of New Accounting Pronouncement
In 1997, the FASB issued FAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which supersedes FAS No. 14, Financial
Reporting for Segments of a Business Enterprise. This statement, which the
Company was required to adopt in fiscal year 1998, requires public companies to
report certain financial and descriptive information about their reportable
operating segments, including related disclosures about products and services,
geographic areas and major customers. The implementation of FAS No. 131 did not
have a material effect on the Company's consolidated financial statements.
In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue Recognition"
was issued requiring that revenue be recognized when certain criteria are met.
In addition, the Emerging Issues Task Force ("EITF") reached a consensus on
issue EITF 00-10 in September 2000, "Accounting for Shipping and Handling Fees
and Costs". The Company has analyzed the implications of both SAB 101 and EITF
00-10 and believes that these pronouncements did not have a material impact on
the Company's consolidated financial statements.
(2) Acquisitions
The Company completed its acquisitions of Newmark & James, Inc. and
American Weavers, LLC on June 30, 1998 and August 10, 1998, respectively. Both
of these acquisitions have been accounted for under the purchase method of
accounting and their results are included in the Company's 1998 consolidated
statement of earnings from the respective dates of acquisition.
On November 12, 1998, the Company acquired all of the outstanding capital
stock of World in exchange for 4,900 shares of the Company's common stock. The
acquisition of World has been accounted for under the pooling-of-interests basis
of accounting and, accordingly, the Company's historical consolidated financial
statements have been restated to include the accounts and results of operations
of World. The Company incurred before-tax, nonrecurring charges aggregating
$20,600 in 1998 related to the World Merger, of which $17,700 of the charge was
recorded as non-operating expense and $2,900 of the charge was recorded as a
write-down of World computer equipment that was disposed of.
On January 29, 1999, the Company acquired certain assets of Image
Industries, Inc. ("Image") for approximately $192,000, including acquisition
costs and the assumption of $30,000 of tax-exempt debt. The acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on the estimated fair values at the date of acquisition. The estimated
fair values were $205,366 for assets acquired and $42,903 for liabilities
assumed.
On March 9, 1999, the Company acquired all of the outstanding capital stock
of Durkan for approximately 3,100 shares of the Company's common stock valued at
$116,500 based on the closing price the day the letter of intent was executed.
The Durkan acquisition has been accounted for under the pooling-of-interests
method of accounting and, accordingly, the Company's historical consolidated
financial statements have been restated to include the accounts and results of
operations of Durkan.
On November 14, 2000, the Company acquired certain fixed assets and
inventory of Crown Crafts, Inc. using the purchase method of accounting and,
accordingly, the purchase price was allocated to the assets acquired and
26
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
the liabilities assumed based on estimated fair values at the date of
acquisition. The estimated fair values were $37,284 for assets acquired and $440
for liabilities assumed.
(3) Receivables
Receivables are as follows:
2000 1999
--------------- ---------------
Customers, trade......................................... $ 433,042 405,477
Other.................................................... 4,125 2,826
--------------- ---------------
437,167 408,303
Less allowance for discounts, returns, claims and
doubtful accounts..................................... 81,095 70,479
--------------- ---------------
Net receivables........................... $ 356,072 337,824
=============== ===============
(4) Inventories
The components of inventories are as follows:
2000 1999
--------------- ---------------
Finished goods........................................... $ 295,447 254,179
Work in process.......................................... 73,658 65,456
Raw materials............................................ 205,490 175,139
--------------- ---------------
Total inventories......................... $ 574,595 494,774
=============== ===============
(5) Property, Plant and Equipment
Following is a summary of property, plant and equipment:
2000 1999
--------------- ---------------
Land..................................................... $ 23,870 21,767
Buildings and improvements............................... 266,094 236,119
Machinery and equipment.................................. 876,417 791,839
Furniture and fixtures................................... 33,657 33,436
Leasehold improvements................................... 5,727 4,854
Construction in progress................................. 32,435 51,645
--------------- ---------------
1,238,200 1,139,660
Less accumulated depreciation and amortization........... 588,147 514,846
--------------- ---------------
Net property, plant and equipment......... $ 650,053 624,814
=============== ===============
Property, plant and equipment includes capitalized interest of $3,097,
$3,213 and $1,661 in 2000, 1999 and 1998, respectively.
Effective January 1, 2000, the Company changed the estimated useful lives
on certain property, plant and equipment. The impact of the change on net
earnings for fiscal 2000, was approximately $14,600, or $0.27 per share.
During 1998, the Company recorded a charge of $2,900 related to a write-
down of computer equipment acquired in the World acquisition and disposed of in
1999.
27
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(6) Other Assets
The components of other assets are summarized below:
2000 1999
--------------- ---------------
Goodwill, net of accumulated amortization of $16,355 and $ 112,376 113,560
$13,171, respectively..................................
Other assets............................................. 6,098 10,089
--------------- ---------------
Total other assets....................... $ 118,474 123,649
=============== ===============
(7) Long-Term Debt
The Company's credit agreement provides for an interest rate of either (i)
LIBOR plus 0.2% to 0.5%, depending upon the Company's performance measured
against certain financial ratios, or (ii) the prime rate less 1.0% and has a
termination date of January 28, 2004. At December 31, 2000, the Company had
credit availability of $450,000 under its revolving credit line and $70,000
under various short-term uncommitted credit lines. At December 31, 2000, a total
of $266,969 was unused under these lines. The credit agreement contains
customary financial and other covenants. The Company must pay an annual
facility fee ranging from .0015 to .0025 of the total credit commitment,
depending upon the Company's performance measured against specific coverage
ratios, under the revolving credit line.
On October 25, 2000, the Company entered into a one-year asset
securitization agreement enabling the Company to sell up to $205,000 of an
undivided interest in a defined pool of trade accounts receivable. The agreement
may be extended in one-year terms. The net proceeds were used to reduce
borrowings under the revolving credit facility. Interest rates under the
facility vary with the commercial paper rates for the Blue Ridge Asset Funding
Corporation plus an applicable margin. The interest rate under this facility
generally averages slightly lower than the rates under the Company's revolving
line of credit.
On January 3, 2001, the Company entered into a five-year interest rate
swap, which converted approximately $100,000 of its variable rate debt to a
fixed rate. Under the agreement, payments are made based on a fixed rate of
5.82% and received on a LIBOR based variable rate. Differentials received or
paid under the agreement will be recognized as interest expense.
Long-term debt consists of the following:
2000 1999
--------------- ---------------
Revolving line of credit, due January 28, 2004.................... $ 215,857 384,452
Asset securitization, due October 24, 2001........................ 191,104 -
8.46% senior notes, payable in annual principal
installments beginning in 1998, due September 16, 2004,
interest payable quarterly...................................... 57,143 71,429
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually................................... 47,222 56,666
8.48% term loans, payable in annual principal
installments, due October 26, 2002, interest payable
quarterly....................................................... 11,429 17,143
7.58% senior notes, payable in annual principal
installments beginning in 1997, due July 30, 2003,
interest payable semiannually................................... 4,286 5,714
6% term note, payable in annual principal and interest
installments beginning in 1998, due July 23, 2004............... 5,343 6,679
Industrial Revenue Bonds and other................................ 57,444 53,982
--------------- ---------------
Total long-term debt.............................. 589,828 596,065
Less current portion.............................................. 224,391 33,961
--------------- ---------------
Long-term debt, excluding current portion......... $ 365,437 562,104
=============== ===============
28
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The aggregate maturities of long-term debt as of December 31,
2000 are as follows:
2001..................................................... $ 224,391
2002..................................................... 33,375
2003..................................................... 27,427
2004..................................................... 241,014
2005..................................................... 9,448
Thereafter............................................... 54,173
---------------
$ 589,828
===============
(8) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are as follows:
2000 1999
--------------- ---------------
Outstanding checks in excess of cash..................... $ 42,895 42,373
Accounts payable, trade.................................. 165,108 159,812
Accrued expenses......................................... 101,576 83,253
Accrued compensation..................................... 62,952 54,954
--------------- ---------------
Total accounts payable and accrued expenses........... $ 372,531 340,392
=============== ===============
(9) Stock Options, Stock Compensation and Treasury Stock
Under the Company's 1992 and 1993 stock option plans, options may be
granted to directors and key employees through 2002 and 2003 to purchase a
maximum of 2,250 and 675 shares of common stock, respectively. During 2000,
options to purchase 105 and 79 shares, respectively, were granted under these
plans. Options granted under each of these plans expire 10 years from the date
of grant and become exercisable at such dates and at prices as determined by the
Compensation Committee of the Company's Board of Directors.
During 1996, the Company adopted the 1997 Non-Employee Director Stock
Compensation Plan. The plan provides for awards of common stock of the Company
for nonemployee directors to receive in lieu of cash for their annual retainers.
During 2000, a total of 4 shares were awarded to the nonemployee directors under
the plan.
During 1997, the Board of Directors adopted the 1997 Long-Term Incentive
Plan whereby the Company reserved 2,550 shares of common stock for issuance in
connection with options and awards. During 2000, 6 shares were awarded under an
executive incentive plan.
Additional information relating to the Company's stock option plans
follows:
2000 1999 1998
------------- ------------- --------------
Options outstanding at beginning of year...... 2,043 1,387 1,568
Options granted............................... 184 809 174
Options exercised............................. (181) (124) (316)
Options canceled.............................. (178) (29) (39)
------------- ------------- --------------
Options outstanding at end of year............ 1,868 2,043 1,387
============= ============= ==============
Options exercisable at end of year............ 931 873 686
============= ============= ==============
29
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
2000 1999 1998
------------- ------------- --------------
Option prices per share:
Options granted during the year............. $ 20.13-26.26 19.69 - 35.13 17.23 - 32.31
============= ============= ==============
Options exercised during the year........... $ 5.67-19.70 5.67 - 19.17 5.67 - 19.38
============= ============= ==============
Options canceled during the year............ $ 6.67-35.14 9.33 - 35.13 5.67 - 31.94
============= ============= ==============
Options outstanding at end of year.......... $ 5.61-35.13 5.61 - 35.13 5.61 - 32.31
============= ============= ==============
As allowed under FAS No. 123, the Company accounts for stock options
granted as prescribed under Accounting Principles Board Opinion No. 25, which
recognizes compensation cost based upon the intrinsic value of the award.
Accordingly, no compensation expense has been recognized in the consolidated
statement of earnings for any stock options granted in 2000, 1999 and 1998. The
following table represents pro forma net income and pro forma earnings per share
had the Company elected to account for stock option grants using the fair value
based method.
2000 1999 1998
--------------- ------------- -------------
Net earnings
As reported.............................. $ 162,599 157,239 115,254
Pro forma................................ 160,313 155,282 114,411
Net earnings per common share (basic)
As reported.............................. $ 3.02 2.63 1.91
Pro forma................................ 2.98 2.60 1.89
Net earnings per common share (diluted)
As reported.............................. $ 3.00 2.61 1.89
Pro forma................................ 2.95 2.57 1.87
This pro forma impact only takes into account options granted since January
1, 1996 and is likely to increase in future years as additional options are
granted and amortized ratably over the vesting period. The average fair value of
options granted during 2000, 1999 and 1998 was $13.00, $15.28 and $17.24,
respectively. This fair value was estimated using the Black-Scholes option
pricing model based on a weighted-average market price at grant date of $22.69
in 2000, $26.48 in 1999 and $30.44 in 1998 and the following weighted-average
assumptions:
2000 1999 1998
------------ ------------ ------------
Dividend yield................................. - - -
Risk-free interest rate........................ 5.1% 6.4% 4.7%
Volatility..................................... 48.1% 46.7% 48.9%
Expected life (years).......................... 7 7 7
Summarized information about stock options outstanding and exercisable at
December 31, 2000, is as follows:
Outstanding Exercisable
-------------------------------------------------------- ------------------------------------
Number of Average Average Number of Average
Exercise price range Shares Life (1) Price (2) Shares Price (2)
- ------------------------- -------------- -------------- ------------- --------------- -------------
Under $11.00............. 576 4.57 $ 10.40 494 $ 10.25
$12.00 to 17.00.......... 286 3.70 16.53 268 16.49
$17.01 to 19.69.......... 537 8.91 20.39 67 19.72
$19.94 to 31.94.......... 209 8.03 30.15 53 31.07
$32.00 to 36.00.......... 260 8.11 34.91 49 34.74
-------------- ---------------
Total 1,868 931
============== ===============
30
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
- ----------------
(1) Weighted average contractual life remaining in years.
(2) Weighted average exercise price.
During 1999, the Company's Board of Directors authorized the repurchase of
up to 10,000 shares of its outstanding common shares. During the quarter ended
July 1, 2000, the Board of Directors authorized an additional repurchase of
5,000 outstanding shares bringing the total authorized repurchase to 15,000
shares. For the year ended December 31, 2000, a total of 4,713 shares of the
Company's common stock was purchased at an aggregate cost of $106,689. Since the
inception of the program, a total of approximately 8,745 shares has been
purchased at an aggregate cost of $192,624. All of this repurchase has been
financed through the Company's operations and revolving line of credit.
(10) Employee Benefit Plans
The Company has a 401(k) retirement savings plan (the "Plan") open to
substantially all of its employees who have completed one year of eligible
service. The Company contributes $0.50 for every $1.00 of employee
contributions up to a maximum of 4% of the employee's salary. Effective January
1, 2000, the Company amended the Plan to match an additional $0.25 for every
$1.00 of employee contribution in excess of 4% of the employee's salary up to a
maximum of 6%. Employee and employer contributions to the Plan were $16,926 and
$6,055 in 2000, $14,873 and $5,080 in 1999, and $12,345 and $4,213 in 1998,
respectively. The Company also made a discretionary contribution to the Plan of
approximately $2,500 and $2,100 in 2000 and 1999, respectively.
The World Carpet Savings Retirement Plan (the "World Plan"), a defined
contribution 401(k) plan covering substantially all World employees, was merged
into the Plan on March 1, 1999. Employees were eligible to participate after
completion of one year of service. Under the terms of the World Plan, World
would match employee contributions up to a maximum of 2% of the employee's
salary and employees vested in the contributions based on years of credited
service. For the years ended December 31, 1999 and 1998, the Company
contributed approximately $142 and $703, respectively, to the World Plan.
Durkan maintained a 401(k) retirement savings plan (the" Durkan Plan")
open to substantially all Durkan employees. Durkan contributed $0.50 for every
$1.00 of employee contributions up to a maximum of 6% of eligible wages. For the
years ended December 31, 2000, 1999 and 1998, Durkan contributed approximately
$262, $343 and $328, respectively, to the Durkan Plan. The Durkan Plan was
merged into the Plan effective January 1, 2001.
31
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(11) Income Taxes
Income tax expense attributable to earnings before income taxes for the
years ended December 31, 2000, 1999 and 1998 consists of the following:
Current Deferred Total
--------------- --------------- ---------------
2000:
U.S. federal................... $ 64,444 28,466 92,910
State and local................ 8,407 3,713 12,120
--------------- --------------- ---------------
$ 72,851 32,179 105,030
=============== =============== ===============
1999:
U.S. federal................... $ 92,736 (1,928) 90,808
State and local................ 12,104 (252) 11,852
--------------- --------------- ---------------
$ 104,840 (2,180) 102,660
=============== =============== ===============
1998:
U.S. federal................... $ 75,985 (11,485) 64,500
State and local................ 17,761 (2,709) 15,052
--------------- --------------- ---------------
$ 93,746 (14,194) 79,552
=============== =============== ===============
Income tax expense attributable to earnings before income taxes differs
from the amounts computed by applying the U.S. statutory federal income tax rate
to earnings before income taxes as follows:
2000 1999 1998
--------------- --------------- ---------------
Computed "expected" tax expense............. $ 93,670 90,965 68,182
State and local income taxes, net of
federal income tax benefit................. 7,878 7,704 9,784
Amortization of goodwill.................... 700 684 746
Other, net.................................. 2,782 3,307 840
--------------- --------------- ---------------
$ 105,030 102,660 79,552
=============== =============== ===============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2000 and 1999 are presented below:
2000 1999
--------------- ---------------
Deferred tax assets:
Accounts receivable............................... $ 10,751 21,621
Inventories....................................... 11,533 15,533
Accrued expenses.................................. 46,372 41,366
--------------- ---------------
Gross deferred tax assets................. 68,656 78,520
--------------- ---------------
Deferred tax liabilities:
Plant and equipment............................... (65,420) (47,138)
Prepaid expenses.................................. (2,182) (1,892)
Other............................................. (10,388) (6,645)
--------------- ---------------
Gross deferred tax liabilities............ (77,990) (55,675)
--------------- ---------------
Net deferred tax (liability) asset........ $ (9,334) 22,845
=============== ===============
Based upon the level of historical and projected taxable income over
periods in which the deferred tax assets are deductible, the Company's
management believes it is more likely than not the Company will realize the
benefits of these deductible differences at December 31, 2000.
32
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(12) Commitments and Contingencies
The Company is obligated under various capital and operating leases for
office and manufacturing space, machinery and equipment.
Future minimum lease payments under noncancelable capital and operating
leases (with initial or remaining lease terms in excess of one year) at December
31, 2000 are:
Capital Operating Total Future
Leases Leases Payments
--------------- ---------------- -----------------
2001................................... $ 1,199 35,224 36,423
2002................................... 1,223 28,518 29,741
2003................................... 913 22,631 23,544
2004................................... 63 16,576 16,639
2005................................... - 11,162 11,162
Thereafter............................. - 20,620 20,620
--------------- --------------- -----------------
Total payments......................... $ 3,398 134,731 138,129
=============== =================
Less amount representing interest...... 324
---------------
Present value of capitalized lease
payments with a weighted interest rate
of 7.76%.............................. $ 3,074
===============
The Company assumed several capitalized leases from recent acquisitions for
machinery and equipment, at a cost of $7,480, $8,899 and $8,899 for the periods
ended December 31, 2000, 1999 and 1998, respectively. The amortization of these
capital leases is included in depreciation expense. Accumulated amortization was
$3,312, $3,619 and $2,547 in 2000, 1999 and 1998, respectively.
Rental expense under operating leases was $36,392, $28,407 and $27,347 in
2000, 1999 and 1998, respectively.
In December 1995, the Company and four other carpet manufacturers were
added as defendants in a purported class action lawsuit, In re Carpet Antitrust
Litigation, pending in the United States District Court for the Northern
District of Georgia, Rome Division. The amended complaint alleges price-fixing
regarding polypropylene products in violation of Section One of the Sherman Act.
In September 1997, the Court granted the plaintiffs' motion to certify the
class. In October 1998, two plaintiffs, on behalf of an alleged class of
purchasers of nylon carpet products, filed a complaint in the United States
District Court for the Northern District of Georgia against the Company and two
of its subsidiaries, as well as certain competitors. The complaint alleges that
the Company acted in concert with other carpet manufacturers to restrain
competition in the sale of certain nylon carpet products. The Company has filed
an answer, denied the allegations in the complaint and set forth its defenses.
On August 11, 2000, the Company presented to the Court the terms of an
agreement in principle to settle these two cases. Under the terms of the
settlement agreement, the Company will contribute $13,500 to a settlement fund
to resolve price-fixing claims brought by a class of purchasers of polypropylene
carpet and a proposed settlement class of purchasers of nylon carpet. The
Company recorded a charge of $7,000 in the third quarter of 2000, in connection
with the lawsuit. The Company denies all liability and wrongdoing and has agreed
to settle these claims in order to avoid the costs of further litigation. The
court dismissed all claims against the Company and granted final approval to the
settlement on February 5, 2001.
The Company is a party to two consolidated lawsuits captioned Gaehwiler v.
Sunrise Carpet Industries, Inc. et al. and Patco Enterprises, Inc. v. Sunrise
Carpet Industries, Inc. et al., both of which were filed in the Superior
33
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Court of the State of California, City and County of San Francisco, in 1996.
Both complaints were brought on behalf of a purported class of indirect
purchasers of polypropylene carpet in the State of California and seek damages
for alleged violations of California antitrust and unfair competition laws. In
February 1999, a similar complaint was filed in the Superior Court of the State
of California, City and County of San Francisco, on behalf of a purported class
based on indirect purchasers of nylon carpet in the State of California and
alleges violations of California antitrust and unfair competition laws. The
complaints described above do not specify any specific amount of damages but do
request injunctive relief and treble damages plus reimbursement for fees and
costs. The Company believes it has meritorious defenses and intends to
vigorously defend against these actions.
(13) Consolidated Statements of Cash Flows Information
Supplemental disclosures of cash flow information are as follows:
2000 1999 1998
--------------- --------------- ---------------
Net cash paid during the year for:
Interest....................... $ 39,866 37,740 30,852
=============== =============== ===============
Income taxes................... $ 74,592 120,371 75,640
=============== =============== ===============
(14) Quarterly Financial Data (Unaudited)
The supplemental quarterly financial data are as follows:
Quarters Ended
-------------------------------------------------------------------------------
April 1, July 1, September 30, December 31,
2000 2000 2000 2000
--------------- -------------- ------------------ -----------------
Net sales........................ $ 765,083 852,808 838,514 799,441
Gross profit..................... 190,563 215,882 214,220 202,184
Net earnings..................... 33,997 47,203 42,137 39,262
Basic earnings per share......... 0.61 0.88 0.79 0.75
Diluted earnings per share....... 0.61 0.87 0.79 0.74
Quarters Ended
-------------------------------------------------------------------------------
April 3, July 3, October 2, December 31,
1999 1999 1999 1999
--------------- -------------- ------------------ -----------------
Net sales........................ $ 707,167 790,617 809,933 775,547
Gross profit..................... 178,329 200,911 203,246 194,373
Net earnings..................... 27,892 44,093 45,079 40,175
Basic earnings per share......... 0.46 0.73 0.74 0.70
Diluted earnings per share....... 0.46 0.72 0.74 0.70
34
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders under the following headings: "Election of Directors--
Director, Director Nominee and Executive Officer Information"; "--Nominees for
Director"; "--Continuing Directors"; "--Executive Officers;" and "--Section 16a
Beneficial Ownership Reporting Compliance."
Item 11. Executive Compensation
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders under the following headings: "Executive Compensation
and Other Information--Summary of Cash and Certain Other Compensation"; "--
Option Grants"; "--Option Exercises and Holdings"; "--Pension Plans"; "--Certain
Relationships and Related Transactions"; and "Election of Directors--Meetings
and Committees of the Board of Directors."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders under the following heading: "Executive Compensation and
Other Information--Principal Stockholders of the Company."
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders under the following heading: "Executive Compensation and
Other Information--Certain Relationships and Related Transactions."
35
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Consolidated Financial Statements
The Consolidated Financial Statements of Mohawk Industries, Inc. and
subsidiaries listed in Item 8 of Part II are incorporated by reference into this
item.
2. Consolidated Financial Statement Schedules
Schedule I-Condensed Financial Information of Registrant......... 43
Schedule II-Consolidated Valuation and Qualifying Accounts....... 47
Schedules not listed above have been omitted because they are not
applicable or the required information is included in the consolidated financial
statements or notes thereto.
3. Exhibits
The exhibit number for the exhibit as originally filed is included in
parentheses at the end of the description.
Mohawk
Exhibit
Number Description
- ------ -----------
*2.1 Agreement and Plan of Merger dated as of December 3, 1993 and amended
as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin and
certain Shareholders of Aladdin. (Incorporated herein by reference to
Exhibit 2(i)(a) in Mohawk's Registration Statement on Form S-4,
Registration No. 33-74220.)
*2.2 Agreement and Plan of Merger by and among Mohawk, WC Acquisition Corp.,
World Carpets, Inc.and the shareholders of World Carpets, Inc. dated as
of October 22, 1998. (Incorporated herein by reference to Exhibit 2 of
the Mohawk Registration Statement on Form S-3, Registration No. 333-
66061, as filed October 22, 1998.)
*2.3 Asset Purchase Agreement by and among Aladdin Manufacturing Corporation,
Image Industries, Inc. and The Maxim Group, Inc. dated as of November
12, 1998, as amended and restated on January 29, 1999. (Incorporated
herein by reference to Exhibit 2.1 in Mohawk's Current Report on Form
8-K dated January 29, 1999.)
*2.4 Agreement and Plan of Merger by and among Mohawk, Durkan Acquisition
Corp., Nonpareil Acquisition Corp, Durkan Patterned Carpets, Inc.; the
shareholders of Durkan Patterned Carpets, Inc. and the shareholders of
Nonpareil Dying and Finishing, Inc., dated as of February 26, 1999.
(Incorporated herein by reference to Exhibit 2.1 of the Mohawk
Registration Statement on Form S-3, Registration No. 333-77231, as
filed April 28, 1999.)
*3.1 Restated Certificate of Incorporation of Mohawk, as amended.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*3.2 Amended and Restated Bylaws of Mohawk. (Incorporated herein by reference
to Exhibit 3.2 in Mohawk's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.)
*4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
36
*4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk.
(Incorporated herein by reference to Exhibit 3.2 in Mohawk's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2000.)
*10.1 Lease dated April 1, 1988 between Horizon and Kay D. Owens concerning
the addition between the Tufting and Coater Buildings on South
Industrial Boulevard in Calhoun, Georgia. (Incorporated herein by
reference to Exhibit 10.24 in Mohawk's Registration Statement on Form
S-1, Registration No. 33-53932.)
*10.2 Lease dated October 15, 1990 between NBD Trust Company of Illinois and
Aladdin related to a finished goods distribution warehouse in
Romeoville, Illinois. (Incorporated herein by reference to Exhibit
10.28 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)
*10.3 Lease dated October 3, 1994 between Almoda and Aladdin related to a
finished goods distribution warehouse in Columbus, Ohio.
(Incorporated herein by reference to Exhibit 10.29 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
*10.4 Lease dated March 1, 1994 between Design Leasing and Holding Company,
Inc. and American Rug Craftsmen, Inc. related to a manufacturing
facility and warehouse in Calhoun, Georgia. (Incorporated herein by
reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.)
*10.5 Lease dated May 1, 1997 between Opus East, LLC and Mohawk concerning a
distribution warehouse in Glen Burnie, Maryland. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.)
*10.6 Lease dated September 23, 1996 between West End Road Associates and
Mohawk concerning a distribution warehouse in Pompton Plains, New
Jersey. (Incorporated herein by reference to Exhibit 10.10 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.)
*10.7 Lease dated November 27, 1996 between CP-Regency Business Park LTD and
Aladdin concerning a distribution warehouse in Grand Prairie, Texas.
(Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*10.8 Lease dated September 1, 1996 between Catellus Development Corp. and
Mohawk concerning a distribution warehouse in LaMirada, California.
(Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
10.9 Lease dated October 15, 2000 between Majestic Realty Co. and Principal
Life Insurance Company and Aladdin concerning a distribution
warehouse in La Mirada, California.
*10.10 Lease dated June 1, 1998 between Intermark USA, Inc. and Aladdin
Manufacturing Corporation concerning a warehouse in Kensington,
Georgia. (Incorporated herein by reference to Exhibit 10.11 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.)
*10.11 Lease dated February 18, 1999 between Aladdin Manufacturing Corporation
and Industrial Developments International Inc. concerning a warehouse
in Bolingbrook, Illinois. (Incorporated herein by reference to
Exhibit 10.12 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.12 Lease dated February 18, 1999 between Mohawk Industries, Inc. and
Senecca G&H, L.L.C. concerning a warehouse in Miami, Florida.
(Incorporated herein by reference to Exhibit 10.13 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.)
37
10.13 Lease dated November 28, 2000 between Aladdin Manufacturing
Corporation. and Lathrop industrial development, LLC a warehouse in
Lathrop, California
*10.14 Lease dated December 3, 1999 between Aladdin Manufacturing Corporation
and Ex-Cell Home Fashions, Inc. concerning a plant in Bentonville,
Arkansas. (Incorporated herein by reference to Exhibit 10.14 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.)
10.15 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and
DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia.
10.16 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and
DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia.
10.17 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation and
DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia.
10.18 Lease dated December 29, 1999 between Aladdin Manufacturing Corporation
and Seattle-Tacoma Box Company concerning a warehouse in Kent,
Washington.
*10.19 Fifth Amended and Restated Credit Agreement dated as of November 23,
1999 among Mohawk, Wachovia Bank, N.A. Suntrust Bank, Atlanta and
First Union National Bank. (Incorporated herein by reference to
Exhibit 10.15 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.20 Amended and Restated Series Note Agreement dated as of August 31, 1999
for $85 million of senior notes due September 1, 2005 among Mohawk,
John Hancock Mutual Life Insurance Company, John Hancock Variable
Life Insurance Company, Investors Partner Life Insurance Company,
Principal Life Insurance Company, The Franklin Life Insurance Company
and The Prudential Insurance Company of America. (Incorporated herein
by reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-
Q for the quarter ended October 2, 1999.)
*10.21 Amended and Restated Note Purchase Agreement dated as of August 31,
1999 for $100 million senior notes due September 16, 2004 among
Mohawk, The Prudential Insurance Company of America, Principal Life
Insurance Company, John Hancock Mutual Life Insurance Company,
Massachusetts Mutual Life Insurance Company, Alexander Hamilton Life
Insurance Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.2 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended October 2, 1999.)
*10.22 Registration Rights Agreement by and among Mohawk, Citicorp
Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain
Management Investors. (Incorporated herein by reference to Exhibit
10.14 of Mohawk's Registration Statement on Form S-1, Registration
No. 33-45418.)
*10.23 Voting Agreement, Consent of Stockholders and Amendment to 1992
Registration Rights Agreement dated December 3, 1993 by and among
Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition Fund,
L.P., David L. Kolb, Donald G. Mercer, Frank A. Procopio and John D.
Swift. (Incorporated herein by reference to Exhibit 10(b) of Mohawk's
Registration Statement on Form S-4, Registration No. 33-74220.)
*10.24 Registration Rights Agreement by and among Mohawk and the former
shareholders of Aladdin. (Incorporated herein by reference to Exhibit
10.32 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)
*10.25 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of
March 23, 1994 to the Registration Rights Agreement dated as of
February 25, 1994 between Mohawk and those other
38
persons who are signatories thereto. (Incorporated herein by
reference to Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q
for the quarter ended July 2, 1994.)
*10.26 Stock Restriction and Registration Rights Agreement dated as of October
22, 1998 by and among Mohawk and the former shareholders of World.
(Incorporated herein by reference to Exhibit 99.1 of Mohawk's Current
Report on Form 8-K dated February 19, 1999.)
*10.27 Second Consolidated, Amended and Restated Note Agreement dated as of
August 31, 1999 for $50 million of senior notes, $40,000,000 of which
are due October 26, 2002 and $10,000,000 of which are due July 30,
2002, among Mohawk and The Prudential Insurance Company of America.
(Incorporated herein by reference to Exhibit 10.3 of Mohawk's
Quarterly Report on Form 10-Q dated October 2, 1999.)
10.28 Receivables Purchase and Sale Agreement dated as of October 25, 2000 by
and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and
Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc.
10.29 Credit and Security Agreement dated as of October 25, 2000 by and among
Mohawk Factoring, Inc, as borrower, Mohawk servicing, Inc., as
Servicer, Blue Ridge Asset Funding Corporation, The Liquidity Banks
and Wachovia Bank, N.A., as Agent.
10.30 Interest Rate Swap Agreement dated August 31 2000 by Mohawk Industries,
Inc, and First Union National Bank.
Exhibits Related to Executive Compensation Plans, Contracts and other
Arrangements:
*10.31 Mohawk Carpet Corporation Retirement Savings Plan, as amended.
(Incorporated herein by reference to Exhibit 10.1 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.32 Mohawk Carpet Corporation Supplemental Executive Retirement Plan, as
amended. (Incorporated herein by reference to Exhibit 10.2 of
Mohawk's Registration Statement on Form S-1, Registration No. 33-
45418.)
*10.33 World Carpets, Inc. Savings and Retirement Plan dated January 1, 1989.
(Incorporated herein by reference to Exhibit 10.70 of Mohawk's Annual
Report on Form 10-K for the year ended December 31, 1998)
*10.34 Mohawk Industries, Inc. Employee Stock Purchase Plan together with
forms of related Management Investment Agreement, Non-Qualified Stock
Option Agreement, and amendments thereto. (Incorporated herein by
reference to Exhibit 10.3 of Mohawk's Registration Statement on Form
S-1, Registration No. 33-45418.)
*10.35 Stock Purchase Agreement dated as of December 30, 1988 between Mohawk
and Mohasco as supplemented by Supplement to Stock Purchase Agreement
dated December 30, 1988. (Incorporated herein by reference to Exhibit
10.4 of Mohawk's Registration Statement on Form S-1, Registration No.
33-45418.)
*10.36 Securities Purchase and Holders Agreement dated as of December 31,
1988, as amended and restated March 30, 1989, together with
amendments thereto and forms of related Non-Qualified Stock Option
Agreement and amendments thereto. (Incorporated herein by reference
to Exhibit 10.5 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)
*10.37 Investment Agreement dated as of March 31, 1989 among Mohawk, Mohawk
Carpet, Citicorp Capital Investors Ltd., Citicorp Venture Capital
Ltd. and ML-Lee Acquisition Fund, L.P. (Incorporated herein by
reference to Exhibit 10.6 of Mohawk's Registration Statement on Form
S-1, Registration No. 33-45418.)
39
*10.38 Equity Securities Agreement dated March 31, 1989 among Mohawk, ML-Lee
Acquisition Fund, L.P. and Citicorp Venture Capital Ltd.
(Incorporated herein by reference to Exhibit 10.7 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.39 Securities Holders Agreement among Mohawk and Certain Management
Investors dated as of March 6, 1992. (Incorporated herein by
reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.)
*10.40 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Registration Statement on
Form S-1, Registration No. 33-45418.)
*10.41 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Stock Option Plan. (Incorporated herein by reference to Exhibit 10.2
in Mohawk's quarterly report on Form 10-Q for the quarter ended July
3, 1993.)
*10.42 Second Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1992 Stock Option Plan. (Incorporated herein by reference to
Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.43 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.15 of Mohawk's
Registration Statement on Form S-1, Registration Number 33-53932.)
*10.44 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference
to Exhibit 10.1 of Mohawk's quarterly report on Form 10-Q for the
quarter ended July 3, 1993.)
*10.45 Second Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by
reference to Exhibit 10.38 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.)
*10.46 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.39 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992.)
*10.47 First Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1993 Stock Option Plan. (Incorporated herein by reference to
Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.48 Form of Promissory Note between Mohawk and each of the following;
David L. Kolb, John D. Swift and Frank A. Procopio. (Incorporated
herein by reference to Exhibit 10.75 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.)
*10.49 The Mohawk Industries, Inc. Executive Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.65 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
*10.50 The Mohawk Industries, Inc. Management Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.66 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
*10.51 1997 Non-Employee Director Stock Compensation Plan. (Incorporated
herein by reference to Exhibit 10.79 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.)
*10.52 1997 Long-Term Incentive Plan. (Incorporated herein by reference to
Exhibit 10.80 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.)
40
*10.53 Amendment No. 1 to 1997 Non-Employee Director Stock Compensation
Plan. (Incorporated herein by reference to Exhibit 10.74 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997.)
*10.54 Consulting Agreement between Mohawk Industries, Inc. and David L.
Kolb dated August 1, 2000. (Incorporated herein by reference to
Exhibit 10 in Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000.)
10.55 Amendment and Restated Consulting Agreement between Mohawk Industries,
Inc. and David L. Kolb dated January 17, 2001.
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent - KPMG LLP.
___________
* Indicates exhibit incorporated by reference.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K: Purchase of Crown Crafts, Inc. Woven
Division, dated October 11, 2000.
2. Current Report on Form 8-K: Third quarter earnings press release, dated
October 12, 2000.
3. Current Report on Form 8-K: Completion of the purchase of Crown Crafts,
Inc. Woven Division, dated November 14, 2000.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Mohawk Industries, Inc.
Dated: March 9, 2001
By: /s/ Jeffrey S. Lorberbaum
---------------------------------------
Jeffrey S. Lorberbaum,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 9, 2001 /s/ Jeffrey S. Lorberbaum
---------------------------------------
Jeffrey S. Lorberbaum,
President and Chief Executive Officer
(principal executive officer)
Dated: March 9, 2001 /s/ John D. Swift
---------------------------------------
John D. Swift,
Chief Financial Officer, Vice
President-Finance
and Assistant Secretary
(principal financial and accounting
officer)
Dated: March 9, 2001 /s/ David L. Kolb
---------------------------------------
David L. Kolb,
Chairman of the Board
Dated: March 9, 2001 /s/ Leo Benatar
---------------------------------------
Leo Benatar,
Director
Dated: March 9, 2001 /s/ Bruce C. Bruckmann
---------------------------------------
Bruce C. Bruckmann,
Director
Dated: March 9, 2001 /s/ S. H. Sharpe
---------------------------------------
S. H. Sharpe
Director
Dated: March 9, 2001 /s/ Larry W. McCurdy
---------------------------------------
Larry W. McCurdy,
Director
Dated: March 9, 2001 /s/ Robert N. Pokelwaldt
---------------------------------------
Robert N. Pokelwaldt,
Director
42
SCHEDULE I
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.
Balance Sheets
December 31, 2000 and 1999
(In thousands, except per share data)
ASSETS 2000 1999
--------------- -------------
Current assets - intercompany receivable..................................... $ 398,238 507,386
Investment in subsidiaries................................................... 883,163 720,564
--------------- -------------
$ 1,281,401 1,227,950
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities-current portion of long-term debt........................ $ 221,982 30,873
Long-term debt, less current portion......................................... 305,059 504,531
--------------- -------------
Total liabilities....................................................... 527,041 535,404
--------------- -------------
Preferred stock, $.01 par value; 60 shares authorized; no shares issued...... - -
Common stock, $.01 par value; 150,000 shares authorized; 60,838 and 60,657
shares issued in 2000 and 1999, respectively.............................. 608 607
Additional paid-in capital................................................... 183,303 179,993
Retained earnings............................................................ 758,531 595,932
--------------- -------------
942,442 776,532
Less treasury stock at cost; 8,538 and 3,952 shares in 2000 and 1999,
respectively.............................................................. 188,082 83,986
--------------- -------------
Total stockholder's equity.............................................. 754,360 692,546
--------------- -------------
$ 1,281,401 1,227,950
=============== =============
43
SCHEDULE I
(continued)
MOHAWK INDUSTRIES, INC AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc
Statements of Earnings
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
---------- --------- --------
Equity in earnings of subsidiaries.......... $ 162,599 157,239 115,254
---------- --------- --------
Net earnings......................... $ 162,599 157,239 115,254
========== ========= ========
44
SCHEDULE I
(continued)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.
Statements of Cash Flows
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
2000 1999 1998
--------------- ------------- -------------
Cash flows from operating activities:
Net earnings........................................................ $ 162,599 157,239 115,254
Adjustments to reconcile net earnings to net cash used in operating
activities:
Equity in earnings of subsidiaries............................ (162,599) (157,239) (115,254)
Increase in intercompany receivable........................... (109,148) 459,652 1,964
------------- ----------- -----------
Net cash (used in) provided by operating activities........... (109,148) 459,652 1,964
------------- ----------- -----------
Cash flows from financing activities:
Net proceeds from revolving line of credit.......................... (168,595) 384,452 -
Proceeds from asset securitization.................................. 191,104 - -
Net proceeds from term loans....................................... (30,872) 150,952 -
Stock options exercised............................................. 2,397 1,391 4,417
Tax benefit from exercise of stock options.......................... 914 216 243
Purchase of treasury stock.......................................... (104,096) (83,986) -
Other............................................................... - 6,627 (2,696)
------------- ----------- -----------
Net cash (used in) provided by financing activities........... (109,148) 459,652 1,964
------------- ----------- -----------
Net change in cash...................................... - - -
Cash, beginning of year.................................................... - - -
------------- ----------- -----------
Cash, end of year.......................................................... $ - - -
============= =========== ===========
45
SCHEDULE I
(continued)
MOHAWK INDUSTRIES, INC AND SUBSIDIARIES
Notes to Condensed Financial Information Of Registrant
Mohawk Industries, Inc
December 31, 2000 and 1999
(In thousands, except per share data)
(1) Long-Term Debt
The Company's credit agreement provides for an interest rate of either (i) LIBOR
plus 0.2% to 0.5%, depending upon the Company's performance measured against
certain financial ratios, or (ii) the prime rate less 1.0% and has a termination
date of January 28, 2004. At December 31, 2000, the Company had credit
availability of $450,000 under its revolving credit line and $70,000 under
various short-term uncommitted credit lines. At December 31, 2000, a total of
$266,969 was unused under these lines. The credit agreement contains customary
financial and other covenants. The Company must pay an annual facility fee
ranging from .0015 to .0025 of the total credit commitment, depending upon the
Company's performance measured against specific coverage ratios, under the
revolving credit line.
On October 25, 2000, the Company entered into a one-year asset securitization
agreement enabling the Company to sell up to $205,000 of an undivided interest
in a defined pool of trade accounts receivable. The agreement may be extended in
one year terms. The net proceeds were used to reduce borrowings under the
revolving credit facility. Interest rates under the facility vary with the
commercial paper rates for the Blue Ridge Asset Funding Corporation plus an
applicable margin. The interest rate under the facility generally averages
slightly lower than rates under the Company's revolving line of credit.
Long term debt consists of the following:
2000 1999
------------------ ------------------
Revolving line of credit, due January 28, 2004....................... $ 215,857 384,452
Asset securitization, due October 24, 2001........................... 191,104 -
8.46% senior notes, payable in annual principal installments
beginning in 1998, due September 16, 2004, interest payable
quarterly.......................................................... 57,143 71,429
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually...................................... 47,222 56,666
8.48% term loans, payable in annual principal installments,
due October 26, 2002, interest payable quarterly................... 11,429 17,143
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually....................................................... 4,286 5,714
------------------ ------------------
Total long-term debt................................. 527,041 535,404
Less current portion................................................. 221,982 30,873
------------------ ------------------
Long-term debt, excluding current portion............ $ 305,059 504,531
================== ==================
The aggregate maturities of long-term debt as of December 31, 2000 are as
follows:
2001................................................................. $ 221,982
2002................................................................. 30,866
2003................................................................. 25,159
2004................................................................. 239,587
2005................................................................. 9,447
Thereafter........................................................... -
------------------
$ 527,041
==================
46
SCHEDULE II
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years Ended December 31, 2000, 1999 and 1998
(In thousands)
Additions
Balance at charged to Balance
beginning costs and at end
Description of year expenses Deductions(1) of year
----------- --------------- ------------- --------------- -------------
Year ended December 31, 1998:
Allowance for doubtful accounts - trade............... $ 17,162 13,173 7,325 23,010
Provision for cash discounts.......................... 10,036 73,349 72,898 10,487
Provision for claims and allowances................... 25,037 101,088 101,389 24,736
--------------- ------------- --------------- -------------
Total............................................ $ 52,235 187,610 181,612 58,233
=============== ============= =============== =============
Year ended December 31, 1999:
Allowance for doubtful accounts - trade............... $ 23,010 15,804 4,710 34,104
Provision for cash discounts.......................... 10,487 75,155 76,680 8,962
Provision for claims and allowances................... 24,736 123,515 120,838 27,413
-------------- ------------- --------------- -------------
Total............................................ $ 58,233 214,474 202,228 70,479
============== ============= =============== =============
Year ended December 31, 2000:
Allowance for doubtful accounts - trade............... $ 34,104 15,717 10,968 38,853
Provision for cash discounts.......................... 8,962 81,872 78,641 12,193
Provision for claims and allowances................... 27,413 138,815 136,179 30,049
-------------- ------------- --------------- -------------
Total............................................ $ 70,479 236,404 225,788 81,095
============== ============= =============== =============
_______________
(1) Represents charge offs, net of recoveries, to the reserves.
47
EXHIBIT INDEX
Mohawk
Exhibit
Number Description
- ------ -----------
*2.1 Agreement and Plan of Merger dated as of December 3, 1993 and
amended as of January 17, 1994 among Mohawk, AMI Acquisition Corp.,
Aladdin and certain Shareholders of Aladdin. (Incorporated herein by
reference to Exhibit 2(i)(a) in Mohawk's Registration Statement on Form
S-4, Registration No. 33-74220.)
*2.2 Agreement and Plan of Merger by and among Mohawk, WC Acquisition Corp.,
World Carpets, Inc.and the shareholders of World Carpets, Inc. dated as
of October 22, 1998. (Incorporated herein by reference to Exhibit 2 of
the Mohawk Registration Statement on Form S-3, Registration No. 333-
66061, as filed October 22, 1998.)
*2.3 Asset Purchase Agreement by and among Aladdin Manufacturing
Corporation, Image Industries, Inc. and The Maxim Group, Inc. dated as
of November 12, 1998, as amended and restated on January 29, 1999.
(Incorporated herein by reference to Exhibit 2.1 in Mohawk's Current
Report on Form 8-K dated January 29, 1999.)
*2.4 Agreement and Plan of Merger by and among Mohawk, Durkan Acquisition
Corp., Nonpareil Acquisition Corp, Durkan Patterned Carpets, Inc.; the
shareholders of Durkan Patterned Carpets, Inc. and the shareholders of
Nonpareil Dying and Finishing, Inc., dated as of February 26, 1999.
(Incorporated herein by reference to Exhibit 2.1 of the Mohawk
Registration Statement on Form S-3, Registration No. 333-77231, as
filed April 28, 1999.)
*3.1 Restated Certificate of Incorporation of Mohawk, as amended.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*3.2 Amended and Restated Bylaws of Mohawk. (Incorporated herein by
reference to Exhibit 3.2 in Mohawk's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000.)
*4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk.
(Incorporated herein by reference to Exhibit 3.2 in Mohawk's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000.)
*10.1 Lease dated April 1, 1988 between Horizon and Kay D. Owens concerning
the addition between the Tufting and Coater Buildings on South
Industrial Boulevard in Calhoun, Georgia. (Incorporated herein by
reference to Exhibit 10.24 in Mohawk's Registration Statement on Form
S-1, Registration No. 33-53932.)
*10.2 Lease dated October 15, 1990 between NBD Trust Company of Illinois and
Aladdin related to a finished goods distribution warehouse in
Romeoville, Illinois. (Incorporated herein by reference to Exhibit
10.28 of Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)
*10.3 Lease dated October 3, 1994 between Almoda and Aladdin related to a
finished goods distribution warehouse in Columbus, Ohio. (Incorporated
herein by reference to Exhibit 10.29 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.)
*10.4 Lease dated March 1, 1994 between Design Leasing and Holding Company,
Inc. and American Rug Craftsmen, Inc. related to a manufacturing
facility and warehouse in Calhoun, Georgia. (Incorporated herein by
reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.)
*10.5 Lease dated May 1, 1997 between Opus East, LLC and Mohawk concerning a
distribution warehouse in Glen Burnie, Maryland. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998.)
*10.6 Lease dated September 23, 1996 between West End Road Associates and
Mohawk concerning a distribution warehouse in Pompton Plains, New
Jersey. (Incorporated herein by reference to Exhibit 10.10 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998.)
*10.7 Lease dated November 27, 1996 between CP-Regency Business Park LTD and
Aladdin concerning a distribution warehouse in Grand Prairie, Texas.
(Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*10.8 Lease dated September 1, 1996 between Catellus Development Corp. and
Mohawk concerning a distribution warehouse in LaMirada, California.
(Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
10.9 Lease dated October 15, 2000 between Majestic Realty Co. and Principal
Life Insurance Company and Aladdin concerning a distribution warehouse
in La Mirada, California.
*10.10 Lease dated June 1, 1998 between Intermark USA, Inc. and Aladdin
Manufacturing Corporation concerning a warehouse in Kensington,
Georgia. (Incorporated herein by reference to Exhibit 10.11 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1999.)
*10.11 Lease dated February 18, 1999 between Aladdin Manufacturing
Corporation and Industrial Developments International Inc. concerning a
warehouse in Bolingbrook, Illinois. (Incorporated herein by reference
to Exhibit 10.12 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.12 Lease dated February 18, 1999 between Mohawk Industries, Inc. and
Senecca G&H, L.L.C. concerning a warehouse in Miami, Florida.
(Incorporated herein by reference to Exhibit 10.13 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.)
10.13 Lease dated November 28, 2000 between Aladdin Manufacturing
Corporation. and Lathrop industrial development, LLC a warehouse in
Lathrop, California
*10.14 Lease dated December 3, 1999 between Aladdin Manufacturing
Corporation and Ex-Cell Home Fashions, Inc. concerning a plant in
Bentonville, Arkansas. (Incorporated herein by reference to Exhibit
10.14 of Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.)
10.15 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation
and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia.
10.16 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation
and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia.
10.17 Lease dated April 1, 2000 between Aladdin Manufacturing Corporation
and DMK Holdings LLC, concerning a warehouse in Calhoun, Georgia.
10.18 Lease dated December 29, 1999 between Aladdin Manufacturing
Corporation and Seattle-Tacoma Box Company concerning a warehouse in
Kent, Washington.
*10.19 Fifth Amended and Restated Credit Agreement dated as of November 23,
1999 among Mohawk, Wachovia Bank, N.A. Suntrust Bank, Atlanta and First
Union National Bank. (Incorporated herein by reference to Exhibit 10.15
of Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.)
*10.20 Amended and Restated Series Note Agreement dated as of August 31,
1999 for $85 million of senior notes due September 1, 2005 among
Mohawk, John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, Investors Partner Life Insurance
Company, Principal Life Insurance Company, The Franklin Life Insurance
Company and The Prudential Insurance Company of America. (Incorporated
herein by reference to Exhibit 10.2 of Mohawk's Quarterly Report on
Form 10-Q for the quarter ended October 2, 1999.)
*10.21 Amended and Restated Note Purchase Agreement dated as of August 31,
1999 for $100 million senior notes due September 16, 2004 among Mohawk,
The Prudential Insurance Company of America, Principal Life Insurance
Company, John Hancock Mutual Life Insurance Company, Massachusetts
Mutual Life Insurance Company, Alexander Hamilton Life Insurance
Company of America and The Franklin Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.2 of Mohawk's Quarterly
Report on Form 10-Q for the quarter ended October 2, 1999.)
*10.22 Registration Rights Agreement by and among Mohawk, Citicorp
Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain Management
Investors. (Incorporated herein by reference to Exhibit 10.14 of
Mohawk's Registration Statement on Form S-1, Registration No. 33-
45418.)
*10.23 Voting Agreement, Consent of Stockholders and Amendment to 1992
Registration Rights Agreement dated December 3, 1993 by and among
Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition Fund,
L.P., David L. Kolb, Donald G. Mercer, Frank A. Procopio and John D.
Swift. (Incorporated herein by reference to Exhibit 10(b) of Mohawk's
Registration Statement on Form S-4, Registration No. 33-74220.)
*10.24 Registration Rights Agreement by and among Mohawk and the former
shareholders of Aladdin. (Incorporated herein by reference to Exhibit
10.32 of Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)
*10.25 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of
March 23, 1994 to the Registration Rights Agreement dated as of
February 25, 1994 between Mohawk and those other persons who are
signatories thereto. (Incorporated herein by reference to Exhibit 10.3
of Mohawk's Quarterly Report on Form 10-Q for the quarter ended July 2,
1994.)
*10.26 Stock Restriction and Registration Rights Agreement dated as of
October 22, 1998 by and among Mohawk and the former shareholders of
World. (Incorporated herein by reference to Exhibit 99.1 of Mohawk's
Current Report on Form 8-K dated February 19, 1999.)
*10.27 Second Consolidated, Amended and Restated Note Agreement dated as of
August 31, 1999 for $50 million of senior notes, $40,000,000 of which
are due October 26, 2002 and $10,000,000 of which are due July 30,
2002, among Mohawk and The Prudential Insurance
Company of America. (Incorporated herein by reference to Exhibit 10.3
of Mohawk's Quarterly Report on Form 10-Q dated October 2, 1999.)
10.28 Receivables Purchase and Sale Agreement dated as of October 25, 2000 by
and among Mohawk Carpet Corporation, Mohawk Commercial, Inc., and
Durkan Patterned Carpets, Inc. and Mohawk Factoring, Inc.
10.29 Credit and Security Agreement dated as of October 25, 2000 by and among
Mohawk Factoring, Inc, as borrower, Mohawk servicing, Inc., as
Servicer, Blue Ridge Asset Funding Corporation, The Liquidity Banks
and Wachovia Bank, N.A., as Agent.
10.30 Interest Rate Swap Agreement dated August 31 2000 by Mohawk Industries,
Inc, and First Union National Bank.
Exhibits Related to Executive Compensation Plans, Contracts and other
Arrangements:
*10.31 Mohawk Carpet Corporation Retirement Savings Plan, as amended.
(Incorporated herein by reference to Exhibit 10.1 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.32 Mohawk Carpet Corporation Supplemental Executive Retirement Plan, as
amended. (Incorporated herein by reference to Exhibit 10.2 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.33 World Carpets, Inc. Savings and Retirement Plan dated January 1, 1989.
(Incorporated herein by reference to Exhibit 10.70 of Mohawk's Annual
Report on Form 10-K for the year ended December 31, 1998)
*10.34 Mohawk Industries, Inc. Employee Stock Purchase Plan together with
forms of related Management Investment Agreement, Non-Qualified Stock
Option Agreement, and amendments thereto. (Incorporated herein by
reference to Exhibit 10.3 of Mohawk's Registration Statement on Form
S-1, Registration No. 33-45418.)
*10.35 Stock Purchase Agreement dated as of December 30, 1988 between Mohawk
and Mohasco as supplemented by Supplement to Stock Purchase Agreement
dated December 30, 1988. (Incorporated herein by reference to Exhibit
10.4 of Mohawk's Registration Statement on Form S-1, Registration No.
33-45418.)
*10.36 Securities Purchase and Holders Agreement dated as of December 31,
1988, as amended and restated March 30, 1989, together with amendments
thereto and forms of related Non-Qualified Stock Option Agreement and
amendments thereto. (Incorporated herein by reference to Exhibit 10.5
of Mohawk's Registration Statement on Form S-1, Registration No. 33-
45418.)
*10.37 Investment Agreement dated as of March 31, 1989 among Mohawk, Mohawk
Carpet, Citicorp Capital Investors Ltd., Citicorp Venture Capital Ltd.
and ML-Lee Acquisition Fund, L.P. (Incorporated herein by reference to
Exhibit 10.6 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)
*10.38 Equity Securities Agreement dated March 31, 1989 among Mohawk, ML-Lee
Acquisition Fund, L.P. and Citicorp Venture Capital Ltd. (Incorporated
herein by reference to Exhibit 10.7 of Mohawk's Registration Statement
on Form S-1, Registration No. 33-45418.)
*10.39 Securities Holders Agreement among Mohawk and Certain Management
Investors dated as of March 6, 1992. (Incorporated herein by reference
to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993.)
*10.40 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Registration Statement on
Form S-1, Registration No. 33-45418.)
*10.41 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Stock Option Plan. (Incorporated herein by reference to Exhibit 10.2
in Mohawk's quarterly report on Form 10-Q for the quarter ended July
3, 1993.)
*10.42 Second Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1992 Stock Option Plan. (Incorporated herein by reference to
Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.43 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.15 of Mohawk's
Registration Statement on Form S-1, Registration Number 33-53932.)
*10.44 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to
Exhibit 10.1 of Mohawk's quarterly report on Form 10-Q for the quarter
ended July 3, 1993.)
*10.45 Second Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by
reference to Exhibit 10.38 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.)
*10.46 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.39 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992.)
*10.47 First Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1993 Stock Option Plan. (Incorporated herein by reference to
Exhibit 10.40 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)
*10.48 Form of Promissory Note between Mohawk and each of the following;
David L. Kolb, John D. Swift and Frank A. Procopio. (Incorporated
herein by reference to Exhibit 10.75 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.)
*10.49 The Mohawk Industries, Inc. Executive Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.65 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
*10.50 The Mohawk Industries, Inc. Management Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.66 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
*10.51 1997 Non-Employee Director Stock Compensation Plan. (Incorporated
herein by reference to Exhibit10.79 of Mohawk's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.)
*10.52 1997 Long-Term Incentive Plan. (Incorporated herein by reference to
Exhibit 10.80 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.)
*10.53 Amendment No. 1 to 1997 Non-Employee Director Stock Compensation
Plan. (Incorporated herein by reference to Exhibit 10.74 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997.)
*10.54 Consulting Agreement between Mohawk Industries, Inc. and David L.
Kolb dated August 1, 2000. (Incorporated herein by reference to
Exhibit 10 in Mohawk's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000.)
10.55 Amendment and Restated Consulting Agreement between Mohawk Industries,
Inc. and David L. Kolb dated January 17, 2001.
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent - KPMG LLP.
________
* Indicates exhibit incorporated by reference.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K: Purchase of Crown Crafts, Inc. Woven Division,
dated October 11, 2000.
2. Current Report on Form 8-K: Third quarter earnings press release, dated
October 12, 2000.
3. Current Report on Form 8-K: Completion of the purchase of Crown Crafts,
Inc. Woven Division, dated November 14, 2000.